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Taxpayer-Financed Sports Stadiums: Deals Benefit Teams, Not Public

Mises Daily: Tuesday, April 12, 2005 by

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[This article reprinted from the Las Vegas Review Journal with the permission of the author.]

One of Mayor Oscar Goodman's pet projects is to bring a Major League Baseball team to Las Vegas. At a recent breakfast presentation, the mayor promised he would be throwing out the first pitch by the 2008 season.

In Goodman's mind, Las Vegas will never be a major-league city until it has a major-league team. "I've made it clear that we want baseball in Las Vegas, and I'm ready to wheel and deal," Goodman told the Miami Herald.

Goodman may want baseball, but there is no citizen outcry for such a team. And when Goodman says "wheel and deal," he's not talking about his money; he is talking about taxpayers' money.

Reportedly, Goodman has worked on a financing plan, but nobody knows the details. The mayor only says the plan would "make everyone happy."

But Major League Baseball owners go where the taxpayer money is. And if governments aren't generous, they use eager figures like Goodman to leverage it, as is the case with the Florida Marlins. The two-time World Series champions could be interested in Goodman's plan if the team fails to receive $60 million in state funding for a downtown Miami stadium (the Florida Legislature isn't budging).

Government officials regularly pitch the line that the economy benefits when local and state governments spend millions in taxpayer dollars to build stadiums and lure teams. The government then rents the facility to ultra-rich franchise owners for next to nothing.

Time and again, this economic development argument has proven to be a swing and a miss. "Careful analysis of past economic experience in cities that built new stadiums and attracted teams does not bear out" economic development claims, write Dennis Coates and Brad R. Humphreys in a briefing paper for the Cato Institute. Its title: "Caught Stealing: Debunking the Economic Case for D.C. Baseball."

Those who agitate for building stadiums and attracting teams regularly commission glowing economic-impact studies. But these impact studies, point out Coates and Humphreys, use multipliers to estimate how sports spending will impact a local economy, implying the dollars spent will ripple throughout the economy. Yet, because the studies fail to distinguish between net and gross spending, they regularly overstate the impact.

Of course, what are key are net benefits. "As sport- and stadium-related activities increase," the authors point out, "other spending declines because people substitute spending on sports for other spending." Fan money spent at ballgames would likely have gone to other entertainment if baseball wasn't available. Thus, net benefits are zero.

If a major-league team attracts visitors to a particular city from other places, net benefits may accrue. However, Las Vegas does not have a problem attracting visitors.

After analyzing 37 metropolitan area economies boasting professional sports franchises, Coates and Humphreys came to the following conclusions:

  • No positive impact was seen to the growth rate of real per-capita incomes. But pro teams had a statistically significant negative impact on levels of real per-capita income.

  • Retail and service sectors were negatively affected, with the average net job loss in those sectors being 1,924 jobs.

  • Hotel wages tended to increase $10 yearly with the presence of pro sports, but restaurant and bar wages went down by $162 per year.

It's possible that if the mayor agreed a Major League Baseball team would burden the local economy, he'd argue that Las Vegas needs such a team to be a "world-class city." Perhaps he believes it's somehow in the public interest if all Las Vegas residents have a home team to cheer for.

But besides the mayor, just who will be able to afford to attend these games? The average cost for a family of four to attend a single baseball game in 2004 was $155.52. So it is primarily the wealthy who would enjoy the ballgames — games played by millionaires who are employed by billionaires. Must it happen in stadiums financed by working-class citizens who may or may not care about sports?

One more thing: Like all other big public works projects, stadium projects have a history of being boondoggles with massive costs overruns. Camden Yards in Baltimore was 40 percent over budget. When Yankee Stadium was renovated in the 1970s, almost four times more New York City taxpayer money was spent than owner George Steinbrenner originally promised.

No taxpayer money was needed to construct the Las Vegas Motor Speedway or the arenas at various casinos. Funding to build a baseball stadium should be no different.