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November 8, 2005

How Much Is That Stadium in the Window?

Determining the True Public Costs of Big-League Ballparks

by Neil deMause

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We do it all the time. When discussing stadium finance, sports journalists are used to casually tossing off figures as if they came straight from the pages of the Baseball Encyclopedia: Safeco Field, $517 million. Miller Park, $414 million. Pac Bell Park, $306 million (but just $15 million from the public).

We do all this knowing full well that these numbers--sometimes supplied by the teams themselves, sometimes through a sort of spontaneous accretion of news reports--never tell the whole story. While the official figures may be true as far as construction costs go, how then to account for the $1-a-year lease payments, "operating costs" funds, tax breaks and other goodies that play a key role when teams and cities sit down to negotiate a new stadium deal? But we use the official numbers nonetheless, because no one has undertaken the gargantuan task of poring through leases and tax rolls to determine precisely who wins and loses how much from these deals.

No one, that is, until urban planner Judith Grant Long.

Several years ago, as a doctoral student in urban affairs at Harvard, Long decided to set aside her chosen dissertation topic of untangling the public-private partnerships behind the Olympics, in favor of what was, by comparison, a more straightforward problem: How cities and teams decide to split the costs of pro sports stadiums. The goal, she explains, was to determine "whether or not cities and county governments were learning from each other how to make better deals over time."

To do this, though, Long first needed to compile data on the true costs of stadiums and arenas to the public treasury. This May, the results of her labor appeared in the Journal of Sports Economics: a study titled "Full Count: The Real Cost of Public Funding for Major League Sports Facilities," which included a chart of all 99 major pro sports facilities in operation in 2001, along with their publicly reported--and actual--public costs.

The most common omissions from the public record, Long found, included: land and infrastructure costs; ongoing annual expenses required by the stadium lease; and property tax exemptions, an often-substantial subsidy that has become de rigueur for almost all U.S. sports facilities. (The Canadian-born Long notes that in her native land, property tax on sports facilities is "a huge source of revenue," a recurring gripe of Canadian NHL teams that chafe at the tax breaks lavished on their neighbors to the south.)

In all, Long found that public reports of sports-facility subsidies, on average, undercount the true figures by 40%. Spread across all 99 stadiums and arenas, this ghost subsidy adds up to a total of $5 billion. And far from local governments getting smarter, Long found that for post-1990 projects, the hidden costs had actually risen.

For baseball in particular, Long's results threaten to turn upside-down much conventional wisdom about who's been paying for what. Below, for example, is a list of all baseball stadiums built from 1981 to 2001 (the latest in Long's database), according to standard published figures:

Atlanta            1997        $235m               $0           0%
Florida            1993        $125m               $0           0%
San Francisco      2001        $306m              $15m          4.9%
Detroit            2000        $290m              $145m        50%
Houston            2000        $266m              $180m        57.7%
Colorado           1995        $215m              $161m        74.9%
Toronto            1989        $600m              $450m        75%
Seattle            1999        $517m              $393m        76%
Arizona            1998        $355m              $270m        76.1%
Milwaukee          2001        $414m              $324m        78.3%
Texas              1994        $191m              $153m        80.1%
Minnesota          1982        $68m               $55m         80.9%
Pittsburgh         2001        $233m              $193m        82.8%
Cleveland          1994        $173m              $152m        87.9%
Tampa Bay          1998        $150m              $136m        90.7%
Baltimore          1992        $235m              $226m        96.2%
Chicago (AL)       1991        $150m              $150m       100%

*all figures in year-of-construction dollars

And the same list according to Long's data:

