Dallas wants to be a ‘sports city.’ Economists caution using public funds to get there

Dallas’ leaders want to attract professional sports teams to downtown, and they recently signaled that they’ll spend public money to court teams.

The formula sounds simple: attracting a growing sport such as women’s basketball could score financial wins for Dallas. Afterall, new high-profile players such as Caitlin Clark and Angel Reese are selling out arenas as the WNBA has record merchandise sales.

However, opinions are mixed on whether public funds spent on sports facilities actually deliver on economic promises.

Municipal investing in professional sports over the past 30 years — whether through subsidies, tax incentives or bonds to build stadiums and arenas — rarely increases the type of spending that stimulates citywide economic growth, said a pair of economists who study such financing.

“The economic development case for subsidizing sports stadiums remains tenuous, as many studies continue to find little-to-no economic impact, even in areas immediately surrounding stadiums,” according to a 2022 analysis in the Journal of Economic Surveys.

Economists from Kennesaw State University, University of Maryland, Baltimore, and West Virginia University pored over 130 studies produced over 30 years, and found “welfare improvements from hosting teams tend to fall well short of covering public outlays” despite arguments of quality-of-life benefits and civic pride that go with professional sports.

It’s been two months since Dallas agreed to give the WNBA’s Wings $19 million to move from Arlington to downtown.

City officials touted the deal as a significant investment in women’s sports. It’s the first highly publicized local investment in a WNBA team, noted Nola Agha, who studies sports financing and women’s sports.

The Wings’ popularity is soaring. In April, the team sold all season ticket memberships for the first time in franchise history. It also saw a 1,200% increase in individual ticket sales revenue.

Swirling around the city’s Wings announcement is ongoing speculation about whether the NBA’s Dallas Mavericks will stay at the American Airlines Center, look for a new home downtown or settle elsewhere in the D-FW area.

Those discussions are happening in the wake of the recent sale of the Mavericks to the Adelson and Dumont families that run Las Vegas Sands Corp.

Some members of the Dallas City Council have said they would consider using taxpayer money to keep the Mavericks in Dallas depending on how the financing is structured.

Meanwhile, another sign that city officials are open to it is their recent approval of a $592,000 subsidy to bring Dallas Trinity FC, a franchise in a new professional women’s soccer league, to the Cotton Bowl.

Sports as a tool of development

City leaders believe the Wings’ new arena — which is part of an overall $3 billion effort to revamp the Kay Bailey Hutchison Convention Center — will spark development.

“Right now, it’s a big dead zone between Memorial Auditorium and (AT&T) Discovery District and Convention Center district,” said Dallas-based developer Ray Washburne, who envisions creating a hotel and entertainment district in the area.

Jennifer Scripps, president and CEO of Downtown Dallas, Inc., said redevelopment of the Kay Bailey Hutchison Convention Center is one of the biggest projects in the long road to transform the area divided by Interstate 30, which opened the same year as the Memorial Auditorium. The new entertainment district will also force officials to think about transportation, she added.

“Can I walk if I work nearby? Can I drive? How easy is parking? Can I take public transit?”

The demolition of the current convention center is expected to free up about 30 acres. That clears the way for new restaurants, retail, hotels, parks and housing. The city will retain ownership of the auditorium, which was built in 1957, and build a WNBA-approved court, scorers’ table and digital displays.

Ray Perryman, CEO of the Waco-based research firm, The Perryman Group, said the league’s popularity could bring more people to downtown and bolster sales for entertainment businesses in the area.

Often times, public financing makes sense, even if there isn’t “a direct payback that more than covers the initial cost,” Perryman said.

More people are gravitating towards living downtown, and fewer people are working in office buildings. Maintaining a vibrant downtown is an important goal for every urban area, and adding amenities is one way to do it, he said.

“Efforts to move the Wings to a downtown venue should pay handsome dividends to Dallas for decades to come,” Perryman said.

City officials project recovering $23.25 million in revenue over 15 years from parking, facility rental, food and beverage sales, ticket fees and in-arena advertising.

Agha, the economist, said the city appears measured in its approach at first glance.

“At least, in this case, it sounds like Dallas has done a good job of saying ‘OK, what’s our financial impact? What are our revenues and what can be used as expenses?’” Agha said.

