Sunday, April 20, 2008

Study misrepresents Miller Park's economic impact

Tax for Miller Park didn't help economy

Opening day is a time for optimism. Warm weather is just around the corner. Another Bucks' season comes to a merciful close. And this year, we can hope that our Brewers will make a real run at the pennant.

But opening day also raises the question that the Journal Sentinel's Don Walker asked about whether "the stadium has been a net economic benefit to the community." ("Miller Park: Economic promises got it built. Has it paid?" April 4).

Walker refered to a 2-year-old Major League Baseball study by Leon Schur and Swarnjit Arora that gave new meaning to the baseball fans' maxim that "hope springs eternal" when it asserted that: "The direct and indirect economic impact by visitors (Brewers' fans) from outside the area, a majority of whom came from outside the state, resulted in $327.3 million in increased spending and the creation of 4,683 additional full and part time jobs."

These findings contradict all serious research on the economic impact of professional sports. Studies done by independent economists, not those paid for by stadium proponents like this one, are unanimous that there is no real economic benefit from public subsidies of stadiums and teams.

Robert Blade of Lake Forest College, for example, studied 30 cities over 30 years and found that 27 experienced no significant impact from new stadiums, while three experienced a negative economic impact. An anthology edited by Roger G. Noll and Andrew Zimbalist concluded: "A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment. No recent facility appears to have earned anything approaching a reasonable return on investment."

The MLB study made two errors: It ignores the substitution effect and grossly overestimates the number of out-of-town visitors and their expenditures. Both contribute to overestimating the Brewers' contribution to the local economy. The Schur and Arora argument relies on historical local economic impact multipliers that misrepresent the effect of consumer expenditures on professional sports because sports expenditures are subject to extraordinary consumer substitution away from other local entertainment expenditures.

Brewers' fans have relatively inflexible and limited entertainment budgets. The money they spend on a sporting event is a substitute for other entertainment such as movies, restaurants or eating out. Brewers' baseball doesn't increase the aggregate amount of entertainment spending in southeastern Wisconsin; it simply redistributes it from one form of entertainment to another.
Similarly, most professional sports tax collections, almost $15 million according to the Brewers' study, are also substitutes: As other entertainment businesses decline, tax collections from them fall, something the study ignores.

The study estimates that 57% of Miller Park attendees came from outside the metropolitan area, "a majority . . . from outside the state," and spent an additional "$327.3 million." This is almost double the most successful stadium, Camden Yards in Baltimore, where less than a third of the crowd at every game came from outside the area and the net gain to Baltimore's economy was roughly $3 million a year - not much of a return on a $200 million stadium investment and not close to $327 million.

The study also overestimates the spending of the visitors the Brewers' attract. Fans from Green Bay or Chicago don't spend nearly as much as projected because tailgating, the rationale for the stadium's location, ensures that visitors spend their food and beverage dollars in the communities they come from.

Schur attributes significant job growth to the Brewers. But most sports revenue goes to a relatively few players, managers, coaches and executives who earn extremely high salaries.
Most stadium employees work part time at very low wages and earn a small fraction of team revenues. Substituting spending on sports for other recreational spending concentrates income, reduces the total number of jobs and replaces full-time jobs with low-wage, part-time jobs. Since Miller Park was built, Milwaukee has lost more than 19,000 jobs.

Professional sports expenditures also suffer unusually large first-round leakages from the local economy because players export their earnings to their permanent homes. Moreover, players make inflated salaries for only a few years. They have high savings which are invested in national firms. Most of the millions that Schur counts simply leaves Milwaukee with the players and their investment advisers.

Stadium booster studies fail to recognize that there is an opportunity cost involved in publicly financing stadiums. More than the price of construction, what communities sacrifice in other goods or services to build professional stadiums is critical in determining the benefit to the community. The District of Columbia spent $611 million on its new stadium even as it planned to close a staggering 24 public schools and reduce library hours.

A strong argument can be made that the public dollars that financed Miller Park would have been better spent on education, given Milwaukee's achievement gaps.

Finally Schur and Arora argued that the Brewers are an amenity ". . . helping to decrease the recognized brain drain from Wisconsin." This is circular reasoning. The Brewers have been in Milwaukee since 1970, well before the alleged "brain drain" began. If the Brewers were the solution, we wouldn't have the problem!

The 1994-1995 Major League Baseball strike was a natural experiment that sheds light on the impact of professional baseball on a local economy. If the study is correct, the strike would have hurt Milwaukee's economy. But John Zipp found "the strike had little, if any, economic impact on host cities. Retail trade appeared to be almost completely unaffected by the strike."

So there may be good reasons for rooting for the Brewers. But economic development isn't one of them.

1 comment:

John P said...

I agree with you on Miller Park, however, I think that the redeveloped Green bay stadium has had a tremendous economic impact on the Brown County area.

I personally believe that no public monies should be used to fund a sports team stadium, unless an independent study is done demonstrating an increase in economic activity. Even then I still feel uneasy about it. At least in the Green Bay case, the team is not privately owned and the stadium is owned by the city.