Brookings: Topics - Baltimore

@ Brookings Podcast: Baltimore as a Case Study in Metro Economic Recovery

Jennifer S. Vey — Fri, 04 May 2012 00:00:00 -0400

Baltimore provides a prime example of how metropolitan areas around the nation are turning to clean, green industries as a source of vibrant, sustainable growth. Expert Jennifer Vey outlines how such communities can identify their assets and capitalize on them to revitalize their economies.

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Image Source: © Rebecca Cook / Reuters

Baltimore in Focus: A Profile from Census 2000

Sat, 01 Nov 2003 00:00:00 -0500

Executive Summary

The results from Census 2000 underscore the many social, demographic, and economic challenges facing the City of Baltimore and its residents.

Between 1980 and 2000, Baltimore lost 17 percent of its population. Unlike other shrinking cities, however, Baltimore lay in the core of a growing metropolitan area. This wider growth sustained the health of regional labor and housing markets, but accelerated the depletion of economic vitality in the central city. Recent estimates show that the city's population loss has abated, suggesting the trend is not irreversible. Yet Census 2000 confirms Baltimore's diminished standing in its region: Only a quarter of the region's population now lives in the city, and fewer than 30 percent of metropolitan workers are employed there.

Social stress also persisted. As Baltimore's regional economy decentralized in the 1990s, the city lost middle-class households and its poverty rate increased. Baltimore's low median income, in this context, reflects the relatively small share of its adult population engaged in work, as well as the low levels of college education that persist among minority households. One positive trend over the decade was the increasing share of black families who owned their homes. However, insufficient market demand in many of the city's neighborhoods may have curbed the benefits of homeownership as property values remained depressed. Baltimore, meanwhile, attracted very few new households over the latter part of the decade, and failed to benefit from significant levels of immigration that lifted population in so many other U.S. cities.

Along these lines and others, then, Baltimore in Focus: A Profile from Census 2000 concludes that:

The Baltimore region continued to decentralize rapidly in the 1990s. Between 1980 and 2000, the City of Baltimore lost 17 percent of its population. At the same time, its suburban population grew by 35 percent. Today, only one in four residents of the Baltimore region lives in the central city, and only 29 percent of the region's workers are employed there. Although some areas of the downtown gained citizens in the 1990s, the vast majority of city neighborhoods lost population, as did several older suburbs to the north and east of Baltimore. Families were leaving the city during the 1990s: Specifically, the number of married couples plummeted there by more than 25,000, even as their number grew in the suburbs by 35,000.

Baltimore remains a black-white city without significant immigration from abroad. The numbers of both blacks and whites living in Baltimore declined in the 1990s. Unlike in most U.S. cities, however, few immigrants arrived to compensate for these population losses. The city's foreign-born population grew by just 26 percent, placing it 81st among the top 100 cities. Instead, the vast majority (89 percent) of new international immigrants in the Baltimore region settled in the suburbs, in a pattern similar to that in the Washington, D.C. area.

The city's population is aging rapidly. In many of the 23 Living Cities, young professionals aged 25 to 29 represent the largest age group. In Baltimore, this distinction belongs to older Baby Boomers aged 40 to 44. What is more, Baltimore lost residents in nearly every age group during the 1990s, especially 25- to 34-year-olds, whose population dropped by nearly a third. As a result, elderly people make up a large share of households in Baltimore, greater than in all but two other Living Cities (Miami and Philadelphia).

Industry makeup has shifted away from manufacturing, but the workforce remains low-skilled. Thirty years ago, manufacturing accounted for approximately 20 percent of all jobs in Baltimore. Today, only 8 percent of Baltimore employees work in manufacturing. By contrast, over a quarter work in education, health, and social services professions, second only to Boston among the 23 Living Cities. Many of these jobs place a high value on the educational achievement of their workers. Unfortunately, Baltimore lags other cities—and its own suburbs—in college degree attainment among its residents. And while education levels are rising in the city, stark differences between racial/ethnic groups remain. One-third of Baltimore's white adults have a college degree, but only 10 percent of black adults do.

