Dr. Judith Grant Long: Stadium economics and urban development
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In any given year, multiple stadium and arena projects are underway or under discussion across the U.S.—proposed for major and minor professional league sports, college and amateur venues, and for mega-events like the Olympic Games and the World Cup. These projects raise questions about whether public investment in these projects pays off for host cities.
On September 26, 2024, SciLine interviewed: Dr. Judith Grant Long, an associate professor of sport management and urban planning at the University of Michigan. See the footage and transcript from the interview below, or select ‘Contents’ on the left to skip to specific questions.
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Introduction
[0:00:19]
JUDITH GRANT LONG: My name is Judith Grant Long. I’m an associate professor of sport management and urban planning at the University of Michigan, and my research looks at the intersection between sports venues and urban development.
Interview with SciLine
What can you tell us about trends over time, when it comes to the cost of sports facilities?
[0:00:39]
JUDITH GRANT LONG: Well, I don’t think it’s news to anyone that the cost of sports facilities is going up. Facilities are bigger. They have more amenities. Inflation has certainly been a factor. But if we look back over the past 50 years, we can see a market uptick in the price of venues where the average stadium, for example, was approximately $250 million in the 1970s, and then by the 2020s we’re really looking at upwards of a billion dollars, which is a pretty significant increase in total cost.
How has the share of stadium costs shouldered by the public changed over time?
[0:01:21]
JUDITH GRANT LONG: Well, the public sector has traditionally played an important role in funding major league sports venues. And again, if we look over the last 50 years, we would see in the 1970s that the public sector was paying almost 100% of every venue. They were paying for the entire bill, whereas now in the 2020s the average public contribution to a new venue is about 50%. However, the important thing to note here is that while the average cost that the public sector has paid has gone down in terms of share, it’s actually gone up in terms of dollar value. So, while the $250 million venue of the 1970s would have been 100% publicly funded—or largely—in the 2020s, we have a billion dollar venues that are 50% public funded, but that’s 500 million. So, the amount of public funding in terms of dollar value is going up even if the public share of funding is going down.
What are the economic benefits of new stadiums and arenas to host cities?
[0:02:34]
JUDITH GRANT LONG: When we think about the benefits of major league sports venues to host cities, economists generally categorize these into three groupings. The first is economic benefits, and this is generally thought of as providing new jobs or generating new tax revenues. The second category is urban development benefits—which is an area that I focus on—which is really localized benefits. So what is happening in terms of changes in land use, changes in the amount of private investment in new construction, changes in vacancy rates, and so forth, and that’s generally targeted to a certain area of the city that is hoping to be regenerated in some way. The third category is social benefits. These are intangible, a little bit fuzzy. They include civic pride. Something that economists call social cohesion—which is the ability to converse with other residents about the score of the game and so forth. As well as external benefits that would include how the city is viewed by other cities, which is where we get this term major league city or world-class city, that sort of thing.
How do these public benefits compare to public costs?
[0:03:55]
JUDITH GRANT LONG: The cost-benefit analysis is the central question in considering or weighing public investments in major league sports venues. And the vast majority of the research that is done by both myself and many other colleagues in economics and other disciplines suggests that the benefits do not come anywhere near the cost of the public investment—which is to say that the bulk of research suggests that there’s little, or in some cases no benefit that would be counted towards the cost of the venue. So, most economists believe that these are very poor investments from the public sector perspective.
What are the urban development impacts of stadiums and arenas, including their use as “anchors” for sport and entertainment districts?
[0:04:51]
JUDITH GRANT LONG: Urban development impacts try to understand what we frame as localized impacts. So, from a positive side, is the venue creating the incentive for more private investment in the form of new construction, are property values going up, that sort of thing. And on the negative side, some of the urban development impacts include noise, traffic, increases in crime, and that sort of thing. So urban development impact tries to capture both these negative and positive outcomes related with sports facilities. The overarching research suggests that these localized benefits—they can be small. So, for example, we will see some increase in property values, suggesting that the presence of the venue is providing an amenity that people value and would pay more to be closer to. But these increases in property values are fairly small relative to the overall public investment in the venue, and also the research suggests that it’s very difficult to prove causality, that in fact, it’s the presence of the sports venue that’s driving the increase in property values rather than other local conditions.
What happens to sports venues after one-time events such as the Olympics and World Cup?
[0:06:19]
JUDITH GRANT LONG: Well, I’m happy to report there’s some good news on this front. Traditionally, with the Olympic Games, FIFA World Cup, and other major events where venues were custom built or purpose built for those events, the record has been relatively poor in terms of the post-game use of those venues. We’ve all seen pictures of empty, sometimes vandalized venues. But the news is getting better. In particular, the IOC and FIFA have started to change their strategies such that they are electing to go to host cities that are making better use of existing venues. So, for LA 2028, we have a very high rate of use of existing venues. And for the FIFA World Cup in 2026, of course, they’re using a multi-hosting strategy that makes use of existing venues in a number of host cities. So very, very different strategies. So, we’re starting to see different results.
What are the best and worst types of sports-facility investments, from the perspective of the host city?
[0:07:26]
JUDITH GRANT LONG: Well, I think the best kind of investment in a major league sports venue from the public sector perspective is a minimal one. So very, very low amounts of public funding is generally a good deal. And again, that’s in light of the research that is very extensive and has been going on for over 30 years that suggests that there isn’t a lot of economic benefit that is tied directly to the presence of the sports venue. So, the best deal is one where there isn’t a lot of public money. The worst deal, of course, in contrast, is one where there is a fair bit of public money, but the source of that public funding matters as well. So, if the funding for the venue is coming from regressive tax sources such as sin taxes on alcohol or tobacco, or if they’re coming from tourism taxes, it might dampen the enthusiasm for touristic activity in the economy, or even sales taxes, which are also regressive. Those sources of funds can be an issue with regard to determining how well the deal is structured.
What kinds of trends are you seeing regarding the financing of stadium projects?
[0:08:40]
JUDITH GRANT LONG: I think one of them, the more interesting trends that’s happening right now with regard to the construction of major league sports venues, has to do with the increasing privatization, meaning that teams, and more recently, through private equity contributions, they are able to provide for a larger proportion of the construction cost of their venues. So, when I say increasing privatization, I mean that the teams, as well as some of their private partners, are putting up more of the money to build the venues, and as a result, we see the public share of funding, on average, going down because these team contributions are going up. Now that is largely explained by the increasing revenues available to major league teams, particularly through media rights, as well as, in the NFL, personal seat licenses and other significant revenue streams—digital, online betting, so on and so forth. So as this privatization is occurring, one of the things that I’m watchful for is if the public subsidies are, in fact, appearing in the ancillary development projects. So, rather than getting public investment in the venue, the teams are looking to get the public investment through the mixed-use development or the sport and entertainment district that is around the venue, and so if we’re not paying attention to the public investment in those projects, we are missing part of the bigger picture.
