NEIL DEMAUSE
“It’s about a baseball stadium,” read the glossy brochure. “And it’s about a City.” A new stadium, it continued, “will pump new life into our community, will support 1,500 permanent jobs and 3,000 construction jobs, will encourage other businesses to locate in a rejuvenated downtown area,” and “will help restore pride in the city and encourage new retail shopping downtown and a new sense of community purpose.” Moreover, since the public would own the new ballpark, “the city will have the ability to add more police officers on the street to cut crime and increase services to neighborhoods. . . . With a new downtown stadium, everybody wins.” The city was Detroit, the year 1996. The brochure, put together by a pro-stadium group calling itself Detroiters for Jobs & Development, was sent to registered voters in advance of a referendum to repeal a ban on public tax subsidies for stadium construction that had been passed just four years earlier.
Publications like these—usually slickly produced, often with the help of professional public relations firms or political campaign managers—are common sights in cities debating whether to spend public money to help build new homes for their sports teams. A new stadium, it is promised, is a win-win for both the franchise and the public: The team will thrive on the field and at the bank, the city will reap untold economic riches and a redeveloped downtown, and fans will enjoy a better ballpark experience.
The counterargument is equally familiar by now: Whenever new stadiums have been built, the promised lavish economic benefits have failed to materialize. Publicly financed ballparks make teams richer and cities poorer.
The modern stadium boom began in 1989 with the opening of Toronto’s SkyDome. With its food courts, retractable roof, and luxury seating, it set the standard for state-of-the-art baseball palaces—at a cost to Ontario taxpayers of $600 million Canadian. Between 1990 and 2006, baseball has added eighteen new major-league stadiums, at a cost of $5.6 billion. Officially, just under two-thirds of that total—$3.6 billion or so—was public money (Table 6-2.1). But in the murky world of stadium finance, the numbers paraded before the public are seldom what they seem.
TABLE 6.2-1 Stadium Construction and Costs
This flood of new facilities has changed the face of baseball. Within a single generation, baseball has almost obliterated both the prewar ballparks that once dominated the landscape and the multipurpose “concrete donuts” that followed them. The result has been an undeniable windfall for team owners and, as we saw in Chapter 6-1, for their players. The Baltimore Orioles, for example, were a low-revenue team when Eli Jacobs bought them for $70 million in 1989, when Camden Yards was under construction. Just four years later, Jacobs resold the Orioles for $173 million, after seeing annual revenue soar by $23 million thanks to the new park. Jacobs’s profit was thus over $100 million. For the Maryland public, which paid for Camden Yards through a state-sponsored sports lottery, the return was very different.
Over the past decade and a half, independent economists have been busily critiquing both the rise of the taxpayer-funded stadium and the claims regarding its benefits for the public. Some of these names have become familiar: Andrew Zimbalist, Mark Rosentraub, Roger Noll, Allen Sanderson, Robert Baade, Rod Fort, Dennis Coates, Tim Chapin, and so on. In fact, it’s now become boilerplate for newspaper reporters to write in their articles that “economists say stadiums provide few economic benefits”—usually then following with team claims that those ivory-tower economists are full of hooey.
So what do the economic studies actually say, and how damaging are they to stadium boosters’ claims?
Probably the most-cited stadium study—at least the most ambitious—was conducted by Robert Baade, an economist at Lake Forest College in Illinois. To see whether new stadiums really created economic benefits for their hometowns, he studied thirty years’ worth of data from forty-eight cities, noting when a new facility appeared and whether it represented a new team or just a relocation from an older building elsewhere in town. After controlling for other economic indicators, he posed the question: When a city builds a new stadium, what happens to its residents’ per-capita income?
The result: Among the thirty cities with new stadiums or arenas, twenty-seven showed no measurable changes to resident income at all. In the other three, per-capita income appeared to drop as a result of the new sports facility. Concluded Baade: “Professional sports teams generally have no significant impact on a metropolitan economy [and do] not appear to create a flow of public funds generated by new economic growth. Far from generating new revenues out of which other public projects can be funded, sports ‘investments’ appear to be an economically unsound use of a community’s scarce financial resources.”
