ANNAPOLIS – While the NFL stadium debate continues to define the 1996 General Assembly session, economists nationwide disagree whether publicly funded sports facilities actually boost a region’s economy.
“They have about the same impact as a successful Wal-Mart store,” said Kenneth Shropshire, associate professor at the University of Pennsylvania’s Wharton School of Business.
Shropshire and others say that stadium boosters’ arguments usually neglect important points to make public financing look more attractive.
Opposing economists, however, say there are cases when it is beneficial to use government funds to lure a professional team with the promise of a stadium.
At issue is whether Maryland should spend some $200 million to build a new stadium in Baltimore for the former Cleveland Browns and $73 million for road improvements and other costs at the Washington Redskins’ stadium site in Prince George’s County.
Throughout the debate, Gov. Parris N. Glendening and his allies have argued that the taxes generated by the stadiums will cover debt service and create extra revenue, which the state can use in such areas as public schools.
The fight pits one economic theory against another.
Under the “multiplier theory” applied by stadium advocates, sporting events bring the community new dollars, building the economy in a ripple effect as those dollars are spent and passed to different hands.
But other economists say that the ripple effect does not happen.
Bill Hunter, associate professor and chairman of economics at Marquette University in Milwaukee, said that the multiplier is frequently misused by officials and citizens who are trying to get a stadium built.
“If they weren’t going to football games, they’d be spending money in taverns, theaters and bowling alleys,” Hunter said of sports fans. This results in harm to existing businesses, he said, pointing to the “substitution effect,” in which sporting events siphon away money that would be spent on other leisure activities.
The substitution effect is one reason the Department of Fiscal Services’s stadium analysis was significantly less optimistic than one by the Department of Business and Economic Development, the study relied upon by Glendening.
Dr. Massoud Ahmadi, an economic research manager for Business and Economic Development who took part in its study, argued that the substitution effect won’t happen here.
Ahmadi said federal statistics show personal income in Maryland growing by $2 billion a year. A percentage of that growth will be spent on recreation and entertainment, allowing the economy to accommodate stadium sporting events along with other leisure activities, he said.
Ahmadi said the substitution effect is only temporary. “The economy grows — it doesn’t stand still,” he noted.
John Moag, Maryland Stadium Authority chairman, said the Business and Economic Development report is more accurate because it factors in economic growth. Because the Fiscal Services’s report did not, its numbers are “skewed,” Moag said.
Robert Baade, a sports economist at Lake Forest College near Chicago, doesn’t agree.
In 1994, Baade completed a study of nine metropolitan areas with professional sports teams. Over 30 years, seven of those areas saw a decline in their share of the surrounding region’s income, which Baade said casts doubt on sports’ ability to generate revenue for states.
Baade endorses the substitution effect, saying that entertainment spending is simply “redirected toward the pro sports segment.”
“Professional sports as an economic development tool is very benign. It’s almost inconsequential,” Baade said. “We’re misleading the public if we pass these off as investment tools.”
And, in light of the team relocations of the past year, a city may end up spending more on stadium renovations or new stadiums just to keep a team, Baade said.
Baade also said most players live elsewhere in the off- season, keeping a large chunk of money out of the local economy.
Ahmadi, though, believes that 50 percent of the players will reside and spend their millions here.
Among those who argue that publicly funded stadiums can benefit a city are economists who nonetheless caution that this happens only in a few cases.
“For a medium-sized city like Charlotte or Jacksonville, it might be worth it,” said Dean Baim, economics professor at California’s Pepperdine University. “There’s an image factor that may be subliminal … that’s got to be worth something.”
Baim said that the national exposure a major league sports team provides may bring business into a city. “If Microsoft is looking to put a new division in the southeast, they might say, `How about Jacksonville?'” based on seeing the city’s name in the sports media, he said.
But Baim said the benefits for Baltimore are questionable, since the city is better known than Jacksonville or Charlotte. Glendening, however, stressed the intangible psychological benefits of pro football during a meeting this week with state business leaders. The stadiums will “provide the state with a unifying force” that “cannot have a dollar amount put to it,” he said. -30-