A field of pipe dreams?
by Wes Swift
If you build it, they will come.
That’s the hope of Sugar Land officials, who last month OK’d a deal with Opening Day Partners to build a new stadium and bring an independent baseball team to Sugar Land.
For city officials, the park represents the first step in transforming Sugar Land into a destination center, a day-trip Shangri-La that will draw shoppers and their tax dollars into the city limits for sporting events, concerts and other entertainment.
But how realistic are those expectations? Can Sugar Land really expect to see millions of dollars of new spending, creating thousands more every year in sales taxes every year?
According to economists, probably not.
City staff tout the agreement as an exemplar of that paragon of municipal governance, the “public-private partnership:” using public and private monies to build improvements that will not only benefit a for-profit entity, but also pad the municipal coffers with additional tax revenue and raise the quality of life.
The letter of intent signed with Opening Day Partners creates a framework to bring an independent baseball team to Sugar Land by 2012.
According to the city staff, ODP will own and operate a team that will play in the Atlantic League, one of the highest-level independent pro baseball leagues in the country.
Technically, the Atlantic League isn’t a Minor-League Team. Minor-League Baseball is its own organization with ties to Major League Baseball and serves as a developmental league for the majors.
The Atlantic League is one of several independent leagues that has no affiliation with the majors. The league’s eight teams are located in Maryland, New York, Connecticut and Pennsylvania.
Former major league players, such as pitcher Sidney Ponson, Dante Bichette, Jose Offerman and Ruben Sierra have all played in the league.
According to a presentation by city staff, ODP would spend $5 million for team startup costs and another $5 million for stadium construction.
The city of Sugar Land, meanwhile, would contribute up to $25 million for stadium construction and an additional $5 million for parking and on-site construction.
The city’s share will be funded by an economic development sales tax, hotel occupancy taxes and venue taxes levied at the stadium . Funding for the stadium was approved by voters in 2008 referendum. The city will not spend any money from its operations and maintenance budget, according to city staff.
The letter of intent, however, only binds both parties to spend a total of $500,000 for professional design fees. The agreement also requires ODP to open a marketing office in Sugar Land.
Building new stadiums, and the sometimes controversial issues surrounding them, isn’t new.
Since 1990, at least 46 new stadiums have been constructed in cities that have Major League Baseball, National Football League or National Basketball Association franchises. Scores of smaller cities have built stadiums to lure professional or semi-pro teams.
At the core of the push for a sports franchise, from a high-profile NFL team to a Minor League Baseball team, are two desires: First, using the team as a calling card for the city, to highlight its success. Second, the influx of additional dollars such a team would bring.
Supporters of every stadium proposal frequently toss out estimates of millions of dollars of economic impact and new jobs a new stadium will create.
Proponents of a new baseball stadium in Washington, D.C., in 2004 estimated the economic impact at $94 million annually and 360 new jobs.
In 2010, officials with the Richmond Flying Squirrels, the new minor-league baseball team for the Virginia city, estimated the team would generate $40 million annually.
Sugar Land’s projections are smaller, but still impressive.
A cost-benefit analysis released by the city states the new ballpark, funded by up to $25 million in municipal funds, will generate $7.7 million in new spending annually, and $169 million over $30 years. The team is expected to create 120 new jobs just through the operation of the stadium alone.
But economists say that those projections don’t always add up.
J.C. Bradbury, an economist and professor at Kennesaw State University who wrote “The Baseball Economist: The Real Game Exposed,” said new stadiums rarely generate the expected returns.
“I will tell you that there is little evidence that these stadiums have much economic impact,” said Bradbury, who also blogs about the economics of baseball at www.sabernomics.com.
“Economists have studied this for two decades and no credible academic study has found any significant positive benefits. The studies out there that tout benefits are from the same folks who brought us ‘Where's the beef?’ commercials. It's PR spin, nothing more.”
Economic studies back up Bradbury. Economist Arthur Jones, a professor at the University of Maryland Baltimore County, concluded in his book “Minor League Baseball and Economic Development” that “minor league baseball has the economic impact equivalent of a large pet shop.”
Another economist, Dennis Coates, also at the University of Maryland Baltimore County, wrote in the Journal of the American Enterprise Institute that research has shown that new stadiums can actually reduce local incomes.
So why do the economic studies not match up with the projections?
According to Coates and his colleague Brad Humphreys, most economic impact analyses focus on how much money would be generated by the stadium versus how much money would be generated had the stadium not been there.
The two economists argue in “Caught Stealing,” a paper they wrote for the libertarian think tank the Cato Institute in 2004, that these studies don’t take into account the “substitution” effect.
“Not all the spending generated around and in the stadium is new spending,” the pair wrote. “As sport- and stadium -related activities increase, other spending declines because people substitute spending on sports for other spending.”
A recent analysis by the Durham Convention & Visitors Bureau in Durham, N.C., backs up that claim. According to a statement from the agency, the state’s nine Minor League baseball teams generate $47 million annually for the state economy, nearly $27 million of which comes from direct spending by North Carolina residents.
However, at the bottom of the statement includes this note:
“Direct spending by North Carolina residents is included here to emphasize MiLB’s (Minor League Baseball) overall impact; however, if MiLB did not exist in North Carolina, residents likely would use their discretionary income on other entertainment in the state.”