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Soft Budget Constraints in French Football through Public
Financing of Stadiums?
Jeremy Moulard
Institute of Sport Sciences
University of Lausanne
jeremy.moulard@unil.ch
Markus Lang
Institute of Sport Sciences
University of Lausanne
markus.lang@unil.ch
Nadine Dermit-Richard
UFR Sciences du Sport et Éducation Physique
University of Rouen
nadine.dermit@univ-rouen.fr
November 11, 2022
1
Soft Budget Constraints in French Football through Public Financing of
Stadiums?
Abstract
Several football stadiums were built or renovated in France for hosting the 2016 UEFA
European Football Championship. This study examines to which extent the financial support
by local governments for stadium construction or renovation induces soft budget constraints
(SBC) for professional sports clubs. We address the research question based on a quantitative
case study in the context of the construction and renovation of eight football stadiums in France
that took place between 2012 and 2016. Our data shows that the public sector financed on
average 78% of the total construction or renovation costs of the new stadiums and the local
governments paid on average 60% of the total annual rental costs. The results indicate that local
governments in French professional football are "supporting organizations" and help to ensure
the financial sustainability and viability of the clubs by allowing them to benefit from financial
flexibility, which are typical characteristics of SBCs. In total, we identify 32 forms of public
aid that we classified according to different categories of "softness" and whether these aids
appear ex-ante or ex-post. Public aid constitutes financial support that is sometimes very
substantial, amounting to several million euros in each case. This financial support is often not
taken into account by the regulatory authorities and thus could be interpreted as hidden
government subsidies to professional clubs, which in some cases exceed the subsidy allowance
of €2.3m.
Keywords: Soft budget constraints, professional football, stadium, public aid
2
1. Introduction
Since the early 2000s, the sixth generation of stadiums has emerged in Europe (John et al.,
2016). These stadiums are multifunctional, multi-activity commercial facilities that have been
constructed thanks to the hosting of major sporting events such as the FIFA World Cup 2006
in Germany. The construction or renovation of 12 stadiums for hosting the competition in
Germany helped stem a significant loss of competitiveness in the German football league as
well as stimulated strong economic development among its clubs (Breuer et al., 2011). Most
of the new German football stadiums (nine out of 12), which had long been publicly owned,
were privatized. In addition, out of the €1.4 billion in stadium financing, 61% came from the
private sector (€852 million) compared to 39% from the public sector (€548 million).
In 2008, this sixth generation of stadiums did not exist in France and the average age of French
stadiums was 65 years. The possibility for France to host the UEFA Euro 2016 on its territory
could have constituted a powerful accelerator for the emergence of multifunctional stadiums
that are beneficial to the economic development of French professional clubs (Besson, 2008;
Seguin, 2008). However, unlike the German model, almost all stadiums (12 out of 13) that
were built or renovated for the tournament in France remained the property of the cities, and
only four clubs participated financially in the project. Thus, the majority of the new French
football stadiums were financed via public funding. Moreover, in 90% of the cases, the resident
clubs were only tenants of their stadium and rarely the main driving force of its construction or
operation (Moulard, 2018).
This public funding of a new economic resource intended for private professional clubs, which
are very often in deficit, echoes the concept of soft budget constraint (SBC). The concept of
SBC was initially introduced in the context of socialist economies (Kornai, 1979, 1986), but it
is now widely used in describing similar phenomena in market economies such as financial
instability (Maskin & Xu, 2001) and softness in the banking sector (Du & Li, 2007).
In the 2010s, the concept of SBC has been applied to sports, in particular European football.
Storm and Nielsen (2012) were one of the first to use the SBC framework to explain how a
majority of clubs can continue their activity despite persistent losses and sometimes high levels
of debt (Andreff, 2015; Bertheussen & Solberg, 2022; Dermit-Richard & François, 2022). The
reason why these clubs can continue their activity even though they are losing money is thanks
to the support of certain stakeholders. This support, either direct or indirect, is often of a
financial nature and comes from shareholders, banks, or the state to soften the budget constraint
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of clubs, using various types of “softness” either ex-ante or ex-post (Storm & Nielsen, 2015).
Franck (2015, 2018) argues that the introduction of the Financial Fair Play (FFP) regulations
by the UEFA in 2011 hardened the budget constraints of the clubs and contributed to the
financial recovery of European club football. Andreff (2022) proposes other possibilities to
harden the budget constraints at the “micro, meso, and macro” levels in professional team
sports.
So far, the existing literature has neglected to examine the relationship between public funding
of stadiums and SBCs. This gap in the literature was also recently pointed out by Jacobsen et
al. (2021), who suggest that “future research should also focus on [...] financing stadiums, as
these are of a substantial financial character.” Our article contributes to the literature on SBCs
in sports by examining the extent to which the financial support by local governments for
stadium construction or renovation induces SBCs for professional sports clubs. We address this
research question based on a quantitative case study in the context of the construction and
renovation of eight football stadiums in France for the UEFA Euro 2016.
Our study shows that the public sector financed on average 78% of the total construction or
renovation costs of the eight new stadiums and the local governments paid on average 60% of
the total annual rental costs. These results indicate that local governments in French
professional football are "supporting organizations" and help to ensure the financial
sustainability and viability of the clubs by allowing them to benefit from financial flexibility,
which are typical characteristics of SBCs. In total, we identify 32 forms of public aid that we
classified according to different categories of softness and whether these aids appear ex-ante
or ex-post. Public aid constitutes financial support that is sometimes very substantial,
amounting to several million euros in each case. This financial support is often not taken into
account by the regulatory authorities and thus could be interpreted as hidden government
subsidies to professional clubs, which in some cases exceed the subsidy allowance of €2.3m.
The remainder of this article is structured as follows: In the next section, we present the
theoretical background of our study. Section 3 describes the data and the methodology. Section
4 presents the results of our analysis, and section 5 concludes with a discussion of the
limitations of our study and implications for future research.
4
2. Theoretical Background
In this section, we first present the context of our study. Second, we introduce the concept of
SBC in general and then we show how it applies to European professional football.
