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Government and People
Testimony of Brad Humphreys, Associate Professor of Economics, University of Maryland - Baltimore County
At the Public Roundtable on
12 June 2003
Chairman Evans and other members of the committee, I appreciate the opportunity to testify at this hearing today. My name is Brad Humphreys. I am an economist at the University of Maryland, Baltimore County who studies the economic impact of professional sports stadiums and franchises on urban economies. I would like to tell you about my research and the research of other economists who have examined the relationship between publicly funded stadiums and the economies of cities in the United States.
Today you will hear a lot of testimony about the expected impact of a new baseball park in the District of Columbia. Many will claim that a new ballpark will generate a substantial amount of new positive economic impact in the District. The Mayor's Office has already generated an "Economic Impact Study" that claims thousands of new jobs will be created and hundreds of millions of dollars in new income will be generated.
Professional baseball is a monopoly that generates huge profits for team owners and players; businesses located near the new ballpark will benefit greatly from game day crowds. These lucrative revenue streams give many people a vested interest in attracting a baseball. franchise to the District.
I am not one of those people. I am here to tell you about the results .of my research, and the research of other academic economists who, through careful and objective research, want to understand how the urban economy works. The research I will discuss has been published in peer-reviewed academic journals; other economists who are experts in the field have examined this research in detail and found it to be objective, competently performed, and correct. No other source of information you will hear or read can make this claim. I don't have a horse in this race, but I am an internationally recognized expert on races.
At best, a new baseball stadium will have no tangible economic impact on the economy in the District of Columbia; at worst, a new stadium will be a drag on the economy, lowering employment and reducing the income of the taxpayers in the District of Columbia. This is the clear consensus from the academic literature. The team owners, the players and others directly employed in the sports industry, and a select number of businesses located near the stadium will benefit economically. But this benefit will be offset by lower employment and earnings in other parts of the city. Each entertainment dollar spent in a new publicly financed baseball stadium is an entertainment dollar not spent somewhere else in the area. For each new profitable restaurant or bar located outside the stadium, there are restaurants and bars in another neighborhoods that are losing customers. If you spend $338 million in taxpayers money to build a new baseball stadium downtown, you may harm many small businesses in other parts of the District.
I am not claiming that there will be no benefits associated with a new baseball stadium and team for the District of Columbia. A professional baseball team will add to the stature of the District of Columbia. Residents of the metropolitan area will enjoy following the team, attending games, watching games on television, and listening on the radio. Civic pride will grow. The quality of life in the District will increase. These things are important; they have value. I am simply pointing out that the overwhelming economic evidence suggests that no tangible economic benefits will flow from a new stadium. It will be a poor, low return economic development project for taxpayer's money.
The proponents of this stadium subsidy have claimed that, because there is no existing baseball team in the District of Columbia, this case is different. Baltimore, Pittsburgh, and other cities with existing teams were forced to build new stadiums for existing franchises and did not benefit economically. But Denver, Phoenix, and now the District of Columbia attracted new teams, built them new stadiums and reaped large economic windfalls. It's a good story, but again, there is no support for this claim in the academic literature. A new team does not mean new spending in the District. A new team means that existing entertainment dollars in the District are spent at a different location. Proponents of a publicly financed stadium say "look at Denver, look at Phoenix." I say look at Miami and Tampa Bay, where the new baseball teams were recently mentioned as candidates for contraction. Look at Charlotte, where a new NBA franchise left after a few years, leaving behind an new, unoccupied arena. Where are the economic benefits in these cities?
Under the current financing proposal, no existing tax revenues will be used to pay for the proposed stadium; the existing level of government services will not be affected. That is a good thing. But keep in mind that new tax revenues will be used to pay for the stadium; any tax-financed increases in the existing level of government services will be affected. Tax dollars are fungible. This applies equally to current revenues and proposed future revenues. Existing school funding will not be affected, but additional future school funding will be affected. Existing community program spending will not be affected but additional future community program spending will be affected. This is not a false choice - if you raise additional tax revenues, you can spend these new tax revenues on better libraries or a new hospital; alternatively, you can spend them on a new baseball stadium so that billionaire owners can make players millionaires in the District.
I am not against baseball. I am not opposed to public subsidies for baseball stadiums. I am opposed to public financing for sports facilities on the grounds that they will be engines of economic growth, generating thousands of new jobs and raising the income of taxpayers. The evidence from the academic literature on the economic impact of stadiums overwhelmingly suggests that there will be no net economic benefits from a new stadium. So let this be your guiding question: Is it worth $338 million in tax money spent on a new baseball stadium to incrementally improve the quality of life of the taxpayers, civic pride, and the national image of the District?Thank you for your time and attention. I will take any questions.
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