Consultant says $90m Brewers spring-training park would lose money, new consultant sought [UPDATED]

The Milwaukee Brewers are seeking a new $90 million spring-training facility in Gilbert, Arizona, and are generously offering to pay a whole $20 million of the cost:

According to emails among Gilbert staffers, [developer David] Sellers and financial consultants from April to June, the Brewers are willing to put $20 million toward the construction of the new facility.

The town would be on the hook for the other $70 million, which could be funded through bonds, development fees or a special taxing district…

LGE Design Build also proposed a 13-acre village next to the facility that would include 220 hotel rooms, 85,000 square feet of office space and 50,000 square feet of retail. It would cost an estimated $70 million to build, although it’s unclear who would front that cost.

We’ve been over the dismal economics of spring-training facilities before, so how do Gilbert officials justify this rather whopping expense? First by dodgy math — Sellers said annual tax receipts from baseball would only be $880,000, but there would also be added money spent at local restaurants and hotels (people are really going to stay at hotels in Gilbert rather than drive there from a more happening place?), writing that “the Brewers coming into Gilbert is Gilbert tapping into a $850 million … Valley economic impact. Just 10 percent of that would be $85 million being spent in Gilbert that isn’t happening right now.” If the Brewers played, say, 15 home spring-training games at a 7,500-seat ballpark, that would only require each and every fan to spend $755 per game to make those numbers work out.

And second, by ignoring the city’s own economic consultants, who, going against the grain in an industry where you generally tell your client whatever they want to hear, noted that the short spring-training season would limit any economic benefits. The accompanying hotel/office/retail village might bring in some money, Applied Economics concluded in an analysis obtained by the Arizona Republic, but it still likely wouldn’t be enough to make up for spending $70 million on a stadium: “the cost of investing in the stadium versus the value of the mixed-use development may not be justifiable.”

Only one thing left to do: Find some different economists who’ll provide a different answer!

Kathy Tilque, president and CEO of the Gilbert Chamber of Commerce, said the Applied Economics study was fairly limited in its scope and did not take into account the indirect economic benefits of a potential stadium.

The chamber is working with a different economic consulting firm to provide a broader economic analysis. That report should be completed soon and will be turned over to town officials for review, Tilque said.

“It would be a great thing not only for the East Valley but for Gilbert. We just need to make sure the numbers work,” she said.

Surely she meant “check that the numbers work,” not “make sure that the numbers work, by cooking them,” right? Right? Sigh.

IMPORTANT UPDATE/CLARIFICATION: The mayor of Gilbert, Jenn Daniels, just emailed me to indicate that my original headline (“Consultant says $90m Brewers spring-training park would lose money, town seeks new consultant”) was incorrect in one important aspect: The Gilbert Chamber of Commerce went and sought a new consultant without consulting or notifying town officials. “We had no knowledge that the Brewers and their development partner paid the Chamber to conduct a second study,” writes Daniels. “I found out that information with the rest of the public last Friday with the Chamber’s press release.” Since the Brewers were unable to show significant direct revenues from the stadium project, she concludes, “this deal is behind us.”

My apologies to Mayor Daniels, the people of Gilbert, and anyone else who may have been unfairly depicted by my original report. Not the Gilbert Chamber of Commerce, though, because those guys are apparently weasels.

Glendale’s $152m spring-training stadium only generating $160,000 a year in tax revenues

Continuing Glendale, Arizona’s bid to be the cautionary tale for more or less everything, KJZZ-FM has a long report on the disaster that has been the city’s construction of new spring training stadiums for the Chicago White Sox and Los Angeles Dodgers while hoping to pay them off with money from sales tax proceeds from a surrounding development. Operative word: “hoping.”

It’s impossible to predict how long [7-year-old William] Almazan will play baseball. But if he settles in Glendale as an adult, there’s a real chance he’ll have to help pay some of the roughly $331 million the city currently owes on Camelback Ranch.

“Possibly one would argue this was a high-risk transaction,” said Michael Bailey, Glendale city attorney…

Retail, hotels and a golf course were planned for around Camelback Ranch, which Glendale agreed to build in 2007. But the economy tanked in 2008. The venue opened in 2009, and developers failed to deliver sales tax generators needed to pay for the project.

Now the facility is only projected to bring in $160,000 over the next year, and there’s still no developer.

Yup, that’s bad! The city has already paid $96 million on debt service for the stadium, and according to KJZZ’s charts — which don’t exactly match that $331 million figure above — has more than $227 million to go (non-present-value numbers, mind you, so the true cost is going to end up closer to the $152.6 million that the city actually borrowed for the ballparks several years ago). And now all that money has to come from the Glendale general fund, because nobody’s paying sales taxes on an empty lot.