However, Dallas’ incentive for the Wings seems like a giveaway to Victor Matheson, an economist at the College of the Holy Cross who studies sports economics.

“As a fan of women’s sports, it’s nice that (the city is) giving away taxpayer money to women’s sports; however, as an economist, it doesn’t make me happy at all,” he said.

Incentives subsidize sports franchises backed by developers, donors and corporate sponsors with deep pockets, Matheson noted.

“Having an arena allows you to attract these things that make a city more livable and to provide fun ways for local residents to spend their money locally, right?” Matheson said. “So here’s the question though: Given the fact that (American Airlines Center) is already there, does having the WNBA team in there do anything for local Dallas residents that they couldn’t before?”

Studies say sports teams don’t create new local spending dollars. Instead, consumers are using the money they would have spent in a theater or a restaurant elsewhere into buying game tickets and using the concession stand. Other research has shown that local spending would have occurred even if there was no sports team attached to the city.

Public incentives aren’t new to Dallas, even beyond sports. City officials approved a grant and tax incentive worth $4 million last year to build an H Mart supermarket in Koreatown and gave $96.1 million to build a 20-acre district with a a 38-story office, residential and hotel tower south of City Hall.

Using public money to woo sports teams not a novel concept

The Mavericks and Dallas Stars hockey team found a new home after Dallas voters agreed in 1998 to a tax increase to help build the American Airlines Center.

The city borrowed $125 million to cover its share of building costs. Voters approved paying down the debt using 5% car rental taxes and 2% hotel taxes.

Dallas has since paid off the debt, paying it off faster than expected. The company operating the center now pays the city $3.4 million in rent per year.

“We got a 1,000% return on that investment, and it’s still continuing to to grow,” said Rosa Fleming, the city’s director of convention and event services. She pointed out that the area around the center was a brownfield due to years of industrial use. “It wasn’t actually developable, until we decided to invest and develop it.”

Dave Brown, general manager of the American Airlines Center, said the AAC books about 200 events annually with this year on track to breaking records, largely due to the Mavs’ and Stars’ playoff games. But the profitability of arenas should be looked at on a case-by-case basis.

Brown disagreed with the notion that arenas don’t spur economic growth though he declined to share internal economic impact studies.

“It’s indisputable that the AAC has had a massive economic impact,” he said, adding that the arena contributes to around 10,000 jobs and has close to an average 2.5 million ticketed guests per year. “To say we don’t enhance local economies is a ridiculous statement.”

In Texas, men’s professional sports have enjoyed significant subsidies, often built upon emotional connections voters share with their favorite teams, experts say.

The city of Arlington voters agreed to pay $500 million to build the Globe Life Field for the Texas Rangers to replace an existing stadium that was less than 25 years old. The Cowboys got their $1.2 billion stadium after Arlington took on debt of $325 million for AT&T Stadium.

Arlington’s Globe Life Field promises billions in widespread economic impact from business sales, jobs and wages between 2016 and 2054, according to an HR&A analysis.

Previous reporting from The Dallas Morning News, however, showed economists were skeptical of the billion dollar impact.

Economists looked at the city’s tax revenue, the amount that goes directly in the city’s fund, and saw Arlington wouldn’t get enough returns to match what it invested.

HR&A’s analysis estimated that Arlington’s revenue from sales tax, hotel occupancy tax, car rental tax as well as rent paid to the city will result in $134.4 million over 38 years. Some of it goes into paying down the debt for the stadium instead of adding more dollars the city’s fund.

Susan Schrock, a spokesperson for the city of Arlington, said sales tax revenue is not the only indicator to consider when it comes to economic impact. Arlington has seen significant private investment and job creation in the area as well, she said.

Texas Live!, two Loews Hotels, the new Arlington Convention Center, expansion of professional sporting events inside Choctaw Stadium and the One Rangers Way resort-style community are some of the economic drivers now in the area, she said.

“Arlington is now ranked No. 34 by Cvent as one of the top meeting destinations in North America because of these investments,” Schrock said.

Now Dallas may chip away at Arlington’s windfall by luring the Wings to move east. And, eventually, another city could step up its game to lure teams away from Dallas as franchises explore options, experts say.