July 25, 2005

Taxpayers Should Cry Foul Over Stadium Subsidies

The following article originally appeared in the July 24, 2005 edition of the Washington Post.

In its quest to bring professional baseball back to Washington, the D.C. Council agreed to build a new stadium for the Washington Nationals that is to be largely financed by taxpayer dollars. This is a sweetheart deal that will allow Major League Baseball to sell the team at a price that virtually guarantees it a profit while likely creating a burden for D.C. taxpayers.

In February 2002 Major League Baseball purchased the lackluster Montreal Expos for $120 million. Three years later, it agreed to bring the team to Washington on the condition that a publicly funded stadium would be built. The league now is trying to sell the Washington Nationals.

The prospect of a free stadium is tantalizing to prospective buyers, who are expected to bid between $300 million and $400 million for the team. That would make the Nationals one of the highest-priced professional baseball teams ever, and the sale would be one of the most lucrative deals Major League Baseball has ever made.

With construction costs estimated at $535 million, Major League Baseball and a few well-connected investors stand to make a killing, while D.C. residents and businesses are left to pay the bill.

The D.C. Council has said that construction of a new stadium will spur economic development in a neglected area of the District. However, this is a promise the city may be unable to keep.

Economists seldom agree, but the many studies done over the past decade all arrived at the same conclusion: Publicly funded stadiums do not deliver the benefits they promise. A recent paper by the Cato Institute concluded, “The academic research overwhelmingly concludes that the presence of professional sports teams has no measurable positive impact on economic growth.”

This result makes sense. If stadiums could turn a profit on their own, professional sports teams would have no need for massive subsidies every year.

The D.C. Council estimates that a new stadium will create 380 direct and indirect jobs for D.C. residents, but most of these jobs will be day-of-game positions for food vendors, parking lot attendants and other unskilled workers. Local taxpayers will be forking over more than $1 million a job for such part-time, low-wage positions that won’t even pay enough to support a family.

The council says that jobs will be created because a new stadium will attract restaurants, bars and other entertainment venues. But with a location at South Capitol and N streets, the stadium will be some distance from other tourist attractions. This means that the success of surrounding businesses will depend almost entirely on the crowds the team is able to draw.

So far, the Nationals have attracted more than a million fans to RFK Stadium, the team’s current home. After more than 30 years without professional baseball, it is hardly a surprise that a new team is able to satisfy the pent-up demand of D.C. baseball fans. However, this level of fan enthusiasm is not guaranteed if the Nationals deliver several years of mediocre performances.

The D.C. area contains many entertainment venues and is home to four other professional sports teams. With this abundance — possibly an overabundance — of entertainment opportunities, high attendance at Nationals games almost surely must come at the expense of already established venues. New wealth won’t be created by a new stadium but simply shifted within the city.

Funding a new stadium in the District may be good politics, but it is bad public policy. Major League Baseball will be laughing all the way to the bank while D.C. residents will find that they get much less than they were promised — and paid for.

Eric A. Miller is an analyst at the Tax Foundation.