How Spring Training Screws Cities Out Of Millions

Public money for private business is always a bad idea and the spring training scam is just another example of why

(Photo Illustration: Diana Quach)
Mar 29, 2016 at 2:53 PM ET

For players and ballwriters, spring training feels endless. Seven weeks of setting pre-dawn alarm clocks, not remembering the day of the week, and tritely “getting your work in.”

The commonly regurgitated argument for its duration is that, in the olden days of smaller salaries and offseason jobs, players needed the time to get back in shape. Now that baseball is a big-money, year-round enterprise, the thinking goes that starting pitchers need the nearly two months of spring training to build up their arm strength. None of this is true.

The driving factor is that clubs have received generous amounts of public money for state-of-the-art facilities and are locked into leases, with states and municipalities wanting to inject tourism money—hotels, rental cars, restaurants, etc.—into their local economies for as long as possible. It’s also a great business deal for the baseball organizations, some of whom have signed $1-per-year leases and benefited from inter-city bidding wars that resulted in sweetheart deals for ultra-modern facilities. Meanwhile, states are seeing piddly returns on their investment to go with cash-flow shortages.

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Arizona and Florida, which each host 15 clubs for spring training, regularly tout booming business: a study commissioned by the Cactus League claimed $809 million in economic impact for one year’s worth of spring training play and ballpark use while the Grapefruit League touted $753 million in impact.

There’s only one problem: many economists deem those numbers total bunk.

“There’s just no evidence that it does anything,” Philip Porter, an economics professor at the University of South Florida, said, noting that such studies overlook the costs—opportunity and real—of such investments.

After the 1994 baseball strike curtailed the ’95 spring training season and diluted its quality for most of the duration with replacement players, University of Akron professor John Zipp assumed he’d see a negative economic impact because spring training attendance declined 60 percent—he didn’t.

“It’s a wonderful experience,” Zipp said. “It’s just not worth public dollars.”

Critics argue that businesses aren’t going to open solely for spring training, as they’ll still have 11 more months to fill. Further, many out-of-town visitors do not solely travel for spring training but merely include a few games into their pre-existing plans; and hotels need enough capacity so that spring training visitors represent additional business without displacing other tourists.

Those that commission and prepare those economic-impact studies, however, continue to tout the validity of the studies citing the boost seen for each team’s 16 or 17 home games per year.

“I think that debate will probably never be settled,” Arizona Sports and Tourism Authority CEO Tom Sadler said. “I believe in what the economic impact is of the Cactus League being here in March. It’s nearly the economic impact of us hosting a Super Bowl, but ours happens every March. We feel that and we see that in a number of different of industries across the board in Arizona’s economy. I have a hard time accepting that it doesn’t provide a tremendous impact to the state.”

However, third-party economists are not the only ones illustrating that spring training may have a lesser financial impact. Florida’s Office of Economic & Demographic Research reviewed the return on investment for grants issued to professional sports teams and calculated that, for every public dollar spent on spring training facilities, the state received just 11 cents in tax revenue.

Florida’s Real GDP increased $32.9 million over a three-year window—that’s $11 million per year and out of step with the estimated economic impact of three-quarters of a billion dollars. A Palm Beach Post analysis of EDR data from March 2008 to March 2013 showed that tourism spending rose 21 percent in Florida markets that lacked a spring training team and only 15 percent in areas that did have spring training.

In Arizona, a 2015 audit of the AZSTA—which was created by Proposition 302 to help fund sports facilities primarily through hotel and rental-car taxes—deemed tourism revenues to have been “insufficient” to cover obligations for fiscal years 2011-2014 and will “continue to be insufficient” in the future.

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All of that was true even before a Maricopa County Superior Court judge ruled in 2014 that the rental-car tax is unconstitutional because the state constitution restricts vehicle tax revenue to expenditure on related transportation expenses. Two months later, a different judge said the money already collected—the plaintiffs estimate $160 million; the audit reported $122 million —would need to be refunded in addition to the AZSTA losing nearly one-third of its annual budget.

Table 7 of the audit shows the total money pledged to each of the eight publicly-funded Cactus League facilities. For newer constructions such as Camelback Ranch in Glendale, the AZSTA made a $60 million commitment in 2007 that might not get repaid until what’s listed as “2021-2031+.” That means it could extend beyond the projected 30-year shelf life of the authority. As it stands, that $60 million commitment will actually cost $77.1 million including interest.

“The original model within Prop. 302 had very, very aggressive growth rates with no decline in the economy at all over the life of Prop. 302,” AZSTA chief financial officer Kevin Daniels has said.

The AZSTA has a statutorily-defined waterfall of priorities—the bucket on the first level must fill before anything trickles down to the next level—in which the Cactus League ranks third behind the University of Phoenix Stadium (where the NFL’s Cardinals play) and state tourism promotion.

“Nobody predicted a recession,” Sadler said. “It really stunted the growth of this funding source year over year to a point where it’s not going to add up where everybody thought it would but, to date, we have distributed $61 million essentially to three facilities.”

The authority projected that it would disperse $403 million to the Cactus League over 30 years.

“It now looks like it’s going to be—and this is just a point in time, just a projection—probably going to be closer to $250-$275 million,” Sadler said.

