No, Nationals Park is not an exception to the rule that stadiums don’t do squat for local economies

On Wednesday afternoon, WNYC-FM’s Leonard Lopate Show tackled the topic of “Why Cities Fund Professional Sports Stadiums,” a subject of more than passing interest around here. Guests were investigative tax reporter (and my editor on the inequality anthology Divided, still available from finer internet trading conglomerates near you) David Cay Johnston and Grantland staff editor Andrew Sharp, who wrote a long article last month calling on Congress to address stadium subsidies because local officials afraid of losing their teams sure won’t. (Or mostly won’t, anyway.)

Now, one of the problems of talk radio (okay, talk anything) is that hosts feel obligated to pit guests against each other, so here Sharp ended up cast as the pro-stadium side, or at least Mr. Glass Half Full. After Johnston led off by outlining the billions of dollars in public cash that goes to stadiums as “just a drop in a very large bucket” of ways that the public end up subsidizing billionaires, Lopate turned to Sharp for any silver lining, and got this response:

“One of the reasons that cities sell themselves on these investments is that every now and then, particularly when you invest in a stadium in an urban area, it can help stimulate growth around that area, and it can turn into a win-win situation where the owners obviously get their subsidies, but then also the surrounding businesses around those stadiums can prove pretty beneficial to the city at large.”

As an example of one of these wins, Sharp cited the new Washington Nationals stadium, which he said “helped revitalize the whole waterfront area” — though he immediately added that there are far more examples of failures than successes.

I got dragged into this last night when someone asked about it on Twitter, which led to me questioning why anyone would consider the Nats stadium an economic success, and eventually to one of those Twitter conversations where nobody is quite arguing about the same thing and everyone just feels icky and misunderstood. So let me try presenting my side here, in a bit more detail.

First off, as Johnston immediately noted on the air, sports venues are “human surge tanks” — crowds sweep in and sweep out on game days, but most of the year the place is dark, which isn’t a great anchor for neighborhood development. Sharp countered that there are now more bars and restaurants around the stadium, and “you can’t deny that now and then these things work.”

There are a few problems here. First off, you can absolutely deny that now and then these things work, especially given that economic study after study has found no measurable economic benefit for cities that build new stadium, or get new teams, or get teams back in action after strikes and lockouts. If there really are outliers that are win-wins, they’re awfully well-hidden in the data.

Secondly, have you been to D.C. lately? You can’t go anywhere without seeing construction cranes — it’s one of the hottest real estate markets in the U.S., and that’s true of virtually every neighborhood, with or without a stadium in it. It’s impossible to say what would have happened to the Navy Yard area if the Nats were still playing at RFK Stadium (or in Montreal, for that matter) — and even if that area wouldn’t have been developed to the same degree, might developers and residents and restaurateurs have gone elsewhere in the city instead? It’s a huge “but-for” problem, albeit one that stadium boosters love to overlook, especially when they just built a stadium in a neighborhood that was already starting to take off.

But fine: Let’s grant that the arrival of Nats Park at least prompted a handful of sports bars and the like to locate in the immediate neighborhood. (I wouldn’t dispute that.) The question here is whether the stadium project is “beneficial to the city at large,” and you can’t determine that without taking into account the price tag. As I’ve noted many times before, there’s a price point where subsidizing stadiums makes sense: In most cases I’d be fine with spending $1 in public money towards a new sports venue, and even the $20 million or so that San Francisco put up for the Giants‘ stadium is arguably reasonable, even if the SoMa neighborhood was already going gangbusters before Pac Bell Park was built.

Nationals Park, though, cost D.C. taxpayers something on the order of $600 million. That’s a crazy-high figure to justify with a few sports bars, but on Twitter at least, Sharp said that the cost isn’t the point:

I think I get Sharp’s point: We shouldn’t criticize spending $600 million on a stadium just because there are even better investments a city could be making with the money. But that’s not what I was saying at all — rather, the point is that since doing just about anything with $600 million, including sitting on it or throwing it from a helicopter, would be better for the local economy, handing it over to the owners of the Nationals for a new stadium is a massive waste of taxpayer funds.

Let’s start with the simplest example: What if D.C. simply hadn’t collected the money in the first place? About two-thirds of the money came from a tax on large D.C. businesses, and while I’m not about to start defending them as efficient economic engines, they would have done something else with that cash, whether it was hiring more entry-level staff, giving more perks to corporate bigwigs, or (hahaha) cutting prices for local consumers. Sure, probably only a small share of it would have been spent in D.C. — but it’s still a non-zero cost to the local economy. And if that cost is more than the benefit of those handful of sports bars, suddenly the Nats stadium is a net loss for D.C.

