A Bonanza for the City It’s Not

Cities seeking professional sports expansion teams or trying to lure franchises from other cities--or simply trying to keep their current teams--are now required to make enormous financial concessions to these transient teams.

By almost all accounts, the economic impact of a sports franchise on a community is negligible. This is certainly the case in Los Angeles, where the money that would be spent attending a game or otherwise supporting the team is merely transferred to other forms of entertainment--the theater, a night on the town, a weekend in the mountains or at the beach or other sporting events.

Generally speaking, the economic impact of having a franchise relocate to a city is about the same as the opening of a new department store or a large supermarket. When both the Rams and the Raiders left Southern California, our economy did not suffer significantly. In fact, it is highly unusual for large local economies to either expand or contract based solely on the activities of sports franchises. It is safe to assume that when Los Angeles does secure a new football franchise, its true financial impact to our community will be minimal.

Most of the benefits associated with having a team move in are not quantifiable, such as enhancement of the community’s status and the perception that the city has “arrived” and has earned “big league” status.

Strictly speaking, Los Angeles, the nation’s second-largest city and an entertainment capital, does not need these intangible benefits. In fact, a strong case could easily be made that the allocation of taxpayer funds to secure or retain a professional sports franchise could be better invested in other capital projects--those that provide our community with tangible benefits.

Nonetheless, sports serves as the vehicle for what has been termed the “contrived community.” That is, having a major league team provides the city with a symbolic rallying point around which citizens of all walks of life can join together to support a common cause.

The purported financial advantages of having a professional sports franchise, when combined with its perceived social benefits, routinely result in elected officials throwing caution to the wind--doing whatever it takes to secure or keep a team. Franchise owners, sensing the public sector’s thirst for sports, exploit their advantage and hold municipalities hostage. This exploitation results in the granting of favorable financial terms to teams considering a move to desperate cities.

If investing in sports facilities was such a great financial opportunity, private firms, not the public sector, would be actively involved. By and large, the private sector seldom involves itself in such projects, since it does not view such investments as prudent.

As a society, we will do whatever it takes to sustain sports for as long as it remains a cornerstone of our culture and for as long as we believe we need it as an outlet. Franchise owners, as successful businesspeople, realize this and use it their advantage, exploiting any and all revenue opportunities.

Sports has always been a business. But it has taken the events of the last several years to fully appreciate the fact that sports, like most of private industry, is about making money. Why are we so surprised by this?