BASEBALL AND THE AMERICAN CITY: An examination of public financing…

BASEBALL AND THE AMERICAN CITY:
  An examination of public financing and stadium
   construction in American professional sports.


                       By
                  Brian Reich
                 April 30, 2001
         http://www.stadiummouse.com/




             INTRODUCTION
         I believe that great cities in the USA are a mix of attractions and uses. As Herbert Muschamp said, "No
         one goes to cities in search of suburban values. People expect to be wowed. They know that cities have an
         obligation to produce culture not just to consume it, and that architecture, our most public art even in the TV
         age, is the most powerful form in which that obligation can be renewed." Stadia can be important parts of
         civic infrastructure, but they must have quality, longevity, connectedness and street appeal to add value.

                                                     -- Susan Barnes-Gelt (Questionnaire Response)


The public debate surrounding public financing of sports facilities has grown heated in recent years. For
decades, full public financing of sports stadiums and arenas was the norm. In the last few years, demands from
the owners of professional sports teams for more elaborate and costly facilities, coupled with the increasingly
limited resources that state and local governments have to offer, have challenged the viability of this approach.


The purpose of this paper is to analyze the issues central to the controversies over stadium and arena
construction. In addition, this paper will consider how future stadium projects can better serve cities and
benefit the sports teams who play there, while still ensuring that local citizens who do, and do not, support
them are protected. Finally, this paper will review case studies from four cities that have debated investment
into sports construction in recent years and compare those projects to local proposals from the New
York/New Jersey region that are still under consideration.


The first three sections of this paper are based on the existing body of research on the issues related to stadium
and arena construction. Academics, economists, local public officials and citizens have debated this issue
extensively in recent years, and offer a variety of perspectives leading to differing conclusions. While in some
areas, a consensus seems to have been reached, in other areas, bitter disagreements remain.


The first section of this paper discusses the economic considerations in stadium construction. Most notably:


         -    Cost of Stadium Construction: Construction spending for professional sports stadiums and arenas in
              the U.S. has risen dramatically over the past century. The rise in costs is attributed to the use of
              more expensive building materials, increased seating capacity of stadiums, and competition
              among cities to build the best stadium. More than $6 billion has been spent on sports
              construction during the 1990s, and the projection for future expenditures is even greater.

         -    Economic Benefits of Stadium Construction ­ teams: Professional sports entertainment has become a
              multi-billion dollar industry, with teams, players, and owners enjoying the benefits of increased
              interest in, and greater revenues from, professional sports ­ some claim by as much as $25
              million to $40 million per year.1 The construction of a major sports stadium or arena is a key
              element in the creation of these benefits; in most cases, the costs are covered by the local
              municipality while the revenues generated from tickets sales, concessions, parking, and related
              activities are given to the teams.

         -    Economic Benefits of Stadium Construction ­ the public: Economists argue that a major sports stadium
              or arena does not generate sufficient revenue for a city to recover its public investment in facility

1
 Jim Gallagher, "Without New Stadium , Lamping Fears Team will Slump, Lose Fans," St. Louis Post-
Dispatch, May 28, 2000.
                construction. Further, taxes or other public revenues collected from sports events replace rather
                than enhance public revenues derived from other entertainment expenditures. Instead, stadiums
                shift the allocation of discretionary spending within an individual's "entertainment budget" ­ that
                is, the time and money devoted to entertainment. In other words, if a sports team locates in a
                city, and/or a new stadium or arena is constructed, individuals will not increase their
                entertainment budgets but choose between alternative uses such as a local theater, bowling alley,
                bar/restaurant or sports.


The second section of this paper outlines some of the political factors that local officials
must consider in determining whether public money should be invested in stadiums,
including the use of stadium construction as a tool for urban development.

            -   Stadium/Arena Construction and Urban Development: Stadium or arena construction projects can be a
                successful component of an urban development scheme if they are an integral component and
                not the anchor of a redevelopment plan. Traditional urban renewal and economic development
                projects are often high jacked, to satisfy the needs of the stadium construction. While stadium
                construction plans are often rationalized as "urban renewal," they rarely from the basis of a
                comprehensive plan. Instead, such projects enjoy a high profile and artificial urgency.

            -   Stadium Construction as Political Priority: By choosing to commit public resources to stadium and/or
                arena construction, local officials are potentially compromising other local services. Local
                government officials, as well as the public, are not always aware of the potential costs incurred by
                other public services such as transportation, public safety, and education.

            -   Stadium Construction and Public Subsidies: The decision to build stadiums and arenas results in the
                direct subsidy of private entertainment. More than $20 billion has been spent on major league
                ballparks, stadiums, and arenas over the past two decades, including more than $5.2 billion since
                1989. Arguably, a portion of this public largesse could have been available for other public
                investments (e.g. schools, roads, public utilities).

