Thursday, December 22, 2005

It's Nice to Have a Monopoly

Today's Post story confirms what we all knew about the incentives of the players in the whole stadium fiasco, which I touched on here. In sum, MLB has told the potential owner groups not to offer to pay for cost overruns of the stadium. As we suspected, MLB does not want the actual owners of the Nats to negotiate a deal with D.C., because they know that such owners would pay for more of the stadium than MLB wants owners to pay. That is why MLB has refused to name an owner to date. It also explains the presence of Smulyan among the bidders -- he's been in the club, and knows how the game is played, apparently unlike some of the bidders, who are merely good businessmen.

I think cities should be able to build stadiums from tax dollars if they think it would be a good thing for the community. I do not think stadiums pay for themselves, in that the economic benefit they generate typically does not cover the costs. But if the owners of the team want to pick up some or all of the tab and reduce the burden on the city, they should be able to, no questions asked. In a free market this is exactly what you would expect. In fact, if D.C. wants to ensure that the latest baseball club doesn't flee like the previous two, it should make them pay for as much of the stadium as possible.


At 10:06 AM, Blogger dexys_midnight said...

You know, I'm not sure I agree with you entirely DM.

I think you would have to be a fool to think that building a stadium and bringing a sports team to your town is actually an economically sound thing to do--I can't even imagine Mayor Williams thinks that is the case. Almost every economic study out there has shown that it is a major financial loss for a city.

So, why do it in the first place then? Because you want (fill in sport here) in your city. So, if you know that you are going to lose hundreds of millions of dollars in the deal, but you want baseball in your city because of whatever pride and intangibles and other goodies it brings to the city, then I think you have to be considered to have walked into the deal with your eyes wide open.

My point is that this isn't a case of "now it doesn't make economic sense." It never made economic sense. I think DC (or at least the Mayor--and I believe he actually does have good intentions) walked into the deal knowing an owner won't pay for overruns, this project will cost us hundreds of millions, but we want baseball. I don't see any change in the rules here that could cause them to cry foul now.

Sure, I agree with your point that its ridiculous that baseball has such power that they could stop someone who wants to contribute to the stadium from doing so. But it's not like this should be a surprise to anyone.

At 10:24 AM, Anonymous DMCj said...

DM: I guess I'm a fool.

I think bringing in a sports team can be an economically sound thing for a local government to do ... but not all by itself.

The team has to be a part of a larger effort to revitalize part of the city - witness the resurgence of Chinatown as part of the twin impetus of the MCI Center and the convention center.

In other words, professional sports and their stadia aren't an unquestionably profitable proposition - but neither are they sure losers.

The trick is to be smart every step of the way - and that, not the idea of a team or a stadium - is where MLB and the City have gone wrong.


At 11:19 AM, Blogger DM said...

You're right that the economics of the deal have not changed from last year. But what has changed, as I see it, is the fact that MLB has not named an owner with whom the city can deal in a sensible way, to the benefit of both the Nats club and the city, and start to form relationships that will keep the team here.

And I'm not sure that basebal has as much power as they'd like us to believe. When you're buying a car, the only leverage you have is to leave the showroom. To test MLB's power, D.C. better be ready to "leave the showroom" and let MLB walk. I don't think MLB will, so it's worth the gamble, IMO. And if they do, good riddance.

At 3:24 PM, Blogger DM said...


I don't think you are a fool. I think your position is very sound, and a stadium can be a good investment by a city. But it is an investment, not a freebie, so if a city can get private sector participants to invest some of that money, they should.

Also, doesn't Abe Polin own most or all of the MCI Center?


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