Playing the Field: Why Sports Teams Move and Cities Fight to Keep Them.

Siegfried, John J.

Playing the Field is about the imbalance of power in negotiations between professional sports teams and their urban hosts. That professional sports teams have cities over a barrel in negotiations is beyond question. The largesse that teams have extracted in concessions from cities since the Dodgers and Giants bolted New York for California is staggering. Many professional sports teams have persuaded cities to build stadiums for their use and then have secured lease arrangements that would make the holder of a well-maintained rent-controlled New York penthouse blush. This power to extract rents is rooted in the geographic mobility of professional sports teams.

Euchner's diagnosis of the underlying cause for this metropolitan impotence in bargaining with professional sports teams is the insulation of professional sports league admission and team transfer rules from the Sherman Antitrust Act. Baseball acquired its protection in the 1922 Supreme Court Federal Baseball Club v. National League decision written by Justice Oliver Wendell Holmes, in which the Court decided that baseball at the time was not interstate commerce. Baseball has eluded the wider definition of interstate commerce that has evolved since then, although it currently is under Congressional assault, specifically by Florida Senator Connie Mack. In 1962 professional football obtained a statutory exemption for its collective sales of broadcasting rights, and insulated its practice of restricting entry into the league from antitrust scrutiny by including a provision allowing such limitations in its agreement with the National Football League Players Association. Provisions of collective bargaining agreements negotiated at arms length are exempt from the Sherman Act.

The specific practice which brings cities to their knees when bargaining with professional sports teams is the barrier to entry of new teams into the premier league in each sport. This contrived scarcity drives up the value of having a team. Some cities have professional sports teams and others do not, making the acquisition of a franchise a "positional good." Cities that host professional sports teams believe they are recognized as "big league," relish the vivid symbolism of growth and vitality represented by a professional sports franchise, and enjoy the chance to promote a common interest in an urban environment where conflict is more common than cooperation in the perpetual battle for scarce resources. Because there are few decent substitutes for a professional sports franchise, the demand for franchises is very inelastic. Couple this with the fact that teams' resources are mobile--their valuable assets are the rights to operate a team in the premier league and player contracts, both of which can be shipped in a small file cabinet--and there is excess supply of cities yearning for a professional sports franchise. The result is that city-team negotiations are no-contest.

Euchner's analysis of sports teams' successful bargaining with municipalities is grounded in a well established public choice paradigm--the concentration of benefits among a few contrasted with the diffusion of costs among many. He supplements the traditional free-rider story of the manipulation of government for the purpose of wealth re-distribution with an analysis of the fragmentation of local politics in America. Euchner notes that professional sports teams in other countries seem unable to extract much, if anything, in the way of rents from their local governments. This, he claims, is a function of both the organization of sports leagues in other countries--where there is a continuous hierarchy of leagues, and teams move up and down the hierarchy on the basis of their playing success rather than at the discretion of incumbents--and the greater central control of local government authorities. The former reduces the elasticity of demand for premier league franchises, and the latter limits cannibalistic competition among local government authorities.

It is remarkable how such an economically unimportant industry as sports--the annual revenues of a typical major league baseball team are roughly equivalent to those of a single large grocery store--can extract so much more from local governments than can more important manufacturing businesses. Euchner's explanation is the fact that sports is a visible, symbolic, "big ticket" investment, the kind of thing that a mayor can be remembered for, much more so than marginal improvements in parks, libraries, schools, or street festivals.

Sports is also popular with elite established interest groups. Elites self-identify with sports teams in a way that manufacturing firms seldom enjoy. Euchner compares Baltimore's obviously greater concern for retaining the Colts and Orioles, for example, than for keeping the Esskay meat company in town, even though the latter was a much more important local employer asking for substantially fewer concessions from Baltimore taxpayers. But, then, who ever heard of the "Baltimore cold cuts?"

The role of elites in metropolitan give-aways to sports teams is usually submerged in discussions of sports, which are frequently characterized as a service provided primarily for the lower middle class blokes who populate the bleachers. But, in fact, the incomes of ticket purchasers to sporting events are generally above average. And the fraction of people in a metropolitan area who attend the events of a professional sports franchise is quite small. Because large fractions of stadiums are sold out to season ticket holders, those who attend do so frequently, which is one source of their intense interest in securing or retaining a franchise. For a relatively few people, a professional sports franchise creates enormous consumer surplus; but for most it creates no benefits and a modest increase in taxes to subsidize stadiums.

The interested elites have the incentives, small numbers, connections and organizational skills to successfully press their demands on city governments. They are usually part and parcel of the planning process, which helps them pass by the public so-called "studies" of planned stadiums and arenas that are usually no more than optimistic guesses about future bookings and attendance. These studies invariably "prove" that the impact of a sports team on local economic development and employment will be unprecedented. The public, unable to dissect such studies, rarely sees through the inflated multipliers, exaggerated benefits and overlooked opportunity costs that characterize these reports. Such studies seem to suggest that all of the inputs for construction and sports team operations will originate in the local area (enhancing the multiplier), and never mention the potential benefits that are sacrificed when the invested capital is unavailable for use in improving the city's housing stock, secondary education, or transportation corridors.

The limited hard evidence about the economic impact of new stadiums and sports teams on metropolitan areas summarized by Euchner provides virtually no support for the use of sports teams to develop a local economy. Rather than spurring industries that can develop strong export potential, investments in stadiums for professional sports franchises tend to simply rearrange what has already been produced. People who attend sporting events would have spent their entertainment dollars on other local services. The diffused general public, who are asked to foot the bill for a free stadium to attract or retain a franchise do not object because they do not have the individual incentive or organizational skills to resist these demands.

Playing the Field is an interesting book about local politics in America. It illustrates how the less-than-zero-sum game of inter-city competition for jobs can get out of hand when the benefits are concentrated among the relatively few elite and the costs are dispersed. It is also fun to read. The dust cover photo of a packed Baltimore Camden Yards stadium is a gem.

John J. Siegfried Vanderbilt University