Tuesday, November 30, 2004

Stadium Deal -- My Take

I tend to agree with El Gran -- stadiums do not provide net economic benefits to a city (I'm sure SuperNova will make a cogent argument why we're wrong, and I look forward to it). They provide other, intangible benefits, though, such as civic pride in the teams that play in them, and a place for citizens to come together and experience community. To me, it should be enough that the city finds that those benefits are important and worthwhile to spend the money on them.

Ideally, the stadium should be financed as much as possible by private funding. But if that can't be done, then the public money should be raised as much as possible from those who will directly benefit from the stadium, such as the fans who go to the games and the team(s) that use it. My review of this deal seems to accomplish that, in that a good portion of the money is raised from taxes on tickets, concessions, and activity directly related to the use of the stadium. The only component that is not is the tax on large businesses, which apparently was cut back a bit today. That also does not seem unreasonable to me. In the end, I think the D.C. stadium deal is a very reasonable and fair approach to the solving the problem.

Arguing that the stadium will create economic benefits is to me a case of wanting to have it all. Like initiation of recycling programs 15 years ago, many locales said the recycling would pay for itself or make money based on the reuse of materials like paper, aluminum, etc. The reality is that it is a net cost to the locale to recycle. But to me, if recycling is the right thing to do, then the community should incur reasonable cost to do it. Why do we always want to have our cake and eat it, too?


At 9:51 AM, Anonymous Anonymous said...

That's fair. Monetarily it's a loss but you're paying for something you really want, with unmeasurable value. Like shopping on EBAY for NFL Huddles dolls.

Where DC messed up was essentially choosing the "Pay it Now" option at a exorbitant price. They didn't seriously look at private financing or any other sites before agreeing to the deal with MLB. They'll look at it now, but MLB may not agree to it because the more private financing the less of a profit to be made by the team, and the lower the price they'll get for it.

At 10:15 AM, Blogger Yuda said...

I think that this stadium, more than others we've seen recently, will provide some economic gain to the city (though not enough to actually return the entire investment from the council). First, I suspect that a new team in a city will have more effect than just moving a team to a new stadium (though I've nothing to back this up).

But the main reason is that none of the other recently built stadiums have the unique three-jurisdictions setup that Metro DC has. One of the big reasons that the perceived economic benefits of stadiums are smoke and mirrors is that, generally, money spent at and near the new stadium would have been spent elsewhere in the city anyway. Northern Virginia and Montgomery County, though, both have their own entertainment centers; DC will manage to syphon some of the entertainment spending away from these places as people go to baseball games.

At 10:42 AM, Blogger DM said...

LOL, Anonymous, on the NFL Huddles crack. Worthy of attribution, if you would let me. And we all can learn a lot about market value from eBay.

And I take your point about the price paid being steep. But MLB has the leverage in this, so it was and always will be a tough deal to negotiate for DC.

At 12:40 PM, Blogger dexys_midnight said...

you know that I WANT to believe that stadiums help economies, but too many esteemed economists have done too many very detailed studies on this for it not to be a dead issue. The economic studies overwhelmingly support the position that public financing for stadiums is a money-losing proposition (I will have better access tomorrow and will try to post links to some of these studies). But I do agree with DM on this--if people want it, it is worth it. They just pay for it like they pay for other good things to have in their communities.

At 10:28 AM, Blogger dexys_midnight said...

Back when I was in college, my economics thesis was to show that legalized sports gambling/government run sports gambling was a losing proposition (no need to bore you--essentially the black market "bookies" were a more economically efficient model). But the guy who shared my thesis advisor wrote a thesis in which he started out intending to prove that building stadiums and getting a sports franchise made economic sense--he couldn't come up with any scenario under which this was true, so he ended up writing the thesis the other way. I'm sure he never published it, but here are some links you might find interesting:


At 10:40 AM, Blogger DM said...

Dexys, I heard on the radio yesterday that Mark Cuban is starting a hedge fund that consists of a bunch of sports gamblers betting the fund's money. Would you invest?

At 11:45 AM, Blogger dexys_midnight said...

this deserves it's own post....give me 15 mins


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