Household incomes fell in Baltimore during the 1990s as the city lost middle-class residents. A number of U.S. cities lost middle-income families in the 1990s. Yet Baltimore stood out in the degree to which it lost these households. Middle-income and upper-middle-income households—those earning between $34,000 and $81,000 a year—declined by 17,000 in Baltimore during the 1990s. As a result, median household income in Baltimore declined over the decade by 7 percent, and now ranks 87th lowest among the top 100 cities. Thanks in part to these trends, Baltimore's poverty rate increased in the 1990s,and nearly 40 percent of its families with children now live below or near the poverty line.

Homeownership increased for some groups in Baltimore, but many renters struggle to afford housing. About one-half of households in Baltimore own their own homes, more than in other Living Cities. And homeownership has been on the rise for the city's black households, 45 percent of whom now own. The weak housing market in many of Baltimore's inner-city neighborhoods may limit the economic benefits of homeownership, however. Rents in Baltimore declined over the decade, by an even greater percentage than household incomes. Yet even so, 51,000 Baltimore renters still pay more than 30 percent of income on rent, suggesting that most earn too little to afford the modest rents that prevail throughout much of the city.

By presenting indicators like these on the following pages, Baltimore in Focus: A Profile from Census 2000 seeks to give readers a better sense of where Baltimore and its residents stand in relation to their peers, and how the 1990s shaped the city, its neighborhoods, and the entire Baltimore region. Living Cities and the Brookings Institution Center on Urban and Metropolitan Policy hope that this information will prompt a fruitful dialogue among city and community leaders about the direction Baltimore should take in the coming decade.

Baltimore Data Book Series 1
Baltimore Data Book Series 2

Building Inclusive, Multicultural Communities

Bruce Katz — Mon, 27 Oct 2003 00:00:00 -0500

This powerpoint, presented to the Council on Foundations meeting on October 27, 2003, highlights five trends affecting cities and metropolitan regions: Cities are growing while metros continue to sprawl; cities and suburbs are becoming more diverse; the geography of work, and of poverty, is changing; and metropolitan economies are continuing to restructure. The presentation also discusses some of the consequences of these trends and outlines policy areas foundations should be thinking about for the future.

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Bruce Katz

Publication: Presentation to the Council on Foundations

Vacant-Property Policy And Practice: Baltimore And Philadelphia

John Kromer — Tue, 01 Oct 2002 00:00:00 -0400

Both Baltimore and Philadelphia are classic examples of cities in which vacant land and buildings are visible manifestations of enduring economic disinvestment and decline. While improvements in both cities' downtowns have attracted more visitors during the past decade and have generated high-end residential development in or near the downtown areas, conditions of blight and deterioration in many neighborhoods have worsened during this period. In response, the new mayors in both cities have committed to change local government policy and programming related to vacant-property acquisition, conveyance, and development. This paper reports on extensive case studies of Baltimore and Philadelphia, conducted through research, interviews, and local discussion panels. It provides an in-depth review of local policies and practices regarding vacant properties that might help urban leaders respond to this complex issue.

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John Kromer

Envisioning a Future Washington

Alice M. Rivlin and Carol O'Cleireacain — Fri, 01 Jun 2001 00:00:00 -0400

This paper sets out a bold overall vision for economic development and fiscal viability in the District of Columbia over the next ten years. We hope this vision will stimulate vigorous debate and discussion about the District's future and its role in the Greater Washington region. We also hope that broad-based community dialogue about the future of the city will lead to the emergence of a shared vision—not necessarily the one sketched out here—and to serious public and private actions that will turn this shared vision into reality over the next decade.

The vision offered in this paper will not appeal to everyone and will strike some as overly ambitious. Several points, however, should be borne in mind:

First, a mix of strategies will maximize the chances of success. The District needs to attract both adults and families, and to create more job opportunities at the same time. Success in attracting more knowledge-based companies would complement the residential strategy, especially if effectively linked to improving the city's capacity for technical education.

