In Prince William County, Virginia, just south of Washington, the board of supervisors is about to decide whether to issue $35 million in bonds to build a new baseball stadium for the Potomac Nationals, a Class A affiliate of the Washington Nationals. The board just rejected a proposal to let the taxpayers vote on the issue.
Art Silber, the retired banker who put up $300,000 to buy the team in 1990, estimates that it’s now worth $15 to $25 million. But,
Right now, we have the worst ballpark in the league and one that probably ranks in the bottom 10 of organized baseball’s 160,” he said. “At the new ballpark, the visibility will be extraordinary. Naming rights alone will pay for a lot of the stadium.”
He can only imagine what the team will be worth.
Seems like an excellent profit opportunity for a business worth tens of millions of dollars. But he has a better plan: If the county doesn’t pony up, he will sell the team, and new owners will move it.
Stadiums’ Influence on the Local Economy
The county found a consulting firm to produce, as it has done for many governments, an optimistic economic analysis: It suggests that a new stadium would generate 288 jobs, $175 million in economic impact, and $4.9 million in tax revenue over a 30-year lease.
Similar studies have proven wildly optimistic in the past. In 2008 the Washington Post reported that Washington Nationals attendance had fallen far short of what a 2005 study predicted. As Dennis Coates and Brad Humphreys wrote in a 2004 Cato study criticizing the proposed Nationals stadium subsidy, “The wonder is that anyone finds such figures credible.”
Academic studies have consistently found few if any economic benefits of subsidies for stadiums, arenas, convention centers, and the like.
Several Cato studies over the years have looked at the absurd economic claims of stadium advocates. In “Sports Pork: The Costly Relationship between Major League Sports and Government,” Raymond Keating finds:
The lone beneficiaries of sports subsidies are team owners and players. The existence of what economists call the “substitution effect” (in terms of the stadium game, leisure dollars will be spent one way or another whether a stadium exists or not), the dubiousness of the Keynesian multiplier, the offsetting impact of a negative multiplier, the inefficiency of government, and the negatives of higher taxes all argue against government sports subsidies. Indeed, the results of studies on changes in the economy resulting from the presence of stadiums, arenas, and sports teams show no positive economic impact from professional sports – or a possible negative effect.
In Regulation magazine (.pdf), Dennis Coates and Brad Humphreys found that the economic literature on stadium subsidies comes to consistent conclusions:
The evidence suggests that attracting a professional sports franchise to a city and building that franchise a new stadium or arena will have no effect on the growth rate of real per capita income and may reduce the level of real per capita income in that city.
And in “Caught Stealing: Debunking the Economic Case for D.C. Baseball,” Coates and Humphreys looked specifically at the economics of the new baseball stadium in Washington, D.C., and found similar results:
Our conclusion, and that of nearly all academic economists studying this issue, is that professional sports generally have little, if any, positive effect on a city’s economy. 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.
In an updated study from the Mercatus Center at George Mason University, Humphreys finds similar results:
- Professional sports can have some impact on the economy. Looking at all the sports variables, including presence of franchises, arrival and departure of clubs in a metropolitan area, and stadium and arena construction, the study finds that the presence of a franchise is a statistically significant factor in explaining personal income per capita, wage and salary disbursements, and wages per job.
- But this impact tends to be negative. Individual coefficients, such as stadium or arena construction, sometimes have no impact, but frequently indicate harmful effects of sports on per capita income, wage and salary disbursements, and wages per job.
Another Mercatus study by Michael Farren offers a detailed analysis of stadium upgrades and attendance in minor league baseball.
The Same Old Song
Silber and the board of supervisors want the taxpayers to know that this time is different; their $35 million bond issue isn’t a government giveaway:
In Prince William, the board of supervisors is considering a proposal in which it would use bond money to build the stadium. The team would then reimburse the county the entire cost over the course of a 30-year lease.
“We’ve all read about certain professional sports teams threatening to leave if a local government doesn’t buy them a new stadium. The exact opposite is happening here,” said Tom Sebastian, a senior vice president with JBG. “The Potomac Nationals have agreed to pay 100 percent of the cost to construct a new stadium so that they can stay in Prince William County.”
I will gladly pay you Tuesday, 30 years from now, for a hamburger today.
Americans for Prosperity has been fighting this proposal, and its Northern Virginia director, Tyler Muench, addressed that claim in a Washington Post column:
Professional sports teams have been relocating to new cities when they fail to acquire public funding for stadiums. Last year, the Rams stuck St. Louis with a $144 million bill after the team decided to move to Los Angeles. And earlier this year, San Diego taxpayers were left with a $50 million tab after the Chargers joined the Rams in L.A.
This time around is no different. The Oakland Raiders’ move to Las Vegas will leave Oakland taxpayers stuck with a $163 million bill. Teams constantly ask taxpayers for handouts despite generating vast revenues. Billionaire owners get publicly financed stadiums and the working-class citizens pick up the tab – corporate welfare at its worst.
We’ve heard a lot of denunciations of corporate welfare and crony capitalism from Republicans lately. The Prince William board of supervisors has 6 Republicans and 2 Democrats. Board chair Corey Stewart, who just narrowly lost a primary for governor in which he aligned himself closely with President Trump, has supported the stadium deal. Here’s a chance for Republicans in Virginia to show that they stand for fiscal conservatism and free markets, not taxpayer handouts to the wealthy. Who wants to bet that they will?
Nashville, San Diego, and Philly
For one last bit of piling on, this report by Don Bauder in the San Diego Reader is worth quoting at length:
Would you take advice from a gaggle of consultants whose forecasts in the past two decades have been off by 50 percent?
Of course you wouldn’t. But all around the U.S., politicians, civic planners, and particularly business executives have been following the advice of self-professed experts who invariably tell clients to build a convention center or expand an existing one.
A remarkable new book, Convention Center Follies: Politics, Power, and Public Investment in American Cities, published by the University of Pennsylvania Press, tells the amazing story of how one American city after another builds into a massive glut of convention-center space, even though the industry itself warns its centers that the resultant price-slashing will worsen current woes.
The author is Heywood Sanders, the nation’s ranking expert on convention centers, who warned of the billowing glut in a seminal study for the Brookings Institution back in 2005. In this new, heavily footnoted, 514-page book, Sanders, a professor of public administration at the University of Texas/San Antonio, exhaustively examines consultants’ forecasts in more than 50 cities.
Nashville was told its new center would result in 466,950 hotel room nights; it’s getting around 267,000 – “a little better than half [what was projected],” says Sanders in an interview. Philadelphia isn’t garnering even half the business that was promised.
“Getting half the business [that was projected] is about the norm,” says Sanders. “The actual performance is a fraction of what it is supposed to be.”
Yet, in city after city – including San Diego – self-appointed civic leaders listen to and act on these faulty forecasts. In almost all cases, mainstream media and politicians swallow the predictions whole without checking the consultants’ miserable track records….
How can convention centers get away with such legerdemain? Those in the know shut up, and the press, politicians, and public have neither the time nor the expertise to follow the prestidigitation.
How do the consultants get away with being 50 percent wrong most of the time? In my opinion – not Sanders’s – consultants in many fields are paid to provide answers that the people paying the consultants’ bills want to hear. And the people paying those bills are the business community – using taxpayers’ money, of course.
The worst news: “These expansions will keep happening,” as long as “you have a mayor who says it is free,” says Sanders.
Reprinted from Cato Institute.