The Foster and Hunt economics of Triple-A
Although the media-spin machine has created the perception that El Paso is solidly behind the Tucson Padres making El Paso home there are indications that not all is what the spin meisters would have us believe. Although the baseball stadium is well on its way, after City Hall was recently demolished, there are still several unanswered questions as to how the economic mechanics of the baseball team will work.
Sure, we are deep into the contract that to stop the progress now may be cost prohibitive but should we really continue down this road? Do the economics make sense? Exactly how does the economic model for Triple-A work? More importantly, is it even possible that the stadium would be an asset to El Paso?
But first, how did the Tucson Padres end up in Tucson?
In 2010, the Tucson Padres, a minor league affiliate of the San Diego Padres, made Tucson a temporary home while waiting for Escondido California to build them a new stadium. While at Tucson, the Tucson Padres were not only in last place in their league but also struggled to sell tickets. (6)
Originally Escondido tried to lure the Padres to Escondido by promising to build them a baseball field.
Where did the Tucson Padres come from?
In 2010, the Portland Braves were kicked out of their home stadium because Portland converted the baseball stadium into a soccer field. San Diego Padres’ owner, Jeff Moorad purchased the team and renamed it the Tucson Padres in anticipation of having them play in Escondido, right outside of San Diego. Moorad parked the Tucson Padres in Tucson while he worked to get funding from California taxpayer’s to build him a new stadium. Although Escondido spent over $11 million in land acquisitions and environmental studies, the California taxpayers were reluctant to approve public funding to build the stadium if it could not be paid with public redevelopment funds.
Under the California redevelopment law, agencies were created to provide funding for public works such as roads and affordable housing. These were similar to the TIF districts in which revenues from the increased tax-base were used to pay for the projects. The 60-plus year old law was intended as an urban development funding tool.
In 2012, the California legislature did away with redevelopment funds.
US Citizenship for Investing
When the redevelopment fund plan failed, Escondido’s Mayor Sam Abed desperately tried to get the Padres’ to Escondido, by having foreigners pay for the stadium. To do this, Escondido was promising foreign investors a fast-track into US citizenship in return for their investment of $50 million.
Under the EB-5 immigration visa, any foreigner who invests at least $500,000 is given two-years of permanent residence in the United States to manage their investment. This usually leads to US citizenship.
The city of Escondido could not entice any foreign investors to invest in the proposed stadium. In late 2011, the team owner, Jeff Moorad put the team up for sale. By the end of December of 2011, Moorad received three offers to purchase the team. None came from Tucson.
Having played in Tucson for the last two years and with all of the arguments perpetuated by supporters of the baseball stadium about how a Triple-A baseball team would drive economic development, the question that begs to be asked; is why didn’t anyone in Tucson see the benefit of keeping the team there?
Could the answer be that, contrary to popular belief, Triple-A baseball does nothing for the local economy?
In essence, taxpayers in Escondido had no problem using redevelopment funds, monies self-generated by increasing the target area’s tax base but they were not interested in paying for a new stadium from their own taxes. Why? And why were foreign investors, with the promise of citizenship dangled before them not be interested in building a baseball field for the team?
Why did Portland kick the team out?
Another question that needs to be asked is why did Portland convert the baseball field that the Portland Beavers were using to a soccer stadium? After all, the Portland Beavers had been in Portland for the last 10 years. The Portland Beavers are today’s Tucson Padres.
What is it that Portland knows about Triple-A’s ability to drive economic development that the El Paso leaders haven’t asked themselves? Why did they choose soccer over baseball?
Or, is this one of those inconvenient questions that no one at the city wants to ask?
As if those weren’t enough questions to ponder, what are the attendance numbers for the Tucson Padres? After all, the revenue model much touted by the city is that attendance to the games will drive economic development.
Fan Attendance Declines
A comprehensive attendance analysis conducted by David P. Kronhein (7) of the attendance trends for both the Minor Leagues and the Mexican Leagues shows that the attendance rates for the Pacific League, the league that the Tucson Padres belong to, had two teams with the most attendance decline in 2011. Both Salt Lake City and Sacramento ranked first and second place of the biggest declines in total attendance for 2011.
