It was supposed to be a done deal. Washington, D.C., Mayor Anthony Williams and the city’s political elite held a triumphant press conference announcing the return of baseball. League officials were already counting on nearly half a billion dollars in public subsidies coming their way.
But City Council Chairman Linda Cropp halted the bandwagon. She proposed that the city shift the stadium to a less-expensive site and find private financing.
The screams of journalists and politicians who feared losing their subsidized box seats could be heard across the city. Who would have imagined? A public official was putting the interests of her constituents before those of would-be baseball tycoons. After weeks of frenzied lobbying by stadium supporters, the city council is scheduled to vote Tuesday night on the mayor’s plan.
Sports stadiums are among the most common form of corporate welfare. Around the country multi-millionaires and -billionaires routinely mulct local taxpayers to underwrite valuable sports franchises.
Explain economists Dennis Coates and Brad R. Humphreys: “The gambit routinely involves an individual franchise using its monopoly power to extract concessions from state and local governments.” In this case, Major League Baseball purchased the Montreal Expos and organized a bidding war reaching from Portland, Ore., to Monterey, Mexico, to Washington, D.C.
The District “won” by promising to construct a $440 million stadium. It’s the most expensive such facility ever, more costly even than those with retractable roofs.
It is also one of the most heavily subsidized. In contrast, the San Francisco Giants’ stadium was largely privately financed, while new facilities in Cincinnati, Detroit, and Philadelphia all included some private financing.
Moreover, the first cost estimate for the D.C. stadium was only the beginning. Total projected costs have already ballooned to $530 million. But that should surprise no one.
Henry Aaron of the Brookings Institution points to cost overruns of more than $100 million in cities as diverse as Cleveland, Phoenix, and Seattle. Author Charles C. Euchner warns: “Count on that cost ballooning past $600 million or more. Public-works projects invariably run over budget by at least 25 percent.”
Wait, there’s more. To address complaints that he was neglecting community needs, Mayor Williams proposed a $450 million “tax-increment financing” district to fund libraries, recreation centers, and schools. On top of that he has offered some $70 million in goodies–including money for laptop computers at one high school–to buy votes. City Council member Carol Schwartz observed, “Usually payoffs are more subtle than this. This one is very obvious.”
The mayor expects the chief beneficiary, the baseball team, to pay just 20 percent of the direct cost. To finance the remainder he would divert existing revenues and impose a gross-receipts tax on businesses with revenues exceeding $4 million annually. Companies will be assessed as much as $48,000 annually, but Mayor Williams proclaimed: “Our residents will not be asked to pay one dime of tax dollars toward this ballpark.”
Like politicians everywhere, Mayor Williams acts as if businesses rather than people pay taxes. But there ain’t no such thing as a free lunch. Customers, employees, and owners will bear the burden.
And D.C. residents won’t just be paying to build the stadium. Scott Wallsten of the AEI-Brookings Joint Center for Regulatory Studies warns that the rent due from the team “is almost certain to decrease every year after 2009 when accounting for inflation.”
Nor does it stop there. The city might “own” the stadium, but it would be entitled to rent out the facility only 12 days a year. The team would get to market the stadium for the rest of the time.
What a deal. Too bad no other business can talk the city bosses into such a sweetheart arrangement.
The primary justification for looting taxpayers to construct sports cathedrals is always “economic development.” Slightly hysterical Washington Post columnist Michael Wilbon, presumably worried about losing favored access to a publicly financed facility, denounced academic critics of ballpark subsidies: “All you have to do is look at what [stadiums] actually contribute in Cleveland and in Denver.”
But that’s not the uniform experience. In D.C. itself you will have a hard time finding the renaissance that was supposed to be sparked by RFK stadium, which hosted the Redskins for years.
Anyway, if you plop down a half-billion-dollar edifice with thousands of people regularly streaming in and out, some economic activity might sprout up nearby. But the money doesn’t magically appear ex nihilo.
In fact, stadiums actually drain economic activity from other businesses. For example, people attending an evening game and buying hot dogs aren’t going to a movie and restaurant near home. Fans purchasing souvenirs at the park are spending less at the local department store. Subsidized stadiums rearrange spending and development; they don’t create anything new.
