John Locke Update / Research Brief

Swing and a Miss: Why Public Money For High Point Ballpark Is a Bad Idea

posted on in City & County Government, Economic Growth & Development, Local Government, Spending & Taxes
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On Thursday night, Guilford County Board of Commissioners voted 7-2 to hold a public hearing on using tax dollars – for the next 20 years – to build a proposed downtown ballpark facility in High Point.  The hearing will be on Thursday, September 21 at 5:30 pm.  Concerned High Point and Guilford County residents should attend.

The two county commissioners who voted against the public hearing did so because they simply don’t believe it’s appropriate for the county to be involved in this project.  I agree with them.  While the project looks exciting, it is doubtful that project will produce net economic benefits over the long term.  Certainly, the use of taxpayer money raises some important questions.

From the beginning, supporters of this project have claimed that building a downtown facility will be good for the economy and good for the residents of High Point. Spectators coming into the city for baseball games and concerts would spend money in restaurants and hotels. These expenditures would grow businesses and create employment.  And the project would act as a catalyst to further spur economic growth and downtown revitalization.

This narrative is attractive, but there is substantial evidence that it may be overblown. Many researchers have studied whether spending public money on a stadium for a sports franchise produces the sorts of economic benefits that advocates claim.  The short answer is, they don’t.

In 2015, Dennis Coates, Professor of Economics at University of Maryland, Baltimore County, published one such study, a working paper titled “Growth Effects of Sports Franchises, Stadiums, and Arenas: 15 Years Later.” It was a follow-up to a 1999 study in which the authors had examined every city with an NBA, NFL, or MLB franchise between 1969 and 2004. In this new study, Coates added cities with NHL and MLS franchises and extended the study to 2011.

His findings are striking. The presence of a professional sports team does indeed impact the economy, but, contrary to popular belief, the impact is usually negative. Remarkably, when looking across all sports over the past 50 years, it appears that cities with professional teams saw their per-capita gross domestic product drop. In other words, people became poorer. He writes:

…the entire sports environment matters for the level of real personal income per capita, in the sense that the array of sports variables are jointly statistically significant. But contrary to the promised increase, the presence of a major sports franchise lowers the income. 

Studies that reach these conclusions aren’t new. In 1999, economist Raymond Keating published an analysis called “Sports Pork: The Costly Relationship between Major League Sports and Government” for the Cato Institute. In it, looking back over the 20th century, he calculated that nearly $15 billion in government subsidies had been spent on stadiums and arenas for the MLB, NFL, NBA, and NHL.  He concluded: 

The economic facts, however, do not support the position that professional sports teams should receive taxpayer subsidies. The lone beneficiaries of sports subsidies are team owners and players. The existence of what economists call the “substitution effect” (in terms of the stadium game, leisure dollars will be spent one way or another whether a stadium exists or not), the dubiousness of the Keynesian multiplier, the offsetting impact of a negative multiplier, the inefficiency of government, and the negatives of higher taxes all argue against government sports subsidies. Indeed, the results of studies on changes in the economy resulting from the presence of stadiums, arenas, and sports teams show no positive economic impact from professional sports or a possible negative effect.

 The “substitution effect” that he cites is a well-known concept in the economics and business literature. People have a limited number of hours and dollars, and some percentage of those are spent on leisure activities. A new baseball team in High Point will certainly attract fans who will spend money.  But the overwhelming majority of those will be fans who live locally, and they will not be spending new money.  Instead, they’ll substitute, spending money at the ballpark instead of going bowling, to the movies, or to a concert.  The overall amount of money spent in the economy won’t increase; it will just be redistributed.

Unfortunately, the unintended consequence can even be to take business away from small, local competitors, which is surely the last thing any politician or resident wants for the local economy. A new stadium doesn’t magically increase the entertainment budgets of High Point and Guilford County residents. In fact, it may do just the opposite if that stadium is paid for through increased taxes, as is the plan for this ballpark.

 And what if the team or stadium fails? If attendance and revenue don’t meet expectations, then the city will be left to foot the bill – for the next 20 years in this case.  Not only that but if the stadium needs improvements and repairs, that burden remains with the taxpayers who own the ballpark.

Over the past four months, Nido Qubein, president of High Point University, has done a remarkable job promoting this project and securing investors.  He’s attracted both donations and businesses.  I commend that.  But the ease with which he’s been able to find large amounts of money for this project tells me that there is indeed money in High Point and Guilford County for projects that people deem worthy.  There are philanthropists who will donate money for projects they believe will be good for the community, and there are businesspeople who will invest in ventures they believe can be profitable.  A ballpark could be built and financed without putting the taxpayers of High Point and Guilford County on the hook for the next 20 years.

Julie Tisdale is City and County Policy Analyst at the John Locke Foundation. Before coming to the Locke Foundation, she worked at the Centre for Civil Society in New Delhi, India, where she wrote about various economic and public policy… ...

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