But! If we’re going to take into account the substitution effect when something new is built, we need to do so when something isn’t built as well. So maybe when the Camelback Ranch development failed to take place, developers chose to build something else somewhere nearby instead, and locals are spending money and generating sales taxes there instead, and maybe that place is even in Glendale! Slim silver lining, I know, but when you’re Glendale, you have to take them where you can find them.

Top Florida economic advisor lacks econ degree, avoided using real data because it’d look bad

I’ve made fun of Florida’s propensity for giving its sports teams lots of money based on doofy economic impact studies before, such as when Pinellas County moved forward with a plan for giving the Toronto Blue Jays $65 million for a new spring training facility in Dunedin based on an economic report that assumed that every single ticket sold went to a different person who traveled to Florida just for that game. But this, this, from WTSP’s Noah Pransky, takes the damn cake:

10Investigates found the author of so many economic impact reports that support public sports subsidies may not be the expert economist state leaders believe he is.

The resume of Mark Bonn, Ph.D., a professor at Florida State University’s Dedman School of Hospitality, boasts of dozens of reports compiled for municipalities all across Florida, including some statewide organizations.

Bonn’s side company, Bonn Marketing Inc., recently received $23,000 from just one study, commissioned by the Toronto Blue Jays and city of Dunedin to show the economic impact of spring training…

Nobody on the committee questioned Bonn’s qualifications.

But 10Investigates did, asking if Bonn considered himself an economist.

Braves say their spring-training subsidy demand is a trade secret, because Pitbull

Not content with the $355 million they’re getting from Cobb County taxpayers for their new regular-season stadium, the owners of the Atlanta Braves are also seeking public money to build a new $80 million spring-training complex in Sarasota, Florida. (They apparently gave up on Gary Sheffield’s insane plan for $662 million sports complex just north of St. Petersburg.) As Shadow of the Stadium reports, the Braves are hoping to put in a total of diddly-squat towards the cost, while the city, county, state (using its demented sports tax rebate program that a local legislator is trying to repeal), and a private developer split it four ways.

I’d tell you more about the funding details, but as SoS’s (and WTSP-TV’s) Noah Pransky discovered when he filed a public records request on the proposed deal, both the Braves owners and Sarasota County say they shouldn’t have to tell anyone about it because of the Pitbull Precedent:

When 10Investigates requested the public records that had been prepared to this point, county spokesperson Jason Bartolone responded that the Braves “have asserted confidentiality rights” under Florida State Statute 288.075, which aims to protect proprietary business information and trade secrets in public-private economic development deals.

FSS 288.075 is one of the same exemptions used by rapper Pitbull and public agency Visit Florida to deny 10Investigates’ 2015 public records request into the artist’s taxpayer-funded tourism contract. The secrecy and controversy surrounding the deal, later disclosed to be worth $1 million, wound up costing three of the agency’s top executives their jobs.

If, like me, you didn’t follow the Pitbull scandal at the time, it went like this: Visit Florida, the state tourism agency, hired the Cuban-American rapper to make a promotional video called “Sexy Beaches,” which if you’ve ever heard Pitbull is pretty much his entire musical wheelhouse. Florida House Speaker Richard Corcoran called the result “reprehensible,” and demanded to know how much the state was paying Pitbull for his services. Pitbull and Visit Florida refused, saying their contract was a “trade secret.” Corcoran sued. Pitbull then tweeted out the details of his contract, which included $1 million in payments for this autotuned slice of hell, among other things.

That went so well that the Braves and Sarasota County have decided that their contract is a trade secret too, even if it doesn’t involve meeting sexy strangers in the lobby. (I mean, I really hope it doesn’t.) It’s not clear yet whether Pransky is preparing a lawsuit, but I’d keep an eye on the Braves Twitter feed just in case.

Washington Post doesn’t understand basic stadium economics, free agent spending, Twitter

If you read this site at all regularly, you should already be familiar with Betteridge’s Law of Headlines. So you know what to do when you see this in the Washington Post:

Could the Nationals’ spring training project be affecting their offseason spending?

The genesis of this story appears to be that Jim Bowden, former GM of the Washington Nationals who is now an ESPN analyst, tweeted that the team may hold off on signing free agents this winter because they “are way over budget on [their] Spring Training Complex, making [their] decision difficult.” A Nats spokesperson immediately countered that “one has nothing to do with the other,” but still, Washington Post story.

