Friday, February 04, 2005


$584 million.


Five hundred and eighty-four million dollars. This is the amount Washington D.C. plans to raise to pay for a new stadium for the Washington Nationals. Why? Why do this for Major League Baseball and the new owners of the team? The argument that you heard and will continue to hear on this issue is that the team will bring jobs and many other positive benefits to the community - externalities in the economic world. The Nationals are a public good. Therefore, it falls to the local governments to pay for the right to reap all of these benefits that come from MLB putting their public goods in a community - by ponying up money to build a stadium.

The first question - are the Washington Nationals a public good? I would argue yes. Anyone can listen to a game on the radio, watch it on TV or just follow highlights in newspapers or television and doing so does not harm anyone else's ability to do so - if I am watching Nationals 24-hours a day, others can as well. (Non-rivalrous.) At the same time, it is impossible to prevent people from following the team through means already available to them as mentioned above. (Non-excludable.) However, the team can capture some of these benefits - by selling rights to air games on TV and radio (which they recoup with advertising). They cannot charge the media for allowing them to cover the game - so the public can still follow a team and have enjoyment without the owners benefiting. (Though if you can bring the public to your paper or broadcast by how you cover a team, you can reap some of those rewards through advertising dollars - bringing money to more people - and more of that public benefit.)

The next question - is a stadium a public good? I would emphatically say no. You can exclude people by selling tickets. If a person is sitting in a seat, that means you can't sit in that same seat, unless you are both not that big, very comfortable with each other and the usher is busy talking to that cute blonde down in the front row with the cotton candy.

So, you can't have a beneficial public good team, without a private good stadium. The question then becomes are the benefits of the public good enough so the public should provide a private good?

Obviously there will be an increase in jobs that connect to the stadium - concessions, tickets, parking, security. I would contend that this will just be a switch from other areas - for the entertainment dollar is not unlimited - people will change from another venue, whether it is sports (Redskins, Capitals, Wizards or Orioles), movies or other entertainment options. (Though I doubt that baseball and ballet are even somewhat close to being substitutable.) The good folks in D.C. may not care about business taken from the Orioles, but if the settlement reached with Peter Angelos is tied to the business he does, it could increase operating costs for the Nationals (and other teams) and cause ticket prices to rise - crowding out more entertainment if people still choose to go to Nationals games. This is before the increased taxes on "big business" to fund the stadium. With those increases in taxes to fund the stadium - what impact will that have on the bottom line costs and the jobs of people at those companies? (It's so nice we have big business in the U.S. to tax because they make so much money and we can increase their costs and wait.....why are you going to Mexico? Come back!)

Then there are the obvious benefits like rent (article also discusses the tax plans to recoup costs) detailed to be about $5 million a year in RFK. Let's say that rent doubles to $10 million a year in the new stadium. Just on that alone, it would take over 50 years to pay for the stadium. How long did Busch Stadium last? Riverfront? Three Rivers? The Astrodome? Veterans? Kingdome? Obviously some lasted longer - and maybe the new stadiums will have longer lives than those created under infatuations with domes and multi-use stadiums in the 60s. Maybe they will keep pursuing private financing and find some to cover the costs. They might get $100 million for the parking concession. In the end though, most of the costs will be paid through the taxes and the rent.

Maybe the city will see huge benefits in the time it takes to pay for the stadium. Maybe the dollars of revenue from ads, restaurants and other businesses linked to the stadium will benefit the general populace. Maybe the general public won't have to pay any of these costs directly or indirectly. My two cents say the only real winner is MLB and the new owners. If it ever stops being that way - hello Portland Hoods or Las Vegas Lizards.