Commentary

Foul Ballpark

By Dennis Coates
This article appeared on Reason.com, December 16, 2005.
When Yogi Berra said, “It’s like déjà vu all over again,” he might as well have been describing this week’s D.C. City Council vote on the deal negotiated by the city and Major League Baseball (MLB) for the Washington Nationals’ stadium.

Last year around this time, Mayor Williams and the council acquiesced to the league’s demands by agreeing to build a brand new, baseball-only stadium to be financed largely by a new tax on local businesses. Now the council is being asked to agree to a stadium lease that keeps MLB from having to pay more than $20 million of the cost of the stadium. At the same time, costs have ballooned in just one month from an original estimate of around $440 million. Today the stadium is projected to cost approximately $667 million.

Supporters argue that this will bring economic development to D.C. That’s gotta be worth something, right? Thomas Boswell, in a recent Washington Post column, suggest that the Mayor “promised baseball a sweet deal because he thought Washington would eventually get back far more in return.” He points to construction that has already begun along South Capitol Street as evidence of the “return” on throwing taxpayer money at a multi-million dollar operation like MLB. For stadium supporters, no price will ever be too high for the promise of economic development.

But it’s very unlikely that economic growth will occur as a result of building a stadium for the Nationals. Economist Brad Humphreys and I analyzed the impact of professional sports teams (football, basketball, and baseball) on economic growth of cities from 1969 to the present for the Cato Institute in 2004. After accounting for all the other factors that economic theory suggests will affect income and growth, the presence of professional sports has, in the best case scenario, no effect on economic growth. In the most likely scenario, professional sports actually reduce income per person and they have no effect on overall economic growth in a metropolitan area.

In fact, some sports insiders have acknowledged this. Jerry Bell, point man for the Minnesota Twins’ attempt to get a new stadium, was quoted in the Minneapolis Star Tribune last June as saying of the argument that stadiums do not generate economic development, “At some global level they are obviously correct.” He also said, “I don’t think the economic argument turns it one way or another, so why go there? If there are side benefits, great. If not, so what?”

Yet, D.C. has fallen for the myth. And the costs are going to be huge. Under the new agreement, Major League Baseball will contribute $20 million toward the cost of stadium construction. Never mind that costs overruns are likely to continue — the league’s contribution will stay at $20 million. Even if you accept the mayor’s claim that the stadium won’t actually cost more than $535 million, the league would pay less than 4 percent of the overall cost of the stadium, one of its most significant pieces of capital. This is corporate welfare, pure and simple.

The deal also says the city would, over the course of the lease’s term, give MLB $20 million in non-game-day parking revenue. What looks on the surface like a contribution to defray the cost of building a stadium basically amounts to the league giving a $20 million loan to the city.

In addition, MLB has refused to agree to let the Nationals keep Robert F. Kennedy Stadium as their home field two years from now, even though doing so would be cheaper by about $60 million. In other words, in the best case scenario, Mayor Williams basically agreed to hand over more than $500 million of money from a tax that soaks many D.C. businesses to a multi-million dollar operation that refuses to make the sort of cost-conscious concessions they would make if they were footing the bill themselves. And now he’s asking the D.C. Council to rubber-stamp the agreement.

Little has changed in Washington over the past year. The argument that subsidizing the stadium would lead to job and income creation is no more valid now than it was then. That Major League Baseball is getting a sweetheart deal is as true now as it was last year. And a Council vote against the lease now would be just as good this week as a vote against the overall stadium deal would have been twelve months ago.

Dennis Coates is professor of economics at University of Maryland, Baltimore County. He is co-author of the Cato Institute report, “Caught Stealing: Debunking the Economic Case for D.C. Baseball.”