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Subsidizing Professional Sports

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Submitted By bglg2005
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Professional sports teams help to bring exposure to a city or region. That exposure does not always lead to spurring economic growth. Like in all business decisions there are benefits and opportunity cost that the cities that house professional sports franchises must consider when deciding whether or not to publicly finance building or remodeling a new sports arena. It is those cost and benefits that we will be looking at through the rest of this paper. The benefits when considering subsidizing a franchise can be broken down into two categories: Economic Benefits and quality of life benefits. The economic benefits would include job creation, as the new venue would put many people back to work. From general labor to account executives, jobs would be created to account for the complete operation of running a successful franchise. The creation of jobs would not only be seen in the arena but the surrounding businesses as well such as hotel and restaurants that will need the additional personnel to accommodate the new influx of consumers. Because of the number of jobs created the influx of jobs creation the personal income of the community will increase. The city or region will receive tax revenue increases because of the increased spending of consumers in or around the stadium. (Wilhelm, 2008) There are a few quality of life benefits that come with subsidizing an arena, or stadium. The first is what economist call consumer surplus. The consumer surplus is the difference between what a fan of a sport or team is willing to pay to attend and what they have to pay. Being that the city and surrounding towns will be recognized nationally sometimes globally the city will do what it can to make the city more attractive to businesses and potential residents. This form of civic pride pushes the city to increase the quality of living for everyone (Wilhelm, 2008). There are many economists who do not support the public financing of professional sports venues. They argue that the benefits do not outweigh the cost and that the benefits that are measurable affect a small group of people and not the overall community. Though the financing of these venues to not cut the current budgets of governmental programs, they do restrict additional investment into government programs such as education, crime and drug prevention. Unless it is put into the contract between the city and the team a team can move from its current city to another if the current city doesn’t pony up the money for a new stadium or improvements which will cost residents more money in taxes each year. There’s also the infringement of the quality of life for those who are not fans of the sport or teams as the increased traffic, noise, decreased tranquility would be a nuisance to them (Coates, 2008). Another cost that would offset the benefits that some proclaim is the substitution effect. Those consumers in the city will cut their entertainment budgets to theaters, and amusement parks to be able to afford to watch their team play. That in turn would cause economic strain to other businesses and not growth (Wilhelm, 2008). With the studies conducted over the years the argument that the benefits of subsidizing professional sports venues outweigh the cost has yet to be proven. While there will be some who feel the economic upswing there are others who will feel the down swing due to consumers putting more of their money into the hands of those who own the team. The money spent at a game would have been spent on recreational activities even if there was no professional team in the nearby region. From a utilitarian stand point subsidizing professional sports does not benefits the greater number of people of a community but rather a small portion. The teams in small markets that need more money to compete, need not to have the tax payer bail them out, but rather should have the league officials and owners solve this problem without the help of city tax dollars.

References
Coates, Dennis, (2008), A Closer Look at Stadium Subsidies, Retrieved on November 19, 2011 from http://www.american.com/archive/2008/april-04-08/a-closer-look-at-stadium-subsidies.
Wilhelm, Sara, (2008), Public Funding of Sports Stadiums, Retrieved on November 19, 2011 from http://www.cppa.utah.edu/publications/finance_tax/Sports_Stadiums.pdf

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