CITIES : The Folly of Stadia Mania

As the National Football League’s deadline for deciding if Los Angeles will get a professional team approaches, one of the era’s strangest puzzles must be taken up. How did stadia and sports teams become the trophy wives of urban politics? Sadly, the answer lies in the web of money, media and celebrity that ensnares our society.

By any measure, big-time public sports projects set the standard for make-believe, Tinkerbell economics. They are always justified by the thousands of new jobs, community revivals and torrents of tax revenues they’re supposed to create. These claims, usually manufactured by consultants-for-hire, are dramatically flawed.

Most “impact studies” assume, for example, that ticket, parking and retail income generated by sports teams adds money to a region that would otherwise not exist. Economists estimate, however, that about 90% to 95% of all sports patrons are drawn from the same communities where teams are located. Their spending is simply diverted from other local entertainment and shopping options.

Also, sports consultants typically overvalue what little new spending sports complexes do generate. They mistakenly compare fans from outside the region to tourists who travel to experience Disneyland, the Grand Canyon or other big-time attractions. A $30 game ticket and a hot dog magically “multiply” into hundreds of dollars worth of hotel, travel and shopping revenue. The vast majority of out-of-town fans, however, attend games during business or pleasure trips. It’s highly misleading to attribute much, let alone most, of their economic effects to sports attractions.

Even the regional consequences of siting stadiums in particular locations--suburbs versus the inner city, for example--are quite limited. Last year, New York City’s Independent Budget Office estimated that baseball teams in the city captured about $300 million of economic activity that might otherwise occur in places like neighboring New Jersey. The report noted, however, that even if all such revenues were fully recycled in the community, they would amount to just .09% of the city’s economy and provide barely .04% of its tax revenues.

Yet, cash flow generated by sports is never completely recaptured in this way. Professional teams are highly centralized businesses. Their earnings are gobbled up by a handful of high-priced stars and team owners, few of whom live or spend their wealth in the communities that sustain them.

Then there’s the problem of opportunity costs. Impact studies almost never compare the relative benefits of spending millions on sports teams instead of on things like schools, police or parks. It’s impossible to gauge the true value of a mega-sports deal without considering what the public isn’t getting when it subsidizes a team.

It’s no surprise that virtually every independent, scientifically rigorous study of publicly supported sports projects concludes that they are horrible investments. “Far from being engines of economic growth,” observe University of Maryland professors Dennis Coates and Brad Humphreys, authors of one of the most comprehensive assessments of public stadium deals, “at best, regions get nothing from their sports franchises. At worst, they pay dearly.”

Baltimore’s celebrated Camden Yards baseball park is a case in point. Although it draws about 30% of its patrons from regions like neighboring Washington, a much higher out-of-town ratio than most facilities, it still costs $11 million more a year than it generates for the surrounding community. Furthermore, despite the park’s much-hyped urban-revival benefits, Baltimore’s employment has fallen 5% since 1992, the year Camden Yards opened, while the rest of the nation boomed.

Cleveland’s Jacobs Field was supposed to produce 28,000 jobs and $4 million a year in tax revenue. Instead, a bevy of permanent tax exemptions has stripped $32 million from local budgets, and 1,800 mostly seasonal, low-paying jobs have been created. Just weeks before the park’s completion in early 1995, Cleveland’s tottering school system went bankrupt.

With “successes” like these, it’s no wonder insiders privately concede the dismal economics of publicly supported sports. “Nobody believes the impact studies anymore,” says Neil deMause, co-author of “Field of Schemes,” a book highly critical of stadium projects, “but they provide political cover.” Why do urban leaders persist with policies they know are ineffective?

Some commentators suggest that politicians are avid sports fans. Others say local officials can’t resist building something big and shiny on their watch. Urban leaders seem drawn to simple development strategies like building a stadium when economic growth becomes more multifaceted and tougher to exploit politically. For example, the Raiders and Rams left Los Angeles and Orange counties, respectively, in the mid-1990s at the nadir of the local recession. Since then, the two counties have generated a combined 530,000 jobs and 70,000 new companies. Yet, football-team angst still commands far more political attention than understanding and building upon the regions’ near-miraculous recoveries.

All these factors have been known for decades. Why did sports projects balloon in size and scope during the 1990s?

“Stadia mania” seems to have caught fire only when subsidizing the rich and famous to protect high-end employment and stimulate fashionable entertainment emerged as America’s dominant urban-growth model.

Today’s stadium-construction game is a peculiar mutation of corporate welfare policies pioneered by poor Southern communities and declining Rust Belt states. About two decades ago, these troubled regions began courting manufacturers to relocate to their backyards, or not to leave in the first place, with tax and other incentives. In taking up the offers, many companies extorted huge subsidies, then cut jobs or closed factories anyway. The lavish corporate giveaways broke many a local budget.

Sophisticated, media-rich cities like New York began adopting similar policies in the 1980s in the midst of precipitous manufacturing and blue-collar employment declines. Unlike the hinterlands, however, which worked hard, if unsuccessfully, to preserve working-class jobs, major urban leaders had another option. They could abandon the “old” industrial economy, which was unattractive and messy, and focus instead on building dazzling new playgrounds favored by white-collar elites.

Almost overnight, the notion of subsidizing well-policed, high-end retail, entertainment and office districts, anchored by fashionably redesigned ballparks, became the epitome of enlightened urban policy. Cities that embraced this strategy--Baltimore and Cleveland--earned kudos. No amount of money was too much to entice sports teams, famous studios, stock exchanges or Starbucks to set up shop in the newly sanitized urban core.

A stock-rich breed of politically savvy, mediagenic sports promoters arose to exploit the new sentiments. They hired the hottest, most influential political consultants and well-connected City Hall veterans to orchestrate their stadium and related deals. Amid such celebrity and wealth, it seemed churlish to point out that the economics rarely added up.

The stock boom also enriched the white-collar elites whom politicians most wanted to satisfy as the cost of high-end urban amenities skyrocketed. Sports fans became decidedly upscale as ticket prices doubled over the last decade. By 1994, one study showed, average season-ticket holders enjoyed incomes nearly double the national median, compared with just 58% higher in 1972.

Finally, the celebrity-infatuated media caught the fever. Stadium politics produced lead stories featuring the rich and famous. Circulation and broadcast ratings jumped. New advertising revenues might follow.

A harmless boost to urban egos and pride?

Urban development in the ‘90s has largely wasted a period of remarkable economic opportunity on little more than glitzy, fantastically expensive fluff. Trophy wives, after all, last as long as the money holds out. As with most indulgences, it’s only when times get tough that the real damage becomes all-too painfully apparent.*