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Publicly Financed Stadiums: Don’t Believe the Hype

Bidding groups from Charlotte and Raleigh are hoping to snag a new Major League Soccer franchise when the MLS expands. JLF’s Julie Tisdale compares the two bids here. But importantly, she also points out that research runs contrary to the often heard narrative that publicly financed stadiums boost economic growth and, therefore, are “worth” the investment of tax dollars.

The reason is the “substitution effect,” a well-known concept in the economics and business literature. People have a limited number of hours and dollars, and some percentage of those are spent on leisure activities. A new Major League Soccer team in Raleigh or Charlotte will certainly attract fans who will spend money. But the overwhelming majority of those will be fans who live locally, and they will not be spending new money. Instead, they’ll substitute. Local fans will spend money at an MLS match instead of going to see the Hornets in Charlotte or the Hurricanes in Raleigh, or minor league baseball in either area. Or they will spend money on MLS that they would have spent going bowling, to the movies, or to a concert. The overall amount of money spent in the economy isn’t different; it’s just redistributed.

So is professional soccer fun? Yes. Would it be nice to have a pro team? Yes. Julie’s point isn’t that soccer is somehow bad or “not worth it.” Her point about the efforts to bring professional soccer to North Carolina is this:

Of the 12 bids received this year, five included plans for privately financed stadiums. The fact that nearly half of the owner groups were confident they could build stadiums and develop successful business plans that didn’t rely on taxpayer funding should act as encouragement to cities and counties across North Carolina and the rest of the country. Large subsidies aren’t necessary to attract major league sports, and stadiums don’t have to be built using taxpayers’ scarce dollars. The city and its taxpayers will be better served by leaving the building of stadiums to the private businesses that will benefit most from them.

Read the entire report here.

Donna Martinez / VP of Marketing and Communications

Donna came to the John Locke Foundation in January 2003 after freelance writing for Carolina Journal and contributing to projects for the North Carolina Education Alliance. He...

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