Major league baseball returns to the nation's capital: like many cities that have waited so long for a team, Washington, D.C., is ready to lavish its new residents with a state-of-the-art ballpark that will cost hundreds of millions of dollars. However, who should foot the bill?

DISTRICT OF COLUMBIA Mayor Anthony Williams convinced Major League Baseball to move the Montreal Expos to Washington, D.C.--which has been without a franchise since the Senators left town in 1971 to become the Texas Rangers--in exchange for the city's building a new ballpark. (In the meantime, the freshly christened "Nationals" will play at old RFK Stadium, which is undergoing $14,000,000 in renovations, until their new digs are ready in three years.) Williams claims that a new stadium will create thousands of jobs and spur economic development in a depressed area of the city. His Honor also maintains that this can be accomplished without tax dollars from local residents. Yet, the proposed plan to pay several hundred million dollars for the stadium relies on some type of tax increase that likely will indeed be felt by D.C. citizens.

Moreover, professional sports generally have little, if any, positive effect on a city's economy. The net economic impact in Washington, D.C., and the 36 other cities that hosted professional franchises over nearly a 30-year period was a reduction in real per capita income for the entire metropolitan area.

The practice of professional sports teams profiting at the expense of taxpayers is not new. The gambit routinely involves an individual franchise using its monopoly power to extract concessions from state and local governments. The Washington case differs because Major League Baseball, not the Expos, played the role of the monopolist pitting one potential suitor against another in search of the best deal. However, make no mistake: Major League Baseball's protracted decisionmaking process as it mulled over the relative merits of various locations--Washington; Northern Virginia; Portland, Ore.: Charlotte, N.C.: San Juan, Puerto Rico; Monterrey, Mexico; and the other areas bidding for the franchise--was a classic exercise in concession extraction by a monopolistic sports league.

Williams and others who wanted to lure the team to Washington and now plan to build a new stadium claim that average taxpayers will not be burdened with the costs. Williams stated in his "Message from the Mayor" on Oct. 1, 2004, that "The ballpark will be 100% financed by the team owners, those who use the ballpark, and by D.C.'s largest businesses.... Our residents will not be asked to pay one dime of tax dollars toward this ballpark."

First, the team's share of financing the stadium is a 30-year lease committing the club to an initial rent of $3,500,000 each year, increasing to $5,000,000 by the fifth year, and then rising by two percent minus $10,000 per year thereafter. Of course, the conventional idea behind a lease is that a tenant pays rent for the use of a facility owned by somebody else. So, the team will be renting the facility but will not be paying for its construction--despite the fact that the touted economic benefits that will follow in the wake of the club relocating to the District depend on it being successful and profitable. Professional sports teams certainly are not morn-and-pop operations and can pay entirely for the construction of their own stadiums, although only two baseball franchises--the San Francisco Giants and Los Angeles Dodgers--have done so.

According to calculations of economist Scott Wallsten at the AEI-Brookings Joint Center for Regulatory Studies, the rent the baseball team will pay "is almost certain to decrease every, year after 2009 when accounting for inflation. If inflation averages three percent over 30 years, the [team] will be paying about $3,3000,000 per year in today's dollars by 2035." Thus, in just five years, D.C. taxpayers will be forced to provide another implicit concession--a de facto rent subsidy--to the club.

Second, taxes will be collected on ticket sales, concessions, parking, and merchandise sold within the stadium. Concessions and merchandise are, in common parlance, food and beverages, T-shirts, hats, jerseys, and other souvenirs. It is likely that the D.C. residents who purchase food. beverages, and clothing while attending games would have chosen to eat and buy clothes in the city--and pay taxes on those purchases--in the absence of the stadium and franchise. In other words, revenues generated inside the ballpark may not be new revenues, even if they are dedicated specifically to paying for the new stadium.

Finally, a "ballpark fee" will be imposed on the largest corporations in the District. Whether it is a surcharge or an increase in the corporate income tax rate, this so-called fee is a tax increase, pure and simple. Moreover, this tax will fall on residents if they happen to be owners or employees of the affected businesses, or if they purchase goods or services produced by those businesses. Thus, claiming that Washington citizens will not feel the burden of this corporate tax increase is disingenuous. Corporations do not pay taxes, people do. Whether it is in the form of lower wages for workers, lower asset values for corporate owners, or higher prices for consumers of the goods and services those companies provide, this tax increase will touch residents in some way.

