Public Debt For Private Gain – Stadium Subsidies

Why big new stadiums don’t produce a social benefit – a tale of two cities

By Liam Gash*

In December, our parliament will vote on whether to proceed with a proposed new stadium in Hobart. This roofed stadium as demanded by the AFL will cost well over $1 billion. But we are told that it will make money because of the large number of sporting events, conferences and performances that it will attract. Despite the massive debt being accrued by the state government and the enormous cost of this new stadium, there has been very little discussion in the public arena to test the assertions of stadium supporters.

It might then be instructive to look at the experience of Dunedin in New Zealand and then look at research studies of similar large stadiums built in other countries.

Dunedin is a city of approximately 133,000 people on the east coast of the South Island of New Zealand. It is the second largest city on the South Island and the capital of the Otago region.

The most popular sport in NZ is rugby union, and the Otago Highlanders has a long and proud history. In 2006, the club decided that its existing stadium at Carisbrook was not a suitable venue for the upcoming 2011 Rugby World Cup, and they formed the Carisbrook Stadium Trust to build a new venue.

The result was Forsyth Barr Stadium, built in Dunedin near the University of Otago. It is a rectangular, roofed, all-weather stadium with a capacity of just over 30,000.

By early 2009, a final decision on the Dunedin stadium was still pending but the city council had already spent $45 million on the project. Protest meetings were held and a survey conducted by two academics from the University of Otago found that 71.7% of respondents were opposed to public money funding the stadium.

After 6 hours of debate the council voted 10-5 to build the stadium. In the 2010 council election the mayor who had supported that motion was voted out but the contracts had been signed.

While the new stadium attracted concerts by Ed Sheeran, Fleetwood Mac and Elton John, the revenue has not been sufficient to cover the massive loans for construction and the ongoing maintenance costs.

When I visited Dunedin a few years ago, one local councillor was proposing demolition of the stadium because of the crippling ongoing maintenance costs. There have been profound impacts on Dunedin City Council – widespread cutbacks in services and a proposed 10.7% increase in rates this year. Former mayor of Dunedin, Dave Cull, said:

”Our community got the stadium, but we all paid a far stiffer price than we’d been led to believe.”

Research on the impact of stadiums

Hobart and Dunedin are not unique in having sporting organisations trying to persuade governments to build stadiums for them.

Around the world, big-business sporting codes, despite making enormous amounts of money from ticket sales, merchandise, television rights, sponsorship and advertising, always prefer if someone else can build their stadiums and other infrastructure for them. And, in most cases, the same optimistic ‘estimates’ of how much money they will make are rolled out.

In fact, this scenario is so common it has generated a whole field of academic research.

Over the last 30 years over 130 research studies have examined the economic and social impact of subsidised sporting facilities. The results of these studies were summarised in a 2022 paper by John Bradbury, Dennis Coates and Brad Humphries.

Their conclusions were very clear.

The “level of venue subsidies typically provided far exceeds any observed economic benefits.”

The second point they make is that in some cases new large sporting facilities produced other benefits such as quality-of-life amenities, community pride etc. However, these benefits were not evident in all cases and downsides existed such as “associated crime, congestion” and other negative impacts.

Private profit and public debt
The AFL has an annual turnover of close to $1B per year. According to their website, in 2024 the AFL gave $420.8 million to existing clubs but their spending on elite sporting infrastructure declined from $14.4 million in 2023 to $12.6 million last year. Despite their massive revenue they seek to push the building of stadiums and other facilities onto local and state governments.

Morocco
Morocco in north Africa is to host the soccer 2030 World Cup. The government of Prime Minister Aziz Akhannouch plans to spend a total of $7.4bn on infrastructure for these games, including building the world’s largest stadium with a capacity of 115,000.

Beginning in September this year, these plans have been met with huge street protests chanting “No World Cup, health comes first” and “We want hospitals not football stadiums.” So far three protesters have died in clashes with police and hundreds have been arrested.

The demands of the protesters are – free and quality education for all; accessible public healthcare for everyone; decent and affordable housing; better public transport; lower prices and subsidised basic goods. Many of these issues could equally apply here in Tasmania. The state government has already begun cutting back on services such as TAFE and foreshadowing large cuts in state employees next year.

Bums on seats in Hobart
The Womens AFL game between North Melbourne and St Kilda on 26 October this year attracted 1,377 people to North Hobart Oval. Current crowd numbers for Sheffield Shield Cricket and AFL matches are not huge in Hobart. Even a slight increase in the number of AFL matches played in Hobart will do little to meet the cost of loan repayments and maintenance.

As per the academic research outlined above, much of the revenue that can be expected for a new stadium will not be new money. Shows touring Australia, conferences etc. held in the stadium would large have taken place anyway, but in existing Hobart venues. Income and jobs will be transferred to the from other enterprises.

What other state in Australia, mired in debt, would have massive infrastructure projects determined by the governing body of a sporting code in another state. By any objective cost-benefit analysis the benefits will be accrued by the AFL and the costs will largely be met by ordinary Tasmanians.

References
Bradbury, John Charles and Coates, Dennis and Humphreys, Brad R., The Impact of Professional Sports Franchises and Venues on Local Economies: A Comprehensive Survey (January 31, 2022). Journal of Economic Surveys, forthcoming. Available at http://dx.doi.org/10.2139/ssrn.4022547
Hajar Chaffag, “We need hospitals more than football stadiums, say Morocco’s young protesters”, BBC online, https://www.bbc.com/news/articles/c8rv2l3me40o
Highlanders Rugby Union, Wikipedia, https://en.wikipedia.org/wiki/Highlanders_(rugby_union)

*Liam Gash is a retired communications and marketing professional living in Hobart.

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