Freeman

ARTICLE

Pro Sports on the Dole

Corporate Welfare Deeply Infiltrates Baseball

FEBRUARY 01, 1995 by RAYMOND J. KEATING

Baseball is no longer just a game; it’s big business. Such is the conventional wisdom today. And with salaries skyrocketing to the point where now the average major league baseball player earns $1.2 million a year, who could disagree?

However, ever since the first professional team, the Cincinnati Red Stockings, was fielded in 1869, baseball has been a business. Indeed, this is not something to be ashamed of; it should be celebrated. The fact that baseball is a business allows the professionals who play the sport to hone their skills to a point and for a period of time largely unknown to those participating in amateur sports.

The business status of baseball has enabled it to become America’s “national pastime.” Just as the great feats of Johnny Bench, Tom Seaver, Mike Schmidt, and Reggie Jackson captured the imagination of my generation, the achievements of Ken Griffey, Jr., Matt Williams, Barry Larkin, and Cal Ripken, Jr., inspire today’s youth—and the rest of us as well. This excellence largely emerges out of baseball’s status as a business or profession.

Unfortunately, the dark side of big business is a major part of the game as well. Corporate welfare deeply infiltrates baseball, along with most other professional sports. That is, a distasteful and costly alliance between government and business. Fans no longer support their favorite teams and players merely through ticket prices, concessions, team apparel and souvenirs, and cable TV subscriptions, but through their taxes as well. Taxpayers across America—whether they are fans or not—are subsidizing the portion of the entertainment industry known as professional sports. While such subsidies are completely unjustified, they become even more egregious considering, for example, that the average employee in major league baseball earns more than a million dollars a year.

Examples abound. New York—long accepted as the capital of traditional welfare spending—has managed to turn practically all levels of sport into welfare clients. Most prominently, both the state and New York City have been scrambling since 1993 to come up with plans for either a new Yankee Stadium in a new locale, or upgrades to the current facility in order to stop team owner George Steinbrenner from moving the Bronx Bombers out of New York. The cost to New York taxpayers vary from a whopping $1 billion proposal for an entirely new stadium to almost $400 million for a seemingly modest plan for a stadium upgrade that includes a new bridge leading into an 11,000-car parking garage, as well as a shopping mall.

However, New York state’s officials are not content to extend corporate welfare to only the New York Yankees. In the state’s 1994-95 budget, well over $100 million was slated for other stadiums and sports facilities, including $8 million for Rich Stadium, home of the Buffalo Bills; $25 million for the Buffalo Sabres’ new hockey arena; $4.5 million for the Soccer Hall of Fame in Oneonta, and millions more for minor league baseball stadiums across the state. Perhaps most distressing, though, is the $125,000 in state taxpayer dollars for the Baseball Hall of Fame Stadium in Cooperstown—a great blow to the innocence and independence of baseball.

Of course, New York is certainly not alone in this alliance of government and professional sports. Jacksonville, Florida, for example, has agreed to finance a $121 million Gator Bowl renovation for its expansion National Football League (NFL) team, the Jaguars.

Meanwhile, some cities and states have taken the saying “Build it and he will come” from the movie Field of Dreams literally. St. Petersburg, Florida, built a domed stadium in anticipation of landing a major league baseball team. A possible move by the San Francisco Giants to St. Pete was nixed, so no baseball team yet. The taxpayers’ bill equaled $138 million. Similarly, the State of Missouri started building a new domed stadium in St. Louis to lure an NFL franchise. Despite lobbying by U.S. Representative Richard Gephardt, the NFL shunned St. Louis during its last expansion meeting. The cost of the yet-to-be-completed stadium to Missouri’s taxpayers—an estimated $200 million. The city of Nashville, Tennessee, is building a taxpayer-funded arena for basketball and/or hockey without a tenant as well, at a cost of $140 million.

These governments have decided to take on the role of venture capitalist. Government bureaucrats lack the experience, knowledge, and proper incentives to make such investment decisions. In addition, the risky nature of these endeavors dictates that private resources should be used in lieu of taxpayer dollars.

