I've studied stadium financing for over two decades – and the new Bills stadium is one of the worst deals for taxpayers I've ever seen

The Conversation

After New York lawmakers blew past the deadline to approve the state budget, they finally came to an agreement on April 9, 2022, that included a US$850 million subsidy for a new stadium in Buffalo for the Bills.

I am not exaggerating when I say that the New York Legislature has managed to craft one of the worst stadium deals in recent memory, considering the high bar set by other misguided state and local governments.

Stadiums are terrible public investments. The taxpayers don't want to pay for them. Why are governments willing to subsidize them?

A return to the bad old days

There were many things to dislike about the project. It is the largest taxpayer handout for a new stadium in the history of the U.S. The total government price tag could easily be over $1 billion.

It is counter to the trend of the past decade toward lower levels of public funding for stadium construction with taxpayers footing over 60% of the cost.

The first wave of the modern stadium boom began in 1991 and state and local governments covered two-thirds of the construction costs. During the Great Recession, government leaders found it politically unpalatable to give hundreds of millions of dollars to billionaires as they laid off teachers and firefighters.

Over the past decade, my research has shown that public subsidies have fallen on average. The most recent Super Bowl was held in Los Angeles.

The bad old days are evoked by the Bills deal.

Stadium subsidies are terrible public policy, and this arrangement is no exception.

The Bills and their owners don't need a handout. Terry Pegula has a net worth of $5.8 billion. The Bills have made over $300 million in operating income since they were purchased by the Pegulas seven years ago. The value of the Bills has gone up by another $900 million since then. Seven years is a long time to invest in a project, but the Pegulas have earned enough to pay for their own stadium.

A new stadium is the only thing better for a team owner. The new stadium is likely to drive up the value of the Bills far more than the $350 million the Pegulas are contributing to the stadium's construction costs.

Stadiums make poor neighbors

Two decades of research has shown that stadiums and franchises have little or no impact on local economies. The Bills aren't likely to be an exception.

Most of the customers at a sports venue are residents of the metro area who would spend their money elsewhere in the local economy if the team were not around. Stadiums make poor neighbors. The Bills play eight home games in the regular season at Highmark Stadium, which is a huge facility that is rarely used. This doesn't have much incentive for investing in the surrounding neighborhoods.

Don't think that NFL stadiums host a lot of other events. Over its 50 years of existence, Highmark Stadium has hosted 30 major concerts, three college football games and two large hockey games. The venue of Buffalo's stadium is not out of the ordinary.

Rather than creating a dense area of housing, retail establishments and restaurants, Highmark Stadium sits alone as an island of concrete in a sea of parking lots.

The threat of relocation

A survey found that 45% of New Yorkers are opposed to the plan, compared to 22% in favor.

It was included in the state budget.

Stadiums are an example of the classic special-interest problem. A new stadium in Buffalo could determine which candidate gets their vote. For the rest of the state, a small increase in their tax burden is not problematic enough to cause a voter to switch sides.

It's bad for public policy but good for team owners when teams minimize transparency. The Bills stadium proposal was added to the state budget just days before a final vote in the Legislature. It was not possible for lawmakers to fully analyze the issue, and there was little time for public interest groups to mobilize against the handouts.

The team was threatened to be relocated if they didn't pay up. The 49th-largest metro area in the U.S. is Buffalo, which is richer and more populous than San Diego, St. Louis, Portland and Austin.

The team indicated that the 2022 season could have been their last in Buffalo because of their current lease's extension.

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This threat was a slap in the face of Bills fans who have supported the team for over 60 years through subzero temperatures, lake-effect snow, four straight Super Bowl losses and more losing seasons than winning ones.

The number of teams has been kept lower by the league to keep the cost of a franchise low. I don't believe any city's fans or taxpayers are safe if owners are willing to use the threat of relocation.

The Conversation is a news site dedicated to sharing ideas from academic experts. It was written by Victor Matheson.

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