Baseball Teams and Facilities on Term Paper

  • Length: 9 pages
  • Subject: Sports
  • Type: Term Paper
  • Paper: #9361079

Excerpt from Term Paper :

Despite these glowing reports, Keating (1997) cautions that not every community has enjoyed the same level of success as the studies have suggested.

In his essay, "We Wuz Robbed! The Subsidized Stadium Scam" (1997), Keating says, "Only team owners and players clearly benefit from these taxpayer subsidies, because they are relieved of the costs of stadium financing. Indeed, annual debt-service costs can run into the tens of millions of dollars" (55). These savings in costs only serve to help the baseball owners and players though. A report from Financial World cited by Keating noted that revenues for baseball teams with new stadiums increased by almost 40% the year a new facility opened. "The Cleveland Indians and Texas Rangers both moved into new ballparks in 1994; according to Financial World, their franchise values rose by 67% and 37%, respectively, between 1991 and 1996" (Keating 1997:56). At the same time, the franchise value of teams experienced in the league on average actually declined by 5%; furthermore, in 1996, each of the five baseball teams that opened new ballparks in the 1990s paid its players an average salary that exceeded the league average by 28 to 51% and each of these clubs was ranked in the top 10 for total 1996 salary levels paid by baseball teams (Keating 1997). Given the fact that these players and their support staff and facilities are also contributing to the local economy through the multiplier effect, though, this reasoning seems somewhat flawed. Pressing his point, though, Keating argues that, "Taxpayers in the future will not easily escape this economic hoax. Taxes levied to pay for stadiums raise private-sector costs, diminish incentives for working, investing, and risk-taking, and slow economic growth" (57). A 1994 Heartland Institute study conducted by Lake Forest College economics professor Robert Baade investigated economic 30 years' worth of economic data for 30 cities with stadiums in the U.S.; in 27 of these cities, Blaade found no positive economic impact from new stadiums and in three cities, there was even a negative impact. Based on his study, Baade concluded, "If the opportunity cost is included in cost-benefit considerations, public investments in stadiums may be more than just insignificant; they may be negative" (Keating 1997:57). A review by Rouse conducted in 2001 found a number of similarly minded critics as well.

Citing various authors, Rouse points out that almost half of the nation's 115 major professional sports franchises were either receiving new or renovated facilities or had requested them; by the early 1990s, 77% of the sports facilities in the country were government owned; and the benefits to local economies cannot be considered to be the same as benefits to local government treasuries. Rouse questions the economic impact of sports teams and their facilities on local economies by pointing out that such public subsidies result in a form of corporate welfare. "But 'private' stadia," he says, "such as those housing the San Francisco Giants and Washington Redskins, also have public costs. Stadia accessories -- including government funded highways, off-ramps, rail connections, and parking lots -- are financed by taxpayers" (Rouse 2001:630). This author concludes that approximately 40% of new sports facilities construction is paid by taxpayers. These analyses, though, may not take into account all of the relevant economic factors associated with sports teams and their facilities.

Some independent analysis shows that even in the cities where taxpayers are required to pay an inordinate amount of support for a baseball team, they stand to gain in the long-term because of the multiplier effect, even at a very small rate. For example, between 1987 and 2000, Keating estimated that taxpayers paid almost 60% of the $12 billion or more that was spent on new stadiums and arenas in the four major league professional sports (not counting the hundreds of millions more for minor-league ballparks in the United States). If the above assumptions concerning the economic impact of a baseball team on a community can be considered valid, though, the taxpayers in these cases would receive some type of return on their 60% investment during this 14-year period. An application of the multiplier effect based on the foregoing estimates of 1.5 to 3.2 from Kelly and Shropshire is provided in Table 1 and Figure 1 below.

Table 1. 60% of $12 billion or $7.2 billion invested over a 14-year period, or approximately $.51 billion a year [not adjusted for inflation]) in billions - 1987-2000:

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Total $0.51 $0.51 $0.51 $0.51 $0.51 $0.51 $0.51 $0.51 $0.51 $0.51 $0.51 $0.51 $0.51 $0.51 $7.14 $0.77 $0.77 $0.77 $0.77 $0.77 $0.77 $0.77 $0.77 $0.77 $0.77 $0.77 $0.77 $0.77 $0.77 $17.85 $1.63 $1.63 $1.63 $1.63 $1.63 $1.63 $1.63 $1.63 $1.63 $1.63 $1.63 $1.63 $1.63 $1.63 $29.99

Figure 1. 60% of $12 billion or $7.2 billion invested over a 14-year period, or approximately $.51 billion a year [not adjusted for inflation]) in billions.

Even assuming that a community is heavily taxed to provide the requisite incentives to lure a baseball team to its city, the investment is well worthwhile in terms of the multiplier effect alone. The initial investment of $7.2 billion, or approximately a half a billion dollars a year, reaps significant returns at the 1.5 estimated level (more than doubling the original investment), and positively stellar returns on the taxpayers' investment at the 3.2 multiplier level with a whopping 418% return on their investment. These rates of return are even assuming the higher 60% rate identified by Keating as opposed to the 40% figure offered by Rouse.

Current and Future Trends. Based on the foregoing, it is abundantly clear that sports franchises and major sporting events will continue to be aggressively pursued by cities, and franchise owners and event organizers will continue to place one community against others in a quest for the best possible deal for the organization's stakeholders. As was shown time and again in the research, there is a lot of money at stake and the winners will be those who are able to provide team owners with the best mix according to some difficult criteria. "Cities must be willing to evaluate, in a more public way, whether the huge expenditures needed to be perceived as 'big-league' are worthwhile" (Kelly & Shropshire 1995:62). Community leaders in the future are going to have to make it clear to their constituencies that there are no absolutes involved in making the decision to lure a baseball team to their city, and the decision as to whether to aggressively pursue a franchise or a major event, despite the influence of economic impact studies indicating substantive benefits, remains largely subjective (Kelly & Shropshire 1995).

In the near-term, at least, Kelly and Shropshire suggest that there will continue to be increasing pressure on communities to build new, state-of-the-art sports facilities just to remain competitive. The broadcast fees being paid to leagues by television networks could even decrease in the future, thereby placing still more pressure on team owners on where to locate (Kelly & Shropshire 1995). Therefore, in order to maintain overall revenues at existing levels, the construction of new facilities will most likely remain the single biggest demand of sports enterprises in the foreseeable future. As one commentator pointed out, "If there's anything happening today it's an increasing number of clubs trying to get new facilities, recognizing that their reliance on national media is going to go down" (Kelly & Shropshire 1995:61).

Conclusion

The research showed that just about everyone in the country is a stakeholder in the sports industry - even if they do not want to be. Increasing numbers of sports facilities are being paid for by American taxpayers to the alarm of critics who point to a number of disadvantages associated with the practice. Nevertheless, even a casual analysis of the existing data shows that the resources allocated for attracting and retaining a baseball team, even a minor league team, can reap positive benefits for a community in terms of the multiplier effect and its impact on the eventual return of the community's original investment. In the final analysis, communities in search of economic revival should listen to Gene Budig and "Play ball!"

Works Cited

Chapin, Tim. (1999). Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums.…

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