Baade’s study has since been repeated by other economists. It has been conducted on other sets of cities (for example, major and minor league stadiums in the state of California) with similar results. But these findings don’t prove that stadiums don’t have a positive economic impact. Rather, they show that if they do have an impact, it’s too small to measure with a coarse-grained indicator like per-capita income. So let’s look at some other measures of economic impact, starting with job creation.
Proponents everywhere tout the thousands of jobs to be created by stadium projects. But the government “creates jobs” when it spends money on just about anything—including John Maynard Keynes’s famous suggestion of burying money in bottles and paying people to dig it up again. So how do stadiums compare to other public works in terms of job creation?
Comerica Park, according to official figures, was slated to cost Michigan taxpayers $145 million. Even if the 1,500 permanent jobs promised came to pass—and were full time, not jobs as seasonal hotdog vendors and the like—that would amount to about $100,000 in public expense per job created. Many stadiums boasted considerably higher cost-per-job figures: The Arizona Diamondbacks projected that Bank One Ballpark would create 340 full-time-equivalent jobs from a public expenditure of $240 million ($705,000 per job); one Minnesota Twins stadium plan promised 168 jobs at a cost of $310 million (almost $2 million per job).
In terms of bang for the public buck, figures like these are somewhere on the far side of dismal. For example, both the U.S. Department of Housing and Urban Development and the Small Business Administration require that projects they fund come in at no more than $35,000 per job. Well-designed economic development programs, say planning experts, typically come in at a cost-per-job ratio of less than $10,000; a study by the state of Maine found that job-training programs in that state cost just $2,300 per new job.
Another way to evaluate the public’s return on investment is to look at cash flow. In 1998, Johns Hopkins economists Bruce Hamilton and Peter Kahn conducted a study of how much money Camden Yards was costing the state of Maryland, versus how much new tax revenue it was bringing in. Their conclusion: Economic benefits amounted to about $3 million a year, while costs averaged $14 million—a net annual loss of $11 million. This figure was measured during Camden Yards’ “honeymoon” period, when sold-out games (and Cal Ripken at-bats) were still commonplace.
Hamilton and Kahn’s study appeared in Sports, Jobs & Taxes, a 1998 anthology from the Brookings Institution. The publication included a who’s who of sports economists, tackling the question of what sports stadiums do for—or to—local economies. As editors Roger Noll and Andrew Zimbalist wrote at the time: “In every case, the conclusions are the same. A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment. No recent facility appears to have earned anything approaching a reasonable return on investment. No recent facility has been self-financing in terms of its impact on net tax revenues.”
How can this be? New stadiums have drawn millions of additional fans. Don’t all those dollars provide some boost to their local economy?
Actually, no. As it turns out, not all consumer spending is created equal. Stadium spending fails as an economic engine in two ways: It isn’t new spending, and it doesn’t stay at home.
The first factor is called the substitution effect. The argument goes like this: By and large, residents of a city have a certain amount of disposable income to spend on entertainment, whether that be sporting events, movie tickets, or a night out at a bowling alley. If a baseball stadium draws three million fans, that’s three million people who otherwise might have spent money elsewhere that night. Even tourists, unless they came to town specifically to see a baseball game, provide no net gain if their Yankees tickets are substituting for, say, an afternoon at the Museum of Modern Art.
One of the headaches of economics (and baseball analysis, for that matter) is that you can’t do controlled experiments. You can’t rewind the clock to see how a given city would have fared without its new stadiums. Fortunately, with baseball we have the next best thing: the 1994 labor stoppage. The sport shut down in early August of that year, wiping out the rest of the season and thus its economic benefits.
Shortly after the strike began, Canada’s CBC News reported “a grand slam for some businesses” such as theaters and “dramatic increases in rentals at the video store.” One comedy club manager quipped, “We really feel it would be in the best interest of entertainment in Toronto if the hockey players sat out the whole season too.” Several studies failed to find any sign of lost tax revenue thanks to the loss of baseball; economist John Zipp reported that “the strike had little, if any, economic impact on host cities. Retail trade appeared to be almost completely unaffected by the strike.” The obvious conclusion: People were spending the same money, just on different things.
The second factor in reducing any positive impact from stadiums is leakage. When you spend money at a bowling alley, most of the money goes to local residents who work as pinsetters, shoe-rental clerks, and the like; even the owner probably lives nearby. This creates what’s called a multiplier effect, where every dollar you spend gets re-spent locally by all these local workers.
