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Abstract

The modern U.S. stadium-development model enables “sport-extortion,” a phenomenon in which franchise owners leverage artificial scarcity, antitrust carve-outs, and credible relocation threats to extract public subsidies that deliver negligible public benefits. Owners use the league’s monopoly power and superior negotiating leverage to pit cities against one another and extract public money for new stadiums or upgrades to their existing stadiums. The owners and community leaders who support using public money to finance these projects promise huge economic returns and development for their communities. However, a survey of the empirical literature and examination of recently approved stadium projects reveal that these projects often lead to minimal gains in income or employment from new venues; real-estate effects are localized to the areas immediately surrounding the stadium, and the effects are mixed; and intangible “civic pride” benefits are overvalued due to public-choice problems that favor a vocal minority. If these projects were privately financed, there would be little concern with the minimal return on investment to the community. However, the recent trend of cities providing substantial public funding means that taxpayers are bearing the cost of projects that primarily benefit private interests. This Note evaluates potential policies that could realign the private incentives of the leagues and teams with the public welfare of the communities that the franchises call home. The policies considered in this Note are tightening restrictions on federal tax-exemption for stadium-related municipal bonds and more cautious use of Tax Increment Financing by including robust “but-for” tests and private risk-bearing; restricting the use of eminent domain in stadium projects; and clarifying or expanding league-specific antitrust immunity to impose federally guided relocation criteria. This Note concludes that an approach combining tax reform, disciplined public-finance tools, and calibrated antitrust adjustments offers the most likely path to protect taxpayers while preserving the legitimate community benefits of professional sports.

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