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Beware of numbers used to sell stadiums

Date Published: 02/03/2008

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A recent Star Tribune op/ed by economist Kenneth Zapp critiques a Metropolitan Sports Facilities Commission-sponsored report that estimates tax revenue derived from local sports arenas. Zapp makes several points commonly raised by opponents of public financing of professional sports stadiums.

First, the report implies that tax revenue from sports facilities would not have been collected had they not been built. This is not true. Every economic study of stadiums has found that professional sports do not create economic value. If people do not have such games to attend, they spend their money on alternative forms of entertainment or events, which are also taxed.

He also notes the analysis does not take into account present value of the future cash flows from taxes and states that it's unfair for other entertainment-related businesses to pay taxes that help build a stadium for a competitor. But he overlooks income taxes in his summary of stadium revenue:

A stadium generates revenue from naming rights, concession rights, advertising, seat licenses, ticket taxes, parking taxes, souvenir and related NFL merchandise sales taxes, media access fees and facility use fees. The commission claims there are multiple uses for a covered venue besides sports; these activities should also pay their portion of the cost.

This is a significant omission, since according to the commission's report [Download Report.pdf], "Over one-half (57%), or $197,700,000, of the total estimated tax revenue is attributable to the personal income tax on professional sports organization payrolls" for the Twins, Vikings, Timberwolves and Wild between 1961 and 2006.

The study did not calculate taxes paid by visiting teams, who pay Minnesota income tax on a portion of the payroll representing the number of games played in Minnesota. I haven't found an estimate of that total, but considering that Minnesota teams have historically lower-than-average payrolls

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