The latter number is dependent on the rental-car tax remaining a part of their budget. Should the AZSTA lose its appeal and refund the worst-case scenario of $160 million, the original contribution could be quartered from $400 million to about $100 million.

The MLB teams won’t be on the hook for the shortfall; that obligation will fall on the cities. Of the estimated $141.7 million total cost for the facility and infrastructure, a 2014 Glendale city report noted the Dodgers and White Sox will pay only $10.9 million, or about 7.7 percent of that total. And the two clubs have $1-per-year leases. In fact, the agreement requires the 19-year lease to be paid upfront by both teams, so at least Glendale has already collected its whopping $38 from the two franchises that Forbes valued at a combined $3.55 billion. Let’s hope it wasn’t all spent in one place.

The cost of attending spring training, meanwhile, continues to rise. Those tourist taxes add to the travel bill and, recently, the cost of game tickets has spiked dramatically. That extra money is earmarked for the ballclubs’ coffers and won’t help offset the city’s costs.

Florida is currently building a new $144-million facility to be shared by the Houston Astros and Washington Nationals in West Palm Beach that, with interest, will actually cost about $233 million. That sum will be shared by the county ($116 million), the teams ($67 million), and the state ($50 million). That makes the facility 71 percent publicly funded.

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Even when teams move spring training locations there isn’t any real positive impact. For example, the Astros are leaving Kissimmee in Osceola County and the Nationals are leaving Viera in Brevard County; neither team is likely to see a change in their bottom lines. Porter pointed out that, when the Yankees moved their spring training site from Fort Lauderdale in Broward County on Florida’s east coast to Tampa in Hillsborough County on the west coast, the impact should have been evident in a comparison of the economic activity after the move.

“All those people that are coming would now have gone to a different community,” Porter said. “Since we’re comparing one community to the other, we ought to double the amount of the effect. It ought to really be noticeable.”

Instead? “Nothing happens,” he said.

Porter described the spring training inducement as an invitation for a national company to enter the market and take business from local companies; money spent at the ballpark on tickets, concessions, and advertising is “leakage,” meaning it doesn’t stay local and is instead siphoned off to the home market of the baseball franchise.

An egregious case study concerns the Red Sox’ new spring training facility in Fort Myers of Lee County. When their lease for the older City of Palms Park was nearing its end, Porter said, the local sports authority discussed spending $25 million on renovations to keep the franchise in town. Around the same time, however, nearby Sarasota lost the Cincinnati Reds to Goodyear, Ariz.—the Reds were lured by $32.5 million in public funds to convert an under-construction one-team facility to a modern two-team complex—so Sarasota began bidding against Fort Myers to house the valuable Red Sox franchise.

By the time the negations concluded, Lee County had scrapped its $25 million renovation idea in favor of a new facility that ultimately cost $78 million. The terms of the lease call for the county to “fund one hundred percent (100%) of the Project Cost Budget” while the Red Sox only owe $500,000 annually for the lease—which, with some escalators, amounts to about $16 million over 30 years—while it remains “the exclusive right of the Red Sox to retain all revenues derived from the Project including, without limitation, revenues from tickets, parking, advertising, promotions, sponsorships, scoreboard, LED and billboard signage, concessions, and naming rights with respect to all elements of the Project during the term of the lease.”

“The competition between the two communities put $50 million worth of stadium in Boston’s pocket,” Porter said. “The two communities are only separated by about 40 miles of highway. The people who work there wouldn’t even move, they would have just commuted. It wouldn’t have changed anything in Florida at all, but they gave $50 million of taxpayer money for a new stadium.

“It was just a waste of money that was generated by two cities competing with each other.”

Worse yet? No matter where the Red Sox settled, the project would receive some of the same state funding.

“The state was competing against itself,” Porter said, “and it cost $50 million.”

Oh, but there’s more: though City of Palms Park has been vacant since 2012, Fort Myers is scheduled to pay $1.8 million annually in stadium construction debt service through 2023. So while hotel demand does peak during spring training in February and March, it may not be enough to offset the steep costs. Plus, spring training isn’t the only game in town: amateur sporting events, for instance, also drive demand.

Porter paraphrased renowned University of Chicago sports economist Allen Sanderson by saying that impact studies use only two of the four basic algebraic functions: they can add and multiply, but don’t know how to subtract or divide.

“When you see the economic impact of spring training, you have to take that with a grain of salt,” Porter said. “If the economic impact, as they measure it, was a million dollars but the cost was $20 million dollars, they’d still say the economic impact was a million dollars. They don’t measure costs.”

Others argue that sports provide an intangible value of stature and civic pride. Daily spring training news stories in print and on TV can introduce host cities to fans in other areas.

“Is there a value to having a sports franchise? Absolutely,” Neil deMause, co-author of Field of Schemes: How the Great Stadium Swindle Turns Public Money Into Private Profit, said. “Is there a value beyond just the sheer economics of it? Absolutely.

“It’s valuable, but it’s not more valuable than, like, another half-a-dozen schools. It’s a matter of trying to look at it realistically.”

Not only are cities and states spending lavishly on professional sports at the expense of other needs, such as education, but they also are making such gifts to teams playing in a league that generated $9.5 billion in revenue last year.

“The last part of the whole problem,” Porter said, “is baseball doesn’t need the money.”