Saturday, August 20, 2011

Actual Research Proving the Baseball Stadium Is a Bad Idea

Will this matter to any in our City Council or some members of the County Commission who already seem to be for this?  I doubt it.

In case you don't know, local government officials are considering subsidizing a minor league baseball stadium.  From what I've heard, this will cost $36M or so.  I doubt that includes interest costs, which will no doubt be close to the construction cost.  From the WECT story, everything seems to be poised to happen very fast (i.e. before the City Council election.)

So, here it is.  Here are the facts.  Don't let people persuade you with grand ideas if they don't have the facts to back it up.

During the last 15 years, economists such as Stanford's Roger Noll, Smith College's Andrew Zimbalist, and Cleveland State University's Mark Rosentraub repeatedly have shot down the claim that new stadiums benefit local economies. "There is no dispute in the economic community about who gets the primary benefit from the subsidy," says Raymond J. Keating, chief economist for the Washington-based Small Business & Entrepreneurship Council and an expert on sports facility financing. "It is very clear a ruling against how eminent domain is now used will change some of the issues used by local government and teams in making their case for public financing of sports facilities."

Rosentraub estimated Arlington would lose roughly $235 million over 30 years as a result of the new Cowboys stadium, a far cry from the city's (and team's) projected $7 billion gain over the same period. (The raised taxes for the stadium would actually take spending money out of the local economy.) Local businesses tend to be largely unaffected, Rosentraub has found, because teams attempt to control almost all of their fans' entertainment spending, including shopping and dining. This leaves little room for the promised spillover growth around the stadium.
Do baseball teams need subsidies?

Reason (2005):
In fact, league profits had grown 17 percent a year since 1995, according to baseball economist Andrew Zimbalist, with franchise valuations increasing by 250 percent in just half a decade. Attendance and television revenue were at all-time highs. Small-market teams, far from being unable to compete, actually thrived in 2002, with the tiny-revenue Oakland A's making the playoffs for the third of four consecutive years. Even the contraction-targeted Twins won their division for the first of three straight seasons.

[...]The San Francisco Giants have thrived in the standings and at the gate with a handsome, revenue-generating stadium that was 100 percent privately financed.
Also, even though profits are up, attendance is down.  Part of the reason is increased availability of baseball on TV.

[B]aseball attendance on a per-game basis (the best rate to measure, and what is used here) was down 8 percent last year compared to 2007, its all-time high[...]
The best comparison is to measure the same number of home dates this year to the same number of home dates last year on a club-by-club basis. Do that through May 1 and you find out that attendance is down -- by 369 people per game, or 1.3 percent.

Market Watch:
Two websites that resell tickets to Bronx Bombers games say the average price of tickets to Yankee Stadium has fallen 10% to 20% this year, with attendance levels for the team down 10%.

"Most studies find that new sports stadiums do not increase employment or incomes," 80 economists said in a recent letter to Williams and the D.C. Council. "The reason appears to be that sports stadiums do not increase overall entertainment spending but merely shift it from other entertainment venues." They said "a vast body of economic research" indicates a new D.C. stadium "will not generate notable economic or fiscal benefits for the city."

In fact, as economists Dennis Coates and Brad R. Humphreys note in a recent Cato Institute paper, there's evidence that sports stadiums can hurt local economies. Looking at the economic performance of 37 cities between 1969 and 1996, they found "the presence of pro sports teams had a statistically significant negative impact on the level of real per capita income."

DC Fiscal Policy Institute:
Most studies find that new sports stadiums do not increase employment or incomes.  Some even find that stadiums have a modest negative effect on local economies.  The reason appears to be that sports stadiums do not increase overall entertainment spending but merely shift it from other entertainment venues to the stadium.
The net economic impact of professional sports in Washington, D.C., and the 36 other cities that hosted professional sports teams over nearly 30 years, was a reduction in real per capita income over the entire metropolitan area.

[...]Economists Robert Baade and Alan Sanderson looked at the economic growth patterns of cities that hosted sports teams. On the basis of evidence from 10 metropolitan statistical areas over the period of 1958 to 1993, they found that leisure spending was realigned, not increased, and an insufficient number of fans were attracted from beyond the area to significantly contribute to the city’s economy.

[...]In other words, nonsports entertainment spending has a bigger ripple effect in the economy than sports-related entertainment spending. Therefore, the economic gains from sports-related spending will never be large enough to fully offset the economic loss from a decline in nonsports entertainment spending.

[...]• The presence of pro sports teams in the 37 metropolitan areas in our sample had no measurable positive impact on the overall growth rate of real per capita income in those areas.

• The presence of pro sports teams had a statistically significant negative impact on the level of real per capita income in our sample of metropolitan areas.

• The presence of pro sports teams had a statistically significant negative impact on the retail and services sectors of the local economy. The average effect on employment in the services sector of a city’s economy was a net loss of 1,924 jobs as a result of the presence of a professional sports team.

• The presence of pro sports teams tended to raise wages in the hotels and other lodgings sector by about $10 per year. But it tended to reduce wages per worker in eating and drinking establishments by about $162 per year.

[...]But building a new arena for that basketball team reduces real per capita income by almost $73 in each of the 10 years following the construction of the arena, leading to a net loss of about $6 per person.

Similarly, in cities that have baseball franchises, the net effect of an existing baseball team playing in a 37,000-seat baseball-only stadium (the average capacity of the baseball stadiums in our data set) is a $10 reduction of real per capita income.

Brookings Institute:
Probably the most successful export facility [ie stadium] is Oriole Park, where about a third of the crowd at every game comes from outside the Baltimore area. (Baltimore's baseball exports are enhanced because it is 40 miles from the nation's capital, which has no major league baseball team.) Even so, the net gain to Baltimore's economy in terms of new jobs and incremental tax revenues is only about $3 million a year—not much of a return on a $200 million investment.
Ralph Nader:
However, stadium subsidies have benefited one segment of society. Team owners enjoy windfall profits when they turn around and sell.
And did you know that we already had a minor league team in 2001?

The Wilmington Waves were a minor league baseball team in Wilmington, North Carolina. They were a Low-A class team that played in the South Atlantic League, and were a farm team of the Los Angeles Dodgers for the franchise’s only year in Wilmington. They played all of their home games at Brooks Field, on the campus of the University of North Carolina at Wilmington. However, because Brooks Field was not easy to spot on campus (Uh huh, I'm sure that's one reason), attendance for the Waves' home games was substantially low.

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