NASHVILLE, Tenn. (WTVF) — As the debate for who, if anyone, should pay for the Tennessee Titans to get a new stadium continues, an economist from the American Economic Association (AEA) weighed in on the pros and cons of using public money.
The AEA drew upon decades of research from other stadiums across the country.
"The key point is 'what could be done with the money that is spent on the stadium alternatively,' and 'how valuable is that to the local community?'" explained John Sigfried, AEA Secretary Treasurer Emeritus and former Vanderbilt economics professor.
He explained nearly all NFL stadiums are built with the help of some public funding.
"Virtually every stadium has some public money and even the ones that were privately financed because the public sector had to pay for the access roads. And for the water at the stadium and rights and things like that," stated Siegfried.
While he said a stadium for a non-existing team can boost a local economy to a certain point, new stadiums for existing teams with stadiums are more difficult to justify.
"Building anew is almost inevitably a loss for a city because the entire cost of the new stadium has to be outweighed by the incremental benefits of having that new stadium versus the old stadium," explained Siegfried. "And most of the benefits that come from a [new] stadium are actually created by the old stadium."
Those beginning benefits are ones that Siegfried explained cannot be factored in for a second stadium because they're already "cashed in."
"When a stadium is originally built and attracts a team that brings something to the local community, something for people to do, they can go to the game... It also makes people feel better because they think they're in a major league city or and so they're big shots and they like to hang out in bars and talk with their friends about it," he said. "If you're talking about replacing a stadium, some of those benefits don't count because you already have the team."
As Siegfried saw time and time again in his study of NFL stadiums across the country, the draw for a new stadium was for more boxes and suites that earn the owners more money and the hope of hosting a Super Bowl.
"For the billion-dollar-plus replacement stadium, the focus seems to be on having a stadium that has a roof on it. And that seems to be focused on trying to attract the Super Bowl," said Siegfried. "It's very short-term benefits: The teams only play nine home games. So that's only nine days out of 365. And that Super Bowl comes once a decade at best if you have a facility where they're willing to play the Super Bowl and there are negatives to some of these things in terms of the domestic violence, crime rates, traffic congestion, etc. They may not outweigh the benefits, but they certainly shouldn't be an offset against counting of the benefits."
"[You have to consider] what the potential benefits are, what the costs are, and you have to include all the costs, including the congestion costs around the stadium on game days, including, there are some studies that show that crime rates go up at the time," Siegfried explained.
Beyond the Super Bowl, other stadiums and cities the AEA studied showed unwanted challenges for locals with an influx of visitors.
"Being an 'it city' comes with costs. We have to continue to upgrade the water system, the electrical system, the roads and so on. So we need to be sensible about whether or not we want revenues just to rise," he said.
Without income tax in Tennessee, Siegfried explained the public money from the state or the City of Nashville would likely come from a regressive tax like a sales tax.
"They argue that a lot of it would come from sales taxes at the stadium and around the stadium. Well, yes, but if we didn't build the new stadium, people would spend their money on something else. They go to a bowling alley and pay sales taxes," he explained. "So counting just the sales taxes from around the stadium is making the assumption that absent the new stadium, people who spent their money around the stadium would not spend it at all, anywhere in Davidson County. They may not spend all of it there, but it's preposterous to assume they spend none of it there."
"There's lots of...negative externalities. We also can't put a number firmly on the positive externalities. About the only thing we can put a firm number on is the revenue the team collects," stated Siegfried. "But that goes to the team owner and about 60 to 65% of it goes to the players by contract by the collective bargaining agreement with the league."
He explained there is no perfect equation that fits every city.
"It will have some positive economic effect as well as some offsetting negative effects. How they balance out is the trick of deciding whether you want to do that and that's what I guess we pay our politicians for," Siegfried said.
To read Siegfried's full report "The Economics of Sports Facilities and Their Communities," download the study.