Basing an entire article on one stray remark from a guy paid to come up with bulk-size opinions on camera is bad enough, but this report also displays a stunning failure to understand the concept of sunk costs. Think of it this way: You’re about to buy a new computer because you’ve determined it will increase your productivity and allow you to earn enough money that it will pay for itself. Then you find out that your roof has a leak, and you need to spend more than you thought to repair it. Unless you’re short on cash — which is unlikely since you have a net worth of $5.4 billion — you’d be foolish to skimp on one investment just because another cost arose that you’ll need to pay regardless.

For the Nationals to cut back on free agent spending because their spring training complex is running over budget, in other words, they’d have to be incredibly stupid. Which isn’t to say it’s impossible — teams all the time set “budgets” for payroll based on little more than how much the next guy is spending, even though player salaries are sunk costs as well once you’ve signed them. But taking it this seriously is a sign that the Post not only is jumping to write articles based on off-handed tweets, but has a serious misunderstanding of economics. Good thing there isn’t anything happening soon that’s likely to exploit those weaknesses.

Dunedin Blue Jays spring-training study fails to understand how hotel rooms work

The Pinellas County Commission is preparing to vote on a request from the Toronto Blue Jays for $81 million in upgrades to their spring training facility in Dunedin — I know, I don’t know where you find $81 million worth of upgrades to a spring-training park either, but anyway — and Noah Pransky’s Shadow of the Stadium has delved into the economic impact projections that the team is using to justify the public expense. A previous city report projected $80 million a year in annual economic impact from the Jays’ presence, a figure that’s tough to jibe with numerous studies showing the actual effect of spring training teams on spending to be near zero; Pransky previously revealed that that study had assumed that anyone visiting Dunedin in March was there for baseball, which, um, no.

So is the new report by the city of Dunedin (the Jays paid half the cost) any better? It claims to only count tourists who said they were there just to see baseball, which is an improvement. However, it still counts every ticket sold as one added hotel room sold — which is wrong both because visitors may attend more than one game per trip, and also because hotel rooms can hold more than one person each:

The new report projects $21.4 million in annual economic spending, which at current hotel and sales tax rates means only $1-2 million a year in actual tax receipts, and if you then have to divide by 6-8 … let’s just say nobody in Pinellas County should be planning on seeing that $81 million again.

Tampa proposes $30m subsidy for Yankees’ spring stadium, this passes for getting off cheap these days

The New York Yankees, a team that will be paying $225 million in player payroll this season (just thought I’d mention that, no reason), have agreed to a lease extension with the city of Tampa on their spring-training stadium that will include $30 million in city- and state-financed upgrades. (The Yankees will chip in $4.1 million for improvements to their training complex, and $6.2 million that they’ve already spent on the stadium since 2010, which is a new meaning of “will chip in.”) Planned improvements include new concessions concourses, new sun roofs, and a new “grand entrance” for fans fleeing the watchful gaze of bronze George Steinbrenner.

In exchange, Tampa gets to ensure the presence of the Yankees for another 21 years: The lease currently ends in 2025, and will be extended through 2046. That’s not a horrific tradeoff, though it’s worth noting that entire new minor-league stadiums have recently been built for this price. And the assessment of Hillsborough County Commissioner Ken Hagan, aka the guy who thinks a single college football game can create 2,000 permanent jobs, remains, um:

[Hagan] said the deal is a good one for taxpayers. The county, which owns Steinbrenner Field, will receive an additional $8.4 million in lease payments for the extra 20 years of the contract. The improvements to the Yankees’ practice complex will raise its taxable value resulting in more property taxes.

And, Hagan said, the continued presence of baseball’s biggest name for spring training will continue to fill local hotels, bars and restaurants with out-of-state visitors.

“When you consider all the additional revenue, this is an extremely attractive return on investment, which makes this deal a no-brainer,” Hagan said.

First off, $8.4 million over the years 2026 through 2046 is never going to make a dent in $30 million in construction costs right now. The property-tax bump is likewise going to be small; as for the throngs of “out-of-state visitors” allegedly drawn to Tampa in March just to see Yankees spring training games, haven’t we killed that urban legend dead yet?

If there are two reasons to care about this, other than just enjoying hating the Steinbrenners for being rich and still being able to get public subsidies whenever they want (assuming the city and county approve the deal, which they haven’t yet), it’s because it’s likely to give another boost to the trend of MLB teams making demands for public upgrades or replacement of not-that-old spring training facilities (Steinbrenner Field was built in 1996), and because it gives us another hint of what Ken Hagan is likely to be like in negotiations for a new stadium for the Tampa Bay Rays. That’s almost certainly going to cost Tampa taxpayers a heck of a lot more than $30 million if it happens, especially if Hagan hauls out rationalizations like these.

Spring training games really really don’t produce any economic benefit, okay?

