Image generated by ChatGPT 4o
The Tennessee Titans are building a new, $2.1 billion dollar home and you’re going to pay for it.
No, Vanderbilt students are not going to have to take out their, or their parent’s check book and write out an eye watering figure, but Nashville and Tennessee taxpayers are going to bear a record breaking financial burden to the tune of $1.2 billion dollars, the largest ever stadium subsidy in the nation.
Large public subsidies for the stadiums of major sports teams have been somewhat of a trend in recent years, and with that has come a substantial amount of criticism. The Oakland Raiders and Athletics have both benefited from brand new stadiums funded by public money in Las Vegas, while the Buffalo Bills have received $850 million dollars from the State of New York for a new home. The Chicago Bears and White Sox, the Jacksonville Jaguars, the Cleveland Browns, the Tampa Rays and the Kansas City Chiefs, and others are all collectively seeking billions of dollars worth of subsidies.
The problem with new stadiums
While sparkling brand new stadiums may be visually appealing, they are not good economic investments for the cities, states and citizens funding them. They do not generate enough new economic activity to offset the substantial costs that the public bears for them. There is an opportunity cost (investments could potentially be better placed elsewhere) associated with such subsidies, money that could be going towards areas like healthcare, infrastructure and education. In the words of economist J. C. Bradbury, “When you ask economists if we should fund sports stadiums, they can’t say ‘no’ fast enough.”
Intangible benefits
The counter-claim is that there are intangibles that come with funding such stadiums, amongst which are the strong sense of community pride and identity that sports teams foster in a citizenry. When Nashville lured the present-day Titans from Houston with a stadium subsidy, then Nashville Mayor Phil Bredesen publically shared, “I can’t justify building a football stadium on direct economic impact. The professors who make a living pooh-poohing that are right. But there are a lot of intangible benefits that make it more than easy to do”.
Deal financing and rationale
Regardless of your view on the economic and social benefits of publicly funded sports stadiums, the fact of the matter is that residents are going to bear a substantial cost with the new Titans Stadium. But in Nashville’s case, this subsidy might actually make sense.
Let’s start with the fundamentals of the agreement between the City of Nashville, State of Tennessee, the Titans and the NFL. Of the total $2.1 billion cost of construction, $840 million will be privately financed by the Titans and the NFL. The state of Tennessee will contribute $500 million through bonds, while Nashville will pay $760 million with revenue bonds. The Nashville portion of the pie will be paid for with sales taxes in and around the area of the new stadium, along with a 1% increase in the city’s hotel tax that will raise over $10 million annually. The hotel tax disproportionately impacts Vanderbilt students whose family’s travel to the city often and stay in hotels around campus.
So, how does this deal make any sense? Nashville residents pay for a brand new stadium for a sports team worth billions of dollars, while studies have shown that these subsidies are economically illogical? It goes back to the original 1996 deal to bring the Titans to Nashville. The lease signed them obligated the city of Nashville to provide a “first-class” facility until 2039, meaning that the taxpayer was responsible for renovation and maintenance costs to maintain the facility, money that came out of the city’s general fund, which also goes toward education, public safety, government operations, infrastructure and the like. Estimates were that the cost of maintaining the stadium to the end of the lease would be up to an eye-watering almost $2 billion.
This new stadium gets Nashville out of that original lease, no longer having to bear the enormous cost to maintain the stadium using general fund money. Instead, Nashville’s portion of the pie comes out of revenue bonds, paid for only using the aforementioned sales and hotel taxes, alleviating a significant strain off of Nashville’s general fund. Further, as part of the new deal, the city would regain 66 acres of land that will be developed into a park, greenways, housing and businesses on the Cumberland’s east bank.
Yes, the Titans are building a new stadium, and we are paying for it, but considering all of the benefits–tangible and intangible–of this new stadium, it might prove to be a good business decision by the city of Nashville.