The Tucson Padres’ attendance fell 52,196 from the 2010 to 2011. “The Padres’ attendance of 252,136 was the lowest of any Class AAA team in 2011”, writes Kronhein in his attendance report. (7, page: 20) In fact, the Padres had an average attendance of 3,410 for each of its 71 home games. In contrast, the closest team to the Padres, the Las Vegas 51s, averaged 4,486 per game. (7)
Not only are the Padres at the bottom of its league in games won, but it is also at the bottom of its league in attendance numbers.
According to the city’s fact sheet on the ballpark (8), “Triple-A baseball would provide 71 home games per season”, bringing an “annual estimated 436,000 patrons”. In other words the city is assuming that just because the worst team in the league is now making El Paso home, it will magically increase its attendance from 4,486 to 6,141 per game.
According to the city’s logic, 1,656 additional fans will attend each game because the city says so.
It makes me wonder where they came up with $17.9 million in revenues. Could it be the same place as the additional 1,600 plus fans?
As if that wasn’t enough magical hocus-pocus with the numbers, the city adds; “many cities have experienced considerable growth in the area where the ballpark is located”.
“The basic idea is that sports stadiums typically aren’t a good tool for economic development”, wrote Victor Matheson, an economist at Holy Cross that has written extensively about the economic impact of stadiums. (3) He adds that cities produce studies that are made by interested parties in building the stadiums in order to bolster their argument.
But, he adds, take the “number the sports promoter says, take it and move the decimal one place to the left”, adding, “then divide it by ten” giving you a good estimate of the actual economic impact. (3)
So the city says that the economic impact of the baseball stadium is going to be $17.9 million. Let’s apply Matheson’s formula to this number. This gives us an economic impact of a whopping $179,000. How realistic is this figure?
Proponents of stadiums like to point out that the economy is stimulated by the construction jobs to build the stadium. (1) In the case of El Paso, every recent major construction project has gone out to out-of-town builders. Small, trickle down jobs are given to the locals. But, the money leaves town. Regardless, the jobs are temporary and end as soon as the stadium is built.
Finally proponents like to point out that the people attending the games generate new spending in the community. (1) Unfortunately that is not true. People who attend the games simply reshuffle their disposable incomes away from movies and other local attractions to attend the games. (2) Randal Vataha, founder of Game Plan who has been involved in minor league transactions agrees that minor league teams compete with movie theaters for entertainment dollars. (5) No new spending is generated with the stadium.
Here is something else to ponder; economists generally disagree on almost everything, except that they are in agreement on one thing, that when it comes to public financed stadiums; the teams, i.e. the owners win and the taxpayers lose. (4)
And since the city leaders love to compare El Paso to other cities, here is one they should be paying attention to. Glendale, who actually negotiated a deal, unlike El Paso, with the team owners to pay $2.2 million in annual rent payments, will still lose $9 million annually even if their home team were to dominate their league. (3)
Susie Byrd, Steve Ortega and Joyce Wilson, along with the complicit news media have done a good job in creating the illusion that the baseball stadium is a good thing for El Paso. The truth is that the economics of minor league baseball, especially with the contract that the city leaders put in place with Foster and Hunt will only benefit Foster and Hunt at the expense of the city’s taxpayers.
Forty-nine percent of the revenues for teams come from ticket sales. (5) The costs for the players are paid for by the big-league affiliates. Without the expense of a stadium, Foster and Hunt stand to make some serious money off, of the backs of the local taxpayers.
Now that’s a good deal, where do I sign up?
- Brooking, Article | Summer 1997, “Sports, Jobs, & Taxes: Are New Stadiums Worth the Cost?”, By: Andrew Zimbalist and Roger G. Noll Wisconsin Reporter
- “Selig defends sports stadiums funded by taxpayers”, Unknown author, November 28, 2012, online blog accessed on April 25, 2013
- The Atlantic, If You Build It, They Might Not Come: “The Risky Economics of Sports Stadiums”, Pat Garofalo and Travis Waldron, September 7 2012 Reason.com
- “Taxpayers on the Hook for Gwinnett, Ga. Baseball Stadium Public subsidies for stadiums are win-lose propositions: The teams win, and the taxpayers lose”, A. Barton Hinkle, October 31, 2012
- Forbes, “Minor Leagues, Major Profits”, Michael K. Ozanian, August 08, 2008
- Inside Tucson Business, “Tucson Padres confident they’ll stay another year, maybe longer”, Kaity Sitzman, June 29, 2012
- Minor League Baseball 2011 Attendance Analysis, David P. Kronheim
- The City of El Paso Downtown Ballpark Factsheet