Is Sport Significant?

Sport has become a major industry as well as a major cultural preoccupation in the contemporary world. Cities are increasingly using major sporting events and activities to re-image themselves, promote urban development, fund economic growth and regeneration, as well as implement policy and programs for social and physiological harmony. In Canada, The Federal Policy for Hosting International Sporting Events (2008) provides a framework for the delivery of Sport Canada`s hosting program. The policy recognizes the growing interest in hosting sporting events, not only as a stimulus to sport development, but also as an economic and community development tool. Before the 1950s, most stadiums and arenas for professional sporting events were paid for entirely by the owners of the teams. In 1951, Ford Frick, the commissioner of major league baseball, then the most popular sport, decided that the owners should insist that state and local government officials provide subsidies for new baseball stadiums. He felt that public subsidies were justified because baseball brings many benefits to state and local economies beyond the games themselves. Seldom has a commissioner done more for the owners of professional teams. Public officials wholeheartedly embraced his idea, to the point that large public subsidies for stadiums and arenas became commonplace. (Tresch, 2008). This paper will continue to explore reasons why governments should subsidize sport. The following points will be discussed; the economic impact of sport on a City, the quality of life sport provides citizens, the community involvement sport offers, and finally the consumer surplus afforded by sports and sporting venues. Preceding these favourable topics to stadium subsidization will be a look at the contrary beliefs before the paper concludes.

Economic Impact

There has been much debate in recent years over the possible economic impact that a stadium and it`s professional sport team might bring into a city. Cities are at a point where they must become centers of entertainment for those living in the suburbs. Professional sports arenas/stadiums accomplish this effectively and provide a public good to the surrounding community with jobs, business, entertainment and a general improvement of living standards. The positive economic outcomes do not address the public policy consequences of governments lowering the cost of team ownership and the bias this introduces into leisure activity markets. In addition, as a result of several court decisions and legislative actions, sports leagues enjoy limited protections from market forces that should be identified as part of the public’s investment in the financial success of teams (Rosentraub, 1999). Hamilton and Kahn (1997) noted that if the Baltimore Orioles and Baltimore Ravens produced annual intangible benefits valued at $20 or more by each household (less than $2 per month), the public sector investment in the sports facilities would produce sufficient benefits to exceed the cost. Rosentraub and Swindell (2005) found that residents in Indiana placed sufficient value on the intangible benefits of the Indianapolis Colts to create a positive return on the public’s investment in a new stadium. These studies raise the possibility that the intangible benefits generated by teams could offset any investment by governments that is not recouped through pecuniary returns. Carlino and Coulson (2004), relying on regression models, found the presence of a National Football League franchise in a region accounted for an 8% increase in rent levels. Santo (2005) included newly designed sports facilities in a reassessment of a previous study of the effect of teams on regional income levels (Baade & Dye, 1990) and found regions with teams and new facilities had higher income levels. Downtown locations offer a synergy with other entertainment and business activities that have generated higher levels of economic development (Nelson 2001), even with teams capturing more spending by fans at facilities. The location of sports facilities in downtown areas has also been found to change some regional employment and development patterns (Austrian & Rosentraub, 2002). If tax money was used to build these arenas and stadiums and it provides all of these benefits to the city, then it seems to be money well spent.

Quality of Life

Sport provides an externality related to the overall quality of life that is absent from most other goods and services. Sport is a public good, and as such the consumption of the good by one individual does not reduce availability of the good for consumption by others; and that no one can be effectively excluded from using the good. (Stevens 2009). A professional sports team may bring external benefits in the form of people gaining utility from having a shared rooting interest in the team, whether they attend the games or not, or possibly by generating a sense of civic pride, much as is derived from having a world class symphony orchestra or botanical garden. (Tresch, 2008). After all, the New York Yankees are truly beloved throughout New York. Not all New Yorkers are emotionally attached to the Yankees, of course, but if enough of them are then the externality from having the team could be quite large. These kinds of non-marketed, quality-of-life externalities are difficult to estimate. Let us take a look at an amateur sporting event and the rallying of a community behind it. In the Niles Township (Illinois) High School District, community volunteers, local businesses, and school employees collaborated to acquire and install lights for the school football field. (Nix, 1982). Sport has this capacity to bring people together and give a sense of pride and belonging to a community, even at the amateur level. Professional teams can do the same, and these teams -- especially when successful -- provide a psychological boost to city residents and, in the process, benefit the city. Economists nearly universally agree that stadium subsidies are bad for a city's economy. Where these analyses fail, however, is in the importance to capture the impact of sports teams on civic pride.

