••• Tax & Spending •••

“Goal” of the World Cup is Soccer, Not Wasting Taxpayer Cash

Earlier this month, Kansas City was announced as one of the 16 host cities for the 2026 FIFA World Cup. It’s a big achievement for the community: KC was chosen because of the success of Sporting KC and other local soccer teams in bringing out fans and participation, so the current excitement is well-earned. However, Kansans – or Missourians for that matter – shouldn’t bend over backwards for subsidies to support an “economic boom” that is always overstated in host cities.

To understand potential fiscal mishaps, it’s important to understand the background of Kansas City’s major sports stadiums. Both the Chiefs and their Truman Sports Complex neighbors, the Royals, see their stadium leases expire after the 2030-31 season, so both teams are scouting potential new locations. The Royals are primarily investigating Downtown KCMO, whereas Chiefs President Mark Donovan is considering a move to Wyandotte County near the Kansas Speedway. Besides drawing new fans with new amenities at a new stadium, crossing the state line is an opportunity for the Chiefs to rekindle the Border War for the most subsidies possible to determine.

It’s rather unlikely that the Chiefs will come to a settlement between Missouri and Kansas, create designs and plans, then construct a new stadium by 2026. The World Cup announcement has thus led speculators to believe that there will be a $50 million investment into Arrowhead…at the expense of Kansas City taxpayers. In fact, Kansas City is already handing out a tax break by exempting World Cup ticket sales from sales tax. It’s important to note that these two policies have been made on the Missouri side, but could be replicated in the future in Kansas to “attract” teams or tournaments.

Though it’s hard to predict a multi-billion dollar team’s decisions almost a decade out, the right decision regarding subsidies is clear: don’t waste taxpayer cash! Between 1995 and 2015, 29 of the NFL’s 31 stadiums received a total of $7 billion in public subsidies, only to have practically nonexistent income or job growth in the long run. Studies from the Brookings Institution and the Journal of Urban Affairs have found no effect on local tax revenue, employment, or personal income growth after a new stadium showed up in town.

Subsidies probably won’t be limited to stadiums though. An initial reaction to the World Cup hosting is that it will draw in new tourists and business, and thus KCMO and KCK need to be prepared for an “economic boom.” This hope doesn’t often live up to the hype though. When Wichita hosted rounds of the NCAA “March Madness” tournament in 2018, tax from hotel bills only increased by .99% from the previous year. Yes, there are obvious differences between NCAA tournament games and a World Cup. When Brazil hosted the World Cup in 2014, the country spent $14 billion for an estimated $11.1 billion return on investment in economic activity…over the next 10 years. While hosting large international sporting events like the Olympics of the World Cup does create a short-term increase in employment and business, Summer Olympics between 1976 and 2012 had an average cost overrun of 252% – which gets fielded on the back of taxpayers.

Exaggerated claims about World Cup prospects aren’t new: Nashville claimed that the World Cup would bring $700 million in economic benefits to the city. The issue is that estimates fail to take into many different economic effects. For instance, inflated numbers of out-of-state ticket buyers overexaggerate local spillover effects and may lead to poor investments.

Businesses, developers, and some legislators will argue that the World Cup is an opportunity to “spend big” on projects with STAR bonds to bring in cash. But this is another excuse to try and get the state to dole out more ineffective subsidies for little economic impact. A 2017 analysis by Nathan Jensen with the Kauffman Foundation found that there was little evidence that Kansas PEAK bond recipients experienced a significant boost and employment compared to non-peak recipients. This would earn a red card in soccer. In a 2020 KPI report analyzing STAR Bonds in Wichita, the subsidies “had no measurable effect on the persistent decline of business and job growth in downtown Wichita.” Jensen recently reported that 75% of companies awarded incentives in the Kansas City area would have made “similar investment regardless of the public subsidy.” The cost of these failures is that Kansas has the highest effective tax rates on mature businesses.

So yes, let’s show the world the best that KC has to offer as they travel for the World Cup – that includes killer barbeque and Midwestern Hospitality. Let’s keep our worst – ineffective subsidies draining taxpayer cash – out of the picture.