Tuesday, August 7, 2012

Hagerstown Stadium Construction

Hagerstown Maryland has a population of 40,000 and a Single A baseball team called the Suns. You might remember the Suns as the place that Bryce Harper played last year. My co-author and Towson colleague Tom Rhoads told me about how Hagerstown is trying to build a new stadium to avoid the team from moving to Winchester Virginia. You can read our previous research on minor league baseball stadium construction here, but in short we find a new stadium adds about 400,000 fans to attendance over 10 years at the A level that the suns play at. Surprising to me is the cost of the stadium listed at 30 million dollars with 10 million coming from local governments. My previous look into construction cost shows that most single A stadiums cost about half that much.  A good example might be Lancaster Jethawks who saw a large uptick in attendance and then it fell over time.

Typically when these stadiums are being discussed the team and proponents of construction  write large studies claiming that the project will pay for itself and of course Hagerstown has done just that by hiring Ripken baseball. I have only skimmed the report but my quick thoughts. This is meant as a quick comparison and not a criticism of the Ripken study, I have not read it closely enough yet.

1. The report claims that Hagerstown will see large impact on income and jobs. Nearly every study economists have done looking for the impact on the local economy of a new stadium or a team has shown zero effect on income or employment. The reasoning is that although spending on baseball or other sports might go up with a  new team or stadium spending on other entertainment might go down as families choose baseball over movies or eating out. A recent study by Nola Agha shows for some levels of minor league baseball that local incomes increase with new teams or stadium, but not the level Hagerstown plays in.  Hagerstown proximity to Fredrick which also has a minor league team might mean families substitute going out in Hagerstown for going to Fredrick (just 1/2 hour away) to see baseball if the Hagerstown team moves, so for Hagerstown not having a team could have a bigger impact than a town where there is no close other team.

2. The estimated impacts on attendance seem a bit high in the report. The report does use stadiums built in downtowns, while our study uses stadiums built between 1992-2006 so things may have changed. We find that attendance increased roughly 50% for the first 3 or so years, while their low estimates are 60% increases. Additionally, the report suggests attendance stabilizes after the 4th year, while our research shows that roughly 4 years after a stadium is built attendance is 33% higher than before and 10 years later it only about 15% higher. So their estimates in terms of attendance don't seem unreasonable.

3. In a case study of Ceder Rapids an A team with similar attendance we estimate that the return on investment of ticket revenues is roughly 2% this doesn't include concessions. What is very interesting is that with state help the bond to borrow the money will be just above 3% so with parking and concessions it should have a positive return for the team, but look to point number 1 about if this makes sense for the city.

I'm still agnostic if Hagerstown should help fund a stadium, which is strange for an economist as usually one of the tenants of sports economics is that public subsidies are a bad idea. I would be hesitant to support it since the down side of these situations  (construction cost overruns, lower than project attendance) in my anecdotal view seem to happen more than the upsides. However, given the low cost of borrowing and the potential for baseball fans to drive to Fredrick, this just might make sense.



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3 comments:

Millsy said...

Hi,

Interesting to hear about Hagerstown (I am a Frederick county native). Out of curiosity, what do you think the advantage is with "the potential for baseball fans to drive to Fredrick, this just might make sense."? The only benefit there seems to be for the fans, so they don't have to drive too far to get the hell out of Hagerstown.

I assume the municipal boundaries of Frederick are separate from Hagerstown both by city and by county. I would suspect that Hagerstown would prefer that people stay there after the games rather than head to Volt (especially given the shopping amenities they hold so dear...perhaps the only other reason to head to H-town besides the Suns).

Has the team threatened to pull out of Hagerstown if no funding is provided? Also, is the team owned by the Nationals, or is the stadium privately funded by a separate owner (always interesting in these situations who is expected to put up the $$).

Seth Gitter said...

Millsy

First, Hagerstown has said it would consider moving to Winchester, VA if it doesn't get help with a new stadium.

The benefit part wasn't clear. My thinking was that the Suns draw about 140,000 a year without the Suns those 140,000 nights at a game will likely be spent doing something else. My guess is some people will choose to drive to Fredrick or Baltimore for there annual trip or two to the ball park, thus Hagerstown is losing taxes dollars to Fredrick (or the county)

The ownership for the Suns is separate from the Nats and the Nats seem to be asking for better facilities too. http://articles.herald-mail.com/2012-02-14/news/31065412_1_hagerstown-suns-minor-league-bryce-harper-suns-officials

Millsy said...

Ah, sorry it just wasn't clear before what you meant. Yes, I certainly agree there is a pretty close substitute in Frederick if Hagerstown is lost to Winchester.