Modern‐​Day Gladiators

August 31, 2002 • Commentary

The more government changes, the more it remains the same. The Roman Empire built the Coliseum and entertained its citizens with gladiators. Today cities entertain the masses by building stadiums for baseball and football contests.

Washington, D.C., Mayor Anthony Williams wants to bring professional baseball to the nation’s capital by contributing as much as $200 million toward a new stadium. A group of northern Virginia businessmen are working to saddle taxpayers with $100 million to $200 million in costs for a new baseball franchise. In fact, more than 30 sports facilities have been built or planned over the last decade. Last year, 15 baseball and football franchises were asking for new stadiums.

Obviously, franchise owners prefer that someone else pay. Since Milwaukee inaugurated the modern gladiatorial era in 1953 by building a stadium to tempt the Braves to leave Boston, governments have spent more than $20 billion, in current dollars, on sports facilities. According to economist Alan Krueger, that’s 2 1/2 times what the poor, impoverished sports moguls contributed.

Stadium supporters argue that such government “investments” create jobs. Fred Baranowski, president of the Downtown San Diego Partnership, even exults that the Padres ballpark project “has stimulated property values and residential and commercial development interest in a part of downtown that was dormant for decades.”

It is all too good to be true. Public finance experts Roger Noll and Andrew Zimbalist found 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.”

Baltimore’s Camden Yards may be one of the nation’s best, but Johns Hopkins University economist Bruce W. Hamilton figures every city resident contributes $12 a year toward the stadium’s upkeep. And that doesn’t include the revenues that could have been generated from investing people’s money elsewhere.

Many facilities are huge financial black holes. In San Diego, the Padres convinced the city to build them a stadium — which has been long held up in litigation — and then promptly dismantled the team that went to the World Series. The team later reneged on its promise to build new hotel and office space, which was supposed to help generate tax revenue to pay off city bonds.

The Chargers came up with a $68 million renovation project for Qualcomm stadium. Through revenue‐​guarantee, city taxpayers effectively buy unsold seats, which has cost San Diego taxpayers $25 million so far. The Chargers are now threatening to move to Los Angeles — unless San Diego builds them a new stadium, thank you very much. Obviously, stadiums generate economic activity. But there’s no guarantee that they will even help their own neighborhoods. For instance, Yankee Stadium has not revitalized the Bronx. And even if they help some local property owners, there are losers. San Diego’s project has boosted rents, driving out many businesses.

Moreover, enriching a few lucky individuals or companies should not be confused with benefiting the public. Making some people pay so others can profit is a misuse of government. Especially when the same argument could be made for subsidizing any business.

Why not build a new factory for General Motors? Or construct buildings for new restaurants? Even if corporate subsidies were a good thing in theory, there’s no reason to believe that a stadium would be more productive than other public programs, let alone private projects.

The real economic cost of stadium construction is the “opportunity cost.” That is, any “investment” has to be measured against the benefits that would accrue from spending the money elsewhere, whether creating new schools or providing credit for new entrepreneurs.

Almost every study proclaiming the economic benefits of sports facilities ignores the impact of siphoning that money out of other activities. As Hamilton puts it: “You produce jobs working at the stadium, but you reduce jobs at bars or bowling alleys or clothing stores or wherever else (fans) would spend their money.”

Economists Robert Baade and Allen Sanderson reviewed the experience of 10 cities since 1958 and concluded that adding a stadium had no impact on employment. Noll and Zimbalist found only “an extremely small effect on overall economic activity and employment.”

The best way for government to promote development is to improve the overall investment and regulatory climate. True, politicians quail before owners’ threats to move. Yet if the only way to prevent a team from leaving is to shovel corporate welfare into a billionaire’s hands, the proper response, especially from cities and states in fiscal crisis, is to say no thanks. Public officials need to remember what government is supposed to be about. The Roman Empire provided bread, circuses and gladiators to anesthetize its citizens. The American Republic can and should do better.

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