Major league baseball returns to the nation's capital: like many cities that have waited so long for a team, Washington, D.C., is ready to lavish its new residents with a state-of-the-art ballpark that will cost hundreds of millions of dollars. However, who should foot the bill?

USA Today (Society for the Advancement of Education), March, 2005 by Dennis Coates, Brad R. Humphreys

DISTRICT OF COLUMBIA Mayor Anthony Williams convinced Major League Baseball to move the Montreal Expos to Washington, D.C.--which has been without a franchise since the Senators left town in 1971 to become the Texas Rangers--in exchange for the city's building a new ballpark. (In the meantime, the freshly christened "Nationals" will play at old RFK Stadium, which is undergoing $14,000,000 in renovations, until their new digs are ready in three years.) Williams claims that a new stadium will create thousands of jobs and spur economic development in a depressed area of the city. His Honor also maintains that this can be accomplished without tax dollars from local residents. Yet, the proposed plan to pay several hundred million dollars for the stadium relies on some type of tax increase that likely will indeed be felt by D.C. citizens.

Moreover, professional sports generally have little, if any, positive effect on a city's economy. The net economic impact in Washington, D.C., and the 36 other cities that hosted professional franchises over nearly a 30-year period was a reduction in real per capita income for the entire metropolitan area.

The practice of professional sports teams profiting at the expense of taxpayers is not new. The gambit routinely involves an individual franchise using its monopoly power to extract concessions from state and local governments. The Washington case differs because Major League Baseball, not the Expos, played the role of the monopolist pitting one potential suitor against another in search of the best deal. However, make no mistake: Major League Baseball's protracted decisionmaking process as it mulled over the relative merits of various locations--Washington; Northern Virginia; Portland, Ore.: Charlotte, N.C.: San Juan, Puerto Rico; Monterrey, Mexico; and the other areas bidding for the franchise--was a classic exercise in concession extraction by a monopolistic sports league.

Williams and others who wanted to lure the team to Washington and now plan to build a new stadium claim that average taxpayers will not be burdened with the costs. Williams stated in his "Message from the Mayor" on Oct. 1, 2004, that "The ballpark will be 100% financed by the team owners, those who use the ballpark, and by D.C.'s largest businesses.... Our residents will not be asked to pay one dime of tax dollars toward this ballpark."

First, the team's share of financing the stadium is a 30-year lease committing the club to an initial rent of $3,500,000 each year, increasing to $5,000,000 by the fifth year, and then rising by two percent minus $10,000 per year thereafter. Of course, the conventional idea behind a lease is that a tenant pays rent for the use of a facility owned by somebody else. So, the team will be renting the facility but will not be paying for its construction--despite the fact that the touted economic benefits that will follow in the wake of the club relocating to the District depend on it being successful and profitable. Professional sports teams certainly are not morn-and-pop operations and can pay entirely for the construction of their own stadiums, although only two baseball franchises--the San Francisco Giants and Los Angeles Dodgers--have done so.

According to calculations of economist Scott Wallsten at the AEI-Brookings Joint Center for Regulatory Studies, the rent the baseball team will pay "is almost certain to decrease every, year after 2009 when accounting for inflation. If inflation averages three percent over 30 years, the [team] will be paying about $3,3000,000 per year in today's dollars by 2035." Thus, in just five years, D.C. taxpayers will be forced to provide another implicit concession--a de facto rent subsidy--to the club.

Second, taxes will be collected on ticket sales, concessions, parking, and merchandise sold within the stadium. Concessions and merchandise are, in common parlance, food and beverages, T-shirts, hats, jerseys, and other souvenirs. It is likely that the D.C. residents who purchase food. beverages, and clothing while attending games would have chosen to eat and buy clothes in the city--and pay taxes on those purchases--in the absence of the stadium and franchise. In other words, revenues generated inside the ballpark may not be new revenues, even if they are dedicated specifically to paying for the new stadium.

Finally, a "ballpark fee" will be imposed on the largest corporations in the District. Whether it is a surcharge or an increase in the corporate income tax rate, this so-called fee is a tax increase, pure and simple. Moreover, this tax will fall on residents if they happen to be owners or employees of the affected businesses, or if they purchase goods or services produced by those businesses. Thus, claiming that Washington citizens will not feel the burden of this corporate tax increase is disingenuous. Corporations do not pay taxes, people do. Whether it is in the form of lower wages for workers, lower asset values for corporate owners, or higher prices for consumers of the goods and services those companies provide, this tax increase will touch residents in some way.