A Radical Idea for Changing How Cities Finance Stadiums

City governments very seldom turn down stadium financing deals. It's almost like they're addicted to them. Detroit, for instance, will soon be home to a $450 million hockey stadium paid for largely by Michigan taxpayers. Even though the city is in debt to the tune of $18 billion and can’t afford to keep all of its street lights on, emergency city manager Kevyn Orr agrees with Michigan Governor Rick Snyder that the best possible way to stimulate Detroit's economy is a new stadium.

Orlando isn’t Detroit, and the professional soccer stadium it’s agreed to finance won’t cost nearly as much as the Red Wings’ new home—$85 million versus $450—but it’s a similar deal. The Orlando City Soccer Club wants a Major League Soccer franchise. To attract one, club ownership says it needs a dedicated soccer stadium, and that building one with public financing will have a positive economic impact for Orlando and Orange County. As countless economists have argued, this is largely bunk. The most recent study to make this argument, published in 2012 and focused on professional basketball instead of soccer, found "no statistically significant association between having an NBA arena or an NBA franchise and MSA regional personal income." Meanwhile, an article published in the Journal of Economic Perspectives in 2000 noted that "independent work on the economic impact of stadiums and arenas has uniformly found that there is no statistically significant positive correlation between sports facility construction and economic development."