2.1 Context
In anticipation of France’s bid to host the UEFA Euro 2016 on its territory, the French
government commissioned two reports to evaluate the existing stadiums (Seguin, 2008) and to
analyze the competitiveness of French professional football (Besson, 2008). The two reports
concluded that France severely lagged in the process of modernizing its major stadiums, which
handicapped French sports, particularly football.
At the same time, the reports claimed that the renovation of existing stadiums or the
construction of a new sixth generation of stadiums could have strong leverage effects on the
revenues of football clubs and could trigger a virtuous circle that would benefit the sports
economy because a new stadium not only improves the share of ticket sales in overall revenue
but also generates higher ancillary revenue (e.g., merchandising and catering). According to
the Seguin report, the German example in the context of the 2006 FIFA World Cup in Germany
“provides tangible proof” of these positive effects.
The perspective of the French government was that the new stadiums would generate higher
revenues for the corresponding clubs, making it possible to reduce public subsidies or even
“should enable resident clubs to do without public funding in the future” (Delpierre, 2011).
However, none of these objectives has been achieved in France because the operation of the
new stadiums has not created more resources to increase the competitiveness of the clubs, and
therefore the local governments have not been able to remove their subsidies (Moulard, 2018).
2.2 The Concept of Soft Budget Constraints
The concept of budget constraints is associated with the market economy, in which an
individual is limited by the amount of income available to him/her. This constraint is
synonymous with financial discipline and a so-called “hard” budget constraint. Kornai (1979,
1986) was the first to observe that in the context of socialist economies a state-owned enterprise
is not subject to this budget constraint because it can count on state aid in the event of serious
financial difficulties. This aid was not limited to one-off interventions: firms suffering chronic
financial losses were rescued regularly. In other words, the socialist enterprise enjoyed a
5
guaranteed ability to survive. Such direct or indirect financial support helps to ease the
budgetary constraints of companies in socialist economies, thus enabling them to continue their
activities while accumulating negative financial results. Kornai et al. (2003) identified five
main groups of instruments leading to soft budget constraint during the post-socialist
conversion: budgetary subsidy, tax relief, bank and trade credits, and non-payment of social
security contributions.
This aid can be provided at different stages in the life cycle of an enterprise. Szabó (1988)
describes the existence of a “preliminary” (ex-ante) SBC, which allows companies to benefit
from negative balances in their accounts before financial balance sheets are made. Based on
this definition, preliminary softness can be defined in the following way: “The budget of an
economic unit is soft in a preliminary sense if it has non-market-type incomes obtained under
the force of contracts concluded before the start of the fiscal period, as a result of bargaining
with the institutions disposing of these incomes. (The non-market type incomes in these
contracts can be subsidies, tax relief, preferential loans, rescheduling of enterprise debts,
favorable setting of purchasing or selling prices of the unit concerned, etc.).”
Kornai’s main work focuses on the second type of SBC, which Szabó (1988) calls “incremental
budget constraint.” In this case, even if the company did not benefit from ex-ante relief, it could
derive an ex-post advantage. The budget of an economic unit is soft in an incremental sense,
“if it has incomes obtained through non-market bargaining during the fiscal period, as a result
of revisions of original contracts or new contract(s) concluded during the period in question
with the institutions disposing of such incomes.” It is important to highlight that the concept of
the fiscal period is essential to Szabó for the definition of a time frame; without it, the notion
of budget constraints is also meaningless.
For Kornai et al. (2003), certain conditions must be present to identify an SBC in a particular
environment: “If the organization in question holds a key (socioeconomic) position in the
broader society providing important goods and/or services, the likelihood of softness is
potentially high.” The concept of SBC is not only an economic phenomenon, but it also
depends on cultural, political, and social factors (Kornai, 1986). These characteristics are
present within professional football in Europe (Dermit-Richard & François, 2022; Franck,
2015, 2018; Storm & Nielsen, 2012, 2015).
6
2.3 Soft Budget Constraints in European Professional Football
The application of the SBC concept to professional sports leagues is based on the observation
that despite the chronic deficits of many European football clubs, surprisingly few bankruptcies
can be observed (Dietl et al., 2008). The importance of football, and therefore of clubs, in
society means that they almost always find financial support to avoid bankruptcy. This is the
“too big to fail” principle (Storm & Nielsen, 2012).
Storm and Nielsen (2015) identify the following six forms of softness that are characteristics
of SBCs:
• Soft pricing (S1) takes place when a public stadium and/or training facility is made
available to football clubs at below-market fees.
• Soft taxation (S2) designates all types of tax exemptions granted by the public
authorities and permitted by law or some political decisions in favor of the clubs.
• Soft subsidies (S3), which come in either open or hidden forms, are provided by
governments or include all support from clubs’ shareholders and investors to reduce
deficits and pay off debts to keep clubs running during severe financial situations.
• Soft credit conditions (S4) refer to the liberality of banks when granting a loan when
they know that rich tycoons behind the club can reimburse the debt.
• Soft investments (S5) exist when the government or other sponsors pay for part or
perhaps all of the costs when clubs build a new stadium.
• Soft accounting (S6) refers to the idea of adopting questionable or even illegal
practices to circumvent the rules for granting credit, with the effect of deceiving lenders.
Over time, club support has taken the following forms in the context of European football:
In Italy, several clubs have benefited from the partial or total release of their debts to the state
or local authorities (S2). For example, the Salva Calcio scheme set up by the Italian government
reduced the debt of Serie A clubs from €1.32bn to €400m for the 2003/2004 season (Baroncelli
& Lago, 2006) and Lazio Rom was saved from collapse in a major rescue operation in 2015
through a relaxation of its tax obligations (Foot, 2007). In addition, S6 is often accepted or even
encouraged by the Italian government, which has even occasionally changed legislation to
facilitate a softer accounting (Foot, 2007).
Spanish clubs have benefited from bank support (in the case of the most popular clubs in the
form of S4) as well as the generosity from the government in the form of S2 and S3 (Ascari &
7
Gagnepain, 2006). On two occasions, in 1985 and again in 1991, the government intervened to
facilitate debt relief and refinancing; however, this had no lasting effect on the clubs’ financial
situation. A law was even introduced in Spain, known as the “Concursal” law, which allowed
Spanish clubs to obtain 50% debt relief and debt write-off plans while avoiding relegation to a
lower division. In total, 21 clubs benefited from the law in the 2010/2011 season (Barajas &
Rodríguez, 2014). This support may also come from the clubs’ shareholders (S3), many of
whom will never be able to recover the money they have invested (Grant, 2007; Hamil &
Walters, 2013). Such shareholders are often referred to in the literature as “sugar daddies”
(Lang et al., 2011; Sass, 2016).