Sport and Community Involvement

Many state and local governments have subsidized the construction of arenas and stadiums for the use of professional sports teams. They often justify the subsidies with claims that the stadiums generate positive externalities, including public goods and community inclusiveness. As Owen (2003) states, professional teams have a publicly good element about them, and stadiums, subsidized or not, are an important factor in bringing this public good to the community. This is very similar to the point Santo (2005) makes, when he discusses sport stadiums as development tools that can be used to revitalize the community. Toronto Mayor David Miller announced recently that with Provincial and Federal government approvals now in place, a plan by Maple Leaf Sports & Entertainment to increase public access to year-round soccer facilities and install grass at BMO Field can proceed. Miller went on to say that “the agreement of our government partners means tremendous things for soccer at both the community and professional levels.”(Girard, 2009). The upgrades to these facilities, which includes BMO Field and Lamport Stadium, will result in more than 2,500 more hours available for community sport use and have met with support from the Canadian and Ontario soccer associations as well as residents and businesses near Lamport Stadium in Liberty Village. (Girard, 2009). Miller continued to say that “this is a terrific example of the public and private sectors working together to build our city and the sport of soccer and also means good things for the community and for the players on Toronto FC and all our National teams.”(Girard, 2009). Mayoral influence aside, this particular show of community involvement has others believing in the good it will do to this particular community. Bob Hunter, the executive vice-president of venues and entertainment for Maple Leaf Sports & Entertainment had this to say: “Converting BMO Field into a natural grass surface will have tremendous benefits for our community, our city, Toronto FC and soccer in Canada. BMO Field's natural grass surface will support growing and developing soccer at amateur, national and professional levels, by creating greater levels of access and opportunity.” (Girard, 2009).

Consumer Surplus

One of the real sources of benefits of sports teams is their surplus value to consumers. The consumer surplus is the amount that consumers benefit by being able to purchase a product for a price that is less than they would be willing to pay. As Owen (2003) states, fans can benefit from the mere presence of a team, without attending games or even watching them on television by following the progress of a team in television reports and newspapers, or by word of mouth. Coliseums can create consumer surplus benefits by providing types of entertainment to local residents that would otherwise not be available to them. Subsidizing sports stadiums or multipurpose coliseums catalyzes these facilities to provide locally unique forms of entertainment that create enough consumer surpluses to make these projects socially worthwhile. Irani (1997) estimated aggregate consumer surplus from major league baseball franchises based on regression estimates of the demand for major league baseball games. Also, in an analysis of the consumer surplus from all three U.S. major league sports, Alexander, Kern and Neill (2000), using ticket revenue along with alternative parameter values for the price elasticity of demand, estimated consumer surplus from major league baseball, basketball and hockey franchises. Both of these studies find that the consumer surplus from major league sports franchises are substantial. Successful teams may instil a pride in a community even for the people who are not particularly interested in the team. In economic terms, fans can be free riders, and provision of the public good by the government is a well-known solution to the free-rider problem. These benefits, although difficult to measure, are the only way to truly calculate the social value of teams.

On the Contrary

Economists are almost unanimous that government financing of stadiums is a bad investment for the economy. However, governments continue to finance stadium constructions for the economic benefits that they are supposed to provide as well as others reasons such as those stated above. The debate for those against can incense and enrage. How can governments possibly entertain the idea of subsidizing sport? Nadar (2000) argues that even if a stadium is subsidized, these houses of sport only cater to the rich. In his Boston Globe article he states: “Real fans will end up being second-class citizens as ticket prices increase and affordable seats are placed farther away from the field as luxury boxes become a priority. Regular fans, families, and other non-corporate patrons will be relegated to the seats above and behind the luxury boxes and club seats.” Others argue that education, healthcare and infrastructure should be the main priorities of government funding. Sport is just not considered to be a top priority, and should not be for those legislators whom provide the subsidiaries. The Sport Welfare system is only maintained by the perception of several popular myths, such as Cities with pro teams will be deemed “Major League”, that an improvement of the quality of life will result and that it sport provides family entertainment, however the acquiescence of public officials to the demands and often times the threats of owners has often been referred to as “legal extortion” At the end of the day, the only true winners in sport subsidiaries are the millionaire players and billionaire owners.

Conclusion

As participants, spectators, or volunteers, people are attracted to sport — arguably more than to any other activity. This popularity transcends national, cultural, socio-economic and political boundaries and can be invoked with success in virtually any community in the world. Sport’s popularity derives in large part from the fact that, when done right, it is fun and enjoyable for everyone — participants and spectators alike. In contexts where people are faced with difficult and unrelenting challenges in their day-to-day lives, the value of this dimension of sport should not be underestimated. Sport is an inherently social process bringing together players, teams, coaches, volunteers and spectators. Sport creates extensive horizontal webs of relationships at the community level, and vertical links to national governments, sport federations, and international organizations for funding and other forms of support. Sport has emerged as global mass entertainment, and has become one of the most powerful and far-reaching communications platforms in the world. Because global sport events offer the capacity to reach vast numbers of people worldwide, they are effective platforms for public education and social mobilization.
By extension, high-performance athletes have become global celebrities in their own right, enabling them to serve as powerful ambassadors, spokespeople and role-models for development and peace initiatives. This paper has explored the positives of sport and what it can do for a community as a whole. Through thorough analysis of economic impact, quality of life, community involvement and consumer surplus, it is obvious to see why governments should provide subsidies for sport.


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