At a baseball stadium, much less of your consumer dollar recirculates in the local economy. Some of your cost in attending a Yankees game goes to pay the beer vendor or the groundskeepers, but the lion’s share goes to George Steinbrenner and his players, none of whom are likely to spend it on cans of tuna fish at a Bronx bodega. In a study of the Mariners’ impact on the nearby Pioneer Square district of Seattle, Baade found that “the stadium may have served as little more than an economic conduit through which spending on Kingdome events passed from one set of non-resident hands to another.”
Add it all up, and you get a situation that soaks up public money with minimal public return. As University of Chicago sports economist Allen Sanderson, himself a diehard White Sox fan, has said: “If you want to inject money into the local economy, it would be better to drop it from a helicopter than invest in a new ballpark.”
So if stadiums don’t boost cities’ bottom lines, what do they provide? Some of the additional arguments put forth by stadium proponents include:
Preventing a move. Virtually every team seeking a new stadium drops hints that it will skip town if its demands aren’t met, or allows local political leaders to make the threat for it. Yet franchise relocations in baseball are rare—the Expos’ decampment for Washington, DC, in 2005 was the first such move in thirty-three years. This is less a function of baseball’s commitment to “stability,” as Bud Selig might have you think, than a result of its financial structure: MLB relies far more on local TV revenue than other sports. So where an NFL team owner can safely move from big-market Houston to relatively tiny Memphis, knowing that he’ll still be entitled to a share of the league’s lucrative national TV contract, a baseball owner doing the same would take a huge hit to the wallet. As MLB discovered while trying to unload the Expos, the supply of untapped large baseball markets is next to exhausted.
Not that this has stopped teams from using move threats to extract stadium deals from their hometowns. Sometimes, in fact, pro-stadium politicians have even suggested bogus move threats to team owners as a means of jump-starting stadium negotiations: Both the Chicago White Sox’ rumored move to Tampa Bay in the 1980s and the Minnesota Twins’ dalliance with North Carolina in the late 1990s turned out to have been ideas hatched in the Illinois and Minnesota governors’ offices.
Winning baseball. One of the most common pro-stadium arguments is that the additional revenue streams from a new park will make the team “competitive,” especially if the team isn’t saddled with much construction debt. For every team that found winning ways in a new home, though (the Cleveland Indians are usually the poster child in such examples), there’s another team, such as the Pirates, that moved into its new home and then promptly sank deeper into the cellar. Which is the truth?
Table 6-2.2 is a list of every team that has moved into a new stadium since 1991 (the Rockies are excluded, since they played only two seasons in their original park). The list also includes the teams’ average winning percentages in the final five seasons of their old parks and in the first five seasons (if they’ve played that many) in their new ones. The overall averages: a .486 winning percentage before the move, .520 afterward. It appears that a new ballpark is worth about 5.5 wins a year.
TABLE 6-2.2 Teams Moving to New Parks Since 1991, with Winning Percentage in Final Five Years in Old Park, First Five in New Park
In economic terms, this actually makes sense. One thing new stadiums do, as we saw in Chapter 6-1, is increase the marginal return on spending to improve your team. In simple terms, a team is more likely to sign a Barry Bonds—or, to use the actual example of Cleveland, give long-term contracts to Jim Thome and Kenny Lofton—if it knows the people turning out to watch him are paying $25 per ticket instead of $15.
Of course, a $500 million stadium is an awfully expensive way to pick up five and a half games in the standings. (As Nate Silver has estimated in Chapter 5-2, each extra win is worth an average of $1.1 million to a team, with the benefit going up the closer a team gets to playoff contention.) This was noted in 2000 by Minnesota state representative Phyllis Kahn, who proposed that instead of buying the Twins a new stadium, the state just chip in $2 million a year toward Brad Radke’s contract.
A better place to see a game. It’s hard to argue with success, and baseball fans have poured into new stadiums in record numbers, at least when the gates first open. But it’s equally hard to argue with geometry, and measurements have found that what fans are getting for their money isn’t necessarily a better seat from which to watch the game. New stadiums are invariably described by designers as “intimate.” But while most feature a smaller foul territory, which brings the first-row seats closer to the action, the need for roomy club seats and luxury suites has pushed upper decks skyward.
