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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.
It is common during stadium-subsidy debates to trot out studies that either exaggerate net additional activity or simply report total activity as if that is what matters. The recent "Economic and Fiscal Impacts of a Major League Baseball Franchise and Stadium on the Commonwealth of Virginia" (2003 update) at baseballinva.org is a perfect case in point.
Stephen Fuller of George Mason University estimates economic activity during construction of a hypothetical $300 million ballpark at $277.9 million. After the team arrives, estimated annual (yes, annual) economic impacts are $266.9 million per year. Fuller surmises that tax revenues from this annual economic activity will be large enough to cover payments on $300 million in bonds over 30 years with $289 million left to spare.
This would seem to be a tremendous value. But, alas, these estimates are irrelevant for the decision that confronts Virginians because they are totals rather than net additions to activity. No attempt is made in the study to net out amounts that would have been spent by people in the Northern Virginia area, in that area, if they decide not to "play ball."
If Northern Virginia were like the rest of the locations studied by economists, nearly all of the $277.9 million during construction, and nearly all of the $266.9 million per year that Fuller attributes to the arrival of the Expos, would simply be transferred from other construction and entertainment spending that would have happened without the Expos. Since the $266.9 million per year would have the same potential for tax revenue generation in its alternative spending, the net additional value of spending it would attract to the Expos would be close to zero.
That leaves development value and intangibles to carry the day for stadium-subsidy proponents. Space limitations preclude a lengthy discussion and suffice to say that no professional analysis finds any difference in economic-growth rates attributable to the presence of pro sports teams. Economists have just begun to apply the tools used for assessing intangible environmental values to the so-called "intangible" values of pro sports teams. Estimates are typically in the tens of millions of dollars, significantly less than the typical subsidy in the hundreds of millions.
So, the economic truth is that stadium subsidies are dramatically larger than the values they create. But even the most pointy-headed of ivory tower econo-mists knows that stadiums are subsidized according to political strengths rather than on the strength of well-assessed benefits and costs.
It will come as no surprise to this observer that, if the Expos move to Northern Virginia, ground will immediately be broken on a state-of-the-art, heavily publicly subsidized stadium. And the vast majority of Virginia taxpayers will cover the cost of highly entertaining major-league baseball for the distinct minority of residents who are baseball fans.
RODNEY FORT is a professor of economics at Washington State University. He has written extensively on sports economics.