The Dollars and Sense of Public Financing of Professional Sports Arenas

WashingtonNationalsStadium.jpg

Those of us who reside in the nation’s capital are reveling at the very idea of having “our” team, the Washington Nationals, playing in brand-new stadium (pictured above). The team is lousy and the fans are staying away in droves, but at least we can bask in the civic glory of having financed a dandy new playpen for the ballplayers. And now our mayor, who opposed that project while he was a member of the city council, has bought into the idea big-time, having signed onto a plan to spend $125 million or so to help build a new soccer stadium just across the Anacostia from the new ballpark. He’s also said to be flirting with the idea of erecting a new football stadium to try to lure the Washington [insert unmentionable profesional football team name here] back into the District from the crummy 91,000-or-so-seat house that Jack Kent Cooke built just a decade ago out in suburban Landover (nee Raljohn).

The local success story here that everyone is trying to repeat is the Verizon (nee MCI) Center, the basketball arena over on Seventh Street where the local Wizards and Mystics play. They, like the Nationals and the [insert unmentionable professional football team name here], aren’t very good, but the new downtown facility has sparked considerable redevelopment in a previously run-down part of town. That’s great, but what more generally can we learn from it?

Not much, it turns out.

There’s a fairly substantial research literature on this very question, and the results (though inevitably being somewhat mixed—this is social science, after all) give little aid and comfort to all the local developers and civic boosters whose idea of progress stems from an over-active Edifice Complex. Here is a nice piece by Dennis Coates, an economist at the University of Maryland-Baltimore County, that splashes cold water all over developers’ claims about the benefits of public financing of sports facilities.

[Hat tip to Scott Adler]

8 Responses to The Dollars and Sense of Public Financing of Professional Sports Arenas

  1. Dan May 30, 2008 at 11:59 am #

    As I read the first couple paragraphs, I was thinking I’d post a link to my old professor’s stuff, but alas, you seem to have found it yourself.

    Someday, I hope to know something google doesn’t.

  2. Robert L. www.neolibertarian.com May 30, 2008 at 12:53 pm #

    There’s also Bastiat’s ‘what is unseen’ question: if $125 million were spent reducing paperwork burdens and taxes on local businesses and on cleaning up crime what would the benefit of that be? What if DC just gave $125M back to its residents? The go/no-go thinking of ‘would this stadium create benefits that justify it’ is a false choice.

  3. Joel May 30, 2008 at 1:59 pm #

    you need to spend money to reduce redtape? yikes, what a conundrum for the libertarian …

    but i agree about the false dichotomy. imagine what that money could do in funding social programs.

    or, what about using it to pay to have the word “redskins” erased from the annals of american sports?

  4. sam May 30, 2008 at 4:37 pm #

    There is a big difference between financing stadium construction and what is being proposed for the new stadium.

    The $125 million in question would go for infrastructure on the undeveloped piece of land — Poplar Point — where the stadium would be built. The land is going to be developed either way, so, as I understand it, the city will have to spend the money no matter what goes on the site. City governments have to provide roads and sewers.

    The point is, there is a big big big difference between spending money to lure a professional franchise (bad) and merely paying for infrastructure that cities traditionally need to provide anyway (unavoidable).

  5. Lee Sigelman May 30, 2008 at 5:05 pm #

    Sam:
    You may well be right. Or not, as the negotiations, I think, are ongoing and the soccer people are making dissatisfied noises about the $125 million the city is talking about. Nor do I take it as a given that the land would inevitably have to be developed; it’s a great, scenic spot and a pretty weird place to plop down a soccer stadium. Whatever happened to RFK as a good site anyway? Anyway, the whole idea of building a new stadium for the [insert unmentionable professional football team name here] is about the wackiest I’ve heard yet.

  6. Lee Sigelman May 31, 2008 at 8:13 am #

    Follow-up on my reply to Sam:

    Looks to me like the $125 or $150 million the city is being asked to put up isn’t just for site development. The following is from David Nakamura’s piece in the POST on 5/28:

    The city would finance construction bonds with excess tax revenue being collected by the District to pay for the baseball stadium. D.C. United would be responsible for paying for any costs above $150 million, according to the sources, who spoke on condition of anonymity because the plan is still being finalized.

  7. sam May 31, 2008 at 12:21 pm #

    Thanks for the reply. First, the site will be developed no matter what. Clark is the firm that is tipped to the develop the site, the stadium is just one part of the whole shebang. So if there isn’t an agreement to build the stadium, the plot earmarked for the stadium will just get used for more condos or office space. Also, RFK has a lot of charm, but the team can’t post a profit if it stays in RFK. All their revenue goes to renting the stadium, and they don’t have the benefit of concession sales or advertising billboard revenue.

    Interesting info from the Post, thank you, though I think the paragraph can be interpreted either way. That is, the city would pay $150M: that could be all infrastructure, or only $1 of infrastructure and $149,999,999 of stadium construction. What makes me think it’s mostly infrastructure is 1) it’s a completely undeveloped piece of land, and therefore needs infrastructure, and 2) 27,000 seat soccer stadiums in this country tend to cost, at the most, $120ish million. Obviously, that’s not scientific, but it’s just something to keep in mind.

    Of course, the actual breakdown of cost for construction vs. infrastructure is probably verifiable, and I’ll be the first to admit I’m wrong if the city is being asked to foot the bill for construction.

  8. Garry June 3, 2008 at 10:47 am #

    I think it’s possible that the District gets a net economic benefit from the Nationals. In the District’s case a huge bulk of the fans come from outside the “state.” Thus you have discretionary dollars that were slated for NoVa or Maryland now going to the District (or least they will once the surrounding neighborhood develops). Regionally it’s a wash or even a net negative. Football at the RFK site is another matter given the nature of that neighborhood.