If the city government could magically generate economic growth, why enrich sports moguls? D.C. could help local entrepreneurs instead by building industrial, restaurant, and retail space to lure new businesses. Or it could simply bomb poor neighborhoods with $100 bills and watch the economy flourish.
Ironically, as Paul J. Gessing of the National Taxpayers Union points out, what Mayor Williams is really doing is “taxing D.C. residents to benefit Virginia and Maryland residents.” Four out of five sports fans are likely to live in the suburbs, and few of them ever boosted D.C. economic life much, even when they drove in to worship the Redskins. Mayor Williams is Robin Hood in reverse.
Wilbon so hates academic research because its results are so clear. If you include costs as well as benefits–and the studies commissioned by stadium supporters tend to ignore such inconvenient facts as costs–sports facilities are a bad deal.
Write Coates and Humphreys: “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.” But that’s not all. Incredibly, the two economists found “a statistically negative impact on the level of real per capita income.”
It turns out that the so-called economic multiplier from sports entertainment is less than for non-sports entertainment. That means dollars deposited in the accounts of team owners, players, and stadium employees generate less secondary economic growth than money spent elsewhere. As a result, most of us lose big when government forcibly buries our cash in a politically correct field of dreams.
Talk about raining on the corporate-welfare parade. Mayor Williams, when confronted with the Coates-Humphreys study (published by the Cato Institute), complained: “I can’t imagine why, with all the things happening in the world, the Cato Institute would take the time to analyze the impact of baseball in Washington, D.C.”
But the better question to ask is, with all of the economic and social problems facing the District, why is Mayor Williams devoting so much energy to enriching pampered sports-franchise owners? Why is a stadium more important than new business investment, improved health care, higher-paying jobs, enhanced crime prevention, and better schools?
People enjoy sports. But those who enjoy it should pay for it. Columnist Marc Fisher contends that a stadium “would improve the texture of daily life,” whatever that means. Is that really an argument for subsidizing stadium construction? Investors wealthy enough to buy a franchise are wealthy enough to build a playing facility.
Still, sports columnist Wilbon denounces “too many pseudo-politicians, like Cropp, who tuck and run at the first hint of opposition.” If Cropp is a pseudo-politician, it’s because she’s willing to buck the political establishment to search for a better deal for local residents.
In fact, Cropp doesn’t go far enough. City Council member Adrian M. Fenty notes: “Quite honestly, [the mayor’s and Cropp’s] are basically the same proposals, just different sites.” He adds, “Major League Baseball is a collection of wealthy owners who can pay for this themselves. I’m hearing the same constituent feedback on Cropp’s proposal as on the mayor’s: that there are better priorities for taxes.”
City politicians have reason to pay attention to public attitudes. In September voters upended three incumbents, all of them supporters of the mayor’s stadium boondoggle. Political insider Lawrence T. Guyot noted that “Linda Cropp is one of the few people on the council who is reacting favorably to the political tremors that were unleashed on September 14,” including the reemergence of disgraced former mayor Marion Barry. A Washington Post poll found that nearly 70 percent of city residents oppose public financing of the stadium.
Would killing the subsidy deal mean no franchise? “Baseball is very unhappy about this,” says Mark Tuohey, chairman of the D.C. Sports and Entertainment Commission. “Baseball is befuddled.” After all, sports moguls expected D.C. officials to do a permanent genuflect while delivering the goodies.
The nation’s capital does remain a desirable location for a baseball team. But if the owners threaten to go elsewhere, life will go on. Says Cropp: “I don’t want baseball to leave, but I want to do what’s best for the District.”
What’s best for the District, and other cities and counties across the U.S., is to end the sports gravy train. The message should be simple: You want to own a sports franchise? Then be prepared to pay for the stadium that goes with it.
–Doug Bandow is a senior fellow at the Cato Institute and the author of several books, including Beyond Good Intentions: A Biblical View of Politics and The Politics of Envy: Statism as Theology.