The behavior of continuing to invest despite the accumulation of debts and deficits seems
irrational in a market economy. It can be justified considering that a football club can meet the
social and emotional expectations of fans, investors, and communities. Frick and Prinz (2006)
come to this conclusion concerning German football, citing the cases of Schalke and Borussia
Dortmund, which were on the verge of bankruptcy and saved by public grants (S3).
Another refinancing source can come from increased broadcasting rights (S3), enabling the
clubs to meet future salary costs under multi-year employment contracts (Downward &
Dawson, 2000). Operating in this way leads to a vicious circle in which an increase in television
rights induces an increase in player salaries and potentially an increase in deficits.
3. Method
In this section, we present the data and the indicators that are used in our analysis. To examine
the relationship between public funding of stadiums and SBCs, we need a sufficient number of
stadiums of the same generation that were built or renovated in the same country and within a
similar time frame. France offers such a recent field of analysis, thanks in large part to the
stadiums built or renovated for the UEFA Euro 2016. In our study, we sometimes use the short
name of a club. Table 1 displays the full club’s name as well as the short name and the
corresponding city of the club.
[Insert Table 1 about here]
Of the 13 French football stadiums built between 2008 and 2016, we excluded the stadiums of
Le Mans FC and Grenoble Foot 38 from our investigations following the filing for bankruptcy
of these clubs just two years after they began using their new stadium. Even though these two
8
examples seem to characterize the SBC syndrome well, the lack of economic data on these
clubs and the difficulty of finding the stakeholders of the new stadium project within the two
organizations were major obstacles. In addition, the minor stadium renovations in Toulouse
and Lens did not seem significant enough to warrant analysis. We, therefore, excluded these
two cases from our sample as well. Since we wanted to study heterogeneous stadiums and clubs
with different operating models, the remaining nine case studies seemed to be an optimal
sample for our study. Unfortunately, it was not possible to carry out an in-depth investigation
on Valenciennes FC, due to the inability to gather more detailed data on the club. Consequently,
our sample is made up of the eight stadiums presented in Table 2 below.
[Insert Table 2 about here]
To conduct our analysis, we used two major sources: (i) the 2017 Court of Audit report on
public aid for the UEFA Euro 2016 in France
1
and (ii) the eight individual reports on the
accounts of French clubs from 2012 to 2019 provided by each season by the French DNCG
(National Direction for Management Control).
2
Table 3 summarizes the data that we collected
from these two main sources.
[Insert Table 3 about here]
The data presented in Table 2 enabled us to develop the following three indicators that are
essential for our analysis:
Indicator 1: Share of investment made by clubs (1a) and by public actors (1b)
With Indicator 1, we can get an understanding of the share of financial investment made by
clubs (Indicator 1a) and public actors (Indicator 1b) in financing the construction of stadiums.
We will also derive the overall level of financial expenditure by clubs in the construction or
1
The Court of Audit (Cour des comptes) is a French administrative court that performs financial audits. It is
mainly in charge of verifying the legality of the public accounts of the State, national public bodies, public
companies, the social security regime, and private organizations benefiting from State aid or that seek donations
from the public. It reports to parliament, the government and the public concerning the legality of those accounts
(https://www.ccomptes.fr/fr/documents/39890).
2
The abbreviation DNCG stands for Direction Nationale de Contrôle de Gestion and is an organization in charge
of overseeing accounts of the clubs. For an analysis of the relationship between DNCG and the FFP regulation,
see Dermit-Richard et al. (2019), who show that DNCG is focused on the solvency of the clubs, whereas FFP is
concerned with profitability.
9
renovation of stadiums. The purpose of Indicator 1 is to highlight the predominant role of public
funds in financing the construction or renovation of stadiums and their access infrastructure.
Indicator 2: Percentage of rent paid by clubs (2a) and by public actors (2b)
The overall annual rental fee – which includes loans, financial costs, and fees for maintenance
and operation of the stadium – aids in understanding the financial investment by the club and
by the public actor. Indicator 2 enables us to measure the share of the annual cost of the stadium
borne by the club (Indicator 2a) and by the public actor (Indicator 2b). In addition, this indicator
enables us to measure the dependence of professional clubs on local governments for the
financing of stadium rental fees. The comparison between Indicators 2a and 2b also sheds light
on the amount that the city will have to bear if the resident club was to disappear, either through
relegation or economically, as in the case of Le Mans mentioned above.
Indicator 3: Stadium operating result with the participation of the public actor (3a) and without
its participation (3b)
The stadium operating result of the clubs is the difference between stadium-related operating
receipts and stadium-related operating expenses since the first day of stadium operation.
• Stadium receipts: sponsors and advertising, match revenues, other income (including
merchandising, co-branding, and public subsidies)
• Stadium operating expenses: remuneration of administrative staff (15% of total gross
wage costs of personnel, according to the DNCG), other expenses (which include the
structural costs of the club, such as stadium rent, utilities, security, and stadium
maintenance). Also included is the financial result, which includes the interest on loans
taken out to finance the investment in the stadium and/or its development
These receipts and expenses related to the operation of the stadium of resident clubs have been
analyzed from the first day of operation of the new stadium until the 2018/2019 season. We
have chosen to consider only the seasons before the Covid-19 pandemic. We did not want to
distort the operating results of stadiums that were empty for several months from 2020 to 2022.
3
The average of these seasons corresponds to season N+. For example, in the case of HAC, N+
3
In our study, we adapt the time frame defined by Szabó (1988) by using the date of the first day of operation of the stadium
and not the fiscal period. This allows us to understand the public aid received prior to stadium construction and that received
after it starts operating.
