| The real cost of public subsidies for sports facilities is significantly higher than popularly reported, and, as a result, governments and taxpayers underestimate the magnitude of their financial commitment. Specifically, land, infrastructure, the ongoing public costs associated with the operation of the facility, and foregone property taxes are routinely ignored. For each of the 99 facilities in-use for the 2001 season for the “big four” major league sports, I calculate the present (PV) of the public total public subsidy including public development costs (building, land, and infrastructure), annual public costs (maintenance, capital improvements, and municipal services) net of annual public revenues (rent and other revenue sharing as specified in the lease), and foregone property taxes, over an average 30-year lifespan, discounted to 2001. I construct two measures of variation: total public subsidy (expressed in 2001 dollars) and the public share of total development costs (expressed as a percent) to demonstrate that there is indeed significant variation in deal outcomes across jurisdictions.; I find that the real cost of public subsidies is underreported by an average of {dollar}51m per facility, representing a 40% increase in the total public subsidy. Whereas industry sources report an average public subsidy of {dollar}125m per facility based on a total development cost of {dollar}222m, I estimate that the real total public subsidy is {dollar}175m. Across all 99 facilities, I estimate the total value of the underreported public subsidy to be {dollar}5 billion dollars. The impact of adding these unreported costs is to increase the average public share of total development costs from 56% to 79%, an increase of 23 percentage points. |
