Dennis Coates has written an outstanding opinion piece in the American on public subsidization of sports. He nicely frames the subject and presents evidence on pro sports' impact on local economies, including the external effects of sports. The whole piece is worth a read, but I'll post the concluding paragraph to whet your appetite.
Of course, even if the benefits of stadiums and arenas cover the subsidies, the subsidies still may not be sound policy. First, there may be enormous variation in the distribution of the consumption and public-good benefits. It is clear that not all citizens in a community benefit equally from the presence of professional sports franchises in their city. Indeed, because the tax revenues used for the subsidies are often generated from lotteries and sales taxes whose burden falls disproportionately on the poor, while the consumption benefits go mostly to relatively wealthy sports fans, the net benefits are distributed regressively. Second, we should consider the net benefits to the community of alternative uses of the funds spent subsidizing sports facilities. Good policy means using the money where the net benefit is greatest, not simply where the net benefit is positive. That’s something state and local governments should keep in mind before pledging millions of dollars to fund the next new stadium project. And it’s something Congress should remember when evaluating the future of U.S. tax policy.
HT to Tom Kirkendall