Billions for Baseball

Baseball stadiums opening to great acclaim recently include the Baltimore Orioles’ Camden Yards, the Chicago White Sox’s new Comiskey Park, the Texas Rangers’ Ballpark at Arlington, and the Cleveland Indians’ Jacobs Field. The acclaim is certainly justified as these new stadiums are unique parks made for baseball, unlike the sterile, round, utilitarian, astroturf stadiums built in the 1960s and 1970s. Unfortunately, taxpayers were tapped for these parks as well—$200 million for Camden Yards, $135 million for Comiskey Park, and $236 million for Jacobs Field and a new arena for basketball’s Cleveland Cavaliers. As for the Ballpark at Arlington, the total cost of $190 million was split—$135 million in taxpayer funding through a one-half cent city sales tax and $55 million in private financing by the Rangers including the sale of 15-year options on 10,400 of the new stadium’s seats and first-year sales of luxury suites. In 1995, the Colorado Rockies will move into a new stadium in Denver which cost taxpayers $141 million.

Even the self-proclaimed free-market governor of Massachusetts, Bill Weld, has succumbed to the temptations of taxpayer-subsidized professional sports. He has thrown his support behind a $700 million stadium and convention center in downtown Boston for the NFL’s New England Patriots.

In Connecticut, multiple layers of government complicate the arena business. The city of Hartford owns the Hartford Civic Center, but is leasing it to the state of Connecticut at a cost of $48 million for a 20-year period in order to help pay the city’s debt service. In turn, the state is investing in upgrades to the arena—home of hockey’s Hartford Whalers—at an estimated cost of more than $5 million. According to a Connecticut economic development spokesman, the state expects to cover their total costs through arena-based revenues, including a $1 ticket tax, and even “generate a small profit.” (Of course, the question arises: If the Hartford Civic Center can generate a profit, why not privatize it?)

In a June 6, 1994, article, Forbes magazine reported, “Over $1 billion has been spent for facilities opened since 1992, ground has been broken on another $1.5 billion worth, and there are plans for still another $5 billion in construction by the end of the decade.” With taxpayers footing most of the bill. The assumption underlying all this activity—government subsidizing, taxing, borrowing, and playing venture capitalist—is that taxpayer subsidization of professional sports enhances economic growth. This is, at best, a questionable assumption.

Robert A. Baade, an economics professor at Lake Forest College in Illinois, wrote a study recently for the Heartland Institute in which he compared economic growth rates in metropolitan areas before and after the introduction of professional teams, new stadiums, and new arenas. His results overwhelmingly indicate “that professional sports is not statistically significant in determining economic growth rates.” Baade declares that his study “finds no support for the notion that there is an economic rationale for public subsidies to sports teams and stadium and arena construction.” He further explains: “Attending a sporting event is but one possible use of an individual’s leisure time and money. It is possible that no connection between professional sports and per capita income growth emerged because sports spending simply substitutes for other forms of leisure spending.” Baade also notes that the types of jobs associated with stadium activity tend to be seasonal and low wage.

Charles C. Euchner, a political science professor at the College of the Holy Cross, also raises serious doubts regarding the economic merits of new sports stadiums in his book Playing the Field: Why Sports Teams Move and Cities Fight to Keep Them. He goes a step further, however, observing:

 

Whatever the merits of sports-based development, those cities that most need an economic boost are least able to make major investments such as stadium construction. Studies have shown that economically struggling cities tend to pay more for expensive and ineffective projects for development because of a sense of desperation to show tangible improvement. Stadiums and sports teams are luxuries that fiscally strapped cities can ill afford—yet have great difficulty bypassing because of the potency of symbolic notions like “renaissance” and “major league status.”

Keep the Yankees in New York?

This “sense of desperation” is most evident in the scramble by state and city officials to keep the Yankees in New York. Many New Yorkers still feel the pain of the Dodgers’ and Giants’ flight to California more than three decades ago. Over these same three decades, New York has witnessed an even more massive exodus of individuals, entrepreneurs, and businesses. Apparently unwilling to make the decisions that will stem and even turn this tide, government officials have grabbed onto the myth that if New York can just keep the Yankees the city’s economy will somehow stay afloat.

In fact, status seems to be the only benefit to be derived from government subsidization of teams and stadiums. Hundreds of millions of taxpayer dollars is a hefty price to pay for a nebulous feeling of status. Yankee Stadium, for example, seems to have done little even for the status of the South Bronx.

Indeed, Professor Baade observes, “The data suggest that stadium subsidies and other sports subsidies benefit not the community as a whole, but rather team owners and professional athletes.” One of the latest government proposals, to keep the Yankees in the Bronx would fit this observation. The plan for a bridge from Manhattan leading straight into a new parking garage, where fans then would proceed through a mall into the stadium, seems specifically designed to separate the stadium and fans from the local, often dangerous, community where Yankee Stadium sits.

Very little empirical evidence exists supporting government subsidization of professional sports. Complementing the economic arguments against such activity is America’s tradition of limited government. When one considers the proper role of government in society, the case against taxpayer-supported sports facilities becomes even stronger.

