How Zimbalist’s Worcester study provides a “convenient dodge” for cities looking to subsidize stadiums

One silver lining of the Village Voice canceling all new articles is that it gives me time to write for Deadspin again, and I did so yesterday, with an article investigating how exactly sports economist Andrew Zimbalist, once known as a prominent critic of stadium subsidies, ended up helping Worcester put together one of the biggest minor-league baseball subsidies ever to lure the Pawtucket Red Sox to town.

There’s been lots of speculation about Zimbalist’s role out on the interweb — I forget if it was in a comment thread here or on Twitter that someone suggested he was secretly following orders of his masters in Fenway Park — but the reality turns out to be more complicated, and in some ways more disturbing:

Zimbalist hasn’t exactly changed his tune on the terrible return cities get from stadiums. But he is more willing to grant exceptions, whether on the grounds that additional non-sports development makes for sunnier outcomes, or because minor-league cities are a different beast altogether…

He was able to reach this conclusion, he says, without any bookkeeping trickery: “I tried to at every turn be as straightforward and conservative as I could.” Even if the stadium itself is a money-loser like virtually all others in the past have been, he says his figures showed the city paying off its debts and even turning a small surplus, thanks to all the tax revenues that would pour in from the development alongside the stadium.

Basically, Zimbalist says that he hasn’t changed his tune on stadium subsidies — he still thinks they’re almost always a waste of cash — but the extra development that was promised alongside the stadium should generate lots of tax revenue, so Worcester should come out even. And if that’s development that Worcester could have gotten without spending to build a stadium — which is Worcester-based economist Victor Matheson’s contention, and which would have allowed the city to keep the tax revenue instead of giving it to the PawSox owners — well, that’s not the question Zimbalist was hired to answer: He just had to say whether a new stadium would require new taxes, and he was able to make the math say “nope,” albeit by throwing in some speculation about housing economics similar to what he did with his first big consulting analysis, that of the Brooklyn Nets arena 14 years ago.

“I don’t want to sound idealistic about this—it’s not perfect,” Zimbalist says. “I was not arguing that this is necessarily the best financial outcome that might accrue to the city.”

But does that come across to the public, I ask? Or do people not attuned to the nuances of stadium economics just hear “no new taxes” and leave it at that, even if it’s siphoning off tax money that might otherwise be available for less sportsy purposes?

“I think the point has come across really well,” says Zimbalist. But, he adds, “you ask, do people understand this? I think in Worcester, they don’t even want to understand it. There’s a tremendous amount of excitement about bringing the team there.”

That’s not exactly a “yes, they’re going into this with eyes wide open,” of course, and it raises concerns about what exactly the role of an economist should be: just to do the math on questions being asked by a city government, or to warn them, “Hey, that’s not really the right question to be asking.” Matheson told me he saw Zimbalist’s role as that of “a bit as an enabler … using his credentials and his prominence to basically give cover to the Worcester city council and Ed Augustus to go forward with this project.” And West Virginia University economist Brad Humphreys says he worries that studies like Zimbalist’s only end up encouraging cities and team owners to tack on development projects with harder-to-define impacts just to muddy the economic waters:

“This is a convenient dodge for any municipal government engaging in these sort of things,” says West Virginia University sports economist Brad Humphreys. “There’s not much evidence about the effectiveness of these targeted redevelopment projects that go along with mixed-use retail/residential projects.” That’s a good thing in one way, he says: At least it’s encouraging sports venues to be built with more than a sea of parking lots around them. But whether the ancillary stuff is going to pay for the subsidy, that’s a pie in the sky claim that has no evidence to back it up.”

Anyway, this article ended up being really long and taking a deep dive into not just the economics on ancillary development, but minor- vs. major-league stadium impacts and the ethics of serving as an economic consultant. You can read the whole thing here, and if all goes according to plan, keep an eye out for future articles by me on stadium (and other) topics at Deadspin.

Friday roundup: Worcester stadium subsidy snowballs, Rochester Rhinos look to abandon 12-year-old stadium, old rich white guys continue to control the media

TGIF, but please cut God some slack for this week in stadium facepalms:

  • Members of the Worcester city council say they won’t rush to rubber stamp city manager Edward M. Augustus Jr.’s proposed $100 million stadium subsidy deal for the Pawtucket Red Sox, with public hearings scheduled for next Tuesday and September 5. Augustus, though, says he won’t accept proposed amendments to the deal, only a straight up or down “yes” or “no” vote, because any changes “would significantly impact our ability to deliver this project on time and could lead to unintended consequences.” So, basically, he’s asking for a rubber stamp, though the council still always has this one available.
  • Worcester city councilmembers might also want to check out this article from WBUR about how throwing large sums of money at minor-league baseball stadiums has worked out in other cities like Nashville, Durham, and El Paso. Representative quote, from Nashville City Councilor John Cooper: “Our overall success as a tourist destination is clearly not part of this baseball project. Nobody here thinks of the minor league baseball park as driving much of that.”
  • Meanwhile, the Worcester stadium deal has already created a cascade effect, with the owners of the Boston Red Sox‘ single-A team, the Lowell Spinners, asking when they’ll get some public money too. “I love Lowell, and I believe in Lowell,” Spinners owner Dave Heller said after meeting with Massachusetts state economic development officials. “I’m excited about the future in Lowell and investing here. I want to make sure we can take advantage of any incentives that are available from the state.” Spoken like a true Vercotti brother.
  • The GM of the New York Islanders and the owner of the Los Angeles Clippers both say they’re optimistic about getting the arenas built that they are lobbying to get built, and they both got articles in major news outlets (Newsday and CBS Sports) about their optimism. Normal non-rich humans who would like to express their pessimism about the arena projects can write a letter to the editor — ha ha, just kidding, CBS Sports doesn’t publish letters to the editor, go write an angry tweet or something.
  • The former owners of the USL Rochester Rhinos got $20 million from the state of New York for a new stadium in 2006, but now the new owners say they’re looking to move to a newer stadium in the suburbs, because people would rather watch the Premier League on TV than sit in a 12-year-old stadium or something? (And this after they narrowly avoided getting evicted!) Anyway, what the hell is it with upstate New York cities not thinking to lock their minor-league teams into long-term lease deals? Is it something in the water?

