We interrupt your regularly scheduled news to bring you live updates from today’s session of the Sports Economics Conference 2024 at the University of Maryland-Baltimore County, hosted by UMBC economics professor Dennis Coates! I’m going to be on a journalists’ panel at 3 pm, but there are a ton of stadium economics superstars presenting until then, so I’ll be liveblogging as best I can. Refresh to see the latest!
9:02 am: Any day that starts with overhearing “What’s there to argue about? It’s the broken window fallacy!” is off to a promising start.
9:42 am: Nick Watanabe of the University of South Carolina presents on a joint paper on how the 2018 Pyeongchang Winter Olympics effected that small community, particularly in terms of housing prices. The authors’ conclusion: There was no overall impact on monthly rent prices during the Games, but the area did build a ton of hotels and resorts, which increased capacity. Besides, Watanabe says, “In the winter it’s freezing cold — so people are not like ‘Hey. we’re going to go up to Pyeongchang and watch some games!'” But rental prices for low-income residents did increase in the run-up to the Games, with landlords in particular charging significantly higher in deposits — 6-10%, or “hundreds if not thousands of dollars.” Watanabe concludes: “Is this gentrification? I can’t fully say.” (Though he does imply he thinks it’s better to be a landowner in an area with new sports activity than a renter — he told a friend in Arlington Heights that he should hold onto his house to see if land values go up after a potential Chicago Bears stadium, but he’s more concerned for residents near the proposed Kansas City Royals stadium who are likely to be displaced.)
10:25 am: Michael Friedman from the University of Maryland-College Park speaks on his book Mallparks, especially as it relates to the now-stone-dead Alexandria, Virginia arena deal for the Washington Capitals and Wizards. With so much evidence that subsidies for new venues are throwing money down a hole, he says, team owners and “no longer trying to sell us on half-billion-dollar stadiums and arenas, but rather “transformative” multi-billion-dollar “integrated stadium developments” or ISDs — or as Friedman also calls them, “Mallpark villages.” He notes, “Team owners are becoming real estate developers, regardless of their experience or expertise.”
In the 1990s, says Friedman, Wizards owner Abe Pollin “took on a tremendous risk” by putting up his own money to cover the construction debt for his new D.C. arena — but also got $70 million in public cash, a team-friendly land lease, and decades of tax breaks. Still, that debt was something other team owners didn’t have to deal with, so once Ted Leonsis took over the Wizards and the Capitals, he went to D.C. Mayor Muriel Bowser, who at first could only offer $432 million, then approached Virginia to see what he could get there.
Asked which stadium started the wave of mallparks, Friedman points to the San Diego Padres‘ East Village development, and then the St. Louis Cardinals‘ ballpark village as early adopters. “What I think shifted the paradigm is Battery Atlanta,” which is now the model for almost every new stadium — “I don’t want 15 acres for a stadium, I want 50 acres for a development.”
11:03 am: Victor Matheson from the College of the Holy Cross is up next, on sports facilities’ overall visitor impact. Noting the more than $35 billion in public money spent on North American stadiums and arenas since 1990 (not counting things like tax breaks and maintenance subsidies), he says, “If you’re going to be asking the public to build your factory for you,” you need to come up with a good economic argument.” Stadiums are increasingly being sold as “entertainment districts” that can also host concerts, community events, or even polling places, he notes — the Alexandria project’s economic claims assumed 511 events a year, which would have been required something like two-thirds of all ticketed sports events in the D.C. area to be held there.
To check on whether this is really happening, Matheson and his coauthors went to Pollstar and other public data sources to find out how many concerts and other non-sports events were being held at sports venues. “How often are these things used?” he said. “Not much.”