Second, an inclusive planning process is essential. Even changes that appear positive to most people will be perceived as threatening to some. In any neighborhood experiencing an inflow of population and an upgrading of the housing stock there is a potential for tension between new and long-time residents.

Third, a shared vision may reduce conflict over targeting resources. Revitalization requires concentrated, visible effort in particular neighborhoods and schools. Spreading resources too thinly, without the critical mass to make a visible difference in any one place, is a recipe for failure

Fourth, cross-jurisdictional cooperation is crucial to healthy regional growth. The economic recovery of the District comes at the right moment for it to participate actively in a dialogue with the rest of the Greater Washington Region over cooperative strategies to benefit

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Alice M. Rivlin
Carol O'Cleireacain

The District and Baltimore Face Double Whammy in Welfare Reform: Greater Challenges and Less Funding for Needed Services

Carol S. Meyers — Tue, 01 May 2001 00:00:00 -0400

This report finds that after over four years of implementing welfare reform, the District of Columbia and Baltimore City find their programs at points substantially different from the programs of their suburban neighbors. The two cities are wrestling with helping the long-staying, hard-to-serve welfare recipients move toward and into employment, while at the same time assisting the working poor, including many former welfare recipients, to improve their conditions. In contrast, the major focus of suburban welfare departments is on the working poor and includes efforts to keep them employed and to increase their earnings. The mismatch between the resources available for and the greater expense of serving the hard-to-serve handicaps both the District and Baltimore in helping both groups of families.

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Carol S. Meyers

Washington-Baltimore Metropolitan Area

Sat, 01 Apr 2000 00:00:00 -0500

The cities of Washington and Baltimore and their suburbs were combined after the 1990 Census into a Washington-Baltimore Consolidated Metropolitan Statistical Area (CMSA). Geographical areas that have this federal designation include communities with "a high degree of economic and social integration." This integration between the Washington and Baltimore areas is evidenced by such indicators as: the joint application to host the Olympic Games, the joint use of the Baltimore/Washington International Airport, and the many Washington area fans who attend the Baltimore Orioles' games. Nevertheless, the two areas have been experiencing different growth trends in the 1990s.

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Divided We Sprawl

Bruce Katz and Jennifer Bradley — Wed, 01 Dec 1999 00:00:00 -0500

A call for a reinvention of the American city and suburb that would exploit the infrastructure of the one and mitigate the "frantic privacy" of the other.

By many accounts Baltimore is a comeback city. It has a beautiful piece of calculated nostalgia in the Camden Yards baseball stadium, which draws tens of thousands of visitors throughout the spring and summer. It has a lively waterfront district, the Inner Harbor, with charming shops and not snacks for sale every hundred yards or so. But although it may function well as a kind of urban theme park (and there are plenty of cities that would love to achieve that distraction), as a city it is struggling. For twenty years Baltimore has hemorrhaged residents: more than 140,000 have left since 1980. Meanwhile, the surrounding suburbs have steadily grown. The population of Howard County, a thirty-minute drive from the city, has doubled since 1980, from 118,600 to 236,000. The people who have stayed in Baltimore are some of the neediest in the area. The city has 13 percent of Maryland's population but 56 percent of its welfare caseload. Only about a quarter of the students who enroll in a public high school in the city graduate in four years.

And Baltimore is not unique. The image of America's cities has improved greatly over the past few years, thanks to shiny new downtowns dotted with vast convention centers, luxury hotels, and impressive office towers, but these acres of concrete and faux marble hide a reality that is in many cases grim. St. Louis, Cleveland, Philadelphia, and Washington, D.C., lost population throughout the 1990s. These cities are also losing their status as the most powerful economies in their regions. Washington started the 1990s with a respectable 33 percent of the area's jobs. Seven years later it had only 24 percent. The rate of population growth in the nation's suburbs was more than twice that in central cities—9.6 percent versus 4.2 percent—from 1990 to 1997. In just one year—1996—2.7 million people left a central city for a suburb. A paltry 800,000 made the opposite move. In the major urbanized areas of Ohio 90 percent of the new jobs created from 1994 to 1997 in the suburbs. Ohio's seven largest cities had a net gain of only 19,150 jobs from 1994 to 1997; their suburbs gained 186,000. The 1990s have been the decade of decentralization for people and jobs in the United States.