10
corresponds to an average over seven seasons (2012/2013 to 2018/2019). N+ represents three
seasons at OL; four seasons at ASSE, FCGB, and OM; five seasons at PSG; six seasons at
OGCN; and seven seasons at HAC and LOSC. This N+ average makes it possible to even out
exceptional receipts and income (differences in the number of matches, and costs due to the
weather) as well as exceptional sports results. It also allows for what we feel is a more long-
term comparison. Moreover, the fact that these N+ averages are not based on a consistent
number of years for each case has no impact because no comparison in absolute terms is made.
Indicator 3a allows us to measure and show the weak economic development that the clubs
have experienced since their new stadium began operations. We will see that stadium
operations often result in losses.
We derive Indicator 3b by subtracting the results of indicator 3b from the results of indicator
2b. This shows that the stadium operating result of the clubs is even more insignificant and
loss-making if local governments do not finance the stadium rent fees. This indicator highlights
the dependence of clubs on public aid and sheds light on the SBC syndrome in financing French
stadiums.
4. Results
To present our results, we proceed in two steps: First, we try to answer the question of whether
the public financing of football stadiums has introduced SBCs in French professional football.
Second, we classify the various forms of public aid that accompany the financing, construction,
and operation of the new French football stadiums into different categories.
4.1 The Presence of SBC in French Professional Football?
To examine whether public support for stadium construction or renovation induces SBCs, we
proceed as follows: First, we examine who paid for the construction or renovation of the
stadiums. Second, we analyze the amount and share of stadium rental fees for clubs and local
government. Third, we look at the operating results of the stadiums with and without public
support.
4.1.1 Public and private investment
First, we show that the public sector has invested huge sums into the construction of the eight
new French football stadiums. Table 4 displays the respective amount of public and private
investment.
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[Insert Table 4 about here]
The table shows that the total investment in the eight new stadiums represents approximately
€2.4bn when the financing of access infrastructures is included. The private sector invested
€529m (including €430m for OL alone), while local governments contributed more than
€1.8bn. Only PSG paid for the entire renovation of its stadium and did not receive any public
aid for its project. It should be recalled, however, that the stadium is owned by the city of Paris,
which financed its original construction. As for OL, while it did manage private financing of
its stadium, it required involvement by the city in financing the stadium’s access infrastructures
(32% of the project’s financing, i.e., €202m). For HAC and FCGB, their cities asked the clubs
for financial investment in return for their involvement in the stadium-planning phase. But the
levels of private financial investment in these two stadiums were very low, with the local
governments having financed 97.5% and 90% of the projects respectively. Finally, in the four
other stadiums, the public sector made 100% of the investment for ASSE, OGCN, LOSC, and
OM, although the amounts were quite varied. In these eight cases, we can see the significance
of public funding, which represented 78% on average of the financing cost of the projects.
4.1.2 Share of stadium rental fees for clubs and local government
Second, we show that the rent paid by the cities represents an even greater financial
commitment for the public sector in the case of this new generation of stadiums. Table 5 reports
the amount and share of stadium rental fees for the clubs and the cities.
[Insert Table 5 about here]
Even though the rent paid by clubs has significantly increased (+540%) between the old and
new stadiums, the public sector still covers most of the annual rental costs of the new stadiums.
Specifically, the average rent for clubs between the old and new stadiums rose from €0.78m to
€4.5m. Despite this increase, the local governments finance an average of 60% of the annual
rental costs of the stadiums, representing €6.45m per year. This cost increased significantly
with the arrival of the new stadiums. However, the financial involvement of clubs and local
governments depends on the stadium. We can differentiate two cases:
(i) The share of the annual rent paid by the club is higher than that paid by the local government
in three out of eight cases: PSG (81% paid by club vs 19% paid by city), OL (68% vs 32%)
12
and FCGB (57% vs 43%)
4
. The larger shares of participation by the clubs in the case of PSG
and OL can be explained by the fact that PSG is the operator of its stadium and OL is the owner.
In the case of FCGB, the club is only a tenant of the stadium on match days. However, the
club’s financial contribution is much greater in the case of FCGB than in the other similar
settings described below.
(ii) The local government covers the larger part of the stadium’s costs in five out of eight cases:
HAC (100%), OGCN (86%), LOSC (71%), OM (65%), and ASSE (65%). All these clubs are
only tenants of the stadium on match days, except HAC, where the club is the operator of the
stadium. In this case, it benefits from operating the stadium every day of the year, without
paying rental fees for at least three years of the contract. One noteworthy finding is the high
cost of rental fees for the stadiums built under a public-private partnership (PPP) in Lille
(LOSC), Marseilles (OM), and Nice (OGCN), which oblige the local authorities to pay more
than €10m per year for more than 30 years. In these cases, the local authorities could be
required to bear the annual cost of the stadium alone if the resident club was to disappear. This
cost would represent between €13m and €16m per year.
4.1.3 Operating results of the stadiums with and without public support
We report the operating results of the stadiums with and without public support in Table 6.
[Insert Table 6 about here]
The table shows that seven out of eight clubs (except for PSG) have an operating loss in N+
despite the public aid received. OL and its private stadium have high repayment costs due to
the loan taken out to finance that stadium. Once the investment is repaid, its business model
could be profitable in the long term. For the other six clubs, the financial results have been in
deficit since the opening of their new stadium, and they cannot expect a reduction in their rental
costs because of their status. This deficit would be even more pronounced if the share of
stadium expenses financed by local governments on an annual basis were not considered
(Indicator 3b). In such an event, the clubs of Nice, Lille, and Marseille would find themselves
in a precarious financial situation. The financial situation of OGCN is nearly balanced in N+
with Indicator 3a but would suffer a deficit of €11m per year without public aid. This figure
4
This calculation was valid before the relegation of FCGB to the second division in the summer of 2022. Since then, 100% of
the stadium’s costs are covered by the local government (https://www.francebleu.fr/sports/football/girondins-de-bordeaux-
la-metropole-bordelaise-renonce-a-son-loyer-de-5-millions-d-euros-pour-aider-1656062057).
13
would be more than €13m in Marseille. Lille’s club would be the most affected, with an annual
deficit of almost €29m.
4.1.4 Public financing of stadiums as a sign of a soft budget constraint?
In the previous analysis, we have shown that the public sector financed on average 78% of the
total construction or renovation costs of the eight new stadiums. Ex-ante investment is crucial
for building these new stadiums and their access infrastructure, even in the case of private
projects. In addition to this potential public aid that can vary according to the city, we have
shown that the local governments pay on average 60% of the total annual rental costs. Without
this public aid, the stadium operating deficit of the seven clubs other than PSG would rise from
€61.9m to €112.44m. This represents an ex-post public contribution of almost €52m for seven
clubs, which is significant financial support.