But even for those limited number of events, how many of the people attending are actually a net positive, and how many are already in town and are just substituting spending at one venue for spending at another? Matheson et al. looked at hotel usage (“with lots and lots of dummy variables,” for the stats geeks in the audience, which is almost everyone here) and found that “no one travels to go see the NBA [or NHL],” but “people will go to Minneapolis to see Madonna or Bruno Mars” (or for postseason games, sometimes):
The numbers are better for MLB and NFL games (Matheson is speeding through his slides, so no screenshots of those, sorry), but they’re still relatively low — and in terms of new tax revenue, at best only amount to a few millions of dollars a year. So sure, go ahead and spend money on new sports facilities, he says — but spend “in the low tens of millions, not the billions.”
11:30 am: Next on the docket is Jeff Carr from the University of Michigan, where he works with sports economist Mark Rosentraub, who famously published a book on why stadiums are terrible deals and then followed that up a decade of consulting contracts later with a book on why actually they don’t have to be. “I have Mark on speed dial if any of you want to debate him,” quips Carr, correctly reading the room.
His presentation is focused on three disparate sports venues — the San Diego Padres‘, Edmonton Oilers‘, and Las Vegas Raiders‘— but came down to: San Diego’s stadium district didn’t show big property value growth after Padres stadium opened, but new property taxes were enough to pay off the stadium debt (accounting for substitution?). In Edmonton, the city’s CRLs (their version of tax increment financing districts) had varying rates of development per dollar spent, with the overall upshot: “Did development occur downtown? Yes. Do we know why? No. Get back to me in two years.” For the Raiders stadium, he estimated a total of about $109 million in tax revenues over two years, counting hotel and sales taxes — amounting to a total of about $1.5 billion over 30 years.
The obvious question for me, if not everyone in the room: Are these really new tax revenues, or is some of it being redirected from other spending that would be happening if not for the new sports venue. The second Carr is finished presenting, Kennesaw State University economist J.C. Bradbury’s hand shoots up: “The real question is the counterfactual: What would have happened otherwise? I love going to San Diego and the Gaslight District, but the worst part is right around the ballpark.” Vegas has numerous other venues aside from the Raiders’ stadium, he notes — and as Matheson then points out, while Taylor Swift might not have played Vegas without a new football stadium, the Red Hot Chili Peppers might well have.
Friedman then pointed out that any study of visitors needs to account for “time switchers” who might visit a city regardless, and just choose to go to a stadium concert instead of doing something else while in town. Carr’s reply: He hopes to work on that, so TBD.
Time for lunch! More in a bit.
1:34 pm: And we’re back, all sugared up from the Oreo cake at lunch. Frank Stephenson from Berry College is picking things up with another look at visitor impacts from sporting events: The importance of hotel data, he says, is that you can use it to calculate incremental visits — in other words, subtract out normal amounts of hotel stays to find the net effect. You can also use it to estimate how long people stay, and whether there’s a “hangover effect” after a major event where spending is lower than normal, partly because it can take time to break down stages, etc., and prepare for other events.
Are there slides? You bet there are!
Stephenson, summing up: “Each running of the Preakness generates about $2 million in net hotel revenue.” That’s not nothing, but it’s also about .001% of the $200 billion annual local economy. “Sports gets tons of publicity, but in terms of economic impact it’s just not all that huge.”
2:30 pm: And now it’s time for Professor Nutjob himself, J.C. Bradbury! He previously warned us that there might not be any Simpsons memes in his presentation, so everyone’s on the edge of their seats waiting to find out.
The title of his talk is “Stadium Policy and Politics,” and draws off his must-read paper with Coates and Brad Humphreys on stadium subsidies. That paper broke stadium construction into three eras: the inaugural era (up through 1960), the “superstadium era” (the concrete donuts of the 1970s and 1980s), and the “stadium mania” era. And over that time, though construction standards got better, stadium lifespans started to get shorter, and is now around 30 years.