The other third (roughly) of the public cost, meanwhile, came from kicking back sales taxes on money spent at the ballpark — not a sales-tax surcharge, mind you, but refunding to the Nats sales taxes that otherwise would have gone to the district. So if the Nats had been playing at RFK, this would have been money that would have gone into the public treasury — and if the Nats had never come to town, at least some of those sales taxes would have been collected when locals spent at other entertainment options in D.C. Again, it’s not 100% — but you can make an excellent case that even doing nothing would have been more economically beneficial to the D.C. economy than building a baseball stadium.

What we’re left with as a pro-Nationals Park argument, then, is that if a city is going to blow a few hundred million dollars on something, at least putting it in a promising neighborhood downtown might shift a little bit of development to that locale. That’s certainly true — Tim Chapin at Florida State has done some good work in this area — but using it as an argument that some stadiums are good public investments is like saying, “Sure, the Pentagon budget may be bloated beyond belief, but aren’t these some cool hammers?”

I don’t want to get on Sharp’s case too much — he was asked to present a counterexample of a stadium deal that’s worked out better, and he threw out one that seems to have been a relative success, at least on a “look around and see if the surrounding streets are blowing with tumbleweeds” basis. But that’s the problem: Just looking at what is there misses what would have been there — and elsewhere in the city — if the project hadn’t been done. Pointing to a full sports bar is easy; pointing to the bar across town that closed, or was never built, because public or consumer spending was diverted away from there is hard without a time machine. And stay away from those things, man, they’re dangerous.


26 comments on “No, Nationals Park is not an exception to the rule that stadiums don’t do squat for local economies

  1. First time Ive ever disagreed with a post on this site. But you’re way off here. The Nats park brought in a TON of development – apartment buildings & office buildings. In fact, the complaint here is that there are NOT ENOUGH bars and restaurants near the stadium.

    Secondly, DC is a perfect example of how arenas can change areas. I live 4 blocks from the Verizon Center. When I went to college (99-03) the area around the Verizon Center was a total shithole. But the arena changed that and we now have 4 different apartment buildings that opened up in a 2-block radius from where I live.

    You are correct to say that the arenas arent the sole cause for the reason – DC construction is booming – but you need an anchor.

    There is a sigifnicant distinction in economic impact between arenas/stadiums built in cities (Nats Park & Verizon Center) and those built in the burbs (FedEx Field). The Redskins stadium has done nothing for nobody, while the two city stadiums have CLEARLY had an economic impact.

    You can argue whether or not the public paid too much to help fund the stadium, but your title is absolutely, 100% incorrect. It DOES do something for the local ecomony. It created an entire new neighborhood for people to live in. When I moved back to DC in 2011 – there were zero living options in the Waterfront. That has drastically changed. You have to give the ballpark credit or you’re lying.

  2. So you’re saying that all of the new construction that took place in the Navy Yard area is solely because people are desperate to live/shop near a baseball stadium? That simply defies logic — not just because of the “it’s dark 280 days a year” issue, but because it hasn’t worked that way in any other city in the nation. Developers simply aren’t going to build buildings just because there’s an “anchor” if there’s no market for people to live and shop there.

    Did Nationals Park perk up the ears of developers, who thought, “Hey, there’s some buzz about this place, maybe let’s direct some dollars here?” Sure, very possibly. (Though there’s no way of knowing if this wouldn’t have happened anyway without the stadium — again, there’s hardly a patch of dirt in D.C. that hasn’t gotten new development plopped on it in the last decade.) Does that mean that those buildings, and those residents, wouldn’t have come to somewhere else in D.C. without a stadium? Or, for that matter, that D.C. couldn’t have sparked development in the Navy Yard itself far more cheaply by throwing some money at smaller improvements instead of a $600 million stadium? I’m not buying it.

  3. The argument for economic impact in San Diego typically goes something like this: “Look at all the free advertising the city gets every time a Charger game is broadcast on TV!”

    First, apart from the handful of national TV games only the best teams get during each season, most games are broadcast regionally in the home and away markets, with a couple of very brief shots of the bay. Apart from that the visual focus is on the field which for the viewing audience could be in Anytown, USA.

    Second, the “advertising” is not free; it’s the cost of a stadium.