These examples showcase that local governments in French professional football are indeed
“supporting organizations” and help to ensure the financial sustainability and viability of the
clubs by allowing them – through the financing of their stadium in the construction and
operation phases – to benefit from financial flexibility that is a characteristic of SBCs.
4.2 Typology and Temporality of SBCs in French Football
The financial flexibility that is made possible by SBCs can be difficult to identify because it
occurs in different time frames and falls under various typologies. Thus, in the next step, we
seek to better identify the various forms of public aid by classifying them according to the
different categories of “softness” defined by Storm and Nielsen (2015) and the time frame (ex-
ante or ex-post). The time frame relates to the concepts of preliminary and incremental SBCs
introduced by Szabó (1988).
4.2.1 Soft pricing
Soft pricing takes place when a public stadium and/or training facility is made available to
football clubs at below-market fees.
Example 1: Sale of a building plot at a preferential price – ex-ante aid (OL)
Within the framework of the Lyon project, numerous legal complaints were filed, arguing that
Lyon had allegedly sold the land used for the construction of the stadium to OL at five to six
times cheaper than the market price. The 32 hectares of land were sold to the club for €40 per
14
square meter, compared to a supposed market price of €200, representing savings of nearly
€5m.
5
Opponents of the project lodged complaints against the administrative decisions and
authorizations before the start of the work (town-planning decisions and deliberations on the
transfer of land). The revision of the local urban plan was thus delayed by four years compared
to the initial schedule, and the issuance of the building permit and the sale of the land by two
years.
The challenges concerning the selling price of the land were rejected at first instance by the
Lyon Administrative Court, first for those sold by the city of Décines-Charpieu, then for those
sold by Lyon. In its two judgments, the court validated the price estimate made by France
Domaine, the public agency that at the time monitored state-owned land, because its estimate
had considered the nature of the land that was sold, in a zone classified for urbanization in the
long term and “intended for the building of major sports, leisure or cultural facilities at the
urban-area level.”
6
We consider this aid as ex-ante, as it was provided before the stadium was built. In our view,
this aid can be characterized as soft pricing, as the price of the land was devalued because of
the new stadium project, and a political decision was made that specifically reclassified the
construction area under the project.
Example 2: Below market price of stadium rental fee – ex-post aid (OM, PSG, ASSE, OGCN,
LOSC, FCGB, HAC)
In 2017, the Court of Audit determined that a “rental fee lower than the rental value of the
facility, its maintenance cost, and the commercial benefits it provides constitutes an
irregularity.” This irregularity was observed in the seven public stadiums of our study,
“sometimes in significant proportions compared to the required level.” In Marseille, for
example, the rent to be paid by the club in the first drafts of the project was €12.8m. The local
government agreed to lower this rental fee to the club by over 55% to help the club (Court of
Audit report of 2017). The Court of Audit noted that the rental fees for all public stadiums were
still underestimated by about 20% and did not consider the calculation method recommended
5
http://tout.canol.fr/le-grand-stade-de-decines.html
6
Tribunal Administratif de Lyon, 18 December 2014, Association Carton Rouge, No. 1201065; judgment
challenged before the Lyon Administrative Court of Appeal. Tribunal Administratif de Lyon, 6 October 2016,
Association des contribuables actifs du Lyonnais, No. 1302600.
15
by the State. To be considered “fair,” to comply with the European Commission’s auditing of
the financing of UEFA Euro 2016 stadiums, the level of the rental fee (set share) to be paid by
the club was supposed to take into account public investment in the form of the application of
a minimum rate of 2% per year of investment, corresponding to the occupancy rate of the
resident club calculated based on the number of days the facility is used. This set share was to
be added to a variable share calculated based on the club’s turnover. To calculate this, France
Domaine recommended using a graduated scale of turnover starting at €2m, to which
progressive rates by turnover level were applied.
We view this aid as ex-post, as the amounts of the rental fees are often calculated after the first
few months of stadium operation, to determine the costs and revenue generated by the new
stadium. For us, this is soft pricing, because the price is undervalued by the local government.
4.2.2 Soft taxation
Soft taxing designates all types of tax exemptions granted by the public authorities and that are
permitted by law or some political decisions in favor of the clubs.
Example 1: Reimbursement of stadium-related taxes – ex-post aid (OGCN, FCGB)
In the Bordeaux model, the city reimburses the private partner Vinci (the builder/operator) each
year for the taxes it owes that are not included in the management fee. Elimination of these
taxes reduces the stadium’s operating cost and hence the fee that the club must pay to the city.
The most recently available estimate made by the Court of Audit in 2017 states €33.7m in tax
refunds made by the city of Bordeaux since the stadium opened in 2015.
7
This same pattern
can be seen in Nice. Thus, the local tax, waste collection tax, and property tax are billed to the
city by Vinci. The Court of Audit estimated the loss of tax revenue between 2013 and 2017 at
€72m.
While such tax reimbursement agreements may be negotiated before construction, we consider
this aid to be ex-post, as the tax amounts are calculated and reimbursed after the construction
of the stadium.
7
https://www.ccomptes.fr/fr/documents/39890
16
4.2.3 Soft subsidies
Soft subsidies, in either open or hidden forms, are provided by governments or include all
support from the club’s shareholders and investors to reduce deficits and pay off debts to keep
clubs running during severe financial situations.
Example 1: Cancellation of the rental fee owed by the club to the local government – ex-post
aid (HAC)
In the case of Le Havre, for example, the club was granted a full rent waiver by the local
government during the 2014–2017 period, two years after the stadium was built. The local
government has thus borne ex-post public financing of €5 million per year, not provided for in
the lease contract. To justify this financial involvement, the president of the metropolitan area
government explained that HAC had been at risk of being demoted for financial reasons by the
DNCG at the end of the 2014 season and that he could not take the risk of finding himself in
charge of an empty stadium without a club. The city thus chose to help the club by financing
the entire cost of the stadium, while allowing the club to continue to benefit from the stadium’s
operating revenues. This aid represents a form of ex-post subsidy via the stadium rent. More
recently, during the summer of 2022, this ex-post subsidy was also observed in Bordeaux. The
relegation of the FCGB to the second division led to the payment of €5m per year from the
local government.