Minnesota          1982        $141m              -$107m          -75.9%
Arizona            1998        $376m               $78m            20.7%
Detroit            2000        $365m               $115m           31.5%
Atlanta            1997        $269m               $95m            35.3%
San Francisco      2001        $343m               $142m           41.4%
Florida            1993        $186m               $95m            51.1%
Toronto            1989        $492m               $351m           71.3%
Baltimore          1992        $221m               $195m           88.2%
Houston            2000        $269m               $250m           92.9%
Seattle            1999        $538m               $553m          102.8%
Cleveland          1994        $328m               $359m          109.5%
Texas              1994        $226m               $249m          110.2%
Pittsburgh         2001        $262m               $303m          115.6%
Colorado           1995        $249m               $295m          118.5%
Chicago (AL)       1991        $247m               $296m          119.8%
Milwaukee          2001        $357m               $436m          122.1%
Tampa Bay          1998        $236m               $321m          136%

*all figures adjusted to 2001 dollars

Ignore the differences in the gross construction cost figures for the moment; Long's will necessarily be higher, since they're adjusted to inflated 2001 dollars. Instead, focus on the percentages. Several stadiums make astonishing leaps to the head or the back of the pack--the "privately funded" Giants' and Marlins' home parks, in particular, turn out to be hitting up the public purse for about half their costs. Furthermore, nearly half all stadiums in Long's sample now have a public share greater than 100%--meaning taxpayers are putting out more than the total construction bill itself.

To see why, let's take a closer look at the Giants' Pac Bell Park (now SBC Park, and soon to be AT&T Park if the latest merger-related rumors are true). The widely reported $15 million in public funds--used to relocate a public transit facility that was in the way of the ballpark--was just the tip of the iceberg, it turns out. Long estimates $33 million in value for the land itself, donated by the local government for the cause at no cost to the Giants; $25 million worth of municipal fire, police, and garbage services; and $83 million in forgone property taxes, because despite being privatedly owned, the stadium nonetheless receives a full property tax exemption.

The best deal, meanwhile, is an unexpected one: the much-maligned Minneapolis Metrodome, which turns out to have actually produced a $107 million profit for the people of Minnesota. It is, in fact, the only stadium in existence for which the public came out in the black.

The Metrodome's secret, explains Long, is that it's "an old-fashioned lease in a newish stadium." While taxpayers put up most of the Metrodome's construction cost--at $68 million, it's still the cheapest modern ballpark, even after adjusting for 20 years of inflation--government negotiators made sure to recoup their costs with a lease that guaranteed the public more than half of gross concessions revenues, one-quarter of stadium ad revenue, and 100% of parking fees. Even after paying for stadium operations and without collecting property tax, that still leaves the Metrodome as the singular case of a stadium that turns a public profit. (This may also help explain Twins owner Carl Pohlad's incessant stadium demands in the face of public disdain; notes Long, "Compared to the other owners, there's no question why he's a little peeved.")

Mostly, Long's study shows the degree to which we need to rethink what "cost" means in terms of stadiums, and how to determine who's bearing the burden. My own research into the proposed Mets and Yankees stadiums--each sold to the press as entirely privately financed--has found about $400 million apiece in public costs, thanks to such unreported subsidies as tax breaks, free rent, and other goodies hidden in the depths of the team's "memorandum of understanding" with the city. This, in fact, looks to be the wave of the future for teams playing the stadium game: Pay the up-front construction costs--scoring points with the voting public, while racking up a hefty revenue-sharing deduction--and make it up on the back end via the lease.

Not that Long intends her figures to be taken as gospel, either. After all, in surveying 99 stadiums and arenas, it's inevitable that she's let some money flows slip through the cracks. One notable example that jumps out is Detroit's Comerica Park, where side deals on team-run parking lots and ticket taxes funneled to the Tigers undoubtedly boosted the public share well above Long's 31% estimate.

Items like these, she hopes, will be addressed by individual researchers who can use her work as a baseline for more detailed investigations. "What I've tried to do," she says, "is to create a framework so that a relatively educated layperson could look at development agreement, and come up with a reasonable estimate of the future costs for the municipality."

Even, one hopes, a relatively educated sports journalist.

Neil deMause is an author of Baseball Prospectus. 
Click here to see Neil's other articles. You can contact Neil by clicking here

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