Not even cities that are growing—southern and western boom cities—are keeping pace with their suburbs. Denver has gained about 31,000 people in the 1990s (after having lost residents during the 1980s), but the counties that make up the Denver metropolitan area have gained 284,000 people—about nice times as many. In Atlanta and Houston central0city growth is far outmatched by growth in outlying counties. And these cities, too, are losing their share of the jobs in their respective regions. In 1980, 40 percent of the jobs in the Atlanta region were in the city itself; by 1996 only 24 percent were.

Meanwhile, the poor have been left behind in the cities. Urban poverty rates are twice as high as suburban poverty rates, and the implementation of welfare reform appears to be a special problem for cities. Although welfare caseloads are shrinking in most cities, in general they are not shrinking as quickly as they are in the states and in the nation as a whole. Often cities have a disproportionate share of the states' welfare recipients. Philadelphia County, for example, is home to 12 percent of all Pennsylvanians on welfare. Orleans Parish, in which the city of New Orleans is located, has 11 percent of Louisiana's population but 29 percent of its welfare recipients. This hardly adds up to an urban renaissance.

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Bruce Katz
Jennifer Bradley

Publication: The Atlantic Monthly

Sports, Jobs, & Taxes: Are New Stadiums Worth the Cost?

Andrew Zimbalist and Roger G. Noll — Sun, 01 Jun 1997 00:00:00 -0400

To find out more, see Roger Noll and Andrew Zimbalist's edited book, Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums.

America is in the midst of a sports construction boom. New sports facilities costing at least $200 million each have been completed or are under way in Baltimore, Charlotte, Chicago, Cincinnati, Cleveland, Milwaukee, Nashville, San Francisco, St. Louis, Seattle, Tampa, and Washington, D.C., and are in the planning stages in Boston, Dallas, Minneapolis, New York, and Pittsburgh. Major stadium renovations have been undertaken in Jacksonville and Oakland. Industry experts estimate that more than $7 billion will be spent on new facilities for professional sports teams before 2006.

Most of this $7 billion will come from public sources. The subsidy starts with the federal government, which allows state and local governments to issue tax-exempt bonds to help finance sports facilities. Tax exemption lowers interest on debt and so reduces the amount that cities and teams must pay for a stadium. Since 1975, the interest rate reduction has varied between 2.4 and 4.5 percentage points. Assuming a differential of 3 percentage points, the discounted present value loss in federal taxes for a $225 million stadium is about $70 million, or more than $2 million a year over a useful life of 30 years. Ten facilities built in the 1970s and 1980s, including the Superdome in New Orleans, the Silverdome in Pontiac, the now-obsolete Kingdome in Seattle, and Giants Stadium in the New Jersey Meadowlands, each cause an annual federal tax loss exceeding $1 million.

State and local governments pay even larger subsidies than Washington. Sports facilities now typically cost the host city more than $10 million a year. Perhaps the most successful new baseball stadium, Oriole Park at Camden Yards, costs Maryland residents $14 million a year. Renovations aren't cheap either: the net cost to local government for refurbishing the Oakland Coliseum for the Raiders was about $70 million.

Most large cities are willing to spend big to attract or keep a major league franchise. But a city need not be among the nation's biggest to win a national competition for a team, as shown by the NBA's Utah Jazz's Delta Center in Salt Lake City and the NFL's Houston Oilers' new football stadium in Nashville.