A sound governing philosophy dictates that government should undertake only those critical activities that the private sector proves unable to supply. On the federal level, national defense comes to mind. On the state and local levels, one thinks of public safety, such as police and the justice system. The political debate intensifies once the focus moves beyond such duties. Witness the growing debate over welfare in our nation. The notion, therefore, that subsidizing professional sports—a part of the entertainment industry—is a proper government undertaking becomes highly debatable, to say the least. It is difficult to imagine any of our Founding Fathers, if alive today, supporting taxpayer-funded baseball stadiums as a legitimate function of government.

From 1950 through 1980, though, the trend toward government-owned stadiums and arenas seemed irreversible. According to economics professors James Quirk and Rodney Fort, in their book Pay Dirt, the percentage of publicly owned stadiums in baseball’s American League rose from 12 percent in 1950 to 86 percent in 1980; the National League rose from 0 percent to 83 percent; the NFL increased from 36 percent to 96 percent; the National Basketball Association (NBA) from 46 percent to 76 percent; and the National Hockey League (NHL) from 0 percent to 52 percent.

A small retreat was witnessed in the 1980s, though, as publicly owned facilities actually dropped by 1991 in the National League to 75 percent, in the NFL to 93 percent, and to 65 percent in the NBA. During this period, the Miami Dolphins moved into the $100 million team-owned Joe Robbie Stadium, and baseball’s St. Louis Cardinals bought Busch Stadium. Also in 1992, Toronto’s Skydome, home to the Blue Jays, was privatized.

Taxpayer Revolt?

Government ownership of stadiums and arenas is not inevitable. The question becomes: How to stop the channeling of taxpayer dollars to professional sports? A question that has been asked about countless government ventures of highly dubious nature throughout the ages.

The first option would be a noble declaration by the powers that be in professional sports that taxpayer dollars will no longer be sought or accepted by their respective sports. It is difficult to imagine George Steinbrenner, for example, who has so cleverly manipulated New York’s elected officials thus far, suddenly declaring that he no longer seeks taxpayer dollars and is willing to buy Yankee Stadium from New York City and invest in improvements. After all, the beneficiaries of government programs and spending never suggest eliminating those benefits.

The second option would require self-control on the part of America’s elected officials—swearing off taxpayer subsidies of sports. In the past, elected officials have had few incentives to cease subsidizing sports. Little organized opposition existed to such ventures and many fans were at least perceived to be appreciative of such government action.

The final decision will lie with the American voters. In fact, when put to a vote of the people, some taxpayer-funded sports stadiums have not fared well. The people of San Francisco, for example, have turned down several referendums for a new home for their Giants. Even some politicians have said no. Tax-cut-minded New Jersey Governor Christine Todd Whitman recently nixed a deal to build an arena in Camden to lure the Philadelphia 76ers and is examining privatization options for the state’s Meadowlands Sports Complex, home to the NFL’s Giants and Jets, the NBA’s Nets, and the NHL’s Devils.

Indeed, alternatives to taxpayer subsidies are available. The NFL expansion Carolina Panthers, while accepting $40-45 million worth of land from the city of Charlotte, will play in a new stadium privately financed, in part, through the sale of permanent seat licenses. These license sales guarantee the purchasers the right to buy season tickets in perpetuity. They also can be bought and sold in the marketplace. The total construction costs of the new Carolina Stadium will be $160 million, with $100 million from the seat licenses and the rest from private investors. In addition, Washington Redskins owner Jack Kent Cooke is proposing to privately finance a new stadium in Maryland, with construction costs estimated at $160 million.

The American people need to understand that the economic impact of government subsidization of sports is negligible at best. More likely, by adding to ever-increasing levels of government spending and taxes and choosing political rather than market means of allocating resources, one can legitimately argue that such subsidization is anti-growth in nature.

Fans also must realize that professional sports in America will still thrive without taxpayer subsidies, as they did in the past. Naturally, team owners will have to reallocate some resources toward capital investments. However, no one should weep for America’s multi-billion dollar sports industry, nor its millionaire players. They would simply be confronted with the same decisions faced by all other businesses.

In fact, government officials would better focus their attention on creating a healthy economic environment for their respective cities and states by lowering taxes, reducing regulatory burdens, and paring down the size of government. Such an enterprising environment attracts investment, businesses, and individuals, who in turn create a viable market for baseball, football, hockey, and basketball.

Heck, an environment conducive to economic growth and opportunity might even create a market for soccer in the United States. Well, perhaps I go too far.

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February 1995

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