Public funding of Camden Yards renovations a bad deal for Baltimore, economists say

Repeated promises made by state officials and Orioles executives that a renegotiated Camden Yards lease will pay off for Baltimore City and state taxpayers denies decades of economic research, and few details about how those benefits will be delivered have been formalized with less than two months before the Birds’ lease expires.

Part of the deal involves $600 million in public money, funds the team can access only after they have signed a multidecade agreement. Once the ink is dry, the team can use the money for stadium renovations and maintenance. Any private development inside Camden Yards would be financed by the team.

Spending public money on sports teams has been extensively studied by economists for decades and the preponderance of research has yet to find an economic benefit for taxpayers that justifies the costs.

So why do politicians keep giving the public’s money to sports teams?

One of the pioneers of this research is Robert Baade. The Lake Forest College economics professor began picking apart the bargain in the ’80s and ’90s after a wave of stadiums were constructed with public dollars.

“That’s less money for schools, for roadways, for sewers, clean water,” he said.

He set his curiosity on whether these investments were paying off and was surprised to find that the answer was overwhelming: no.

Cities that pinned their hopes on stadiums as economic drivers fared less well than ones who chose an alternate plan; for example, enticing a corporate headquarters or automobile assembly line to move to town, he said. By following the cash flow, Baade found players and owners profit, while governments incur the cost.

Stanford economist Roger Noll has also dug into the relationship between sports and government subsidies. He catalogued a collection of case studies in his own book “Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums” with co-author Andrew Zimbalist.

In recent years, Noll said some cities, like San Francisco, have said no to teams because the economic arguments for shelling out money for their stadiums has been demonstrated to be false. In other cities, disappointing revenues have sparked lawsuits.

Let’s roll up our sleeves and find out just what the experts are talking about. After all, it’s our money.

Is this about economics or politics?

Owners often say the cost of running a team keeps them from affording a remodel without government help. The team will benefit the city, owners argue, and politicians looking to keep favorable approval ratings, and their jobs, accede.

Baade argues that stadium renovation deals are less about economics and more about political fortunes.

“If you’re a politician, you certainly don’t want to lose a team on your watch,” Baade said.

The chance of a team moving to another city hangs over any lease negotiation, and the political bargaining chip weakens the government’s hand in an already lopsided deal, Baade said.

An example still fresh in the minds of many Baltimoreans is the 1984 surprise midnight move of the Baltimore Colts football team. The catastrophe spurred Maryland politicians to build Camden Yards to anchor the Orioles to the city and help get a new football team.

What about the jobs?

Cities compete with one another to attract businesses, like an electric vehicle battery plant or a retail district, Baade said, and part of the reason is to create jobs.

Noll said even when a new stadium is built, a city gets about as many full-time jobs as a Macy’s department store.

But when economists talk about jobs, they don’t just consider the number of jobs, they consider the pay, the benefits and whether those jobs will boost an economy. There, too, even new stadium builds fall flat.

With so many details still unknown, it’s hard to say for sure what types of jobs Orioles and CEO Chairman John Angelos will create with his redesign. Restaurants and shops feel like a safe bet, and there’s also been talk of housing.

However, hourly jobs in retail and restaurants, even hotels, aren’t likely to pay well enough to support families. Those jobs typically don’t come with extensive benefits packages and pale in comparison to those offered at an automobile assembly line, a technology park or a medical center.

Where does the money go?

Noll said if the baseball stadium didn’t exist, family entertainment budgets spent on tickets, concessions and parking would be spent elsewhere in the city.

This creates “a reverse Robin Hood effect,” he said, because money spent by fans goes back to a small number of people — owners and players, who don’t live, work and play year-round in the city — not back into local businesses.

This “substitution effect is often ignored by those who are trying to make a case, or are advocates, for using public funds to provide for commercial sport,” Baade said.

Also important, Baade said, is that baseball stadiums only make money on game days, and revenues are capped by seat capacity. So to bring in more money, owners must diversify their revenue streams with season ticket packages, box suites and more places for fans to spend their money.

High-priced live-work-play spaces, like Angelos has described creating at Camden Yards, may cater to a more affluent crowd and price out some fans.

Baade cautioned of the economic injustice of using public money for a resource not equally accessed by all.

“If you’re catering to a more and more elite audience, what’s the rationale for public support of, number one, a private business activity that primarily caters to more affluent customers?” he asked.

But the view

Over the years, Baade said he’s heard many flawed justifications for using tax dollars for stadiums, including this one: If baseball watchers see the stadium on TV during a commercial cutaway it might draw people to move to the city. Baade called the argument “absurd” and unlikely to generate any meaningful amount of business or residential relocation.

Families and businesses looking to relocate choose a place to live and work based on good schools, attractive tax rates and public safety.

“It may be that the most significant impact is in terms of psychological benefit,” Baade said, of the hometown pride enjoyed by fans — an intangible societal benefit he admitted that as an economist he’s not qualified to assess.

brenda.wintrode@thebaltimorebanner.com

Brenda Wintrode

brenda.wintrode@thebaltimorebanner.com

Brenda Wintrode covers state government, agencies and politics. Before joining The Baltimore Banner, Wintrode wrote an award winning series of long form investigations for Wisconsin Watch.

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