Who Benefits the Most?
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by user Harold Friend LouGehrig
March 19, 1978 New York Times: The Equivalent of Three Rivers Stadium, Veterans Stadium, and Riverfront Stadium.
Former New York City Mayor John Lindsay, who persuaded the city to rebuild Yankee Stadium, expressed the belief that it would have been a disaster for the city if the Yankees had left. "I think it was the right thing. Brooklyn never recovered when the Dodgers left the city." The initial figure of $24 million to rebuild now stands at $95.6 million, which includes funds for urban renewal of the surrounding neighborhood. The contract between New York City and the Yankees gives the city a graduated percentage of the gross gate revenues and between 5-10 percent of concession sales, but there is a provision that allows the Yankees to deduct maintenance costs, which has become a contentious issue. The Yankees claimed maintenance costs of $839,106 for 1977 plus a note to the city indicating that the figure might rise, based on further discussions with the city. The Yankees' 1977 revues from attendance and concessions should have resulted in the city receiving almost one million dollars in rent, but after deducting maintenance costs, the Yankees will pay only $150,000.
There is also a question about the $24 million initial figure to rebuild Yankee Stadium. The engineering firm that did the work say their data indicated the figure is much too low. An engineer associated with Praeger, Kavanaugh, and Waterbury, was quoted as saying : "The $24 million figure was pulled out of the air. Mike Burke felt that the city should pay amount to keep the Yankees as it paid for Shea for the Mets. And that was $24 million." In addition, an obscure clause at the end of the lease stated that the Yankees had the right "To alter and improve the stadium during the period of renovation so as to be equivalent in all respects with the best features of the new stadia in Pittsburgh, Philadelphia, and Cincinnati." The clause resulted in the Yankees determining what was done with little concern for cost.
One of the most significant agreements of the Yankees' deal with the city was never kept. New York City reneged on its agreement to renovate the surrounding neighborhood. The city's explanation was that the fiscal crisis killed this part of the plan. It was the only part of the reconstruction agreement between the Yankees and New York City that came in under cost.
COMMENTS:
A new ballpark is being constructed for the Yankees, starting in 2007, at an estimated cost of $1.2 billion. New York City will provide $200,000 and the rest will be raised through the sale of bonds by the Yankees, who will not pay rent or property taxes. No New York sports team pays property taxes. Now, don't try to be a wise guy. It won't work. YOU can't claim that you and your kids are a sports team and should receive an exemption from YOUR property taxes.
When Yankee Stadium was being renovated, the Yankees had the right to ensure that the construction would produce the best features of the new stadia in Pittsburgh, Philadelphia, and Cincinnati. Three Rivers Stadium in Pittsburgh and Riverfront Stadium in Cincinnati opened in 1970, while Veterans Stadium in Philadelphia opened in 1971. All are gone. None was retained longer than 32 years. That is inexcusable. With proper maintenance and judicious renovations, ball parks should last centuries, not decades, as Wrigley Field and Fenway Park will illustrate in 2014 and 2012. Teams build new parks to stimulate the economy and provide the fans with a better experience when they attend a game. Rubbish. Nothing is better than attending a game at Wrigley, Fenway, or the old Yankee Stadium. Did anyone say, "I remember Ebbets Field?"
The Yankees belong in the Bronx. As Mayor Lindsey said in the early 1970s, it would have been a disaster if the Yankees left. He was right, but not in the way he meant. It would have been a disaster to Yankees fans in the New York metropolitan area, but from a financial standpoint, keeping the Yankees or any sports team by offering subsidies and tax breaks does not help city residents. Proponents of subsidizing privately held sports teams claim that there are four ways in which sports facilities improve the local economy. Building a ball park creates construction jobs, individuals who go to games or work for the team generate spending within the community, thus expanding local employment, the team attracts tourism and companies to the area, which increases local spending and the creation of jobs even more, and all the spending has a "multiplier effect," which means that the increase in local income results in more new spending and job creation. It is then argued that the economic growth new stadiums create make them self financing, and revenues from ticket taxes, sales tax on concessions, spending outside the ball park, and property tax increases in the area (not on the ball park), offset subsidies given to the team. This sounds good, but according to economists, building a ball park is helps the local economy only if it is the most productive way to make capital investments and use its workers.
