(Center Square) — Monumental Sports and Entertainment have been in talks this summer of a future move to northern Virginia for some of Washington, D.C.’s professional sports teams if the city doesn’t chip in more for improvements to their sports arena, the Washington Post has reported.
Monumental owns D.C.’s professional hockey and basketball teams, the Washington Capitals, Wizards and WNBA team, the Mystics. The teams currently play in downtown D.C.’s 26-year-old Capital One Arena in Chinatown, but Monumental should be close to paying off the mortgage on the building – and company founder and CEO Ted Leonsis has historically hinted at moving the teams elsewhere once that happens, due largely to dissatisfaction with the financial contributions from the city.
Chris Douglas, an economics professor at the University of Michigan-Flint and a longtime student of stadium economics, says this is a common tactic of sports teams vying for greater public investment in their stadiums.
“There’s a couple of ways that teams extract these subsidies from state and local governments,” Douglas told The Center Square. “First, they threaten to move to a different state.”
“Really, it’s extortion. Teams extort the city and the state to build a new stadium” – or pay for its maintenance – “otherwise they’re leaving,” Douglas said.
University of Maryland Professor of Economics Dennis Coates agrees.
“To characterize these [arrangements] as public-private partnerships is maybe very generous to the idea of what happens. Extortion is probably a more accurate description,” Coates told The Center Square.
“The current case is almost a perfect example of that where the owner says, ‘Oh, I don’t like the facility that I’m in. You fix it for me, or I’m going elsewhere.’ That’s not a partnership.”
Despite this, these types of public-private funding relationships between sports teams, stadiums, arenas and local and state governments are not uncommon. In fact, according to Coates, they may be more of the rule than the exception these days.
“An entirely privately funded stadium is almost, but not quite, a unicorn. They really are not generally privately funded,” Coates said.
And while pricey public-private funding arrangements may not be uncommon, the sports industry might get better deals than most others, as state and local governments often contribute hundreds of millions of dollars to arena construction and give teams special and ongoing breaks regarding taxes and maintenance.
“The local government in Alabama didn’t say to Saturn or BMW, ‘Yeah, come here – we’re going to build you your entire plant,’” Coates said.
“They would say more like, ‘We’re going to give you tax breaks, we’re going to improve the highways in and out of the facility … We’re going to set up training programs so you have the skilled workforce that you need,’ but they’re not looking to pay the billions of dollars for the entire facility.”
Yet teams – and lawmakers – continue to advocate for the investment of taxpayer dollars in arenas and stadium districts, and localities continue to bow to team demands, often citing team-funded studies of stadiums’ economic impact on an area.
But according to Douglas, those studies vastly overestimate that impact. Spending is often redirected from local businesses to the arena, and, with all the deals governments give sports complexes – like exemption from property taxes – governments often don’t see much benefit either.
“The overwhelming consensus in the economic literature by people who study these issues is that arenas and stadiums generate basically no economic impact,” Douglas said.
“The reason there’s no economic impact from these stadiums is that they’re just closed way more often than they’re open.”
When teams attempt to pressure localities into devoting more public funds to stadiums, Douglas argues those localities “should just let the team leave,” though he doubts Monumental intends to move.
