Tuesday, November 4, 2008

Should New Yorkers pay for new stadiums?

I'm a big Yankees fan. But as an adult, I realize that not everyone shares my interests. Certainly, I would never ask anyone else to pay for my tickets to a game. And yet, this is exactly what is happening with public financing for new stadiums for both the Mets and Yankees. According to the New York Times:
"Days after taking office in 2002, Mayor Michael R. Bloomberg killed Rudolph W. Giuliani’s plan to spend $800 million in city funds to build baseball stadiums for the Yankees and the Mets, saying they were too expensive during a recession.

Three years later, Mr. Bloomberg unveiled his own plan calling for the two teams to pay the construction costs of their new stadiums, while the city would build public parks, parking garages and transit stations nearby. The cost to taxpayers, the mayor suggested, would be relatively small and the benefits to the city would be great...

But as the two stadiums near completion, the cost to taxpayers is anything but small, a review of the projects shows. Though the teams are indeed paying approximately $2 billion to erect the two stadiums, the cost to the city for infrastructure — parks, garages and transportation improvements — have jumped to about $458 million, from $281 million in 2005. The state is contributing an additional $201 million."

This doesn't include tax-breaks and other indirect subsidies, which have totaled roughly $480 million.

This type of public financing is not uncommon in cities throughout the country. City governments and residents are wooed by "Impact Reports" purporting to show that these new stadiums will revitalize abandon down-town areas, create jobs and spur economic growth. The only problem is, this isn't really true.

Some of the most interesting research in this area has been done by Brad Humphreys and Dennis Coates, two economists at the University of Maryland, Baltimore County. Humphreys and Coates have done numerous studies assessing the impact of new stadiums on cities, generally finding no significant economic benefit to residents.

There are several reasons for this, but one of the most important is that people only have a certain amount of disposable income to spend on entertainment. They might spend it at a baseball game or at a concert or at the movies. But people wont spend more just because there are more entertainment options.

Humphreys and Coates looked at a series of Players' strikes and lockouts, which are perfect natural experiments to test the economic impact of sports franchises. What they found was that strikes and lockouts didn't cause the local economies to suffer; rather, people went to more concerts, movies and restaurants.

The case for public stadium financing is based on it's supposed benefit to the local economy. In reality, public financing is a tax-payer giveaway to developers and teams--exactly the people who don't need government help.

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