The use of Public Funds for Private Benefit: An Examination of the Relationship between Public Stadium Funding and Ticket Prices in the National Football League

Abstract

During the past decade there has been a proliferation of sports stadia being built in America's municipal districts. While it used to be common for the public to fully fund stadium construction projects, over the past 20 years factors such as political motives, tax reform, and increased public awareness of tax equity have forced sports teams to share increasing amounts of the financial burden (Crompton, Howard, & Var, 2003). As public funding for stadia construction has decreased, franchises have continued to strive for maximized profits. Concurrently, the cost of attending events in sports stadia has increased for consumers in terms of higher ticket prices even though changes in fixed costs should not affect pricing (Leeds & von Allmen, 2004).

The purpose of this study was to examine the relationship between the use of public funds to build stadia and the profit maximizing goals of National Football League (NFL) franchises. A hypothesis was formulated that stated the impact of the public share of the construction cost would have no effect on relative ticket prices for those that consume the product. The cross-sectional data for a ticket price model, which consisted of seasonal data from every NFL team to play from 1991 through 2003, was investigated. The results showed an increase in public funding by 10% lowers ticket prices by 42 cents. As shown, the bulk of the variation in ticket prices was due to a general increase over time and MSA per capita income.

Keywords

National Football League public finance stadia ticketing

Get full access to this article

View all access options for this article.

References

Associated Press. (2004, March 4). St. Paul city council deals blow to mayor's stadium plan. Retrieved March 29, 2004, from http://www.lexisnexis.com/universe.

Baade

R. A.

, & Dye

R. F.

(1990, Spring). The impact of stadiums and professional sports on metropolitan area development. Growth and Change, 1–13.

Baade

R. A.

(1996). Professional sports as catalysts for metropolitan economic development. Journal of Urban Affairs, 18(1), 1–17.

Broughton

(2004, December 20-26). Building boom for ‘05, but spending up a bit. Sports Business Journal, 7(33), 18.

Brown

, & Paul

(1999). Local organized interests and the 1996 Cincinnati sports stadia tax referendum. Journal of Sport and Social Issues, 23(2), 218–237.

Brown

, Nagel

, McEvoy

, & Rascher

(2004). Revenue and wealth maximization in the National Football League: The impact of stadia. Sport Marketing Quarterly, 13(4), 227–235.

Brunori

(2001). State tax policy. Washington, DC: The Urban Institute Press.

Burdekin

R. C.

, & Idson

T. L.

(1991). Customer preferences, attendances and the racial structure of professional basketball teams. Applied Economics, 23,179–86.

Crompton

, Howard

, & Var

(2003). Financing major league facilities: Status, evolution and conflicting forces. Journal of Sport Management, 17(1), 156–184.

10.

Fort

(2004a). Inelastic sports pricing. Managerial and Decision Economics, 25, 87–94.

11.

Fort

(2004b). Subsidies as incentive mechanisms in sports. Managerial and Decision Economics, 25, 95–102.

12.

Foster

, Greyser

S. A.

, & Walsh

(2006). The business of sports. Mason, OH: Thompson Higher Education.

13.

Leeds

M. A.

, & van Allmen

(2004). The economics of sports (2nd ed.). Boston, MA: Addison Wesley.

14.

McDonald

, & Rascher

D. A.

(2000, January). Does bat day make cents?: The effect of promotions on the demand for baseball. Journal of Sport Management, 14(1), 8–27.

15.

McEvoy

C. D.

, Nagel

M. S.

, DeSchriver

T. D.

, & Brown

M. T.

(2005, May). Facility age and attendance in major league baseball. Sport Management Review, 8(1), 19–41.

16.

Mikesell

(2002). Fiscal administration (6th ed.). Belmont, CA: Wadsworth Publishers.

17.

National Football League. (1998, February 25). Collective bargaining agreement between the NFL management council and the NFL players association. Retrieved March 9, 2006, from http://www.nflpa.org/media/main.asp?subPage=CBA+Complete

18.

Rascher

D. A.

(1999). A test of the optimal positive production network externality in major league baseball. In Fizel

, Gustafson

, & L. Hadley (Eds.), Sports economics: Current research (pp. 27–48). Westport, CT: Praeger Press.

19.

Stiles

(2004, January 17). ‘Perfect Storm’ squashes baseball stadium; Dubuquers’ discontent over recent issues rose up in unison. The Telegraph Herald, p. A4.