One reason, says Bradbury, is the novelty effect: Fans rush to see new stadiums, but the honeymoon wears off in a matter of 5-10 years. Team owners, though, are typically locked into 30-year leases — possibly to match typical 30-year mortgages, though there’s no real reason to do so. This means they can’t tear down a stadium every five years just to build a new one; they can, however, use the lease expiration as an excuse to demand a new home, and start the novelty cycle anew. And since the stadium mania era started in the ’90s, we’re getting ready to hit “the cusp of a new stadium construction wave.” He adds: “I’ve had to keep my phone on silent today because reporters keep calling me about new stadium plans.”
Meme time!
Over the next 20 years, Bradbury predicts, we’re on track to double the roughly $37 billion of public spending on sports venues that’s occurred in all of history so far.
In return, most of the spending at sports venues is redirected from other spending. Here Bradbury returns to the broken-window fallacy, which supposes the vast economic benefit from a child breaking a store window. “Oh, you should be happy, you’re going to pay the glazier, he’s going to spend money to feed his family, and everyone will get rich,” goes the fallacy, he says. “Hooray for the broken window!” But this leaves out what else the shopkeeper would have spent money on if the window hadn’t been broken — which would have had just as much economic impact.
Team owners love to argue that “but this time it’ll be different”; the numbers, however, continue to show that it never is. “Mike Plant, CEO of Braves development company said ‘We’re going to create a city. … This one will be different.'” Instead, when Bradbury looked at the actual fiscal results, “It seems like the county is losing about $15 million of its subsidy.”
So why do elected officials continue to provide subsidies for these deals? Some traditional theories:
- Teams will leave without stadium subsidies. But the Buffalo Bills, Tennessee Titans, Texas Rangers, Milwaukee Bucks all got tons of public cash without move threats, so that’s not always the case.
- Rich people are using their political power to push through stadium subsidies. But team owners tend not to be that actively involved in stadium campaigns, and when they do, it often goes badly — see Alexandria.
Instead, Bradbury cites Kevin Delaney and Rick Eckstein’s Public Dollars, Private Stadiums, which cites the importance of “local growth coalitions”: a conglomeration of business leaders, political leaders, union officials, and media that end up doing the lobbying work on behalf of team owners. “Local growth coalitions are the unofficial guiders of development policy,” Bradbury says, something he saw firsthand when he sat on a local public development agency in Georgia and “we met at the local chamber of commerce” — which is hardly a neutral body.
“Getting politicians to like stadium is like shooting fish in a barrel,” continues Bradbury: They tend to be male, educated, affluent, and sports fans. At the same time, public economic development agencies have a huge self-interest in proving their worth by doing things, whether effective or not: As Bradbury puts it, “Shoot anything that flies, and claim anything that falls.” And, he says, “A stadium is a really good opportunity to say ‘I did that.'”
Media, meanwhile, can be counted on to engage in bothsidesism, where two opposing sides are presented as of equal validity even when one is backed by evidence and the other is just PR guff. It doesn’t help when economic impact studies are presented to give credence to the PR side — Delaney and Eckstein called them “fantasy documents,” Bradbury notes. (He himself has coined the more memorable term “clown documents.”)
And, he says, “the public really isn’t that supportive of stadium subsidies”: Several recent polls found majority opposition to using public money for sports construction. As economist Geoffrey Propheter found, 58% of sports subsidies were approved when they went to referendum; but 96% were approved when they went to legislative votes.
This entry is getting really long in part because Bradbury’s presentation is meant as a sort-of plenary, but also because he talks even faster than me; I’m leaving even more of what he said on the liveblog cutting-room floor. His conclusions: Economists need to do more studies of recent stadiums to combat “This one will be different”; policy advocates need to focus on how to influence growth coalitions; and media reporters need to stop treating all sides as equally valid, regardless of what actual evidence they have on their side, and also frame things in terms of opportunity costs: How many fire trucks could you buy with this money?
That’s the nutshell version. I’ve gotta go prepare for my panel talk, see you all tomorrow!
UPDATE: Here’s audio of the journalism panel discussion with me, Ken Belson of the New York Times, and Pat Garofalo of the American Economic Liberties Project.