Nine out of ten sports economics experts think Worcester’s stadium deal is awful, and the tenth is the guy who helped design it

I’m still unpacking the exact details of the Pawtucket Red Soxletter of intent to move to Worcester and the $100-million-ish in subsidies it would include — I see the team would get to establish a $1-per-ticket surcharge on city-run events at the stadium and use the cash for its own future capital projects fund, for one thing, while the Worcester Telegram notes that the deal would include $5.6 million in future property-tax breaks for the builders of the larger development project. But Grant Welker of the Worcester Business Journal figured out a quicker path to evaluating the deal: Send copies of the stadium documents to ten sports economists and stadium experts (including me) and ask what they thought of the plan. Which led to the sentence of the week, if not the year:

Of those experts, the only one who spoke positively about the deal was the Smith College professor who was hired by the city to judge the economic viability of the offer to the PawSox.

Yep, that’s right: Nine out of ten sports stadium experts agree that Worcester is getting hosed, and the tenth is none other than Andy Zimbalist, stadium skeptic turned sometime stadium huckster, who is the guy who helped Worcester come up with its plan in the first place. Let’s run through a sampling of quotes:

  • Nola Agha, University of San Francisco: “It virtually never works.”
  • Joel Maxcy, Drexel University: “There’s just mountains now of economic evidence that the payoff that’s promised and what actually happens is far different. … If it were a private person, you would never take such a nonsensical bargain.”
  • Robert Baade, Lake Forest College: “The idea that this is going to serve as a catalyst for economic development, which is the hope – and I emphasize the word hope – is misguided. … Your community could think of all other ways to spend the money with better economic return than a minor league baseball team”
  • Victor Matheson, College of the Holy Cross (which is in Worcester): “This is an extraordinarily expensive stadium. … They seemed to be smarter than that. I’m extremely surprised that [the city’s cost] is as large as it is.”
  • Andrew Zimbalist, Smith College: “If you can do something like this that was culturally and socially positive and at least break even, it made sense to go forward.”
  • John Solow, University of Iowa: “There’s a great deal of consensus among sports economists of all political stripes that this is not a good thing for local governments to be doing.”
  • Michael Leeds, Temple University: “I really, really don’t see it. … You’re counting on something [the new development generating enough tax revenue to pay off the stadium] that’s not very likely to happen, and you better have a Plan B in place.”
  • Allen Sanderson, University of Chicago: “Overwhelmingly, the fannies in the stands are local. They’re choosing to spend a day or an evening at the ballpark instead of at the ball or other entertainment options.”
  • Neil deMause, guy with a blog: “Worcester’s city leaders haven’t just outbid Pawtucket, they’ve ladled on goodies like they’re trying to buy Larry Lucchino’s love. Assuming they can get past all the legislative hurdles, it should be enough to get the city a pro sports team, but it’s tough to see spending more than $100 million in tax kickbacks and state infrastructure subsidies on a team that you could buy outright for $20 million as smart bargaining.”

Zimbalist’s argument, it appears, is that while the stadium itself would be a money pit, getting that additional $100 million in hotels and housing and whatnot would generate enough new money to make the whole deal worth it. That assumes, of course, that nobody would be willing to build hotels and housing and whatnot without a stadium — which is a pretty odd assumption, since it’s not the presence of a Triple-A baseball team that’s going to make anyone want to live or even stay overnight in Worcester.

And also, those with long memories will recall that this is the exact same argument that Zimbalist used on a previous paid gig, for then-New Jersey Nets owner Bruce Ratner, in which he determined that a new Brooklyn arena would lose money for the public, but taxpayers would make it back from all the new housing that would go up alongside it. At the time, I also called for a second opinion from another sports economist, in that case Rod Fort of Washington State University (he’s now moved on to the University of Michigan, who noted this:

“I would never have undertaken this exercise. In essence, Andy is trying to forecast 33 years hence, and he’s forecasting housing markets, which there are other people spending all their waking moments on. What you see is assumption after assumption after assumption after assumption.”

In short: Housing economics is complicated (for starters, new residents come with new costs for things like schools and other public services, not just new tax revenues), and Andy Zimbalist is not a housing economist, but that hasn’t stopped him from telling cities that they’ll be fine sinking money into stadiums and arenas so long as there’s a housing component, and Worcester just took the bait. Presumably it’s bait that city officials knew Zimbalist was going to offer, and that’s exactly why they hired him, but that still doesn’t make the whole thing stink much less.