Externalities Of Sports

The topic that I have chosen is how externalities of a professional sports team affects the city, town, or state that it is in and how also it can increase or decrease the economic value of the current place that it resides in. There are plenty of professional sports teams in America, and some cities even have multiple teams inside of them, such as Boston, New York, Atlanta, etc. With numerous sports inside of the United States, the demand for a sports team is required; with this type of demand it could be beneficial or harmful for whichever city that it exist in.

One of the many positives externalities that professional sports teams can generate is increasing the city’s revenue. With a city having a professional sports team, the people that

live their will spend their money to go support their hometown team. It can bring great increase to existing partners in the community too. Any given day in the community of a sports team you can receive deals at a local business that you can take advantage of if you are a fan of that particular sports team. With a humongous stadium in that city to support their sports teams, they can also use it for other forms of revenue gaining events; such as concerts, car shows, or anything that can help attract people to put the stadium for good use. With more events going on at a stadium that was made for one purpose, it could open the door for brand new opportunities for the city in terms of gaining revenue. More events going on in the stadium, then there will be people visiting from out of town to attend these events and that helps the city because; where are they going to stay? Where are they going to eat while they’re in town? They will be staying in a hotel in the city and going to a local restaurant to eat and that is helping the city even more. So more events then more people will come to the city and that means a plus in the revenue column.
This takes me to the second positive externality and that is managing to increase the size of the city. The city can add neighborhoods, hotels, restaurants, bars, coffee shops, and many more places to the city to make it fit people migrating into the city. Finally, with the increase of the number of individuals visit and people moving to the city. You will have to create more jobs and more people will open up small business and this takes me to my final positive externality; making more jobs and small businesses. Now people are coming to the city they will be looking for a well-paying job; the new places that they are building they can go work at. More people with want to venture into the entrepreneurship and open up small businesses and hope to make a profit with the rapidly increasing size of the city. This also relates to the externality about revenue because it is still increasing, and now with the major development of the city it will help the city in more ways than one.
When there is a positive to something there is always negatives.

One of the negative externalities that professional sports teams serve is that can put the city into potential debt. Many think once a sports team is here, they are here to stay. They are wrong. Professional sports teams are a big investment to a city, and with investments you will always have a risk. If the sports team does not do good for a long time and the massive amounts of fans do not show up to each game and does not support them the team could go into great debt. The expenses can overweigh the revenue. The big stadium that they play in, the expenses they have to pay are extremely high and with employees and staff of the team also having to get their fair share of money, and it can be harmful to the team and the city to keep the team going. In San Diego, California there is QUALCOMM stadium and they host many events; in 2007 their final expense cost was $16,325,013; within 2 years in increased to $19,788,498 (San Diego Government). This is almost a 4-million-dollar increase over two years in a well-populated city, so imagine what will happen if this happened to a city that is not as popular as San Diego? The potential debt could skyrocket if the team doesn’t do good every year. With the city potentially going into debt, almost every single one of those small businesses that entrepreneurs made whenever the city was expanding, they will most likely go into debt and be forced to closed down. Traffic control is the next negative externality I will discuss. On game days, teams have thousands of people packed into one section of the city and people who are not attending the game can find this very annoying. Non-fans might want to go out and enjoy their day, but the overwhelming amounts of crowds of people can disturb them. The next and final negative externality I will discuss is stadium subsidiaries. Stadium subsidiaries are legal aids that the government gives cities to build new stadiums, but the

aid comes from the taxes from people in that city that will have the stadium. Stadium subsidiaries raise an economical question on efficiently and equity (Baade). A new stadium being built within a city is like an investment for the city, if it works then they gain great revenue from it but if it doesn’t then they will be in major debt and trouble with the state of government. Also, if people heard about this taxes that they will have to pay for a new stadium they might not like the idea presented. They might not be a sports fan and might not find it reasonable to put a stadium in that city because they might not enjoy sports. To be respectable, a survey could me sent out around the city to see if a new stadium would be good for the city and they could put why or why not, just to make it fair to everyone that currently resides inside of that particular city. The opportunity cost of putting that stadium there could be outweighed by other opportunity cost that non-sport fans can maybe think of.
My conclusion I have come across is that even though having a professional sports team in your city is very beneficial, it also has it negative aspects. The increase of revenue is always good and with the increase of it, you can make the city a lot better economically and have much-needed stability. Much like stadium subsidiaries and potential debt, it raises questions and making the city second guess themselves on if they really need a sports team and if they can support it. Teams receive massive amounts of revenue over the courses of a year but dues to expenses that the stadium has to pay, it could leave the team organization and the city in debt to the state. Finally, it all depends on whether or not if the city has the opportunity cost to be able to manage these sports teams efficiently or if they try to resort to other possible outputs to make everything better overall.