The proponents of new stadiums and franchises argue that there will be substantial economic benefits from proposed facilities and teams. Indeed, a report from the District's Office of the Deputy Mayor for Planning and Economic Development insists that the team and ballpark will "create 360 jobs earning an annual total of $94 million." That amounts to an astounding $261,111 per job. The wonder is that anyone finds such figures credible. Yet, decade after decade, cities throughout the country have struggled to attract or keep professional sports teams, and the idea that a team brings with it large economic gains invariably arises. As it turns out, claims of large tangible economic benefits do not withstand scrutiny.

All impact studies use multipliers to estimate the effect of each dollar spent directly on sports on the wider local economy. The multiplier theory implies that the dollars spent on sports entertainment will have ripple effects. Critics argue that, at best, the multipliers used in prospective impact studies overstate the contribution that professional sports make to an area's economy because they fail to differentiate between net and gross spending.

In computing the benefits of investment in a stadium, the appropriate focus is on net benefits, that is, benefits that would not have occurred in the absence of the stadium. These studies rarely consider what economists call the substitution effect. Indeed, not all the spending generated in and around the stadium is new spending, and not all the taxes on that spending are new net tax revenues. As sports- and stadium-related activities increase, other outlays decline because people substitute spending on sports for other purchases. That is called the substitution effect. If the stadium simply displaces dollar-for-dollar spending that would have occurred otherwise, there are no net benefits generated. Many fans attending the new team's games will bring their entertainment spending from the suburbs into the District--unless, of course, they would have frequented D.C. restaurants, bars, nightclubs, parking lots, and other businesses even without a baseball team in Washington.

Moreover, some economists have posited that there is a simultaneous effect at work. Dubbed by economists John Siegfried and Andrew Zimbalist as the "leakages and multipliers" effect, the theory suggests that--to the extent sports spending has a multiplier effect at all--spending on sports may have a much lower local multiplier than spending on other entertainment goods.

The difference between the impact studies commissioned by teams or cities and the academic literature is more than simply a matter of prospective estimates versus retrospective facts. Academic studies consider a large number of metropolitan areas with major league professional sports over a long period of time and examine a variety of factors that are likely to predict either aggregate economic activity or the vitality of specific sectors of the local economy.

Our research examines all 37 U.S. cities that had one or more professional football, basketball, or baseball franchise between 1969 and 1996. The data set contains a wide variety of franchise movement and new stadium and arena construction. We focus on identifying factors that affected either the level or the growth of income per person. Although attracting a new football team or building a new basketball arena might have had some effect on those variables, other factors certainly played an important role as well.

Our approach is to quantify the sports environment by taking into account the presence of franchises, franchise entry and departure, stadium construction and renovation, the location of new stadiums and arenas, and the "novelty effect" of a new stadium or arena. We then estimate econometric models of the level or growth rate of income in metropolitan areas and include the variables reflecting the sports environment.

The results of our analysis indicate the following concerning the presence of pro sports teams in the 37 metropolitan areas:

* No measurable positive impact on the overall growth rate of real per capita income.

* A statistically significant negative impact on the level of real per capita income and the retail and service sectors of the local economy.

* The average effect on employment in the service sector of a city's economy was a net loss of 1,924 jobs.

* A tendency to raise wages in the hotels and other lodgings sector by about $10 per year. Yet, it tended to reduce wages per worker in eating and drinking establishments by about $162 per year.

* A tendency to raise the wages of workers in the amusements and recreation sector by $490 per year. However, this sector includes the professional athletes, whose annual salaries certainly raise the average salary in this sector by an enormous amount.

Our calculations also accounted for the effects of a variety of other local economic conditions on earnings and employment. On the basis of the estimated relationships, we computed the average effect of a professional baseball team and stadium on earnings, holding constant all other pertinent economic factors. On average, professional baseball lowered the earnings of workers in eating and drinking establishments by about $144 per employee per year. Baseball also lowered the per employee annual earnings of workers in the hotel and lodging sector by about $38. Most striking of all, baseball lowered the annual earnings of workers in the amusements and recreation sector by $503. The last result is impressive, in part because it includes the salaries of the baseball players themselves.

Those results suggest that there is a great deal of substitution of economic activity related to professional baseball for other amusement and recreation activities in cities that host teams. That substitution harms workers employed in alternative entertainment and recreation activities.

These results are based on the actual experience of U.S. cities with professional baseball over a period of nearly 30 years. The economic benefits touted by Williams are predictions about future economic impacts based on a flawed methodology.