            -   Stadium Construction and the Political Process: The dominant political force behind the construction of
                major sports stadium is so-called "economic extortion" by a combination of sports teams, fans,
                and major sports leagues. "In many cities, threats of relocation, and actual relocations, were
                important influences on local government decisions. But the unique and symbolic value aspects
                also carry a lot of weight with elected officials."2 Additionally, the construction of stadium results
                in economic and political benefits for local corporate interests, labor and media -- often at the
                expense of the average taxpayer.


The third section of this paper discusses some of the intangible benefits often associated with stadium and
arena construction. In many cases, it is these factors that help determine the future of sports construction
projects.


            -   Major League City Status: Proponents of stadium construction argue that sports team and state-of-
                the-art facilities help elevate cities to the status of "major league." This is based on the belief that
                the overall image of a city is enhanced when large crowds support local businesses and that the
                stadiums themselves provide wonderful additions to the urban character of a city.




2
    Questionnaire response ­ Lynn Bachelor
         -    Stadium Construction and Fan Base: Stadiums and arenas do serve as infrastructure for the civic
              community. They provide an opportunity for community building by promoting common
              interests and themes and by literally providing a place for public congregation. However, sports
              facilities often do not help to bring together diverse elements of a city or region, instead drawing
              almost exclusively from middle and upper class (and more specifically, corporate) interests,
              further dividing communities along economic, racial, and geographic lines.

         -    Stadium Construction and Team Performance. With the construction of new stadium comes increased
              attendance and increased interest in the team by the media and local officials, resulting in greater
              income for the team's owners. Along with greater income comes more pressure for the team to
              perform, and a more money is invested in the team; the result is a better team. In short, a new
              stadium produces wins for a team (on a short term basis) and results in an increase in civic pride.



The fourth section of this paper will review the recent stadium construction histories from Seattle, Denver,
Houston, and Pittsburgh.

         Seattle: When Seattle voters rejected a proposal to fund a new baseball stadium in
         1995, local officials feared the Mariners would relocate to another city and the local
         football franchise, the Seahawks, would follow suit. State officials found the
         financing for the construction of two new stadiums ­ drawing from a collection of
         taxpayer funds, the creation of new revenue streams, and the generous support of
         local ownership. Now, both the Mariners and Seahawks will have stadiums that rank
         among the finest in the nation.

         Denver: Less than a decade ago, Denver had only one sports team. Today, after
         aggressive lobbying by local government officials and significant public support, the
         Mile High City is home to three new sports facilities and three championship
         contenders. In short, the introduction of major professional sports into Denver, and
         the construction of three new, state-of-the-art sports facilities, has vaulted Denver
         from a sleepy mountain community to one of the nation's leading hotspots.

         Houston: When local officials in Houston refused to build a new football stadium for
         the Oilers, the team packed up and moved to Tennessee. Fearing the beginning of a
         trend, local officials scrambled to find funding to replace the Astrodome, Houston's
         infamous indoor football/baseball complex once deemed "the eighth wonder of the
         world." Now, Houston has a new baseball stadium for the Astros and will
         inaugurate the National Football League's newest team in a brand new stadium next
         fall.

         Pittsburgh: Local voters rejected a proposal to publicly finance the construction of
         two single-use stadiums to replace aging Three Rivers Stadium. But local investors
         joined with local officials to create some of the most creative public/private
         partnerships in the nation ­ and the result is two new stadiums for the Pirates
         (baseball) and Steelers (football).


The final section of this paper will seek to apply the knowledge learned from other cities to the discussion
happening in the New York/New Jersey region. Each of the eight local teams in the New York/New Jersey
region is seeking to replace, or renovate, its existing stadium or arena ­ and requesting generous support from
local taxpayers to fund their plans. This follows the trend in around the country, which has seen 21 new
stadiums and 30 arenas built since 1991, eleven more arenas and stadiums under construction, and financing
has been or is virtually in place for nine others. This section will try to explain which local plans appear
economically, politically, and socially viable and how local public officials can ensure that local taxpayers are
protected.
Methodology:


The research for this project began on June 20, 1997, when I embarked on The Great American Baseball Trip
­ a nationwide driving tour, whereby I visited each Major League Baseball stadium and attended a game.
Throughout my trip, I examined the state of baseball and its relationship with the fans. I watched games from
the stands, met with representatives from each team's front office, talked with members of the media, and
looked for player insights on the National Pastime. I even ate a pretzel from every stadium and reported on its
quality. The website where I chronicled my trip is still active at http://www.tmn.com/baseball


More recently, I have had the opportunity to discuss this issue with many leading experts, through a series of
personal interviews, phone conversations, and e-mails. In addition, I prepared a comprehensive questionnaire
for this project (see Appendix). The questionnaire was distributed via email and snail mail to over 150
economists, professors, sports executives, team and league representatives, reporters, local elected officials and
fans across North America. While not statistically useful, the responses (approximately 15%) provide valuable
anecdotal evidence concerning the public financing of stadium and arena construction.