Ballpark, anyone?    (11/02/00)

In 2000, three new ballparks opened: Enron Field in Houston, PacBell Park in San Francisco and Comerica Park in Detroit.  Two more parks will open their gates next year, one in Pittsburgh and one in Milwaukee.  San Diego hopes to open a new ballpark in 2002.  And Cincinnati will open a baseball-only stadium quite soon as well.  By the start of the 2002 season, 14 of the 30 major league ballparks will be less than 10 years old.  Part of this current mania to open ballparks is the improved revenue stream that comes from luxury and corporate skyboxes.  Teams charge hundreds of thousands of dollars for each of them.  How much of an actual revenue increase varies from park to park, but there's no question that both the team and the owner benefit greatly from such a construction.  After Camden Yards was built, Eli Jacobs sold the Orioles for more than 140% more than what he had paid for them just 5 years earlier.

So the real question is: does anyone else benefit or is this just a scam for owners to build equity?  With few exceptions, the tax-paying public bears the majority of the cost of building these baseball palaces.  Do they see any of the benefits, other than keeping their baseball team in town for another 5-10 years?

Many detractors point to the stadium that began the stadium building craze: Camden Yards.  Before Camden, stadiums were just a place to see a ballgame.  There were no special amenities, other than your choice of whether you wanted to buy your beer and hot dogs at a stand or in your seat.  There were sterile, steel and concrete environments, tomb-like at times.  If you want to see the last of these dinosaurs, visit Comiskey Park.

Then Camden was built.  Constructed in a run down part of Baltimore not too far from the city's other attraction, the Inner Harbor, Camden was built with an eye on baseball's history - brick construction, old fashioned steel grillwork like one might find at Wrigley or Fenway - and a taste for modern conveniences - a huge menu to choose from, places to picnic, all sorts of stores for souvenirs and memorabilia, places designed for the kids... a real family outing.  The stadium was an immediate sensation.

The only problem was that it was almost entirely financed by the public at considerable debt.  In fact, some estimates target the annual debt service to be around $20 million.  Ouch.  Of course, there are some extenuating factors, like the fact that the Maryland Stadium Authority has since built 2 football stadiums in that general area.  But those, in large part, are a seperate debt.  The initial plan was that lottery sales would offset the cost, but that hasn't entirely worked out.

However, the story is not all bad.  The city of Baltimore and the state of Maryland have benefited from Camden in several ways.

For instance, ballpark patrons spend and average of $160,000 per game day on restaurants and retail establishments in the Camden/Inner Harbor/downtown Baltimore area (I lump them all together because they are all within the same square mile).  The National Aquarium sees it's ticket sales rise by 8% every time the Orioles have a home game.  Hotel occupancy rises 20% in Baltimore on game days.  In fact, one can point to Camden yards as a significant factor in the decision to expand the Baltimore Convention Center by 300% - if they'll come from out of town to Baltimore just to see a baseball game, surely they'd come for a convention, especially with Inner Harbor so close by.

The stadium also fomented more development in the Inner Harbor Area.  The initial construction, Harborplace and the Aquarium were completed by 1981.  The Power Plant - a family entertainment facility, featuring the Sensorium (a multimedia presentation that included smells) - was finished in the mid-80s, but did not do well, largely due to the fact that the aromas combined to create the odor of a garbage dump.  Nice idea, though.  Other than that, not much else was built there until after Camden was completed in 1992.  Construction really took off after that.  An office building across the street from Harborplace was renovated to include a 4-story shopping mall.  The Columbus Center was built right on the water across from the Aquarium in 1995.  And the convention center expansion was completed in 1996.  SportsCenterUSA cited the popularity of Camden Yards as a critical reason they decided to redevelop the Power Plant into a sports-themed restaurant and gaming facility back in 1997, which is home to the first ESPN SportZone restaurant.  Of all the sports-obsessed locations in the US, they chose Baltimore, specifically because of Camden Yards, to begin the franchise.

Another benefit has been a rise in local property values.  Residential property values have increased significantly in Baltimore since Camden was built.  The price of homes in Canton, Federal Hill and Fells Point have enjoyed the greatest increases, close to 100% since 1992, despite a recession in the mid 90's.  Those areas are pretty close to Camden, if not right next to it.  That increase in property values also means a similar increase in transfer taxes (since they don't have personal property taxes in Maryland), which, of course, means a similar percentage increase in money for the state.  Commercial property values, or at least the price of downtown office space, have also increased dramatically since 1992.  (1)

The crime rate has gone down in Baltimore by 28% since Camden was built.  That's not necessarily due to Camden, of course.  Then again,
from 1981, when the initial construction of Inner Harbor was completed, to 1992, the crime rate went up more by more than 30%. (2)  Other factors played significant roles in the decrease.  However, when one bulldozes a rough part of town, as they did in Baltimore and Phoenix and are currently doing in San Diego, and replace it with a nice new ballpark where families and tourists will frequent, it only makes sense that crime will go down.  This theory is backed up by countless studies showing that the nicer the neighborhood, the less overall crime.  And there's no debate that Camden made that area of Baltimore much more visitor friendly.

But the biggie: consumer spending.  All totaled, out of stadium spending by ballpark patrons, which includes parking, hotels and patronage of local restaurants and bars has increased by more than 250%, an increase of more than $30 million per year, over what was being spent when Memorial was the O's home stadium.  (3)

Baltimore has clearly seen a significant benefit to the new stadium, even if it has come at considerable cost.  Other cities, Cleveland, Denver and Phoenix have enjoyed similar results.

Yes, the owner of the team definitely benefits from a new stadium.  In Eli Jacobs' case, he benefited greatly.  Of course, just about everyone makes a nice profit from selling a professional team.  The last guy who didn't turn some decent coin on a baseball team was probably Fred Saigh, who was forced to divest his portion of the Cardinals in 1953 due to a tax-evasion conviction.  I suspect Jacobs would have gotten a substantial return on his investment in a storied franchise even without a really nice stadium.  Definitely not as much as he did, but substantial nonetheless.

The final tally: taxes do get raised generally.  However, the city becomes nicer, everyone gets a nice place to spend an afternoon or evening and the retailers make more money, thereby putting more sales taxes back into the system.  And when you think about it, making a place nicer is generally gonna raise property values and taxes anyway.  Why not have something there that everyone can enjoy?

Now if they can just figure a way to put a new stadium AND a team in DC/Northern Virginia...

1) estimates by several sources at Long & Foster, the 3rd largest privately owned realty in the US, primarily servicing the Mid-Atlantic region
2) from the FBI Uniform Crime Reports
3) from a study by the Maryland Stadium Authority