What would a National Football League franchise mean for Los Angeles?
Aside from cheering long-deprived sports fans, a franchise could boost property values. At least that’s the view of the Philadelphia Federal Reserve, which studied the social benefits that the NFL brings to host cities and concluded that property values in Los Angeles could rise.
Additionally, the report estimated a resulting increase in property tax revenues of up to $3.6 billion in present value over 30 years, the expected life of an NFL stadium.
“That’s very interesting. That’s a dramatic amount of money,” said Marc Ganis, president of Chicago-based Sportscorp Ltd., a firm that specializes in managing and building facilities for sports franchises.
The little-noted report projected that the increase in property values for cities landing NFL teams can go as high as 8 percent, but that sort of increase is unlikely given the sheer size of L.A, where the value of real property is estimated at $315 billion.
The report, released in 2003 and updated in 2004, does not take into account the substantial property value increases in the Los Angeles area since then.
In a study of 53 cities, the Fed report found that NFL “teams create value for residents” because NFL cities tend to have higher property values. In other words, people are willing to pay higher prices and higher rents in order to enjoy the NFL, regardless of whether they buy a ticket.
The report did not surprise the NFL. “It goes to the quality of life issues,” said Greg Aiello, spokesman for the NFL. “It’s a matter of amenities. Whether it’s malls or parks or sports teams, they all add to the quality of life, and people are willing to pay for that.”
However, some economists remain skeptical, particularly when team owners use such reports as ammunition to demand that taxpayers subsidize sports stadiums.
Owner benefits
Phillip Miller, an assistant professor and economist for Minnesota State University, said economists have reached a consensus that the greatest beneficiary of a taxpayer subsidy of a stadium is the team owner.
“The overarching question that needs to be asked is whether there is a public or private benefit by public financing of an NFL team,” Miller said.
However he added, “Just because there was a consensus in the past, doesn’t necessarily mean that the question is absolutely closed.”
Previously, economists have generally tried to quantify the economic benefits, or lack thereof, of sports franchises by looking at direct impact items such as money brought into the economy, jobs created plus the effect that job creation has on the rest of the economy.
The Fed reports said the economic impact of each of those areas is insufficient to justify the subsidies that cities pay to host professional sports teams.
However, the fact that subsidies continue to be paid suggests that civic leaders and citizens view sports franchises as important parts of civic life.
“I don’t think that you can just overlook the intangible benefits that a city might get from having a sports franchise, even though subsidies raise legitimate questions” says Brian Goff, Professor of Economics at Western Kentucky University and author of “From the Ballfield to the Boardroom: Management Lessons from Playing Fields.”
“The classic example would be the Brooklyn Dodgers that relocated in the 1950s. They were essentially a small business that closed down in Brooklyn,” he said, noting that the direct economic impact on the area from the Dodgers’ relocation was slight. In fact, many other small businesses closed in Brooklyn in the ’50s.
“But here’s the point: No one talks about those other businesses any more. They still talk about the Dodgers,” Goff said.
