Canadians love sports and watching any of the four major sports, hockey, football, basketball and baseball in the home team march the victory in the World Series, Stanely Cup Finals, and Super Bowl generates local pride and more excitement than any other event in town. Fans always stick by their hometown teams whether they win or not win. Cities without a home team home are often willing to dangle the carrot to lure teams to move on while cities with home teams go to great lengths to make sure that they remain home ( Crompton, 2014).
Arenas and stadiums were built between the years 1987 and 1999 in Canada at the cost of 8.7 billion dollars. This estimation only includes direct costs implicated in the overhaul of these facilities; indirect expenses such as those that the money cities might spend in adding the infrastructure required to support these services are excluded. Out of this estimation of the direct costs, taxpayers’ money was used to fund part of this refurbishment which accounts for about 57 percent of the total coast. Other stadiums have been constructed while others are in progress since the year 1999. The tax dollars will support much of these constructions costs. The use of public funds to lure and keep teams remains questionable. Development specialists and economists have carried out a series of studies that depicts that those cities that invest heavily on in sporting activities such as the construction of arenas, stadiums as well as hosting a premier league experience slower income growths compared to those that have not. The reasons as to why cities may engage in sporting activities are not quantifiable because they may include many variables that are intangible ( Edelman, 2012) . These goals include political self-interest and civic pride. The studies overlook the fundamental economic realities. The taxpayers are convinced of their virtue after the cities justify these decisions.
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Funding is divided into two main groups; it may be public or private funding. Federal funding includes and is not limited to taxes, individual authority bonds, municipal bonds, and certificates of participation. It also includes cash aid, naming privileges contributions, restaurant rights, or concessionaire, sponsorships luxury, lease agreements and preferred seating, gift shop revenues, advertising and parking fees. To spread the enormous cost of building a state of the art sporting facility other ways of funding have been expanded to include partnership projects in private and joint public funding. Most often, government funding is in the form of luxury taxes, land contributions and individual contributions within the facility. This paper seeks to address benefits gained in funding of professional hockey teams using taxes.
People often envision the stands packed with loyal fans, sports when they hear a new stadium being brought to their city. Local hotels were bustling with travelers and restaurants filled with diners from out of the town eager to see the big game. The towns of Markham and Edmonton are counting on this experience. They have green lightened public funding in the hopes of drawing in new visitors and creating new jobs towards the multimillion dollar arena projects. Following these reasons, Edmonton approved a deal the owner of Oilers for the proposed stadium while Markham that their planned seat rink will be the home for a new NHL franchise. This is likely to increase the city’s employment, hotel occupancy rates, and per- capita income as asserted by Groothuis, Johnson and Whitehead (2014).
Economic benefits to the cities
A study cited by Matheson that was conducted in the US examined cities that hosted the Super Bowl in the mid 200s. This study proved that mega sporting events are associated with an increased income in the countries that use taxes in funding professional teams. However, this increase in income was only slight. Conducted by the University of Ottawa researchers in 2005 is a study that looked at the economic benefits of the professional sports teams in eight Canadian cities on hotel occupancy rates. Some of these towns included Edmonton, Montreal, and Toronto. This research was published in Sports economic journal when a city with major league franchise goes without a team through a period due to the lockout. It had no significant impact on occupancy rates in hotels as thought by the majority ( Lathrope, 2014).
Research shows that the city’s growth is not affected by subsidizing sports activities. Funds are diverted from alternatives with higher returns; this may hurt the economic growth. A study conducted in 1994 examining economic growth shows that only two areas depicted a significant relationship between the sports team presence and the personal per-capita income.
Most arena and stadium projects have been financed with public money, for example, the summer games in Montreal in 1976. This includes the Olympic Stadium, the Velodrome, and a postmodern apartment complex. Eventually, this stadium became the home of the Montreal Expos. This facility was later sold to Washington D.C and then named the Big Owe due to its lingering debt. There are examples of sporting projects that have continued to generate revenues. An example is the Calgary 1988 Olympics, though these benefits are minimal.
Increase in local tax receipts
Playing host to professional sports teams increases local tax receipts. Salaries of the teams and sales increase the local tax receipts. Economist Mark however in 1977 noted that, professional sports do not account for more than one percent of the country’s payroll in the private sector.
Source of government revenue
Sports facilities generate tax income from their sales. Economic impact studies often accompany proposals to use the public money to finance sporting activities. These studies show that the newly generated income may not stay in the region for long and the secondary jobs created cannot be substantiated. Since most of the cash goes to the players, these funds may not be spent in the hometown as many of them live in other cities. Athletic careers are often short-lived, so most of their money is always invested. League rules require ticket revenues to be shared in other cities with franchise owners to subsidize the teams in smaller markets. These public funds used for arena or stadium may only create fresh revenues for a city if they create new spending by individuals from outside the area or when the donations cause inhabitants to spend cash locally or when the resources keep rotating over locally creating new expenses. This may be close to impossible.
Tourist attraction
Sporting events such as hockey attracts people from outside the city. However, there is no evidence to show that these events are better at attracting visitors than other activities. Tourists who often attend hockey games are those always visiting family or are in town on business. If the sports event were not available, they would spend the money on other activities. A study conducted by two economists, Roger Noll and Andrew shows that sports activities do not attract new industries or tourists.
Employment opportunities
Hosting a sporting event offers opportunities for employment to the locals. These are termed as secondary jobs thus are short term. The city cannot depend on these jobs as they are not permanent and when these activities are over, the unemployment situation goes back to normal.
Sense of civic pride and well-being
Having new amenities helps to boost the sense of civic pride and the welfare of the citizens. This is the primary reason behind cities finding sporting activities in spite of the fact that there are only minimal financial benefits accruing from this activity. To keep the home team home, cities go extra miles to a new team to the city. The local team might threaten to leave. To avoid this, the cities are often compelled to compete with some cities that avail updated facilities. Taxpayers spend a lot of money; this is shown by the weight of economic evidence, it is absurd that they do not get much in return ( Swindell and Rosentraub, 2013). The investment almost appears to be unwise when the return is compared with other potential uses of funds. In spite of these, taxpayers are still willingly supporting the city proposals to spend the funds because of the civic pride. No matter how persuasive, attacks on using the citizens’ tax to fund sporting activities often fall on deaf ears.
References
Crompton, J. L. (2014). Public subsidies to professional team sport facilities in the USA. Sport in the city: The role of sport in economic and social regeneration , 15-34.
Edelman, M. (2012). Sports and the City: How to Curb Professional Sports Teams' Demands for Free Public Stadiums. Rutgers Journal of Law and Urban Policy , 6 (1).
Groothuis, P. A., Johnson, B. K., & Whitehead, J. C. (2014). Public funding of professional sports stadiums: Public choice or civic pride?. Eastern Economic Journal , 30 (4), 515-526.
Lathrope, D. J. (2014). Federal Tax Policy, Tax Subsidies, and the Financing of Professional Sports Facilities. South Texas Law Review , 38 .
Swindell, D., & Rosentraub, M. S. (2013). Who benefits from the presence of professional sports teams? The implications for public funding of stadiums and arenas. Public Administration Review , 11-20.