    Third, it would be far more economically feasible for a city that wants to attract tourism dollars to simply buy advertising during national broadcasts — or the Super Bowl, for that matter — than it would be to “invest” in a stadium.

  4. I lived in DC from 2003-2008. During my last two years in DC, I lived three blocks from the Nats stadium in one of the new condo developments. And I’m pretty sure that area of DC would have developed with or without the stadium. It may have taken a little bit longer, but DC has gentrified dramatically in the past 15 years and the Navy Yard is no exception.

  5. This argument is similar to what is happening in Sacramento. There are numerous projects that have been in the works for years – decades in the case of the rail yards – that have been stalled by city permitting, environmental review, toxic contamination, and the economy. The projects are finally moving forward and, suddenly, all of these projects are attributed to the construction of the arena. The rail yard development, the surge in midtown, the R-Street corridor, the K Street development were all planned or started construction prior to the mention of a downtown arena. What the arena has done is shut down and forced out many local businesses who can no longer afford the gouging that landlords have started in anticipation of the high rents promised by city “leaders” for their properties.

  6. In response to Sean:

    This is a common argument but it completely forgets that the biggest part of development in SW DC was put into motion far before Nats Park. GSA sold the land around the stadium in 2002 and a developer was chosen in 2004 for a $1.7 BILLION project, including the Department of Transportation building and housing. Having people live (24/7) and work (5 days a week) is a far more significant factor in the growth in the area than a baseball stadium.

    Background: http://www.bizjournals.com/washington/stories/2008/02/25/focus13.html?page=all

  7. “I think I get Sharp’s point: We shouldn’t criticize spending $600 million on a stadium just because there are even better investments a city could be making with the money. ” I am confused by this statement. Maybe I am not understanding the context. To me, setting priorities on how money is spent is the essence of good government. Today’s paper mentions the Bucks are getting their arena land for $1 from “their” government.

  8. Post hoc ergo propter hoc

    On another note, any conversation about how much revenue is being ‘generated’ by sports bars or restaurants or other ‘entertainment options’ in or around a specific development (be it sea world or Nats park) fundamentally ignores basic economic principles:

    The consumer spending that is aggregated by any new development must be cannibalized from somewhere else, given that discretionary spending is not a function of how many options people have to spend their money on but on how much discretionary spending they are capable of.

    Some of the aggregate spending done at a 45,000 seat ballpark (or whatever) will likely come from outside the area. That is legitimate “new” revenue to the local market. The rest will just be redistributed from other options further away from the ballpark, from other sports or leisure pursuits or what have you.

    Shiny new buildings do not create new money. Only Benny and Janet do that (and it’s not working that well in the long run either).

  9. Mary: I meant that “Don’t let the perfect be the enemy of the good” is reasonable policy. “Don’t let the good be the enemy of the not completely disastrous” is less so.

  10. Appreciate the response, and enjoy the debate even though we’ll probably never agree on this. Discussing here is much easier than Twitter, though, so one more time:

    The Nats idea was only about 90 seconds of a 40-minute episode, and most of that time I echoed sentiments you’ve expressed better than just about anyone. So we’re generally in agreement. The case against publicly funded stadiums is that teams demand money in exchange for economic development/benefits to the city that rarely materialize. I just think it weakens the argument to pretend that this can never work, and it’s awfully disingenuous to look at what’s happened in DC and call it a failure. The smarter opposition is to say that these plans fail so much more often than they succeed that it’s reckless for the Federal Govm’t to allow cities and states to continue trying at all.

    As for the Nats: I don’t know exactly what I said on live radio, but it’s less about “sports bars” than extensive residential development that’s created an entire neighborhood, as Sean pointed out, and as I said on Twitter last night: https://www.washingtonpost.com/local/nationals-park-part-of-life-in-navy-yard-but-life-no-longer-revolves-around-the-stadium/2014/09/27/c5ed0bcc-459e-11e4-b47c-f5889e061e5f_story.html

    Even the article KSchmidt mentions includes this: “The deal was struck even before Major League Baseball picked the site next door, but it received a huge boost and impetus from the stadium plans. Forest City executives say plans were advanced to catch the baseball wave.”

    It’d be crazy to credit all the development to a stadium, but equally ridiculous to say stadium didn’t accelerate things and act as an anchor for what’s happened since. Calling the stadium deal a failure requires occupying an alternate universe in which a) local government similarly supports development with investments in an area that had been neglected for the past 50 years, b) private businesses use their tax savings to hire more low-level employees, c) private development invests heavily in Navy Yard with no local attraction and no metro, and d) sales tax money spent at Nats park would’ve gone to other entertainment options in DC. Maybe one of those things could be true, but asking people to believe that all of them happen is a major stretch.

