On Tuesday, St. Paul Mayor Melvin Carter and Minnesota Wild owner Craig Leopold addressed the Senate Capital Investment Committee, seeking state funding for renovations to the Xcel Energy Center. The project is estimated to cost over three-quarters of a billion dollars.
The Wild will contribute $216 million, with Ramsey County contributing $159 million. This leaves the state government with the remaining $395 million — half the entire cost of the project.
Setting aside the high price tag, there are several reasons for Minnesotans to be concerned with this proposal.
First, with Minnesota facing a potential $6 billion budget deficit, the state cannot afford to allocate funds to frivolous expenses. Not to mention, under the state’s borrowing guidelines, the bonding bill for this year will be capped at $700 billion. Any funding to Xcel Energy Center would likely have to replace other, more essential, infrastructure projects.
What’s more, it is particularly questionable that taxpayers are being asked to subsidize the facility of a sports team worth over a billion dollars and owned by a multi-billionaire.
For decades, proponents have argued that facilities like Xcel Energy generate economic activity and, therefore, deserve public subsidies. That idea, however, does not stand up to empirical scrutiny. Research evidence suggests that subsidies for stadiums and other entertainment facilities often cost taxpayers more than they are worth.
A bad deal for taxpayers
Public subsidies for huge entertainment venues, such as stadiums, are not new. Locals, after all, love their sports teams and do not like to see them leave. This fact incentivizes cities across the country to offer goodies — such as tax breaks and handouts — to sports teams to get them to relocate or, in Xcel Energy’s case, stay.
According to proponents of these subsidies, franchise sports teams attract people, spending, and other businesses into cities. Hence,
subsidies are offset by revenues from ticket taxes, sales taxes on concessions and other spending outside the stadium, and property tax increases arising from the stadium’s economic impact.
The same argument has been put forward for Xcel Energy Center.
“It’s not a question of whether taxpayers should be on the hook for this building. We are,” Carter said. “It’s a question of whether we want to facilitate, we want to set ourselves up, so that what we’re on the hook for is a vibrant, thriving center of activity for the next generation.”
Research evidence, however, indicates that Xcel Energy Center’s benefits to the public and taxpayers are likely overblown. A 2022 research paper, for instance, summarized 130 studies on 50 years of stadium construction between 1970 and 2020, concluding that
consumer spending on sports represents a transfer from other local consumer spending, not net-new spending.
Even though sports stadiums attract non-local visitors,
most consumer spending in and around pro sports venues derives from local residents; therefore, the opportunity cost of local sports consumption falls primarily on other competing local businesses, such as movie theaters, restaurants, and retail shopping.
Most spending on game tickets, concessions, and associated hospitality near a sports venue would have occurred in other parts of the host jurisdiction without the presence of a pro sports team. Sports-related spending largely reflects a redistribution of existing spending by residents rather than increased local spending
Overall,
when positive effects exist, they occur very close to venues, within one or two miles, and in sectors closely related to sports consumption (e.g., food and beverage).
Given the hefty price tag, the case for using taxpayers’ money to renovate the Xcel Energy Center is extremely weak.