Could a Small Stadium Do Big Good?

Maybe small ballparks could economically justify their existence, though not necessarily public investment.

Is everything we know about sports stadiums wrong? Not really. But it might not always be right, either.

What we know—based on decades of research—is that publicly financed sports stadiums are a sucker’s bet for everyone except the rich team players and their even richer owners.

Analysts from every corner of the ideological spectrum agree that revenue from stadium projects rarely if ever covers their costs. The big projects seldom ignite brush fires of development around them. The money fans spend at the games is money they could have spent at other local attractions, but didn’t. And a lot of it flees the region in the pockets of players and owners who live elsewhere (payroll accounts for 60 percent of a pro ball club’s expenditures). In some cases, taxpayers are still paying off debts incurred for facilities (e.g., Giants Stadium) that no longer even exist.

Bottom line: Contrary to the cheerleading of civic boosters, having a big-league sports team in your area actually hurts the economy. Building that team a fancy new arena hurts it even more.

All of this is true—at least regarding big-league sports. But what about minor league clubs, and minor league stadiums?

Richmond’s AA-league Flying Squirrels have complained about conditions at The Diamond ever since they came to town. They would like a new place to play. Some heavy hitters around town would like them to get one. Whispers are flying about a proposal by Mayor Dwight Jones to build them a facility in Shockoe Bottom —even though a whopping 67-22 majority of area residents think any ballpark should stay where the existing one is, on the Boulevard near I-95.

Could this story end like so many others, with elected leaders conspiring with fat cats to fleece the public for private gain? Perhaps. But some recent research suggests smaller clubs and smaller facilities might not be the economic sinkholes their bigger cousins are.

The work comes from Nola Agha, an assistant professor of sports management at the University of San Francisco. It appears in the Journal of Sports Economics and arrives at what Agha terms “an unexpected outcome”: Certain types of teams and facilities can produce gains in regional income (albeit small ones: about $67 to about $117 per capita). This contradicts “the vast majority of academic research” on big-league sports, which “has found nonpositive effects on income...employment...sales tax revenues...and spending.”

You’ll pretty much have to take Agha’s word that her conclusions are solid—unless you’re comfortable with terms such as multicollinearity and homoscedasticity. But Agha, whose data set included “all of the teams that played minor league baseball between 1980 and 2006,” offers some plausible reasons smaller franchises might confer benefits larger ones do not.

For instance: “Teams can theoretically...generate substantial new spending by out-of-area residents or discourage residents from spending outside the local economy. Both of these are more likely to occur in geographically isolated metro areas.” (That’s bad news for Richmond, which lies just a short hop from Charlottesville, Hampton Roads, D.C. and Baltimore.)

What also might help? Using the stadium for unrelated events, such as marching-band competitions. Coordinated marketing by diverse civic groups. And team stability, which can build community identification. There’s a point in Richmond’s favor: “Independent teams are drastically less stable than affiliated teams,” which leads to “lower levels of regional interest, support, and visitor spending...Independent teams stayed in (a metro area) an average of 4 years while affiliated franchises averaged 16 years...As a whole, independent teams are not associated with gains in local area per capita income.”

Also worth mentioning: The minor leagues are not homogenous, and neither are their economic effects. AAA teams, A+ teams, AA stadiums, and rookie stadiums are better for their communities than other categories. What’s more, Agha cautions that her research doesn’t include any cost-benefit analysis, “so there is no implication that cities should invest in AA or rookie stadiums.” Stadiums could confer some economic benefits yet not produce enough to recoup their costs.

And besides: This is just one study. Other research could contradict it. Other economists could pick it apart. Anecdotal evidence could offset it: Witness Gwinnett, Ga., which built a stadium to lure the AAA Braves away from Richmond—and which has seen none of the attendant promises come true.

All the same, the work needs noting. The economic case against sports stadiums used to be open and shut in every instance. Now, in some cases, it is simply open.

This column originally appeared in the Richmond Times-Dispatch.

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  • ||

    Thank god Houston voters refused to dump $217 million into a 50 year old stadium. The other bond proposal for a new jail only passed by around 400 votes. Houstonians haven't rejected a bond proposal since 2007, hopefully this is a good sign.

  • fabius||

    The success of major college football in building gigantic stadia without public funding goes surprisingly unmentioned in this debate. At Ole Miss, we're about to spend $100M on a new basketball arena and $50M on a large addition to the stadium, and 100% of the money is coming from private, earmarked donations.

    It will be a boon for the city as well as the university, because the Athletics Department functions in an environment where it must create value for someone in order to obtain funding.

    **The same cannot be said for the majority of mid-major programs that are not profitable.

  • Death Rock and Skull||

    There are numerous examples of college sport facilities constructed with taxpayer money, though.

  • eubes||

    A university can't threaten to move across the country like a pro team can.

  • John Jay.||

    So if cities are unwilling to refuse to throw tax money at these things, it seems like the next-best option is for the city to just own the stadium and the team. Not that I know how to make that happen (assuming most owners would be unwilling to sell), but the pro sports business actually seems like a relatively legitimate role for government, in that sports teams provide a public good (fostering a sense of community pride, I guess) that isn't readily offered by the market (where teams can just up and move to a city that promises a better deal), while also having the potential to be self-sustaining and profitable.

    Incidentally, I grew up just down the road from that Gwinnett stadium (and family still lives there), and it really is staggering how bad of an idea it is. Even more so since any increases in attendance would probably be at the expense of the parent team—it was difficult enough already to get the suburban families in the area to make the ~45-60 minute trip downtown to Turner Field, and now they have a cheaper, much more convenient alternative.

  • fabius||

    The city of Biloxi, MS has hit on what I'm guessing will be a pretty workable model for a new Minor League baseball park. Their building it on land owned by the casino across the street that MGM is leasing to the city for $1/year. (It's currently just an employee parking lot; so well worth it to the casino to have large crowds congregating nearby a couple of times a week all summer.)

    And BP is picking up about half the construction costs to make up for that month a few years ago when it was their fault we couldn't go fishing. I'd rather it be done with no public funds, but as ripoffs go, it's a hell of a deal.

  • fabius||

    *they're

  • Death Rock and Skull||

    "sports teams provide a public good (fostering a sense of community pride"

    Horseshit.

    No matter how "good" or "profitable", governments have no business being involved in sectors of economies.

  • John Jay.||

    I'm not arguing with that. I'm just saying, since government involvement is pretty much inevitable at this point, it can at least get involved in a way that doesn't merely funnel tax money to millionaires. I also added the "I guess" as an acknowledgement that the point is a tenuous one, but probably not completely without merit.

    I do think there are some interesting differences between sports and other businesses, but I don't have the time or energy to write an essay on that right now.

  • The Last American Hero||

    Hasn't worked so well for the Toronto Maple Leafs. Cities should be in the business of running a city - not aquariums, art museums, zoos or sports teams. They don't know how to do it, they don't have any incentive to do it well or efficiently.

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    YEAH BITCH! MULTIPLIERS!

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  • Car Scanner||

    I think it's hard to say whether it's good or bad to build a good stadium.

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