    I think it’s a lot more reasonable to say that when done in a smart way and paired with other renewal plans, stadiums built in urban areas can absolutely help revitalize surrounding neighborhoods … and it’s too bad that it almost never actually happens that way.

  11. It is clear that the pleasantness of the area immediately surrounding a new publicly-subsidised ballpark is not a sufficient basis for declaring the entire public expenditure worthwhile. We don’t have access to the alternate realities in which the Expos never moved to Washington, or in which the city refused to give away its tax dollars, thereby forcing the Nationals either to stay at RFK Stadium or to build a new stadium with their own money.

    Also, there’s the ever-present “replacement effect”, whereby any increase in economic activity that can be attributed to the presence of the new ballpark is offset by a diminution of activity in another sector of the leisure economy.

    But particularly interesting to me is your mention in this entry of the San Francisco Giants’ new ballpark, where you say that “even the $20 million or so that San Francisco put up for the Giants‘ stadium is arguably reasonable” (though adding the caveat that “the SoMa neighborhood was already going gangbusters before Pac Bell Park was built”). I might have missed other blog entries of yours where you opined on this. Can you elaborate? And are there any other recent projects in which the use of public funds was small enough to be reasonable in your view?

  12. Andrew: I guess it depends on what you mean by “works.” If the goal is to leverage a stadium that you’ve already decided to build by putting it in a place that will accelerate development of that particular neighborhood, Nats Park isn’t a terrible model. If the goal is to spend $600 million in a cost-effective way to actually create economic growth for the city as a whole, I can think of a couple of dozen better options, including Allen Sanderson’s suggestion of throwing money out of a helicopter.

  13. Ferdinand: I haven’t written much about the Giants stadium here lately since it opened way back in 2000. But it’s my go-to answer when radio interviewers ask me for an example of a stadium that worked out financially for the public.

    Then, like you, they usually say, “What’s another one?” and I go “Uh…” The D.C. arena isn’t bad (since like SF it was almost all private money), and the Minneapolis Metrodome actually paid its own way since the Twins and Vikings shared concessions and parking revenue with the state, but that’s not really “recent.” Unfortunately, most recent projects involve large public subsidies that are never repaid, because that’s precisely why team owners are demanding them.

  14. The major driver of development in DC is Metro. If you are located near a Metro station, it increases the value of almost any thing. And for the record, the area around the Verizon center was not a bad area before the Verizon center was built. It was Chinatown and was a very safe place on the edge of downtown.

  15. The problem with the ‘stadiums can help revitalize a neighborhood’ argument is that at a cost of $600 million, the city might as well just build a bunch of fancy condos, etc themselves and sell them.

    If your city is growing, all this development will happen regardless. If you want to revitalize a certain area, use the permitting system to encourage growth in that area versus others.

    Other property tax incentives…

    Any option to redevelop a neighborhood is cheaper for the city and probably as or more effective than a stadium.

  16. I lived in DC about the same time as Sean–the Verizon Center had been in place for a couple years and the city was beginning to market the “Golden Triangle” as a place for upscale nightclubs, restaurants, etc. It was definitely not a bad place to live, though admittedly there were some rougher neighborhoods nearby.

    Rather than being a +1/slam dunk case, the whole debate about Nats Park ignores the bigger trends that have benefitted DC as a whole (again, depending on your perspective): the centralization of corporate offices and HQs (especially IT firms and Federal contractors) in the DC area, in particular the city itself, which has brought a wave of new, well-educated residents with significant disposable income ; the Federal Government’s decision to locate office buildings in the city near Metro stops; the change in fashion of younger people especially to prefer urban living near transit and walkable neighborhoods.

    None of these trends has a single thing to do with sports teams–but make downtown sports teams more successful, so I’d say the development argument gets the causality wrong. Any city–from Cleveland to Milwaukee to St. Louis–that had similar trends would be a lot more prosperous than they are now without a baseball stadium.

    Revisiting the Nats Park neighborhood this summer–I am shocked by how little things have changed since I lived there four years ago, despite the Nats on-field success. Same parking lots, same lousy “bars” (in one notable case using shipping containers), same self-storage units, a Starbucks and Quiznos…even the same crappy liquor store on South Capitol Street. One or two VERY slow-developing apartment buildings, which were allegedly slowed down by the financial crisis when little else in the city was.

