Commentary

Surprise! Stadiums Don’t Pay, After All

This article appeared in The Washington Post on October 19, 2003.

We’re all expected to love baseball — it’s America’s sport, after all — but I know a few taxpayers in the greater Washington area, maybe even a few thousand, who don’t. You know, people who weren’t — horrors! — glued to their TV sets, rooting for the luckless Red Sox or the jinxed Cubs to finally make it back to the World Series. People who haven’t spent every waking moment since 1971, when the Senators left, plotting to lure a team to town. People who don’t think the city’s image and its future depend on spending millions of taxpayer dollars on a state-of-the-art stadium for a transitory collection of athletes, artificially assembled through league drafts, franchise trades and high salaries.

Alas, the idea that such taxpayers might exist doesn’t even seem to be on the radar screens of many local officials, who are falling all over themselves trying to scrounge together enough public money to lure a major league baseball team back to the national capital area. District Mayor Anthony Williams is proposing $339 million to build a stadium in town (even though there’s no commitment yet from any team), while baseball boosters in Northern Virginia are pushing millions in state construction bonds to win a franchise.

These politicians are offering the usual justifications for providing the modern version of bread and circuses to their constituents: municipal prestige, business development, new jobs. But in the end, publicly funded stadiums come down to money — and I don’t mean money for the city that gets the team. I’m talking about money for wealthy sports moguls who have turned extorting taxpayers into an art form.

Franchise owners typically win taxpayer support only through threats: Pay us off, or we will leave, they say. Give us a new stadium, or we’ll go someplace that will. Take the current competition for the Montreal Expos, who have been up for grabs ever since Major League Baseball assumed ownership of the financially ailing franchise. The only question seems to be, who will offer the biggest inducements to get them?

Virginia and the District shouldn’t play this game. Stadiums don’t constitute a great unmet social need. Sports should be a private enterprise, privately funded, just as it was during most of the first half of the 20th century.

Yet the willingness of political elites to sacrifice taxpayers on the omnipresent sports altar spans the country. Oregon faces a serious budget crisis, but that didn’t stop the legislature from recently approving $150 million for a new baseball stadium in a bid to win the Expos for Portland. In Oakland, Al Davis, the irrepressible owner of the Raiders football team, won a $34.2 million verdict against the city stadium authority for failing, he argued, to deliver on its promise of sold-out games. In San Diego, meanwhile, negotiations continue between the city and the Chargers, who want a new stadium — eight years after the city renovated the old one.

Today, government involvement in the sports business seems unexceptional. But as Raymond Keating, chief economist for the Washington-based Small Business Survival Committee, observes, “Before the Great Depression, sports subsidies were rare.” Since then, he figures, government has poured well over $20 billion (in current dollars) into sports ventures. Such subsidies cannot be justified in principle. Making some people pay so others, whether franchise owners or restaurateurs or developers, can profit is a misuse of government. The only benefit is private, not public.

Not only were sports facilities built privately earlier in the last century, they still can be. In 1987 Joe Robbie, owner of the Miami Dolphins, constructed his own stadium. Even the Redskins’ FedEx field was primarily a private venture by owner Jack Kent Cooke when it originally opened in 1997 (as Jack Kent Cooke Stadium), though the state of Maryland chipped in for roads and other public improvements.

Proponents argue that franchises provide prestige, but the nation’s capital doesn’t have to worry about a lack of prestige. Is Los Angeles impoverished because it can’t keep a football team? Do people move to San Diego to see the Chargers — or for the climate?

On the flip side, the financial benefits of government support for teams are obvious. Teams avoid having to finance a stadium. They are able to upgrade their facilities at taxpayer expense, even as they cater to a wealthier corporate clientele.

Most teams are owned by extremely wealthy businessmen, such as the Redskins’ Dan Snyder and the Orioles’ Peter Angelos, (not to mention one former owner by the name of George W. Bush), who are able to resell at a profit. Professional sports investments often are a dilettantish affectation, especially for limited partners, who — besides a quick return on their cash — simply crave proximity to the team. Businessman John Imlay Jr. recently parlayed his $6 million investment in the Atlanta Falcons into $35 million, explaining to The Post’s Thomas Heath: “In ten years, I made five times my money and had a heck of a good time.”

The taxpayers are not so lucky. Public finance experts Roger Noll of Stanford and Andrew Zimbalist of Smith College found in a recent study that “no recent facility appears to have earned anything approaching a reasonable return on investment and no recent facility has been self-financing in terms of its impact on net tax revenues.” Even better stadium projects, such as Baltimore’s Camden Yards, require continuing aid for upkeep. As F.W. Walz, a Cleveland city councilman who opposed the nation’s first subsidized sports facility, a baseball stadium, observed in 1928: “Of course, they say the stadium will pay for itself, but we’ve heard that story before.”

Stadium proponents argue that owner enrichment is merely incidental to increased regional economic activity and tax collections. And they routinely produce studies claiming significant financial gains. But even if there is an economic benefit, it is small. University of Maryland economists Dennis Coates and Brad Humphreys figure that annual sports-oriented tax revenues and personal earnings from sports have been much less than 1 percent of the total earnings and revenues for Baltimore and Maryland. As they explain, “Although the absolute numbers seem large and impressive, they are small compared with the existing tax revenues and local economy, even if one grants that the proponents’ estimates are correct.”

There’s much to criticize in such estimates, however. For instance, what’s the right “multiplier”? That is, how much is ultimately generated by a dollar spent on sports? Official figures tend to assume, unrealistically, that all of the money, including, for instance, players’ salaries, is spent locally.

Even more important, though, is that sports spending primarily substitutes for other outlays. Stanford’s Noll figures that the vast majority of those attending games — more than 90 percent — are local residents. They are merely diverting their spending from other leisure activities. Money might shift a bit within a region — from suburbs to city, or from outer to inner suburbs. But, as economists have consistently found, the amount of new economic growth is minimal. Economists Robert Baade of Lake Forest College and Allen Sanderson of the University of Chicago have looked at 10 metropolitan areas that brought in sports teams, and found no net employment increase, as spending was simply realigned. And there was no evident difference in economic performance between cities with or without teams during the 1994 baseball strike, says the University of Akron’s John Zipp.

So if the goal is trickle-down consumer spending and business development, why not build a new automobile factory, retail outlet, grocery store or software facility to attract and maintain companies, jobs and economic growth? Forget a sports team for D.C. Just erect a string of buildings for restaurants. That should draw suburban residents, and their money, here.

But neither sports boosters nor their political allies are much interested in overall economic impact. Fans want a team, potential franchise owners desire subsidies, and elected officials expect political gain — and the opportunity to snag an invitation to the owner’s box. Government stadiums benefit economic and political elites, not the public.

Yes, refusing to play the subsidy game might mean losing a franchise. But if the only way to prevent a team from moving or to get one to come to your town is to shovel corporate welfare into a billionaire’s hands, trust the research — it isn’t worth it.

Doug Bandow, a former special assistant to President Ronald Reagan, is a senior fellow at the Cato Institute who writes frequently on economic and legal issues.