The result, according to Seattle-based stadium consultant John Pastier, is that new parks’ upper decks—the cheap seats that most noncorporate fans must settle for—are invariably farther from the field than the top decks in the old parks they replaced, even when the new stadium’s seating capacity is smaller. In the most infamous example, when the White Sox replaced the 52,000-seat Comiskey Park with a 44,000-seat new stadium of the same name in 1991, fans were alarmed to discover that the first row of the new upper deck was farther from the field than the last row in the old park.
Still, the claims of “intimacy” roll on unchallenged. Perhaps the most unintentionally amusing example of this came in the summer of 1999, when the Boston Red Sox owners were stumping for a new stadium to replace Fenway Park. The new park, explained a ubiquitous TV ad, would place fans “closer to the field, but not to the fans next to you.” How team architects would manage this feat of non-Euclidean engineering was left unexplained.
Urban renewal. While the substitution effect generally precludes using a stadium to bring new money into a city, economists do admit that it can move spending from one part of a metropolitan area to another. Even here, though, economic studies have found that the “revitalization” effects of new stadiums are largely overblown.
One flaw in the theory of baseball stadiums becoming a neighborhood “catalyst” is that since they’re rarely used for anything other than their teams’ home games, they’re dark some 284 days a year. (Arenas, which can book a full schedule of basketball, hockey, and concerts, are better, but even then the transient crowds are often less than useful for encouraging new businesses.) In 2000, six years after Cleveland’s downtown Gateway complex opened, the Cleveland Plain Dealer examined the impact of Jacobs Field and the Gund Arena on the surrounding neighborhood: “The streets are often empty on nights when there are no sporting events or shows. Some popular restaurants and bars have not survived.” The shopping district on nearby Euclid Avenue had deteriorated into “a retail no-man’s land” and was seeking a $292 million trolley project to spur development.
Studies of other “revitalized” stadium districts found similarly shallow results. When Robert Baade looked at Seattle’s Pioneer Square area, he found that some restaurants and bars had opened immediately adjacent to the Kingdome, but “three or four blocks walking distance from the stadium was sufficient to eliminate most of the positive economic impact cited by bars a block or less away.” In downtown Baltimore, economists Hamilton and Kahn found that hotel receipts rose throughout the 1980s as the Baltimore harborfront was built up, but once Camden Yards opened, the trend flattened out.
Intangibles. These benefits, usually summed up as the “civic pride” that comes from rooting for a pro sports team, are the hardest to evaluate. As “intangibles,” they’re by definition impossible to measure.
Not that that’s stopped some people from trying. Economics professor Bruce Johnson of Kentucky’s Centre College took the survey methodology that environmental economists use to put a dollar value on intangible commodities—clean air, unspoiled wilderness—to gauge how much residents of Pittsburgh, Jacksonville, and Lexington would spend to keep or attract a local team. The answer: Between $23 and $48 million, far short of what teams usually demand in stadium subsidies. Johnson told a local newspaper that he had anticipated “really big numbers,” but it turned out that “nobody was willing to pay anywhere near what cities were routinely spending on stadiums and arenas.”
In fact, one of the dirty little secrets of the stadium game is that while new buildings are promoted as cash cows, when public subsidies are discounted, they seldom even pay for their own construction and operation costs. (Camden Yards, according to Hamilton and Kahn, was producing $23 million a year in new revenue for the Orioles during its early boom years, but $20 million of that came in the form of state subsidies.) Given the skyrocketing cost of building new stadiums (PETCO Park, for example, cost more than double what the new Comiskey Park or Jacobs Field cost, even accounting for inflation), this makes sense: A $500 million stadium needs to bring in $35 million a year more than the old place to turn a profit. It’s little wonder, then, that one seldom sees team owners exclusively invest private money to build pro sports facilities. They’re generally bad investments.
The counterexample invariably raised is the San Francisco Giants and their Pacific Bell (now AT&T) Park. Built after four consecutive attempts at public funding were rejected at the ballot box in the late 1980s and early ’90s, Pac Bell was funded almost entirely by Giants ownership, earning plaudits for breaking the cycle of public stadium finance. But San Francisco in the late 1990s was hardly a typical environment for building a baseball stadium. With the booming tech economy having left many Bay Area residents and businesses with money to burn, the Giants were able to sell fifteen thousand “charter seat licenses” (more commonly known as personal seat licenses, or PSLs) to fans seeking prime season-ticket locations, raising about $70 million. Pacific Bell paid a then-high $50 million for naming rights. Even ticket prices 75 percent higher than at the Giants’ old home at Candlestick Park proved no deterrent to nightly sellouts.