8
Example 2: “Payer of last resort” when cities bear the sporting risk – ex-post aid (OM, PSG,
ASSE, OGCN, LOSC, HAC).
Among the seven cases in which the stadium is owned by a city, the latter would have to act as
an ex-post financial guarantor if its resident club were to disappear for sports or economic
reasons. Indeed, the city would have to pay the remaining expenses until the club returned to
the professional world, as happened in the case of Le Mans. This arrangement acts as a crucial
safety net for the club but is a huge risk for the city if the club never returns to the top division.
Nevertheless, one may wonder if this question would be addressed in the Bordeaux project. To
secure long-term payment by the Bordeaux Girondins provided for in the stadium occupation
agreement, a letter of intent constituting a personal guarantee as understood by the French Civil
8
https://www.francebleu.fr/sports/football/girondins-de-bordeaux-la-metropole-bordelaise-renonce-a-son-loyer-
de-5-millions-d-euros-pour-aider-1656062057
17
Code was signed by the resident club’s shareholder. In this letter dated April 30, 2015, sent to
the city, the shareholder (chair of the French media holding company Groupe M6), states that
he “will not disregard the financial situation and fate of its subsidiary FCGB and will ensure
that the latter, in the application of article 20.1 ii of the agreement, fulfills its commitments to
you in respect of (i) the annual rental fee, (ii) the contribution to the annual costs of maintaining
the field of the new stadium; and, where applicable, (iii) the profit-sharing on the turnover
achieved by FCGB.” Since the signing of this letter of intent, the club has been sold to two
successive owners and we do not know if the commitment expressed in the letter was still
binding for the new owners. However, since the relegation of FCGB in July 2022, and the fact
that the city of Bordeaux paid for the entire rent of the stadium, it seems that the initial
commitment made by the owner of the club in 2015 through the letter of intent is no longer
relevant for the new owners.
4.2.4 Soft credit conditions
Soft credit conditions refer to the liberality of banks when granting a loan when they know that
rich tycoons behind the club can reimburse the debt.
Example 1: Role of financial guarantor played by the city to close the financing of the stadium
– ex-ante aid (OL)
Faced with the financing difficulties of Lyon’s stadium, in October 2013 the Department of
Rhône guaranteed €40m in bonds subscribed by the construction group, and the public financial
institution Caisse des Dépôts et Consignations subscribed to a bond issue for the club for €32m.
Involvement by public players represented securing a total of 20% of the financing plan for the
private stadium. This aid raises some questions. Public loan guarantees for professional sports
clubs were prohibited because some of them had been granted indiscriminately for the “day-
to-day operations” of these clubs.
9
However, the minister in charge of sports declared the Lyon stadium and its related facilities
to be of general interest in the context of the holding of the UEFA Euro 2016, by order
9
According to Article 19-2, inserted by Act No. 92-652 of 13 July 1992 into Act No. 84-610 of July 16, 1984, on
the organization and promotion of physical and sporting activities, the granting of loan guarantees or backing by
local authorities or their groupings to associations or limited liability sports companies. Mr. Jean-Marie Girault
reminded the Minister of the Interior that it was in reaction to several financial scandals involving professional
football clubs that Parliament intended, through this measure, to avoid the repetition of practices that were
dangerous for local finances.
18
published on May 31, 2011. After having at first been blocked by several refusals, the
stakeholders of Lyon were finally able to put in place their financial support after this
declaration. The stadium’s “public interest” status has enabled the club to receive non-legal aid
in other circumstances. Stadiums built in France after 2016, on the other hand, have not had
the possibility of receiving similar public loan guarantees, even though this has been desired
by some stakeholders (Braillard, 2016). This example shows us how laws can be adapted ex-
ante and be used on occasion to bypass certain barriers and, in this case, to help in arranging
for public aid for a private club to facilitate the granting of credit for the construction of its
stadium.
4.2.5 Soft investment
Soft investment refers to the case when, for example, the government or other sponsors pay for
part or perhaps all of the costs when a new stadium is built.
Example 1: The city finances the stadium-access infrastructure – ex-ante aid (OM, PSG, ASSE,
OGCN, LOSC, FCGB, HAC, OL)
In France, all access infrastructure is financed by the cities and the State, even in the case of a
private project. For example, the city of Lyon financed all the infrastructure enabling access to
the OL stadium, in particular by public transportation, for a total cost of €220m. This aid,
occurring before stadium construction, is the only one that is in common with all our cases.
Example 2: The city finances the construction or renovation of the stadium – ex-ante aid (OM,
ASSE, OGCN, LOSC, FCGB, HAC)
We have shown there was a significant public investment (78%) in the financing of the eight
stadiums covered by the study. Only PSG and OL fully financed the renovation or construction
of their stadiums. For the other six clubs, the cities usually financed the entire construction or
renovation costs of the stadium. The realization of such projects is dependent on such financial
participation, which is a typical example of soft investment.
Now that we have presented the public aid for these eight different projects, we can provide a
summary of these results in the next subsection.
19
4.2.6 Public financing of stadiums has characteristics of the five forms of SBC according to
two time frames
In the eight case studies, 32 forms of public aid were found. This makes an average of four
SBC-type instruments per project. Public support is thus significant, with sometimes several
million euros being granted in each case, either ex-post or ex-ante (Szabó, 1988). The unique
case of French stadium financing allows us to highlight five of the six types of softness
identified by Storm and Nielsen (2015). Table 7 summarizes the major contribution of our
research.
[Insert Table 7 about here]
We can also note that, in the framework of a private stadium (OL), the SBC instruments are
essentially preliminary and there is local government support to launch and consolidate the
realization of the project, but no ex-post contribution is identified. The club remains the sole
actor and decision-maker of its project. Conversely, in cases where the stadium is owned by
the cities, examples of ex-ante and ex-post aid are found in similar proportions (four each).
