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Baseball in Washington: Games with Tax Dollarsby
Paul Gessing Mar 26, 2002 As baseball fans eagerly await the start of another season, political leaders
in the District and Northern Virginia are planning to make this year the last
without a team in the Washington area. The immediate future of baseball
here still hinges on whether the league decides to shed unprofitable franchises
or move them before the 2003 baseball season. Even so, officials in
Washington, DC and Northern Virginia are both hoping for the latter and are
engaged in a fierce battle over the location of a potential Washington franchise.
Of course, most Washington-area residents would love to see a team move here,
but not at a high price to taxpayers. In this day and age, sports teams
have grown accustomed to receiving a healthy dose of public money for nearly
any stadium project. Out of 16 new major league ballparks built since
1990, only the San Francisco Giants built its home without public funding. A team owner moving to Washington is likely to expect a great deal of tax
money to seal the deal. The Virginia Stadium Baseball Authority already
has a proposal on the table for constructing a $360 million stadium in the
Commonwealth. The District has gotten a relatively late start in the
competition, but Mayor Anthony Williams has already pledged $200 million in
land and financing for stadium construction in the District of Columbia.
Large new public works projects are a tricky proposition in the best of budgetary
times, but in light of budget crises in Virginia and the District, this is
the worst possible time to approve construction of a sports facility. While engaged in a heated battle to provide a sweeter deal to a relocating
baseball franchise, both Virginia and the District have postponed significant
tax cuts. The District put on hold an income tax cut designed to make
its tax rates more competitive with Maryland and Virginia. The DC government’s
savings from halting the tax reduction will amount to a mere $35 million in
2002, or about 1/6 as much as the Mayor has committed to a baseball franchise.
In Virginia, the state faces a revenue shortfall of $3.5 billion in the next
two-and-a-half years and phase-out of the car tax is stalled at 70 percent
complete. The total revenue increase from maintaining the car tax for
two-and-a-half more years is estimated to be $119 million, about one-third
the amount that Virginia officials have proposed for stadium spending. In addition, Virginia’s Governor and Legislature have repeatedly tried
to increase the sales tax to fund additional transportation and education
spending but have been unable to agree on a plan so far. In the words
of Delegate Jeannemarie Devolites, “There will not be a single penny
left to build the roads and transit we need or to build the classrooms and
renovate. If we do not come up with a source of revenue…we will
continue to fall behind.” Politicians should respect their original
promises to taxpayers before spending money on frivolous new projects.
With area officials falling all over themselves to offer subsidies to a relocating
baseball team, one might think that they were absolutely essential. In reality, subsidies should not be necessary to bring a team like the Montreal
Expos or another struggling franchise to the Washington area. With the
eighth-largest media market in the country and a wealthy fan base, the Expos’ worth would nearly quadruple from the recent sale price of $120 million to
$400 million or more. Politicians in Virginia and the District should
require that an ownership group moving a team to the area plow part of that
windfall back into a privately-financed stadium. Taxpayers should not
be forced to foot the bill.
Stadium backers and many politicians argue that building a sports facility
is an “investment.” They believe that economic activity
brought about by the stadium will actually have a “multiplier effect” that generates revenues for state and local economies. No research has
actually proven that the multiplier effect actually exists. Public finance
experts Roger Noll and Andrew Zimbalist conducted the most exhaustive nationwide
economic study of stadium construction. In their work the authors found
that, “a new sports facility has an extremely small effect on overall
economic activity and employment. In fact, no recent facility appears
to have earned anything approaching a reasonable return on investment and
no recent facility has been self-financing in terms of its impact on net tax
revenues.”
Studies commissioned by stadium backers that promise economic development
and job creation simply fail to account for the opportunity costs
(i.e., lost business in the private sector or deferred public projects)
of the construction. Local supporters are no different. While glossing over other potential uses for the $360 million in
public money dedicated to a Northern Virginia stadium, a study posted
on the stadium backers’ web site estimated $8.62 billion in
economic gain over the stadium’s 30-year life. In this
same period, the state and local governments are theoretically supposed
to reap $693 million in new revenues as well. If the $360
million in seed money came from heaven and not the pockets of taxpayers,
at least Washingtonians would not be worse off once the rosy economic
projections start to wilt. In the end, this game of bait-and-switch
must not swindle taxpayers into an even bigger con game: government-subsidized
baseball.
Paul Gessing is a Policy Associate at the National Taxpayers Union, an Alexandria, VA-based citizen group founded in 1969 to work for lower taxes, less regulation, and accountable government.
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