Vocativ has a good article running down the basics of spring training economic impact, which could probably best summed up as “there isn’t hardly any.” Key paragraphs:

“There’s just no evidence that it does anything,” Philip Porter, an economics professor at the University of South Florida, said, noting that such studies overlook the costs—opportunity and real—of such investments.

After the 1994 baseball strike curtailed the ’95 spring training season and diluted its quality for most of the duration with replacement players, University of Akron professor John Zipp assumed he’d see a negative economic impact because spring training attendance declined 60 percent—he didn’t.

“It’s a wonderful experience,” Zipp said. “It’s just not worth public dollars.”

Lots of other good stuff there, including the tale of two neighboring cities battling for the right to put $50 million in public money in the pocket of the Boston Red Sox. (I wish it went a bit into possible explanations why the economic impact of people attending spring training games is near zero — leading theory is that it doesn’t much increase the number of spring tourists to Florida, just changes where they spend their money — but you can’t have everything.) Go read it, then bookmark it for the next time a baseball team insists that it needs a new spring training facility and that it will more than pay for itself in new tax receipts, because that shit is messed up.

Author of study showing spring training is huge boon to Florida says spring training not actually huge boon to Florida

So Charlotte County, Florida released one of those studies a couple of weeks ago that claimed to show that Tampa Bay Rays spring training games “generated an estimated economic impact of $20,978,500” in spending by out-of-towners, which I ignored because if I wrote about every one of these things, I’d never get anything else done. But now Noah Pransky of Shadow of the Stadium has called up the author of the study and not only confirmed that the study didn’t try to account for visitors who would have been in the county anyway (since some people have been known to vacation in Florida in March), but got the study author to acknowledge that he doesn’t think spring training is that much of an economic boon at all:

[Walter] Klages’ response: His study sure didn’t take those things into account; it was never designed to do that.

He added that the majority of overnight visitors who went to Rays games while in Charlotte County likely came to the area for the beaches and weather.  And while he suspected baseball was a factor, he saw it “more like dessert on the platter, rather than the (main course).”

University of South Florida economist Philip Porter, meanwhile, told Pransky that since the county’s economy has grown at the exact same rate as the state’s, he suspects that having Rays spring training in Port Charlotte has had zero economic impact — or even a negative one, since it’s gotten Charlotte County visitors to spend more of their money on a business that takes its revenues and ships them out of the county (known in economics as “leakage”). It all sounded so much better in the press release, but then, that’s the point of press releases.

generated an estimated economic impact of $20,978,500 for Charlotte County – See more at: http://www.charlotteharbortravel.com/press/Charlotte_Harbor_Visitor_&_Convention_Bureau_Releases_Research_Findings#sthash.mBLZooiQ.dpuf
generated an estimated economic impact of $20,978,500 for Charlotte County – See more at: http://www.charlotteharbortravel.com/press/Charlotte_Harbor_Visitor_&_Convention_Bureau_Releases_Research_Findings#sthash.mBLZooiQ.dpuf
generated an estimated economic impact of $20,978,500 for Charlotte County – See more at: http://www.charlotteharbortravel.com/press/Charlotte_Harbor_Visitor_&_Convention_Bureau_Releases_Research_Findings#sthash.mBLZooiQ.dpuf

Florida house approves bill for $12m/year in new sports subsidies, but MLB can only apply if it’s nicer to Cubans

The Florida state house has approved its bill setting up an official process for sports teams to demand tax kickbacks, as first proposed last month. The bill, approved by a 93-16 vote on Friday, would set up a pool of an additional $12 million a year in sales tax breaks (on top of the $2 million a year apiece currently given to the states’ MLB, NFL, NBA, and NHL teams); any projects seeking to get a slice would have to go through a ranking process conducted by the state Department of Economic Opportunity, and then be subjected to a legislative vote.

The one new twist is an amendment that would deny sales-tax funding to the state’s MLB teams — including for spring training facilities — unless baseball revamps its policy on Cuban defectors to allow them to become free agents rather than having to enter the major-league draft. (Right now players like Yasiel Puig choose to establish residency first in a draft-free nation like Mexico in order to score more lucrative contracts, leading to scary stories that become Brett Ratner biopics.) In response, MLB issues a noncommittal statement that it would meet with the players’ union “to determine whether changes can be made to our international signing rules to reduce or eliminate the reliance of Cuban players on criminal organizations when leaving Cuba.”

In any event, this bill is likely to look very different after it gets through the state senate, whose leader have already said they want to eliminate that part where legislators vote on which projects to approve, otherwise known as “the part that actually gives the bill any teeth at all.” Sen. Jack Latvala said he supported the Cuban provision — because this is Florida, so of course he did — but predicted, “This bill will bounce. We’re not gonna do it exactly the way the House does it on the first pass.”