Why Cities Subsidize Sports

The economic rationale for cities' willingness to subsidize sports facilities is revealed in the campaign slogan for a new stadium for the San Francisco 49ers: "Build the Stadium—Create the Jobs!" Proponents claim that sports facilities improve the local economy in four ways. First, building the facility creates construction jobs. Second, people who attend games or work for the team generate new spending in the community, expanding local employment. Third, a team attracts tourists and companies to the host city, further increasing local spending and jobs. Finally, all this new spending has a "multiplier effect" as increased local income causes still more new spending and job creation. Advocates argue that new stadiums spur so much economic growth that they are self-financing: subsidies are offset by revenues from ticket taxes, sales taxes on concessions and other spending outside the stadium, and property tax increases arising from the stadium's economic impact.

Unfortunately, these arguments contain bad economic reasoning that leads to overstatement of the benefits of stadiums. Economic growth takes place when a community's resources—people, capital investments, and natural resources like land—become more productive. Increased productivity can arise in two ways: from economically beneficial specialization by the community for the purpose of trading with other regions or from local value added that is higher than other uses of local workers, land, and investments. Building a stadium is good for the local economy only if a stadium is the most productive way to make capital investments and use its workers.

In our forthcoming Brookings book, Sports, Jobs, and Taxes, we and 15 collaborators examine the local economic development argument from all angles: case studies of the effect of specific facilities, as well as comparisons among cities and even neighborhoods that have and have not sunk hundreds of millions of dollars into sports development. In every case, the conclusions are the same. A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment. No recent facility appears to have earned anything approaching a reasonable return on investment. No recent facility has been self-financing in terms of its impact on net tax revenues. Regardless of whether the unit of analysis is a local neighborhood, a city, or an entire metropolitan area, the economic benefits of sports facilities are de minimus.

As noted, a stadium can spur economic growth if sports is a significant export industry—that is, if it attracts outsiders to buy the local product and if it results in the sale of certain rights (broadcasting, product licensing) to national firms. But, in reality, sports has little effect on regional net exports.

Sports facilities attract neither tourists nor new industry. Probably the most successful export facility is Oriole Park, where about a third of the crowd at every game comes from outside the Baltimore area. (Baltimore's baseball exports are enhanced because it is 40 miles from the nation's capital, which has no major league baseball team.) Even so, the net gain to Baltimore's economy in terms of new jobs and incremental tax revenues is only about $3 million a year—not much of a return on a $200 million investment.

Sports teams do collect substantial revenues from national licensing and broadcasting, but these must be balanced against funds leaving the area. Most professional athletes do not live where they play, so their income is not spent locally. Moreover, players make inflated salaries for only a few years, so they have high savings, which they invest in national firms. Finally, though a new stadium increases attendance, ticket revenues are shared in both baseball and football, so that part of the revenue gain goes to other cities. On balance, these factors are largely offsetting, leaving little or no net local export gain to a community.

One promotional study estimated that the local annual economic impact of the Denver Broncos was nearly $120 million; another estimated that the combined annual economic benefit of Cincinnati's Bengals and Reds was $245 million. Such promotional studies overstate the economic impact of a facility because they confuse gross and net economic effects. Most spending inside a stadium is a substitute for other local recreational spending, such as movies and restaurants. Similarly, most tax collections inside a stadium are substitutes: as other entertainment businesses decline, tax collections from them fall.

Promotional studies also fail to take into account differences between sports and other industries in income distribution. Most sports revenue goes to a relatively few players, managers, coaches, and executives who earn extremely high salaries—all well above the earnings of people who work in the industries that are substitutes for sports. Most stadium employees work part time at very low wages and earn a small fraction of team revenues. Thus, substituting spending on sports for other recreational spending concentrates income, reduces the total number of jobs, and replaces full-time jobs with low-wage, part-time jobs.

A second rationale for subsidized stadiums is that stadiums generate more local consumer satisfaction than alternative investments. There is some truth to this argument. Professional sports teams are very small businesses, comparable to large department or grocery stores. They capture public attention far out of proportion to their economic significance. Broadcast and print media give so much attention to sports because so many people are fans, even if they do not actually attend games or buy sports-related products.

