The AJC runs a piece this morning that looks at the role of stadium construction on economic development. Dennis Coates explains the findings from the economics literature.
But economists almost unanimously agree such stadium deals are bad for taxpayers. A 2005 survey found 90 percent of economists agreeing that governments should not subsidize sports teams.
“The only ones who think they’re going to create development and jobs aren’t economists,” said Dennis Coates, a University of Maryland-Baltimore County economics professor who has been studying stadium financing deals for 13 years.
Coates said economists find that spending on hotels, meals and similar side fare to a baseball game represents leisure money that probably would have been spent on another recreational activity anyway. Development around stadiums would have been built elsewhere, they argue. And to top it all off, studies show that per-person income in communities with professional sports teams is sometimes lower than in those without because of all the money that gets siphoned off to the places where players live and the team’s corporate ownership is located.
But, Commissioner Bert Nasuti doesn’t get it.
Such arguments are nonsense to Gwinnett County Commissioner Bert Nasuti, who came up with the idea of bringing pro ball to the county and has been an unwavering defender of the deal to build the stadium for the top minor-league affiliate of the Atlanta Braves.
Nasuti said he doesn’t understand how the county won’t gain with an estimated 400,000 people spending money at the stadium each baseball season, not to mention all the people who will live, work or shop year-round at developments now under review around the stadium site.
“I really don’t believe that without the anchor amenity of a baseball stadium there that Brand Morgan or any other developer would do the level of development that’s going to be there,” he said.
Nasuti, who claims to have majored in economics as an undergraduate commits a major fallacy in his analysis—the type of gaffe that shouldn’t be made by someone who holds the power to tax. He focuses on the seen benefits and ignores the difficult-to-see costs. 19th-Century economist Frederic Bastiat eloquently pointed out the deficiency in this type of argument in his classic essay “What Is Seen and What Is Not Seen.”
In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.
There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.
It is easy to envision a stadium full of fans watching a Triple-A baseball team in Gwinnett County: fans paying for parking, buying tickets, purchasing concessions. How could anyone argue that this isn’t an economic benefit? It’s all very simple to a “good economist.” The money that fans spend on the game has to come from somewhere; and that somewhere is likely other entertainment options within the community. Professor Coates details this quite clearly in his preceding statement.
It is incorrect to claim that such expenditures are net beneficial to the community. Instead, we are seeing dollars shuffled around the community from one area to another. These effects are possibly quite difficult to see. If every restaurant in the area lost a waiter as a result restaurant patrons choosing to attend Braves games, the opportunity cost is not immediately visible for those who are not trained at where to look. Professor Coates’s work with economist Brad Humphreys have looked the aggregate effect on communities and their findings are unambiguous that sports teams convey zero economic benefits to their hosts. If Gwinnett is going to be an exception, we need to hear an explanation as to why.
There is no doubt that Brad Morgan and other nearby land owners will gain from being close to the new stadium, but other local merchants will be worse off as consumers shift their purchases to the stadium. The estimated 400,000 people’s expenditures represent a wealth transfer, not new wealth.
Another argument made in the article is that there exist non-monetary benefits to the stadium, and that the added taxes borne by citizens is low enough that citizens would tolerate it.
Rodney Fort, a sports economist at the University of Michigan, said the intangible value of having a new recreational opportunity, team to root for and all that goes along with it can produce quality-of-life benefits that can help justify public spending on a project.
The dollar figures are often fairly small spread out across a community’s population, Fort argues.
Seattle officials used a similar argument in seeking to publicly finance a new stadium years ago, Fort said. Backers produced ads comparing the cost to that of a Big Mac sandwich every month.
“A lot of people are going to say, ‘No, it’s not worth a Big Mac a month,’ ” Fort said. “But a lot of people are going to say, ‘Yeah, that’s worth it.’ “
I agree. In fact, I have told numerous individuals that I might be willing to support the Gwinnett plan if it had been sold to the voters differently. Instead, the deal was cut in a back room and without any opportunity for public feedback. Despite what community leaders claim, I have never seen a project pushed through in secret. The public was told that the stadium would pay for itself from day one, which is untrue and deliberately misleading. Furthermore, the stadium proponents have done nothing but tout the economic benefits of the plan. If you are going to take people’s money, just take it. Don’t couple it with a lecture on how your taking it is good for everyone, especially when you are wrong.
So, how much will the new stadium cost? I broke it down to the household level here: $110 now, with an additional $90 spread out over the next 30 years. If the stadium generated $15 million in economic stimulus every year, this would be a good deal, but it won’t do so. And the fact that government officials with the power to tax have taken so little care to research the facts ought be embarrass them.