Management & Labor

Ballpark Dreaming

Economists have a reputation for being cool and dispassionate, but a few phrases or concepts have the capacity to turn even the meekest of them into hectoring ideologues, exasperated with the inability of others to exercise simple common sense.
by | November 2004
 

Economists have a reputation for being cool and dispassionate, but a few phrases or concepts have the capacity to turn even the meekest of them into hectoring ideologues, exasperated with the inability of others to exercise simple common sense.

Try it some time. Tell an economist there may be some hidden virtues in rent control. Or that an expensive urban light-rail system might turn out a good investment. Odds are you will soon be on the receiving end of a sermon denouncing perverse incentives and the waste of billions in public money on inefficient and indefensible subsidies for half-baked government boondoggles.

Better yet, start a conversation about sports stadiums. Suggest casually that a major league baseball team is a civic asset so valuable that it justifies whatever the cost to taxpayers of gaining it or keeping it might be, even if that cost ultimately runs into the hundreds of millions of dollars. Then get ready for a lecture. If there's one article of faith that unites economists and public policy analysts of all colors and creeds, it's that subsidies to sports teams are a scandalous example of welfare payments to millionaires that accomplish nothing for cities or their governments in the long run.

In the past decade, specialists in economics and public policy have written more than a dozen scholarly books attacking the sinister connections between cities and sports teams, and decrying the tragic inefficiencies they create. Whenever a new stadium-subsidy deal is announced, experts such as Andrew Zimbalist, Mark Rosentraub and Robert Baade turn up on sports pages all over the country, denouncing yet another foolish giveaway. One commentator has gone so far as to refer to the group as a "cottage industry."

Industry or not, the scourges of subsidies will be busy in the next few months as Washington, D.C., finalizes its plan to bring the Montreal Expos to the nation's capital and build a new baseball stadium for the team to play in. It is just the sort of arrangement every economist loves to hate. Regardless of who ends up owning the team, Washington's mayor is committed to spending $440 million on the stadium, to be located in an underused industrial neighborhood along the Anacostia River. To pay for the project, the city plans to issue 30-year bonds, repayable mostly through a surcharge on stadium tickets and concessions, and a special tax on D.C.'s largest businesses. Only about 14 percent of the cost--about $5.5 million per year--would be met by rental payments to D.C. from the team's owners.

As is typical of any big stadium deal these days, supporters of D.C. baseball touted the tangible benefits that the team and the new ballpark would bring to the city: jobs, economic growth, millions in new revenue from gate receipts and revitalization of a long dilapidated part of the community. "This is a really incredible day," Mayor Anthony A. Williams said in making the announcement. "America's pastime is coming back to this city and once again giving us the ability to dream great things."

Those are sweet dreams. What's wrong with them? Just about everything, an economist will tell you. For one thing, sports are a tiny part of any regional economy. Rarely do they represent more than 1 or 2 percent of the local job base. A new stadium and the low-wage service jobs it creates represent no more than a drop in the bucket. Fans do pay millions of dollars for tickets, hot dogs and beer, but most of that revenue simply replaces money they would have spent on other forms of recreational activity in the same vicinity.

And finally, economists say, new stadiums don't do much for the surrounding territory. Just ask the merchants around Pioneer Square in Seattle, which was a sleazy downscale neighborhood in the 1970s, before the multi-sport Kingdome was built, and was just as much of an embarrassment 30 years later, when the Dome was demolished and separate new facilities for football and baseball were erected to replace it, at a cost of $700 million.

On the jobs and revenue questions, I will give the economists their due. Sports promoters who glibly predict that a new stadium and/or franchise will bring in tens of thousands of jobs and as much as $100 million in net revenue are talking through their hats. A host of careful studies done over the past 15 years makes it pretty clear that no team has ever come close to accomplishing this. On these issues, I can't really challenge the views of Steven Reiss, one of the most prominent of the sports-subsidy critics: Reis says cities "continue to rely on unsubstantiated forecasts by well-paid consultants to support sports as a economic development tool."

When it comes to neighborhood revival, though, I don't think the answer is quite as clear. It's true that the Kingdome did nothing for downtown Seattle. Nor has the Ballpark at Arlington, where the Texas Rangers play, brought a lot of new life to the community around it. A new baseball stadium didn't save downtown St. Louis in the 1970s, nor is a new domed football stadium helping it much right now. Even a great facility and a playoff team can't accomplish an urban renaissance all by themselves.

On the other hand, there's good evidence--even if it's anecdotal rather than academic--to suggest that professional sports can be critical to inner-city renewal if it's part of a broader public plan. Anybody who walks up 16th Street in downtown Denver, past the restaurants and lofts of the revived LoDo district, and on to Coors Field at the end of the road, can't help but see how commerce, architecture and sports have joined together in a web of successful redevelopment. Camden Yards in Baltimore and Jacobs Field in Cleveland haven't brought any form of salvation to their seriously troubled cities. But they have helped to reclaim parts of them by bringing in millions of visitors. Do those benefits justify the enormous costs that taxpayers in Cleveland and Baltimore are still paying off? I think that's an arguable question--one that cannot necessarily be answered by statistics on economic growth and job creation.

Where the economists clearly are right is in pointing out that the huge subsidies cities give sports owners are the result of an artificial scarcity the owners have created. There are 30 franchises in major league baseball. The owners refuse to make any more, and so any city that wants a team--or wants to keep its team--has to compete against every other aspiring host city in a rigged sellers' market. If baseball management wants to demand a $440 million stadium subsidy as its price for allowing the Expos to relocate to Washington, it can get away with that.

That's because no matter what the press releases say, cities that pay big money for teams and stadiums aren't making an economic investment. They're making an emotional statement about the kind of community they want to be. They want to be "major league," in every sense of the word. When St. Louis offered a subsidy that may eventually come to $700 million to attract the NFL Rams, one civic leader expressed the rationale in blunt terms: "Without them, we're a cow town."

When you lose a team, you lose civic self-respect. When you regain a team, you get some of it back. Even the economists understand the importance of that. And political leaders feel it even more keenly, if possible, than ordinary fans. When the Chicago White Sox threatened to move to Florida in the early 1990s, Illinois Governor James Thompson promised that he would "bleed and die before I let the Sox leave Chicago." And they stayed, at a cost to taxpayers of $167 million.

That's pretty much the way it works. Economists and public policy analysts will keep doing studies that document the inefficiency of sports and stadium subsidies. Mayors and governors will continue to make lavish promises to the few available teams, and, taxpayers will continue to foot the bill, accumulating long-term public debt in the hundreds of millions of dollars almost every time a deal is made. And they generally will pay it without complaining, even if they never voted for it.

If the economics of sports were more rational, there would be three times as many major league teams in every sport. The owners would pay for new stadiums with their own money, or they wouldn't build them at all. We would all get a few of our tax dollars back.

But sports cannot really be understood as a rational enterprise. As one of the most prominent subsidy critics, Mark Rosentraub of Cleveland State University, lamented a few years ago, "the men manipulating the smoke and pageantry of sports are presenting an illusion steeped in the culture and traditions of our society." It's not an illusion that shows any signs of disappearing.

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