A professional sports team, therefore, creates a "public good" or "externality"—a benefit enjoyed by consumers who follow sports regardless of whether they help pay for it. The magnitude of this benefit is unknown, and is not shared by everyone; nevertheless, it exists. As a result, sports fans are likely to accept higher taxes or reduced public services to attract or keep a team, even if they do not attend games themselves. These fans, supplemented and mobilized by teams, local media, and local interests that benefit directly from a stadium, constitute the base of political support for subsidized sports facilities.

The Role of Monopoly Leagues

While sports subsidies might ow from externalities, their primary cause is the monopolistic structure of sports. Leagues maximize their members' profits by keeping the number of franchises below the number of cities that could support a team. To attract teams, cities must compete through a bidding war, whereby each bids its willingness to pay to have a team, not the amount necessary to make a team viable.

Monopoly leagues convert fans' (hence cities') willingness to pay for a team into an opportunity for teams to extract revenues. Teams are not required to take advantage of this opportunity, and in two cases—the Charlotte Panthers and, to a lesser extent, the San Francisco Giants—the financial exposure of the city has been the relatively modest costs of site acquisition and infrastructural investments. But in most cases, local and state governments have paid over $100 million in stadium subsidy, and in some cases have financed the entire enterprise.

The tendency of sports teams to seek new homes has been intensified by new stadium technology. The rather ordinary cookie-cutter, multipurpose facility of the 1960s and 1970s has given way to the elaborate, single-sport facility that features numerous new revenue opportunities: luxury suites, club boxes, elaborate concessions, catering, signage, advertising, theme activities, and even bars, restaurants, and apartments with a view of the field. A new facility now can add $30 million annually to a team's revenues for a few years after the stadium opens.

Because new stadiums produce substantially more revenues, more cities are now economically viable franchise sites—which explains why Charlotte, Jacksonville, and Nashville have become NFL cities. As more localities bid for teams, cities are forced to offer ever larger subsidies.

What Can Be Done?

Abuses from exorbitant stadium packages, sweetheart leases, and footloose franchises have left many citizens and politicians crying foul. What remedy, if any, is available to curb escalating subsidies and to protect the emotional and financial investments of fans and cities?

In principle, cities could bargain as a group with sports leagues, thereby counterbalancing the leagues' monopoly power. In practice, this strategy is unlikely to work. Efforts by cities to form a sports-host association have failed. The temptation to cheat by secretly negotiating with a mobile team is too strong to preserve concerted behavior.

Another strategy is to insert provisions in a facility lease that deter team relocation. Many cities have tried this approach, but most leases have escape clauses that allow the team to move if attendance falls too low or if the facility is not in state-of-the-art condition. Other teams have provisions requiring them to pay tens of millions of dollars if they vacate a facility prior to lease expiration, but these provisions also come with qualifying covenants. Of course, all clubs legally must carry out the terms of their lease, but with or without these safeguard provisions, teams generally have not viewed their lease terms as binding. Rather, teams claim that breach of contract by the city or stadium authority releases them from their obligations. Almost always these provisions do not prevent a team from moving.

Some leases grant the city a right of first refusal to buy the team or to designate who will buy it before the team is relocated. The big problem here is the price. Owners usually want to move a team because it is worth more elsewhere, either because another city is building a new facility with strong revenue potential or because another city is a better sports market. If the team is worth, say, $30 million more if it moves, what price must the team accept from local buyers? If it is the market price (its value in the best location), an investor in the home city would be foolish to pay $30 million more for the franchise than it is worth there. If the price is the value of the franchise in its present home, the old owner is deprived of his property rights if he cannot sell to the highest bidder. In practice, these provisions typically specify a right of first refusal at market price, which does not protect against losing a team.

