Rays should tread carefully when making economic arguments in the Montreal proposal

The Rays are exploring a two-stadium, two-city approach, and they want me to keep an open mind. At risk of being labeled unimaginative, I want to talk about stadium economics.

During the “surrealist” press conference at the Dali Museum yesterday, when asked how the team thought that half a baseball season could justify the price of two new stadiums, principal owner Stuart Sternberg sold the idea with a nod to generating economic activity.

“The cost of building a ballpark here is dramatically less, and as far as the 81 games how do we pay for it, we’re focused here today on what we need to do and what we can do in Tampa Bay and what this means for Tampa Bay is, a smaller commitment because it’s roofless, and ideally, greater economic activity because we’re connecting with another market.”

- Rays Principal Owner Stuart Sternberg

Let’s be clear about one thing: There’s been a lot of study on the economic impact of stadiums and professional sports teams, and — while every team, every stadium proposal, and every city is different — there’s a common, widely accepted, generally held conclusion:

Professional sports teams do not, in general, create a discernible positive economic impact for the communities they inhabit.

This can be hard to accept because it doesn’t make intuitive sense.

Lots of people go to sports games and spend money at them. Sports teams employ people. Games draw some number of fans from out of town, who stay at hotels and eat at restaurants. Anecdotally, it’s easy to find local businesses that benefit from the Rays’ presence. Why can’t academic economists see this?

Photo by Julio Aguilar/Getty Images

The reasons most likely have to do with how individuals decide where they’re going to spend their money, and what happens to the money that gets spent in a ballpark and in its economic orbit.

1. People generally have a set amount of disposable income that they’re going to spend on entertainment, and having a baseball team in town doesn’t meaningfully change that number; all it does is changes where they spend it. Maybe those individuals are more likely to buy a beer at the stadium than they are to buy it at Three Daughters, just a tad further down the road. Maybe they go to Ferg’s in St. Pete before the game rather than to Hattrick’s in Tampa. Having the Rays in St. Pete probably helps St. Pete’s economy in comparison to that of Tampa. But if you’re looking at all of Tampa Bay, rather than one part of it? Not so much.
2. Sports teams do employ local residents; just not in great jobs. The construction jobs that come with building a stadium are a temporary boom, and the many of jobs for the team that go into maintaining the stadium and running it on game days are relatively low paying, hourly, irregular, and seasonal. No one needs to sell hot dogs at a ballpark when the team is away or in the offseason. Attempts to create a multi-use facility, unless wildly successful, will not cause a meaningful number of these jobs to become full-time opportunities.
3. Spending on and by sports teams generate a relatively small multiplier effect. Basically, the positive economic impact for the community of a dollar spent grows when it’s immediately spent again, and then in turn spent again. And the more an individual makes, the smaller a percentage of that income they tend to turn around and spend back into the local economy. Sports teams funnel, percentage wise, a large amount of those dollars they make to their rich owners. Owners (who may not be fully local) make good money and save. Players and Coaches make good money and save. Front office personnel make good money and save. This is not a robust multiplier effect in action.

Put those three realities together, and you actually do have an intuitive case for a negative economic effect on the community (while some studies have seen small negative effects, this is not universal and not conclusive).

Sports teams redistribute the disposable entertainment budgets of the community in a way that creates only a small amount of really good jobs, but that send a large amount of the money to those positions, where it’s relatively ineffective as an economic driver.

Without the team, those entertainment dollars might be spread more evenly to more people, who would then spend more of it back into the local economy, with both primary and secondary effects of ensuring more stable, secure, year-round sources of income.

That’s the rub with asking for public funds, which this sports franchise is likely to do. Funding choices are a matter of opportunity costs, and for at least some of their funding pools, the local government has choices of how best to dispose of them, in order to improve the lives of their constituents.

Would $500 million be better spent on transportation infrastructure like roads or rails? Or on human investment like education? Or on police, firemen, and other emergency personnel? Why would any sports franchise be a more worthwhile investment?

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That’s the backdrop to the stadium financing question, and it’s a hard sell for public funding if your only argument is about economic activity and return on investment.

But by understanding the way the economics are stacked against the idea of funding sports stadiums with public money, you can mitigate those concerns.

Photo by Julio Aguilar/Getty Images

A new baseball stadium, built in part by the community, should be the best possible baseball stadium for that community. How do you do that? A huge part of it is about the number of games.

Want those jobs created to be stable, rather than part-time and seasonal? Keep the stadium open year-round. The buzzword that gets thrown around is “multi-use,” and that can mean different things to different people. The trick is to be as multi-use as possible.

A full baseball season of 81 games plus the playoffs isn’t enough. But add 17 Rowdies games? That’s better. Add 15 spring training games? I mean, spring training doesn’t draw huge crowds, but it tends to be out-of-town, tourism crowds, so that’s not bad. Better still.

Concerts? Other community events? Well, Tampa Bay has plenty of venues for that already, but maybe this can work. Worth a try.

Take away 40 games and tell me I should keep an open mind?

You have got to be kidding me. You’re assuming this community doesn’t understand stadium economics; that’s borderline insulting.

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The Rays and pro-stadium community boosters point to the tourist economy in Florida and argue that forging a closer connection with the city of Montreal is a special situation that makes this plan, in its uniqueness, a good business idea for Tampa Bay.

They’re not entirely wrong. It’s a clever proposal. Bringing extra tourism to the Tampa Bay area is better for the Tampa Bay area, and if the dollars being spent are Montreal dollars that would not otherwise have been spent in Tampa Bay, we’re talking about real added economic activity, rather than just redistribution of the existing activity.

It’s also clever because they’ve sidestepped the over 20 years of serious academic study on the stadium question.

I can’t say for certain that it’s a wretched deal — strictly speaking, in dollars and cents — for the community, and neither can anyone else. Academics care about being right, and tend to guard the specificity of their conclusions jealously.

But it sure doesn’t feel right, and this is one thing I know for certain: the Rays don’t know either, which was something acknowledged by Team President Brian Auld in the aftermath of yesterday’s press conference.

“There is a tourism argument here that is pretty compelling with respect to economic impact. We’re not Economic Impact Analysts, at the Rays, but we’re very eager to see someone start to think this through in a rational way with an open mind and wonder if, maybe, this could be even better than the opportunity would be without Montreal ball.”

- Rays Team President Brian Auld [WDAE]

That’s a decent admission from Auld, but as this process moves forward we, the community, have to remember that we cannot trust team executives when they quote how much money a new stadium will bring, and how great it will be for all of us, if those numbers aren’t well-sourced and peer-reviewed.

I’m skeptical, but I’ll try to keep an open mind, and the Rays have a choice with how they proceed now, and with exactly how they try to sell this idea.

Given the uncertainty outlined above, even the experts cannot justify public spending on sports stadiums with an appeal to economic impact and return on investment. The Rays will have to justify it in other ways, with appeals to community pride and good feeling, and by re-imagining the way we fans and citizens fashion our sports allegiances and identities. To want to pay for this team to stay here, we have to identify with them. We have to love them.

Be very careful, Rays. Loving half a team is already a tough sell. Do not make it harder by lying to us about the economics.