No Land Grab

Op-Classic, 1996: Wild Pitch

By Roger G. Noll

WASHINGTON

Even at a time when major league sports have become a cartoon of financial excess, the proposed new home for the Yankees is breathtaking in its audacity. Excluding land value, a multipurpose mausoleum on Manhattan's West Side would cost a billion dollars.

The debate has centered on two questions: Are sports facilities economically worthwhile? And should the stadium be single-purpose or multipurpose? A more fundamental question is why cities provide large subsidies to teams in the first place.

The Yankees have little economic effect on New York City. True, most fans would never visit the South Bronx were it not for the team. But few tourists come to New York just to see the Yankees. Thus, the Yankees generate a huge increase in economic activity within 100 yards of the Stadium, but not within the metropolitan area.

Nearly all spending at the Stadium is simply shifted from other forms of entertainment like restaurants and movies. Yes, the Yankees do draw suburbanites into the city, but many of these people would spend money in Manhattan or go to Mets games if the Yankees were not an option.

The city does make money by taxing tickets and concessions, but such revenues wouldn't come close to covering the Stadium's debt service. Even if the Jets agreed to play their home games on the West Side and the two teams combined drew four million fans a year, the city would need to collect an unrealistic $20 in taxes from each fan just to meet the mortgage payments.

Independent studies of sports facilities invariably conclude that they provide no significant economic benefits. A sports team does increase overall income in a community slightly, but the increase never offsets the stadium's financing and operating costs. And because a team has relatively few (but very highly paid) employees, it usually causes overall employment in a city to fall because it can drive other entertainment businesses to cut back or close.

Stadiums are bad investments, which is why the teams themselves are never willing to pay for them. New York City would generate more cash by putting the money in a savings account.

Assuming that New York decides to build the stadium, a multipurpose facility would make the most financial sense -- if the Jets and Yankees would agree to share it, which is unlikely. Single-purpose stadiums are more attractive and draw more fans. And the teams want their own stadiums so they can control and profit from other events in them. The city, of course, gains nothing by letting the teams have their way.

Why do cities pour hundreds of millions into new stadiums? With intense competition for sports franchises, not even New York can keep a team without subsidizing it. New Jersey and New York have at various times fought over the Giants, Jets, Yankees and Mets. The sad thing is that the states need not be competitors: Fans could easily support a third team in both football and baseball. But each league is a monopoly, doing what monopolists do best: making the product scarce to hike up the price.

There is a far cheaper way to keep the Yankees. Bribe them. A new stadium could give the Yankees an additional $10 million in profits each year. So instead of spending $80 million annually to finance and operate a new stadium, New York could just hand the Yankees $10 million. Or, even better, the city could pay $100,000 for each game won, with a million-dollar bonus for winning the pennant.

This plan would save the city money, improve the Yankees' bottom line and benefit fans, who would be less likely to have a team that collapsed in the stretch.

Roger G. Noll was visiting fellow at the Brookings Institution at the time of publication.