Cities trying to hold on to a franchise can also invoke eminent domain, as did Oakland when the Raiders moved to Los Angeles in 1982 and Baltimore when the Colts moved to Indianapolis in 1984. In the Oakland case, the California Court of Appeals ruled that condemning a football franchise violates the commerce clause of the U.S. Constitution. In the Colts case, the condemnation was upheld by the Maryland Circuit Court, but the U.S. District Court ruled that Maryland lacked jurisdiction because the team had left the state by the time the condemnation was declared. Eminent domain, even if constitutionally feasible, is not a promising vehicle for cities to retain sports teams.

Ending Federal Subsidies

Whatever the costs and benefits to a city of attracting a professional sports team, there is no rationale whatsoever for the federal government to subsidize the financial tug-of-war among the cities to host teams.

In 1986, Congress apparently became convinced of the irrationality of granting tax exemptions for interest on municipal bonds that financed projects primarily benefiting private interests. The 1986 Tax Reform Act denies federal subsidies for sports facilities if more than 10 percent of the debt service is covered by revenues from the stadium. If Congress intended that this would reduce sports subsidies, it was sadly mistaken. If anything, the 1986 law increased local subsidies by cutting rents below 10 percent of debt service.

Last year Senator Daniel Patrick Moynihan (D-NY), concerned about the prospect of a tax exemption for a debt of up to $1 billion for a new stadium in New York, introduced a bill to eliminate tax-exempt financing for professional sports facilities and thus eliminate federal subsidies of stadiums. The theory behind the bill is that raising a city's cost from a stadium giveaway would reduce the subsidy. Although cities might respond this way, they would still compete among each other for scarce franchises, so to some extent the likely effect of the bill is to pass higher interest charges on to cities, not teams.

Antitrust and Regulation

Congress has considered several proposals to regulate team movement and league expansion. The first came in the early 1970s, when the Washington Senators left for Texas. Unhappy baseball fans on Capitol Hill commissioned an inquiry into professional sports. The ensuing report recommended removing baseball's antitrust immunity, but no legislative action followed. Another round of ineffectual inquiry came in 1984-85, following the relocations of the Oakland Raiders and Baltimore Colts. Major league baseball's efforts in 1992 to thwart the San Francisco Giants' move to St. Petersburg again drew proposals to withdraw baseball's cherished antitrust exemption. As before, nothing came of the congressional interest. In 1995-96, inspired by the departure of the Cleveland Browns to Baltimore, Representative Louis Stokes from Cleveland and Senator John Glenn of Ohio introduced a bill to grant the NFL an antitrust exemption for franchise relocation. This bill, too, never came to a vote.

The relevance of antitrust to the problem of stadium subsidies is indirect but important. Private antitrust actions have significantly limited the ability of leagues to prevent teams from relocating. Teams relocate to improve their financial performance, which in turn improves their ability to compete with other teams for players and coaches. Hence, a team has an incentive to prevent competitors from relocating. Consequently, courts have ruled that leagues must have "reasonable" relocation rules that preclude anticompetitive denial of relocation. Baseball, because it enjoys an antitrust exemption, is freer to limit team movements than the other sports.

Relocation rules can affect competition for teams because, by making relocation more difficult, they can limit the number of teams (usually to one) that a city is allowed to bid for. In addition, competition among cities for teams is further intensified because leagues create scarcity in the number of teams. Legal and legislative actions that change relocation rules affect which cities get existing teams and how much they pay for them, but do not directly affect the disparity between the number of cities that are viable locations for a team and the number of teams. Thus, expansion policy raises a different but important antitrust issue.

As witnessed by the nearly simultaneous consideration of creating an antitrust exemption for football but denying one for baseball on precisely the same issue of franchise relocation, congressional initiatives have been plagued by geographical chauvinism and myopia. Except for representatives of the region affected, members of Congress have proven reluctant to risk the ire of sports leagues. Even legislation that is not hampered by blatant regional self-interest, such as the 1986 Tax Reform Act, typically is sufficiently riddled with loopholes to make effective implementation improbable. While arguably net global welfare is higher when a team relocates to a better market, public policy should focus on balancing the supply and demand for sports franchises so that all economically viable cities can have a team. Congress could mandate league expansion, but that is probably impossible politically. Even if such legislation were passed, deciding which city deserves a team is an administrative nightmare.