This recurrent public presence throughout the projects could have repercussions on the quality
of the projects and the response to the initial objectives. Jacobsen et al. (2021) believe that ex-
ante support is more relevant for effective support for clubs. For them, “ex-post funding can be
argued to be counter-productive to financial viability (e.g., cloaking inadequate finances,
providing incentives for overspending, and rewarding clubs that overspend), ex-ante funding
is more in line with sound financial management (e.g., funds that are contingent upon a history
of sound finances, incorporated in budgets).” This idea for research should be confirmed.
Of the eight instruments identified in this research, Nice and Le Havre seem to benefit the most
from public aid through SBCs (5/8) with Bordeaux since 2022 (6/8)
10
. For the clubs of Saint-
Étienne, Marseille, and Lille (4/8), the same two preliminary and incremental aids are observed.
The financial support provided by the local government for the construction of the stadium and
its road infrastructure, as well as a reduced rental fee and coverage of the team relegation (and
10
Before 2022, four instruments have been observed in the case of Bordeaux: (i) The local government finances
construction or renovation of the new stadium, (ii) The local government finances the stadium access
infrastructure, (iii) Tax reliefs for the stadium constructor, (iv) Stadium rental fees undervalued in relation to
actual price. After the relegation of the club, we can observe two new instruments: The cancellation of rental fee
owed by the club to the local government and the local government covers the risk of team relegation and remains
“payer of last resort” if the resident club goes bankrupt.
20
thus economic) risk, are the four most common SBC instruments in French professional
football.
Finally, Paris and Lyon (3/8) are the two clubs that receive the least aid. According to Moulard
(2018), they are also the two clubs that have invested the most in the projects in terms of being
the prime mover, project governance (owners/operators), skills (with more than 100 targeted
recruitments for the operation of the new stadium, compared to a maximum of five recruitments
for the other clubs), and in terms of structural investment (€430m in investment for OL and
€75m for PSG). They are also the two clubs that come closest to achieving their economic
diversification goals through the stadium. Looking at these two cases, it seems there may be a
link between the level of human and financial investment of a club in a stadium project, the
level of ex-ante or ex-post public aid, and the performance of the project. To partly illustrate
this idea, we can see that costs are better managed in the Paris and Lyon projects than in those
managed and financed mainly by the cities, where the costs of construction increased by 25%
to 68% compared to the initial price. Further research is needed on this issue.
5. Conclusion and Discussion
The objective of this paper is to examine the relationship between public funding of stadiums
and soft budget constraints (SBCs) of professional clubs. Specifically, we seek to answer the
question of whether the financial support by local governments for stadium renovation or
construction qualifies as an SBC. Using data on eight new stadiums for hosting the UEFA Euro
2016 in France, we confirm that public funding of stadiums constitutes the elements of an SBC.
Specifically, based on three indicators, we find that 78% of stadium financing was public and
that local authorities financed an average of €6.45m per year in stadium fees, which represents
60% of the annual operation costs of the stadiums. In addition, we identify different forms of
public aid that fit within the categories of “softness” proposed by Storm and Nielsen (2015)
and appear according to different ex-ante and ex-post time frames (Szabó, 1988).
Identifying the temporality of public aid is essential in measuring the effectiveness of the sports
policies put in place. In this respect, we agree with the conclusions of Jacobsen et al. (2021)
for whom “it is useful to distinguish clearly between ex-ante and ex-post funding.” For them,
ex-ante aid seems to be more effective in supporting and helping clubs to develop. In the
context of stadiums, the Lyon model could confirm their claim: ex-ante aid accompanied the
realization of the club's stadium project, and the absence of ex-post support obliged the club to
invest in and commit to the project, as there was no public safety net in case of failure. In the
21
context of the findings of Storm and Nielsen (2015), we were not able to illustrate the “soft
accounting” category for an SBC in our case studies, but we could confirm the relevance of the
other five softness categories. Being able to identify so many softness categories in a single-
use case (public funding of new stadiums) is rare.
In some cases, the public funding of stadiums can sometimes exceed the €2.3m limit that is
defined in Article R. 113-1 of the French Sports Code as the maximum amount of government
subsidy a professional club is allowed to receive. If the public aid in the context of the
construction and renovation of French football stadiums was considered a government subsidy,
the European Commission could then require the club, for example, to reimburse the amount
between the "fair level" of the rental fee (as defined by its 2013 decision) and the amount paid.
Havran and Andras (2022) claim that the public aids identified in the French case are not unique
and can be observed in other European countries such as in Eastern Europe where "public
stadiums are made available to football clubs by local government at below market fees.” In
addition, they show how “clubs of some countries like Hungary cannot operate effectively
thanks to excessive state subsidies and SBC.” In the same vein, a promising avenue of future
research is to further examine the harmful effects that SBC can have on club management. For
example, it seems that the low stadium operating results observed in France are indeed the
result of an inefficient renovation and construction policy due to significant structural and
organizational limitations (Moulard, 2018). These limitations could be explained by the poor
involvement of club managers in determining their stadium project and then in financing and
operating those stadiums. In these specific cases, recurrent use of SBC instruments seems to
be the cause of a reduction in managerial efficiency (Dewatripont & Maskin, 1995).
In sum, we encourage further research to examine the correlation between the amount of public
aid in a new stadium project and its economic performance. If a negative correlation exists, it
could on the one hand explain the French failure in their stadium modernization effort, and on
the other hand the economic success of the stadium renovation program in Germany, where
61% of the financing came from the private sector (Breuer et al., 2011).
22
Tables
Table 1: Club names and corresponding short names
Club name
Short name
City
AS Saint-Étienne
ASSE
Saint-Étienne
OGC Nice
OGCN
Nice
LOSC Lille
LOSC
Lille
FC Girondins de Bordeaux
FCGB
Bordeaux
Olympique de Marseille
OM
Marseille
Le Havre AC
HAC
Le Havre
Paris Saint-Germain F.C.
