Wall Street Journal
Washington Gets Its Stadium Issue Almost Right
By MARK ROSENTRAUB
February 9, 2006; Page D8

When communities consider welcoming professional sports facilities and teams, they should understand two lessons that economists have learned from the building of dozens of arenas from New England to San Diego. First, by themselves sports facilities can do very little for a community, but if they are part of a development plan tethered to private money, some economic magic can result. The presence of a team does not fuel regional economic development, but it does help decide where entertainment dollars are spent. The concentration of these dollars can make some jobs more accessible and bring people back into the urban center of a region.

The second lesson is understand the value of your market so that you do not make wealthy owners even richer without getting anything out of the deal yourself. Owners want a team in a large population center with thousands of wealthy homeowners, much more so than they want one in America's "greenest city" or a city with millions of tourists but few wealthy residents.

On Tuesday, the Washington City Council voted on a new lease for a ballpark, ending a conflict that resulted from the city understanding lesson one but failing to grasp lesson two.

The ballpark plan and the new lease still commits the District to spend more than $525 million, but now requires $20 million more from Major League Baseball. The District also has received guarantees that will generate at least $70 million in new private-
sector investments, ensuring that long-overdue development in the southeast portion of the city will occur. Make no mistake: This is a great outcome. The planned development, supported with substantial private investments, will locate needed service-sector jobs closer to inner-city residents. The new housing units that are part of the plan will continue to attract the talent and creativity the District needs to continue its economic expansion.

Five years from now people will point with pride to the stadium and mention the District in the same breath as San Francisco, San Diego, St. Louis, Indianapolis and Cleveland. These are some of the cities where a sports facility anchored private-sector development and where the ballpark or arena was appropriately integrated into an urban landscape to create a sense of community and excitement, while attracting needed economic development. Each of these cities can point with pride to new housing, new retail and new commercial development in areas that previously languished or went begging for development deals.

With regard to lesson two, the District Council's recent effort to reduce the public sector's investment in the ballpark, with the additional commitments from MLB, is certainly commendable. But this was a small concession given that the District will invest more than half a billion dollars in the project.

The original deal was the product of MLB's behind-closed-doors auction: Washington was told it was "competing" with Portland, Las Vegas and maybe even other regions to be the home for the Montreal Expos. But no city in this closed-door auction was a real competitor. No other region in the U.S. without a baseball team had the population base or wealth to compete with Washington.

People do not go to Las Vegas to see baseball games; they come to Las Vegas for gambling and shows. And the comparisons between Washington and these two other cities are staggering. The Washington-Northern Virginia area is the nation's eighth largest region in terms of population. Portland, with 3 million fewer residents ranks 24th; Las Vegas has 3.5 million fewer residents. Washington-Northern Virginia is also the nation's fourth wealthiest area while the Portland region's rank is 70th and Las Vegas came in at 91st. Where do you think MLB wanted to be selling baseball tickets, club seats and suites?

So if there are more people and more money in Washington, D.C., how does Portland or Las Vegas compete? They offer a subsidy. But, as it turned out, neither had a public or private entity willing to commit enough money to offset Washington's advantage.

Major cities like St. Louis, San Diego and San Francisco all limited their investments because they understood the value of their markets. The latter two teams also threatened to move to other cities, creating an image of an auction then, too. Washington, oddly enough, offered a subsidy larger than that proposed by other cities in the mythical auction -- when it should have offered one far smaller.

The new lease is a step forward for the District, but negotiating it was like closing the barn door after the horses escaped.

Certainly, the additional money guaranteed by MLB reduces the need for D.C. to contribute tax revenues. It is also true that the District is using taxes on businesses, thereby minimizing the pain for lower-income residents. But those successes do not offset the District leaders' failure to understand lesson two. American cities are the sources of wealth for professional sports franchises just like those teams are the sources of pride and enjoyment for many residents. If the deal is negotiated right, it can be a fair trade.

Mr. Rosentraub, author of "Major League Losers" and co-author of "The Economics of Sports: An International Perspective," is dean and professor of urban affairs at the Maxine Goodman Levin College of Urban Affairs at Cleveland State University.