By Dr. Mike Walden
Anyone visiting my home office immediately knows something obvious about me. The multitude of red baseball hats shows I’m a big Cincinnati Reds fan. Born in that city along the Ohio River, I followed “Big Klu” (Ted Kluszewski) in the 1950s, Frank Robinson in the 1960s and then I basked in the glory days of the “Big Red Machine” in the 1970s. I still try to make it to at least one game a year, and on other days I avidly follow the box scores of completed games.
Major league baseball – as well as other pro sports – are big business today, with revenues collectively in the billions. Cities and regions frequently try to cash in on the popularity of pro sports by aggressively competing for a team.
Yet these attempts to land a pro team often become controversial. Why? Because public money is frequently sought, usually to help build a ballpark, stadium or arena. In North Carolina, High Point and Fayetteville recently pledged public money to assist constructing minor league baseball parks, and the Charlotte City Council has debated helping the area acquire a pro soccer team.
This sets up a clash between those who support public funds for pro teams and those who oppose it. Supporters cite economic development as the main justification for public help. They say a pro team brings several economic pluses. During construction of the playing facility, jobs and incomes will be created. Then once the team is playing, spending by fans on tickets, concessions and nearby restaurants and lounges will inject a continuous stream of new money into the area and can even increase surrounding property values. Plus – promoters continue – any new dollar of spending generates additional dollars of spending through the local supply chain.
The net result – argues those backing public help for pro teams – is that a professional sports team and its associated facility create new jobs, incomes and tax revenues that more than compensate for any public investment. Moreover – backers continue – a pro sports team and modern venue are exactly the kind of entertainment amenity needed to attract and keep successful residents.
Opponents make several counterpoints. Due to the special skills needed to build sports facilities, they say many of the construction jobs will likely come from outside the region, and the permanent jobs in food and facility services are generally low-paying. Unless the players live in the local area, much of their salary will leave the region. Critics also say “multipliers” used to generate supply chain impacts are often inflated.
But the biggest complaint of opponents regarding public support for professional sports teams is over the concept of new spending. Opponents say supporters don’t adequately account for the likelihood that a substantial part of the spending at pro sports games is simply spending shifted from alternative forms of entertainment spending in the region.
That is, if the $100 a family spends at a minor league baseball game is $100 they would have spent at a local restaurant and movie complex in the absence of the minor league team, then the $100 at the ballpark should not be counted as “new spending”. Only if the family would have spent the $100 outside the local area, if the family lives outside the local area and comes into the city specifically because of the baseball team, should – critics say – the $100 be counted as new spending.
Most studies by academics of the economic development potential of pro sports teams have not been encouraging. The general conclusion is that teams and their facilities (park, stadium, arena) do not generate significant net economic benefits for a city or region once all costs are considered.
However, these studies do have recommendations for improving the chances of pro sports giving an economic boost to cities and regions. The sports facilities must be properly sited and constructed. Specifically the venue should be located so as to be easily walkable for fans and close to transportation. The venue should also be properly sized so as to encourage the development of restaurant and entertainment opportunities in locations nearby the facility.
And, perhaps most importantly, obtaining advanced agreement by developers to construct commercial, retail and residential complexes close to the sports facility has been found to enhance the economic impact.
Interestingly, one recent study found a positive economic impact from some minor league teams in smaller cities. The reason may be these towns lack significant entertainment options, and a minor league team serves as a magnet for attracting new spending by residents of surrounding counties.
Still, the current conclusion is that a pro sports team and its complementary playing facility is not necessarily a “home run”, “slam dunk”, “touchdown” or “shot-on-goal” for economic development. When public money is involved several hard questions must be considered and addressed, and lessons should be learned from the experiences of other cities and regions. Hopefully, then the community can decide if the endeavor is a project of promise rather than a field of unfulfilled dreams!
Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics who teaches and writes on personal finance, economic outlook, and public policy.