PSG
Paris
Olympique Lyonnais
OL
Lyon
Source: Own creation
Table 2: Summary of the eight stadiums studied in our research
Club
Club status
Stadium
City
Legal status
Club’s access
to stadium
Year
operations
started
Capacity
ASSE
Leaseholder
Geoffroy
Guichard
Saint-Étienne
Public domain
concession
Game day
2015
42,000
OGCN
Leaseholder
Alianz
Riviera
Nice
Public-private
partnership
Game day
2013
35,624
LOSC
Leaseholder
Pierre
Mauroy
Lille
Public-private
partnership
Game day
2012
49,834
FCGB
Leaseholder
Matmut
Atlantique
Bordeaux
Public-private
partnership
Game day
2015
43,500
OM
Leaseholder
Orange
Vélodrome
Marseille
Public-private
partnership
Game day
2015
67,354
HAC
Operator
Stade Océane
Le Havre
Occupancy
agreement
100%
2012
25,278
PSG
Operator
Parc des
Princes
Paris
Occupancy
agreement
100%
2014
47,929
OL
Owner
Goupama
Stadium
Lyon
Private
100%
2016
58,000
Source: French Football League (www.lfp.fr) and own creation
23
Table 3: Summary of the data collected
Data collected
(Court of Audit report of 2017)
Data collected
(DNCG reports on individual club accounts,
2012 – 2019)
Club status (leaseholder, operator, owner)
Sponsor/advertising revenue
Legal status of stadium
Match revenue/income
Total cost of stadium projects
Revenue from other sources
Total cost of road infrastructure
Gross wage costs for personnel
Amount of private investment in projects
Other expenses
Amount of public investment in projects
Financial result
Annual cost of new stadium expenses
Sponsor/advertising revenue
Annual cost of former rent paid by clubs
Match revenue/income
Annual cost of new rent paid by clubs
Annual cost of rent paid by cities
Calculation of rent and conclusion on low rental fee amounts of
stadiums
Conclusion on abolition of certain taxes for benefit of stadium
builders
Role of financial guarantor played by Lyon city government
Source: Own creation
Table 4: Amount of public and private investment in the eight new stadiums
Club
Total cost of
stadium project
before tax
Private investment
(in € million)
Indicator 1a:
Private investment
(in %)
Public investment
(in € million)
Indicator 1b:
Public investment
(in %)
ASSE
€69.4m
€0
0%
€69.4m
100%
OGCN
€211m
€0
0%
€211m
100%
LOSC
€585m
€0
0%
€585m
100%
FCGB
€221.4m
€20m
10%
€201.4m
90%
OM
€474.8m
€0
0%
€474.8m
100%
HAC
€154m
€4m
2.5%
€150m
97.5%
PSG
€75m
€75m
100%
€0
0%
OL
€632m
€430m
68%
€202m
32%
Total
€2.42bn
€529m
22%
€1.89bn
78%
Source: Court of Audit report of 2017 and own calculation.
24
Table 5: Amount and share of stadium rental fees for clubs and local government
Club
Annual rental
cost of new
stadium
Former annual
stadium rent
paid by club
New annual
stadium rent
paid by club (in
€ million)
Indicator 2a: New
annual stadium
rent paid by club
(in %)
City’s contribution
to annual rental
cost of new
stadium (in €
million)
Indicator 2b:
Local
government’s
contribution as
% of annual
rental cost of
new stadium
ASSE
€4.91m
€0.8m
€1.7m
35%
€3.21m
65%
OGCN
€13m
€0.2m
€1.87m
14%
€11.13m
86%
LOSC
€16m
€0.9m
€4.7m
29%
€11.3m
71%
FCGB
€6.79m
€0.9m
€3.85m
57%
€2.94m
43%
OM
€15.8m
€1.3m
€5.5m
35%
€10.3m
65%
HAC
€5m
€0.8m
€0m
0%
€5m
100%
PSG
€5.4m
€0.3m
€4.4m
81%
€1m
19%
OL
€21m
€1.1m
€14.3m
68%
€6.7m
32%
Average
€11m
€0.78m
€4.5m
40%
€6.45m
60%
Source: Court of Audit report of 2017 and own calculation.
Table 6: Summary of clubs’ operating results using a new stadium
Measure
ASSE
OGCN
LOSC
FCGB
OM
HAC
PSG
OL
Seasons N+
4 seasons
6 seasons
7 seasons
4 seasons
4 seasons
7 seasons
5 seasons
3 seasons
Stadium-related receipts in
N+
€26.2m
€19.3m
€31.6m
€34.6m
€64m
€7.4m
€397m
€99m
Stadium-related operating
expenses in N+
€27.2m
€19.9m
€49.3m
€39.4m
€67m
€9.4m
€175m
€132m
Indicator 3a: Stadium-
related operating result in
N+ with public aid
€-1m
€-0.5m
€-17.6m
€-4.8m
€-3m
€-2m
€222m
€-33m
Indicator 3b: Stadium-
related operating result in
N+ without public aid
€-4.21m
€-11.63m
€-28.9m
€-7.74m
€-13.3m
€-7m
€221m
€-39.7m
Source: DNCG and own calculation.
25
Table 7: Overview of instruments leading to SBCs in the financing of French football stadiums
Public aid
Type of softness
ASSE
OGCN
LOSC
FCGB
OM
HAC
PSG
OL
Preliminary SBC: Before construction
Role of public guarantor
of borrowing by local
government
S4 - Soft credit
condition
0
0
0
0
0
0
0
1
Sale of land at devalued
price
S1 - Soft pricing
0
0
0
0
0
0
0
1
Local government
finances construction or
renovation of new
stadium
S5 - Soft investments
1
1
1
1
1
1
0
0
Local government
finances stadium access
infrastructure
S5 - Soft investments
1
1
1
1
1
1
1
1
Total ex ante aid
16
2
2
2
2
2
2
1
3
Incremental SBC: After construction
Tax relief for stadium
builder
S2 - Soft taxation
0
1
0
1
0
0
0
0
Stadium rental fees
undervalued in relation
to actual price
S1 - Soft pricing
1
1
1
1
1
1
1
0
Cancellation of rental fee
owed by club to local
government
S3 – Soft subsidies
0
0
0
1
0
1
0
0
Local government
covers risk of team
relegation and remains
“payer of last resort” if
resident club goes
bankrupt
S3 – Soft subsidies
1
1
1
1
1
1
1
0
Total ex post aid
16
2
3
2
4
2
3
2
0
Total identified ex ante
and ex post aid
32
4
5
4
6
4
5
3
3
Source: Own creation
26
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