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(Updated to include comment by economist Matheson.)
When the New York Times published a proposal for a $10 million attack on President Obama to be funded by Chicago billionaire Joe Ricketts and his super-PAC, it threw a heavy monkey wrench into negotiations between the city of Chicago and the Chicago Cubs over funding for $300 million in renovations to Wrigley Field. Mayor Rahm Emanuel is what you might call a close, personal friend of the president. And the Ricketts family bought the Cubs three years ago for $845 million. Joe, his son Tom, who is the team’s chairman, and his daughter Laura have all issued statements distancing themselves from the controversial ad proposal. Still, the mayor, according to an aide, is livid.
The Ricketts certainly haven’t done themselves any favors by angering a negotiating partner not known for his even temper. Yet it’s curious that a personal feud might be the deal’s undoing, as opposed to the large body of evidence that public financing of sports venues does not bring the promised economic returns.
To his credit, Emanuel rejected the team’s original proposal to have the city back the entire cost of Wrigley’s renovation. According to Crain’s Chicago Business, the most recent request from the team involves the city pitching in $150 million via bonds that would be paid using the first 6 percent of city and county taxes on Cubs tickets. Setting aside the massive irony that Joe Ricketts’s super-PAC, the Ending Spending Action Fund, is a vocal critic of public spending, there is little reason for the city to do the deal. The standard justification for public spending on privately owned sports franchises is that teams stimulate economic activity and create jobs. In the last 20 years, according to economists Robert Baade and Victor Matheson, this logic has persuaded public officials to pick up the tab for more than half of the $30 billion that professional teams in the U.S. have spent building and rebuilding their stadiums and arenas (PDF).
The methods behind the boosters’ claims, write Baade and Matheson, are “fatally flawed, resulting in a consistent bias toward large, but unrealized, impacts.” Teams and leagues routinely fail to adjust for spending that is merely displaced from other local entertainment and for potential economic activity that gets crowded out by sporting events. When the NFL, for instance, says the Super Bowl brings $300 million to $400 million to the host city, the actual impact is about a quarter of that (PDF). And inflated figures are only part of the problem. The basic premise of public investment is backward. Sports success follows economic growth, not the other way round.
“This is a perfect example of a great giveaway,” says Matheson of the Cubs proposal. While Wrigley is one of the few sports venues with a legitimate spillover effect in the neighborhood, he says, the team is having no trouble drawing 3 million people a year as it is. And there is essentially zero chance of the Cubs leaving town. Plus, by making the avenues around Wrigley a part of the venue on game days, the proposed changes could be a minus for the city. “It’s trying to take neighborhood money and make it Cubs money,” says Matheson.
Cities and states keep plunking down money anyway, because our collective mania for sports makes the industry seem like something much bigger than, say, the cardboard box industry, which, as Baade and Matheson point out, is roughly the same size. Sports make us crazy. Witness Rhode Island lending Red Sox legend Curt Schilling $75 million ($75 million!) to help fund his video game company. Does an entrepreneur who didn’t pitch on an injured ankle get that same deal?
This mania is why a bankrupt baseball team can sell for $2.3 billion. It’s also why teams should pay for their own renovations. They have plenty of more honest ways of separating us from our money than dipping into the public till. As Emanuel himself said of the Ricketts family and the Cubs, “They bought it in 2009, eyes open, well aware.” It’s that sentiment, and not any political payback, that should kill the Wrigley deal.