Stadium Subsidies Strike Out

Now that the players strike is history, Michigan citizens are spectators at two games at once-professional baseball on the field and high-stakes lobbying under the dome in the state capitol.

In mid-February, Detroit Mayor Dennis Archer said that an end to the strike would move state support for a new Tiger Stadium to the front burner in Lansing. Advocates like Mayor Archer and Tigers owner Mike Ilitch want the state to provide financial assistance, though the precise form and amount of subsidy they want has been subject to a lot of change without much notice.

Last year, Mr. Ilitch said he would pay the $175 million to build a new stadium if state, county, and/or local governments would come up with about $200 million in infrastructure improvements for such things as new roads, sewers, lighting, land acquisition and environmental cleanup. But early this year, citing financial strains caused by the strike, Mr. Ilitch stated that he could not build even the stadium without government help. A decisive majority of Detroit voters has already rejected city subsidies, so help from Lansing would seem more critical to the project than ever.

Governor John Engler opposes outright subsidies for construction of the stadium itself unless the state could somehow share future profits with the Tigers ball club. Simply a discussion of state subsidies has attracted lobbyists from Grand Rapids and Lansing who want a piece of the pie for stadiums in their cities if Detroit gets a check. All this raises the more fundamental question: Do public subsidies for stadiums make sense?

Many studies suggest the answer to that question is an emphatic NO. Economist Robert Baade of the Heartland Institute, an Illinois think tank, analyzed the effects of professional sports teams and stadiums on economic development in thirty-six metropolitan areas. The results, he found, overwhelmingly indicated that professional sports is not statistically significant in determining economic growth rates. Baade showed that stadiums led simply to a realignment of jobs away from other leisure activities as well as from manufacturing.

Government-subsidized stadiums usually benefit team owners and players at the expense of the taxpayers and the fans, Baade's work revealed. Subsidies encourage waste, inefficiencies, and inflated salaries. Stadiums built at taxpayer expense often become huge liabilities and require perpetual bailouts, like Pontiac's Silverdome.

Analysts at the Buckeye Center for Public Policy Solutions in Dayton, Ohio come to the same conclusion. They cite studies of stadium projects in Indianapolis and elsewhere to suggest that If city officials, business leaders and local citizens believe a sports stadium is needed and financially sound, private capital should be raised independently to finance the project.

Economist David Littmann of Comerica Bank in Detroit points out that there's no need for the state of Michigan to get into the stadium business as an investor sharing profits with private interests. He urges Mr. Ilitch to do the normal marketplace thing: get together a private investment consortium, or mount a public stock offering, sell shares to the interested investing public and directly share the profits (and risk) with all parties to the investment.

The University of Michigan stadium, completed in 1927, was financed by a private bond offering that guaranteed to subscribers preferential seating between the 30-yard lines for 10 years, Littmann notes. Privately built and managed sports facilities have succeeded in other places, such as Los Angeles and Miami.

Steven T. Khalil, a businessman who sits on the Greater Detroit Chamber of Commerce Business Climate Issues Committee, is even more blunt. In a letter to the Mackinac Center for Public Policy, he urged, In much the same way that the federal government is now turning back to the states activities it should never have engaged in, so should the state of Michigan send the stadium debate back to Detroit and specifically, to the owner and players who stand to gain the most from any new stadium.

Baseball is often said to be as American as mom and apple pie. For that reason alone, it's too important to be dependent upon the government. Detroit may need a field of dreams, but it surely doesn't need a field of schemes.