ERROR
Main Error Mesage Here
More detailed message would go here to provide context for the user and how to proceed
ERROR
Main Error Mesage Here
More detailed message would go here to provide context for the user and how to proceed
search
Close Nav

This Cup Won’t Runneth Over

back to top
eye on the news

This Cup Won’t Runneth Over

Inflated projections of what the World Cup will bring to U.S. cities help explain ever-growing taxpayer sports subsidies. June 27, 2022
Economy, finance, and budgets

One of the most persistent myths about taxpayer investments in sports is that pumping public money into stadiums and arenas or hosting big international events generates enormous economic returns for communities. We got another repeat of that fairytale recently, when mayors and governors around the country touted the benefits that the World Cup would bring if soccer’s international governing body named them as host cities for the 2026 North American tournament. The fantastical sums thrown about—at a time when NFL franchises are asking cities to pony up for the next generation of subsidized stadiums—are a reminder that the public purse is never off-limits to popular pursuits like sports.

In 2017, the governing body of soccer, Zurich-based FIFA (Fédération Internationale de Football Association), accepted a joint bid by the United States, Canada, and Mexico to host the 2026 World Cup, largely because of the success of the 1994 games in the United States. Though America was not thought of as a soccer powerhouse (the U.S. had no top professional league at the time), the tournament nonetheless set a World Cup attendance record of 3.57 million that still stands today. FIFA understandably saw the 2026 tournament—which will expand by 50 percent, to 48 teams playing in 16 cities—as an enormous opportunity to cash in on the continuing growth of soccer in America since 1994. The men’s professional soccer league, Major League Soccer, now boasts franchises playing in 23 U.S. metro areas and three Canadian locations, and America’s sports television networks now cut multibillion-dollar deals to broadcast soccer games from around the world.

Even so, FIFA, like other international sporting organizations, expected cities seeking to host matches in 2026 to submit bids that included government financial incentives. Missouri, Georgia, and Florida, for instance, all passed legislation exempting World Cup ticket sales from state taxes—perhaps one reason Kansas City, Atlanta, and Miami were among the 11 U.S. communities awarded 2026 games. Dallas and Houston, which also won bids, can tap into a state-financed fund that helps cities host big sports events. Baltimore and Cincinnati, with state backing, also committed in their bids to invest public money in upgrades to their stadiums, though neither city’s bid was successful, partly because of shortcomings in their venues. Kansas City pledged some $50 million for stadium upgrades, though it’s not clear where the money will come from. Ultimately, as one critic points out, the buck stops with the taxpayer.

Not everyone wanted to join the bidding. Chicago, Minneapolis, and Glendale, Arizona (whose NFL stadium will host the 2023 Super Bowl), all declined to vie for the tournament. “FIFA could not provide a basic level of certainty on some major unknowns that put our city and taxpayers at risk,” said a spokesman for the Chicago mayor’s office. Chicago officials may have remembered how controversial the city’s expensive attempt to win the 2016 Olympic Games was. Those games proved a financial disaster for the ultimate winning host city, Rio de Janeiro.

Still, competition among cities was fierce, in part because of hyperbolic claims of what a World Cup designation could mean. New Jersey governor Phil Murphy claimed that the 1994 tournament, which included seven games at Giants Stadium in the Meadowlands, brought the state a staggering $500 million in economic benefits—the equivalent of nearly $1 billion today—and he argued that 2026 would generate a similar windfall. A local study for the tourism industry in Nashville, a city that bid aggressively (though unsuccessfully) for the World Cup in hopes of cementing its status as a rising metro, estimated that the matches could bring the fantastic sum of $700 million to the Music City, generating 5,500 jobs and more than $600 million in visitor spending.

Economists who have studied the actual impact of big sporting events dismissed such estimates as wildly inflated, pointing out that no World Cup had ever produced so much economic activity countrywide, much less for a single city. These studies, critics argue, typically overestimate the impact that visitor spending has on local economies. In 1994, for instance, boosters projected that the cities hosting World Cup matches would see $4 billion in extra economic activity, but a 2003 study found that the economies of some host cities shrank that year. One reason is a phenomenon known as the crowding-out effect. Non-sports tourists tend to avoid cities where a big event like the World Cup or Super Bowl is taking place because those events drive up prices on everything from air travel to hotel rooms. In addition, many studies exaggerate the multiplier effect from ticket sales, assuming that they represent additional economic spending when in fact many tickets are purchased by locals who wind up spending less elsewhere. The impact of such shortfalls can be devastating on poorer regions or on countries encouraged by unrealistic projections to spend big money on events.

Many World Cup venues are big, costly stadiums built at least partly with public monies. The exaggeration of World Cup projections is also characteristic of reports that claim public investments in these stadiums return enormous dividends to communities. Instead, extensive research has shown that such public investments rarely pay off; the facilities simply shift leisure spending from one segment of a marketplace to another and produce mostly low-wage, part-time jobs.

Even so, the U.S. appears to be heading into a new era of stadium subsidies. In the last year, the NFL’s Buffalo Bills lined up $1 billion from New York State for a new stadium, the Baltimore Ravens received $600 million in public funding to renovate their venue, and the Tennessee Titans may receive anywhere from $1.2 billion to $1.5 billion in taxpayer funding for their new home. And these deals may only be the beginning: as many as half of all NFL teams may be looking to replace their stadiums in the next decade. If you recall a similar building boom not long ago, that’s because professional sports stadiums have an increasingly shorter lifespan, as teams look to replace them more quickly to supercharge fan interest and stoke new revenues.

The 2026 World Cup will certainly boost the sport (and business) of soccer in the U.S., and it will doubtless raise the country’s already-elevated status as a sports nation. Lots of U.S. fans of the game are no doubt excited by the tournament, and host cities will be thankful they had ready-made stadiums that helped them win their bids. But the exaggerated claims of the economic benefits reinforce the misleading narrative that big-time sports and their venues are economic engines. In truth, they’re more of a luxury that teams enjoy at the expense of the cities and states that often pay for them.

Photo by CHRIS WILKINS/AFP via Getty Images

Up Next
eye on the news

Something Borrowed, Taxpayers Blue

Local governments have pumped billions from speculative bond offerings into their underfunded pension portfolios—even as markets tank and recession looms.
Steven Malanga June 15, 2022
Economy, finance, and budgets
Politics and law
Saved!
Close