    In fact, for years the development has moved from north to south–from the DOT building–towards Nats Park. Or northwest from the actual Navy Yard/8th and I area development (again, riverfront property near a Metro Station in a hot property market–not a tough sell). I can think of several formerly sketchy neighborhoods in NE DC that have nicer housing and better bars/restaurants than the Nats Park area, which suggests to me that the stadium had significant unaccounted for opportunity cost for all the money spent.

  17. On the “extensive residential development” around Nats park can be attributed to things that have nothing to do with the Nats:

    1) The opening of the Navy Yard metro station in 1991 giving easy access to the area.
    2) The GSA selling most of the land giving DC some large parcels to build on
    3) The collapse of the commercial loan market in 2008.
    4) The opening of DOT, the conversion of the Navy Yard from an Armory to office space and the opening of the Marine Barrack Annex on K St.
    5) The huge pent up demand for housing in DC for anything near a Metro and near downtown.

    #1 and #4 bring folks into the area daily to work and spend money, but #3 is probably the largest. Since when it happened there were 4 commercial and 4 residential buildings in the area with all the rest of the plots slated for commercial only. The crash let the developers re-assess what sold in the neighborhood, basically residential DC has commercial space, and readjust to demand before they built another commercial building that would sit empty.

    If you don’t think it would of developed without the stadium please explain NoMA which is going through the same development process at pretty much the same pace (if not faster) since the infill station opened in 2004.

  18. Neil; are you aware of any studies that compare the economic impact of public spending on a hospital, college campus or mass transit to a sports stadium?

    My hunch is any one of those alternatives would generate a more measurable economic lift to a neighborhood.than a stadium.

  19. Mary,

    Actually, Milwaukee Bucks owners are getting their arena land (9 acres) free from taxpayers (from the state) plus at least 21 more free acres from the state, county and city as bonus freebies–for the Bucks owners’ private gain. So far, there are no mandates for them to do anything for the community. They say they will take up to 15 years to develop (sell to other developers) this public land. The owners have made billions in real estate–MKE’s just a pushpin on their global map.

    Mayor Barrett said the $1 Park East land would have gotten developed anyway since everything around it is getting developed. Bucks may actually delay development.

    Worst thing about this scheme is that taxpayers will subsidize a redundant parking garage and an “entertainment mall” designed to siphon business from about 50 bars and eateries near the arena. An economic killer. The Anywhere USA project will have at least 75% chains. Of course, it may be a ghost town on nights without events (and these malls often flounder). The mayor insists you can’t have too many bars and restaurants–we’re already 5th in the US for bars per capita–but he won’t have to face the music if either mall or existing businesses go belly up. He’s near the tail end of eons as a politician. Barrett’s Folly.

  20. GDub: One more thing…taverns, clubs and restaurants near MKE’s arena run the gamut–the mall will only duplicate what’s already there but with chains. It’s a busy scene every weekend but the market will not grow overnight, or even if they add a few hundred more housing units within 10 years. The tourism market is not growing and has even shrunk. Downtown biz is picking up but the only market need IDd by a “destination consultant” is for more low-end restaurants and another restaurant or two in areas with just a couple. But everyone just makes up #$% and keeps repeating it.

  21. MilwauNative–I actually find Milwaukee a great city and one I truly enjoy visiting, both for the friendliness of the people and the nice geographic location.
    I agree though–without a significant injection of wealth (either by visitors or by residents), a large chain-centered development will likely not be a great economic winner. But at least you’ll have a lousy NBA team no one cares about ,right?

  22. Marty T wrote: “If your city is growing, all this development will happen regardless.”

    And, in a world without subsidies, any metropolitan area the size of DC still gets stadiums and arenas.

  23. GDub: Yes, Milwaukee is a beautiful, cultural and fun city with friendly people. I missed it when I lived elsewhere. Visit often!

    As the city council prepares to vote for a cannibalizing chain mall, there has not been a single elected official, business leader or downtown business group to speak against it publicly. All have shilled for it or been silent. Businesses likely to be affected have been completely silent after a couple were quoted voicing concerns and got flack. I guess they fear being blackballed. Also, the Bucks cleverly started a “Bucks Bar Network” last fall and signed up about 15 pubs as Bucks Bars in a paid promo network. Talk about “paying to be played.” But this business-killing plan still must be executed (this majorly subsidized mall is likely to get passed without anything more than a press release and “vaportecture.”
    So city council will have to keep voting on plans for how small fish will get eaten by the BIG BUCKS FISH…

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