[ed. I became acquainted with CVM during the Exxon Valdez Oil Spill litigation process, i.e., "how much would you pay not to have oiled beaches, or dead sea otters, etc.?" As I recall, the results (and potential financial liabilities) were quite controversial at the time.]
Economists have long known stadiums to be poor public investments. Most of the jobs created by stadium-building projects are either temporary, low-paying, or out-of-state contracting jobs—none of which contribute greatly to the local economy. (Athletes can easily circumvent most taxes in the state in which they play.) Most fans do not spend additional money as a result of a new stadium; they re-direct money they would have spent elsewhere on movies, dining, bowling, tarot-card reading, or other businesses. And for every out-of-state fan who comes into the city on game day and buys a bucket of Bud Light Platinum, another non-fan decides not to visit and purchases his latte at the coffee shop next door. All in all, building a stadium is a poor use of a few hundred million dollars.This isn’t news, by any stretch, but it turns out we’re spending even more money on stadiums than we originally thought. In her new book Public/Private Partnerships for Major League Sports Facilities, Judith Grant Long, associate professor of Urban Planning at the Harvard University Graduate School of Design, shatters previous conceptions of just how much money the public has poured into these deals. By the late ’90s, the first wave of damning economic studies conducted by Robert Baade and Richard Dye, James Quirk and Rodney Fort, and Roger Noll and Andrew Zimbalist came to light, but well afterwards, from 2001 to 2010, 50 new sports facilities were opened, receiving $130 million more, on average, than those opened in the preceding decade. (All figures from Long’s book adjusted for 2010 dollars.) In the 1990s, the average public cost for a new facility was estimated at $142 million, but by the end of the 2000s, that figure jumped to $241 million: an increase of 70 percent.
Economists have also been, according to Long, drastically underestimating the true cost of these projects. They fail to consider public subsidies for land and infrastructure, the ongoing costs of operations, capital improvements (we need a new scoreboard!), municipal services (all those traffic cops), and foregone property taxes (almost every major-league franchise located in the U.S. does not pay property taxes “due to a legal loophole with questionable rationale” as the normally value-neutral Long put it). Due to these oversights, Long calculates that economists have been underestimating public subsidies for sports facilities by 25 percent, raising the figure to $259 million per facility in operation during the 2010 season. (...)
The basic evolution behind subsidies for sports stadiums is as follows: owner wants new stadium to make more money and increase the value of the franchise. Owner threatens to move team. Politicians save face by pretending they won’t offer millions of dollars in subsidies. Politicians eventually offer millions of dollars in subsidies and keep the team in the city. If there’s a justification for all this, it comes from the concept of a public good.
“The traditional definition of a public good is that the benefits aren’t scarce, they’re non-rival and non-excludable, so the consumption by one person doesn’t limit the consumption by someone else,” Professor J.C. Bradbury, a sports economist at Kennesaw State University and author of Hot Stove Economics, told me over the phone. “So if I’m happy Charlotte has a basketball team, that doesn’t make anyone else less happy.” The stadium itself, though, is a private good. There are only a limited number of seats, and if my ass is in Section 101, Row V, Seat 21, your ass isn’t.
Still, the thinking goes, a fan can enjoy a team without giving the franchise a penny. If you don’t buy Sunday Ticket, don’t attend any games, and don’t purchase any merchandise, then your favorite football team won’t see any of your money, no matter how passionately you follow them. But how do you quantify this? This is where Contingent Valuation Method (CVM), a survey method originally designed by environmental economists to value public park space or clean air, comes into play.
by Aaron Gordon, Pacific Standard | Read more:
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