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Sports-stadium subsidies strike out

Date published: 3/2/2003

ULLMAN, Wash.--The old saying goes, "Ask a room full of economists a question, and you'll get a room full of opinions." Believe it or not, there is one area where economists are of one mind: Stadium subsidies don't create enough value to make them worth the cost.

Public funding of ballparks creates three types of values--economic-activity value, development value, and so-called "intangible" value. Let's examine economic-activity value--typically the most-abused concept in stadium economics--in the context of the Montreal Expos moving to Northern Virginia.

Economic-activity value is measured in two stages--spending on stadium construction and spending at and around the stadium after the Expos arrive. Assessing economic-activity impacts requires an understanding of the difference between total economic activity and net additional economic activity. A gross accounting just adds up the amount of activity. Net accounting discovers how much additional economic activity happens for the additional planned public spending on a stadium.

While the gross amount can be quite large, it is irrelevant in terms of deciding to subsidize a stadium. In any spending decision, we want to know the resulting net addition to our welfare--that is, how much more do we get for our money? Net additional economic activity is what matters in the subsidy decision.

All professional studies of net economic activity from stadium subsidies reveal it to be negligible at best. And it's easy to see why. Additional economic activity would have to come in from outside Northern Virginia. But surveys of those attending baseball games show that few in attendance come from very far just to see the game (many more travel longer distances for football games).

This means that nearly all of the spending is redirected from within the area. The rumble of machinery and the hustle and bustle of stadium building could have built something else in Northern Virginia. And once they arrive, the Expos would just draw dollars from other entertainment spending by primarily Northern Virginia-area sports fans.

The same is true of spending at businesses that move to the periphery of the new stadium. Business activity elsewhere in Northern Virginia would be just that much less with no net additional activity.

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Date published: 3/2/2003