Monday, June 20, 2005

Stadium welfare 

If you've been reading here, you'll notice I've been a little miffed with our governor over taxes. This is not the only thing that has perturbed me; I've been surprised and disappointed with the Twins Stadium issue as well, for one. Eva Young summarizes some news coverage over the weekend which suggests that the Twins' argument that it makes economic sense has been dropped. Well, duh. My friends and sports economists Brad Humphreys and Dennis Coates have been saying this for years.

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.

A baseball team in D.C. might produce intangible benefits. Rooting for the team might provide satisfaction to many local baseball fans. That is hardly a reason for the city government to subsidize the team. D.C. policymakers should not be mesmerized by faulty impact studies that claim that a baseball team and a new stadium can be an engine of economic growth.

MOBster Phil Miller of Market Power, writing at the most excellent Sports Economist blog (um, guys, you should see if Brad or Dennis will blog with you ... and I work for peanuts, just ask The Patriot), notes that the intangibles argument seems to have captured the Hennepin County commissioners, and Eva clips this from Twins President Jerry Bell.

"I don't think the economic argument turns it one way or another, so why go there?" said Bell, president of Twins Sports Inc. "If there are side benefits, great. If not, so what?

"You get into an economic argument, and the bottom line is, 'Do you want to build it or not?' " he said.

That is, do you want a team or not, because Phil also points out that the monopoly power that leagues have, by leaving out there a pool of other cities denied a major league team that act as leverage against the Twin Cities.
Las Vegas does not have a team in part because it provides leverage to the few teams left (namely Minnesota and Florida) who are still seeking public money for a new stadium in their existing regions. Proponents for public funding in places like Minneapolis and Miami can haul out Las Vegas as a viable threat point to opponents of public funding, just like Los Angeles is a viable threat point to proponents of public funding for NFL stadiums. Believe it or not, St. Petersburg, Fl, was once used in this manner to get public funding for stadiums such as US Cellular Field (Chicago White Sox). The basic threat is "if you don't give us what we want, we're going to take our ball to Las Vegas and play there."

How do you get out of this pickle? Well, one option is to simply call their bluff, as Minnesota has done with Pohlad in the past, a bet Minnesota won when Charlotte voters said no to expanded taxes. Teams can often have a larger "novelty effect" when they move to a new place, but Charlotte seems not to have an appetite, and the market lost its biggest lever when the owners of MLB collected their ransom to move the Expos to Washington DC. It's worth asking Bell and Pohlad, "If we say no, where you gonna go?"

Pawlenty, however, has had a longstanding interest in building stadia for the Twins and the Gophers. I'm not entirely sure why he has, as it doesn't appear to have been his position as a legislator. But nobody is making an economic case for this any more, not even the Twins.

UPDATE (6/22): Phil Miller adds more details.