A better approach would be to use antitrust to break up existing leagues into competing business entities. The entities could collaborate on playing rules and interleague and postseason play, but they would not be able to divvy up metropolitan areas, establish common drafts or player market restrictions, or collude on broadcasting and licensing policy. Under these circumstances no league would be likely to vacate an economically viable city, and, if one did, a competing league would probably jump in. Other consumer-friendly consequences would ow from such an arrangement. Competition would force ineffective owners to sell or go belly up in their struggle with better managed teams. Taxpayers would pay lower local, state, and federal subsidies. Teams would have lower revenues, but because most of the costs of a team are driven by revenues, most teams would remain solvent. Player salaries and team profits would fall, but the number of teams and player jobs would rise.

Like Congress, the Justice Department's Antitrust Division is subject to political pressures not to upset sports. So sports leagues remain unregulated monopolies with de facto immunity from federal antitrust prosecution. Others launch and win antitrust complaints against sports leagues, but usually their aim is membership in the cartel, not divestiture, so the problem of too few teams remains unsolved.

Citizen Action

The final potential source of reform is grassroots disgruntlement that leads to a political reaction against sports subsidies. Stadium politics has proven to be quite controversial in some cities. Some citizens apparently know that teams do little for the local economy and are concerned about using regressive sales taxes and lottery revenues to subsidize wealthy players, owners, and executives. Voters rejected public support for stadiums on ballot initiatives in Milwaukee, San Francisco, San Jose, and Seattle, although no team has failed to obtain a new stadium. Still, more guarded, conditional support from constituents can cause political leaders to be more careful in negotiating a stadium deal. Initiatives that place more of the financial burden on facility users—via revenues from luxury or club boxes, personal seat licenses (PSLs), naming rights, and ticket taxes—are likely to be more popular.

Unfortunately, citizen resistance notwithstanding, most stadiums probably cannot be financed primarily from private sources. In the first place, the use of money from PSLs, naming rights, pouring rights, and other private sources is a matter to be negotiated among teams, cities, and leagues. The charges imposed by the NFL on the Raiders and Rams when they moved to Oakland and St. Louis, respectively, were an attempt by the league to capture some of this (unshared) revenue, rather than have it pay for the stadium.

Second, revenue from private sources is not likely to be enough to avoid large public subsidies. In the best circumstance, like the NFL's Charlotte Panthers, local governments still pay for investments in supporting infrastructure, and Washington still pays an interest subsidy for the local government share. And the Charlotte case is unique. No other stadium project has raised as much private revenue. At the other extreme is the disaster in Oakland, where a supposedly break-even financial plan left the community $70 million in the hole because of cost overruns and disappointing PSL sales.

Third, despite greater citizen awareness, voters still must cope with a scarcity of teams. Fans may realize that subsidized stadiums regressively redistribute income and do not promote growth, but they want local teams. Alas, it is usually better to pay a monopoly an exorbitant price than to give up its product.

Prospects for cutting sports subsidies are not good. While citizen opposition has had some success, without more effective intercity organizing or more active federal antitrust policy, cities will continue to compete against each other to attract or keep artificially scarce sports franchises. Given the profound penetration and popularity of sports in American culture, it is hard to see an end to rising public subsidies of sports facilities.

Authors

Andrew Zimbalist
Roger G. Noll

Brookings: Topics - Baltimore

@ Brookings Podcast: Baltimore as a Case Study in Metro Economic Recovery

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Baltimore in Focus: A Profile from Census 2000

Building Inclusive, Multicultural Communities

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Vacant-Property Policy And Practice: Baltimore And Philadelphia

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Envisioning a Future Washington

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The District and Baltimore Face Double Whammy in Welfare Reform: Greater Challenges and Less Funding for Needed Services

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Washington-Baltimore Metropolitan Area

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Divided We Sprawl

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Sports, Jobs, & Taxes: Are New Stadiums Worth the Cost?

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