Roger G.Noll and Andrew Zimbalist, in their landmark book, Sports, Jobs, and Taxes, write that research reveals that a new sports facility has an extremely small or even a negative effect on the overall economy, as well as on employment. No recent facility appears to have earned anything approaching a reasonable return on investment. No recent facility has been self-financing in terms of its impact on net tax revenues. Regardless of whether the unit of analysis is a local neighborhood, a city, or an entire metropolitan area, the economic benefits of sports facilities are minimal. Contrary what the mainstream media, politicians, and sports teams owners claim, new sports facilities do NOT attract tourists or new industries. Noll and Zimbalist discuss Oriole Park at Camden Yards, which was extremely successful when it first opened in 1992.
In 1991, the sixth place, 67-95 Orioles, playing in Memorial Stadium, drew 2,552,753 fans, which was fifth best in the American League. Attendance the following season, their first in their new park, was 3,567,819, which was an increase of about 1 million fans. Attendance was fairly steady over the next decade, but in 2002, the Orioles, who had been one of the better teams in the late 1990s, once again were 67-95. They drew 2,682,439 fans, which is good, but which was about the same as attendance the last year in Memorial Stadium. Winning teams, not new ballparks, draw fans. About one third or thirty three percent of those who attend Orioles' games don't live in Baltimore. That sounds good, but the data reveal that Baltimore's economy, with respect to new jobs and incremental tax revenues averaged about $3 million during the first years of the new ball park, years when attendance was excellent, but a $3 million dollar a year return on a $200 million investment is not much of a return.
The Cleveland Indians' new ballpark, Jacobs Field, opened in 1994. Forty eight percent of the cost came from a 15-year tax on cigarettes and alcohol in Cuyahoga County. Of course smoking and drinking are bad for you, so the government must try to discourage individuals from indulging in such negative activities by taxing them. Anyway, the Indians (when will that pejorative name be changed?) drew 1,995,174 fans in Jacobs Field's first season, compared to 2,177,908 the previous year at the old Municipal Stadium (The Mistake by the Lake). Hold it a second. It appears that the Indians had better attendance figures in the old ballpark, but do you remember Mark Twain quoting Benjamin Disraeli? "There are three kinds of lies: lies, damned lies and statistics." Okay, another statistic before we get to what really happened. In 1993, the Indians averaged 26,888 a game. In 1994, the Indians averaged 39,121 a game. Remember the baseball strike in 1994? Remember who won the 1994 World Series? Right. There was no 1994 World Series and the Indians only played 113 games in 1994.
The start of the 1995 season was delayed because the 1994 strike carried over into the 1995 season. When the season finally started, the Indians played 144 games and won the American League pennant with 100 victories. They had 2,842,745 paid admissions, averaging 39,483 fans a game. Between mid-1995 and April 4, 2001, the Indians set the major-league record of 455 consecutive sellouts. But since it's all about money, the Indians started to cut payroll because many of the youngsters of the mid-1990s were demanding higher salaries. General manager Mark Shapiro (Sha-PIE-Ro, not Sha-PEAR-O) replaced stars such as Manny Ramirez and Jim Thome with new youngsters who were going to be but were not yet fine players. In 2002, the 74-88 Tribe averaged 32,308 fans a game, and in 2003, the team went 68-94, averaging only 21,358 fans a game. Hey, let's go see the new ballpark.
Fans want to see winning teams or teams they think can win. After the first year or two, they no longer want to see just the new ballpark. The Indians, Orioles, Rockies, and Blue Jays hammer home that point. The Cubs don't play in a new ballpark and the Cubs haven't won a pennant since 1945. They haven't won the World Series in more than a century. But the Cubs and Wrigley Field are a tradition. Cubs' fans pass down that tradition to the next generation. The Cubs always make it interesting, just as the Red Sox used to until 2004, when they finally won it all. Cubs fans hope eternally. Each season, they almost believe that the miracle will happen. It did in Boston and might, some day in the distant future, after we all are long since gone, happen in Chicago. It is the team, it is the tradition, and it the hope that THIS season will be THE season, that draws fans to the ballpark.
References:
Schumach, Murray. "Yanks' Revenues Rise, but City's Stadium Rent Falls." The New York Times. 19 March 1978, p.1.
http://www.brook.edu/press/review/summer97/noll.htm
http://www.baseball-reference.com/teams/BAL/attend.shtml
http://www.twainquotes.com/Statistics.html