Furthermore, Pac Bell’s “private financing” turns out to have been not so private after all. While the Giants paid the full $306 million construction cost, they received both free land and tax breaks from the city. In all, according to Rutgers stadium-lease expert Judith Grant Long, the public ended up subsidizing about 14 percent of Pac Bell’s cost. (Long’s figures show that on average, the typical stadium project costs about 40 percent more than the “official” figures, thanks to unreported costs like free land, property-tax breaks, and public operations and maintenance costs.)
Finally, while the Giants have been a success so far at Pac Bell, it’s still early in the new park’s life cycle: By the time the stadium bonds are paid off, Barry Bonds will be almost sixty years old, and nightly sellouts could be a thing of the past. (The Toronto SkyDome, remember, was a four-million-fans-a-year juggernaut in its first few seasons; by year ten, it had filed for bankruptcy, and the Jays were threatening to move out.) With the Giants on the hook for $18 million a year in construction debt until the year 2020, and lifetime PSLs already sold, the jury is still out on whether the team will ultimately turn a profit on its new park.
The short honeymoon of new stadiums is by now an established fact. Open the gates to a new park, and curiosity-seekers will pour in—for a time. Provide some winning teams, and you can stretch out the good times for a few more years. But by year eight, the new fans will slip away no matter what, and attendance will swiftly fall back toward what it was in the team’s old home (Figure 6-2.1).
FIGURE 6-2.1 Stadium honeymoon
All of the lines in Figure 6-2.1 slope downward after the first few years. But there’s more: Look at the four lines that start at the bottom of the pack, then immediately plunge to around twenty thousand fans per game or lower. These are Detroit’s Comerica Park, Milwaukee’s Miller Park, Pittsburgh’s PNC Park, and Tampa Bay’s Tropicana Field. A mix of domes and open-air stadiums, in small to medium-large markets, these parks have two things in common: All host teams have been out of contention for a generation (or were never contenders), and all opened late in the stadium game, when fans were less likely to make a cross-country pilgrimage to visit the latest in new “retro” parks. Numbers like these have led many to suggest that baseball is suffering from “stadium fatigue,” where the initial attendance bump has grown weaker and the honeymoon shorter. Teams are no longer breaking new ground, merely keeping up with the Joneses.
So does all this mean that new stadiums should never be built? Of course not. But it does mean that if subsidies were removed from the equation, it would usually make more sense for teams to look at other options—renovation, for example, or less grandiose designs that keep costs in line with projected revenue—than to leap to build the next Camden Yards. Of the new ballparks that have mushroomed across America in recent years, not one was built because it was a good business proposition. They were built because team owners saw them as a good way to obtain public cash.
Despite being a bad deal, public subsidies have shown no sign of going away, nor have new stadium demands—the benefits to teams are just too great. Since 2002, team owners have been willing to put up a bit more of their own money, thanks to a new MLB rule—installed, it is rumored, at the behest of George Steinbrenner—that allows teams to deduct stadium expenses from their income for the purposes of revenue sharing, a bookkeeping gimmick that effectively allows teams to pass along 40 percent of their construction expenses to their rival ballclubs.
Of course, this had also led to an acceleration of the trend cited by Long, in that teams are increasingly seeking subsidies that don’t show up either in the newspaper or on their revenue-sharing statements: property-tax breaks, free land, and the like. In 2001, for example, New York Mayor Rudy Giuliani proposed building twin stadiums for the Mets and Yankees, of which half the cost, $400 million apiece, would be paid by the city. The plan was swiftly dismissed by his successor, Michael Bloomberg, on the ground that the city couldn’t afford it.
Four years later, Bloomberg proudly announced plans to build the new Mets and Yanks stadiums entirely with private money. But an analysis of the costs of land, infrastructure, and forgone tax and lease revenue (neither team would pay rent or property taxes) revealed that the taxpayer cost was still about $400 million apiece—almost double what Camden Yards had cost the Maryland public in 1991, even after adjusting for inflation.
The forms of the subsidies may change, but new stadiums are still mostly about one thing: boosting team profits by separating taxpayers from their money.