Rather than use average values of stadium capacity, for example, we use the exact values of the variables for each of the 37 cities. In this way. we are able to compute the effect of sports on earnings and employment in each of the cities. The clear implication is that the presence of professional sports in the Washington metropolitan area has, on average, sapped some strength from the service and retail sectors. Our results reflect the long presence of the Redskins, the arrival of the Bullets (now Wizards) from Baltimore in 1973, and the departure of the Senators for Texas in 1971.

For example, on average, the arrival of a new basketball franchise in a metropolitan area increases real per capita income by about $67. However, building a new arena for that basketball team reduces real per capita income by almost $73 in each of the 10 years following construction, leading to a net loss of about six dollars per person.

Similarly, in cities that have baseball franchises, the net effect of an existing baseball team is a $10 reduction of real per capita income. Note also that the waiters, waitresses. cooks, busboys, and other workers in the eating and drinking establishments that will arise largely will be D.C. residents. They are, presumably, precisely the people whom the stadium proponents argue will benefit from building the ballpark. Yet, our estimates reveal that those people are harmed or experience, at best, only a very modest increase in incomes.

A baseball team in Washington, D.C., might produce intangible benefits. Residents might have an enhanced sense of community pride and another opportunity to engage in a shared experience of civic expression. Perhaps some people will think that D.C.'s image as a "world-class city" will be further burnished. Yet, those intangible benefits accrue largely to people interested in being fans of the baseball team and showing their support by purchasing tickets to games and team paraphernalia. That hardly is a reason for the city government to subsidize construction of a ballpark, or for the baseball team to avoid paying the cost to build it. District policymakers should not be mesmerized by the faulty impact studies that claim a baseball team and new stadium can be an engine of economic growth.

RELATED ARTICLE: Tale of the "Washington Woebegones."

First in War. First In Peace. And last in the American League." For years, this was the battle cry--or was it lament?--for Washington, D.C., baseball. Of course, for thoroughness' sake, historians of the national pastime might want to add that District of Columbia teams--known variously as the Nationals, Senators, Olympics, and Statesmen--also finished last in the National Association, American Association, Union Association, and National League. D.C. did not, however, wind up in the basement of the old Players League, whose only season was 1890. Then again, Washington did not have a club in that circuit.

Washington's latest entry is that of the Nationals, who, in reality, are the transplanted Montreal Expos. The 'Spos, as you've probably guessed by now, spent much of their time North of the Border, but south of the cellar in the Senior Circuit's East Division. They should fit right in with Washington's baseball heritage.

Actually, baseball in our nation's capital, absent since the old Senators skipped town to become the Texas Rangers in 1971--exactly 100 years after the Washington Olympics of the National Association brought big league baseball to D.C.--has a rich and storied history. After all, who can forget the Ladies Day Riot of 1897, when heartthrob Washington hurler Winnie Mercer was tossed from the game by umpire Bill Carpenter for arguing balls and strikes and the largely female crowd, admitted for free that day, responded by storming the field, beating up the ump, and tearing his clothes? They then proceeded to rip out seats and break windows. Yikes! Some 74 years later, the Senators were forced to forfeit their final game in Washington (against the New York Yankees) when fans, upset at the club's impending relocation to the Lone Star State, streamed onto the field in the ninth inning, destroying everything in their path.

The Yanks also proved pivotal in immortalizing the Senators thanks to the bestselling book, The Year the Yankees Lost the Pennant, later turned into the award-winning play, "Damn Yankees," in which a frustrated, middle-aged Washington fan sells his soul to the Devil in order that his beloved Senators can topple the Bronx Bombers for the American League flag.

Truth be told, Washington did win American League pennants--sans Satan's assistance, at least as far as we know--in 1924, 1925, and 1933, defeating the New York Giants in '24 for the club's only World Series title. The team eventually left for Minnesota (to become the Twins) after the 1960 season, paving the way for the creation of the expansion Senators, who lasted but a decade before also moving on. The new-look Nationals will be "welcomed back" to the nation's capital and RFK Stadium--site of the 1962 and 1969 All-Star Games--with an April 3 exhibition contest against the New York Mets. Let the battle for the basement begin!

Wayne M. Barrett

Publisher and Editor-in-Chief

Dennis Coates is a professor in the Department of Economics at the University of Maryland, Baltimore County. Brad R. Humphreys is an associate professor in the Department of Recreation, Sport and Tourism at the University of Illinois, Urbana-Champaign.

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