Buffalo has had a hard enough time maintaining what it has. The region could not survive the the negative publicity that comes with losing a team. The loss would serve as an high profile indicator of the regions economic struggles. Attracting new businesses to Buffalo is already hard enough. If the team left, it would be next to impossible. At least for a long while.
Then there's also that whole civic pride thing. Buffalonians identify themsleves with the football team moreso than just about any other football city. And because of that, some people stay in Buffalo (the rate of population loss has decreased a good bit), restaurants thrive (at least relative to how they'd be w/o the Bills), tourism increases(every time I fly home I'm on the plane with others who are also going to the game, staying at hotels, eating at Duff's, going to the Falls, etc.... SPENDING MONEY).
So while I agree that, generally, spending public dollars on things like this is usually a bad idea, I think in Buffalo's case it actaully makes sense. It's an investment that helps avoid a very difficult social and financial climat.