10th anniversary post: Is a baseball complex a (merit) good?

 

Source: Google Maps

In the summer of 2014, I wrote a reaction to news of state and local government contributions to a new baseball complex outside of Marion. At the time, the state had provided a $1.266 million grant, the City of Marion $750,000, and Linn County had donated the land. Ultimately, according to the operation's webpage, Prospect Meadows secured $5.5 million in public funding, about half the startup cost of the project ("Our Story" n.d.).

At the time I was less impressed by the audacious scope of the project than by the very ordinariness of the public-private transaction. There hadn't seemed to be a lot of controversy or even discussion about the governments donating to the creation of a private business. Yet, in a world (Earth) where government budgets at all levels are stressed, and in which market efficiency is praised as an alternative to governmental inefficiency, this was a lot of money to spend without examining the very basis of the expenditure. I quoted Adam Smith on public works, which are necessary but properly...

can be made only where that commerce requires them, and consequently where it is proper to make them (Wealth of Nations, V.i.iii, Art.1)

and Strong Towns on providing existing businesses with technical assistance rather than handouts to selected ventures, which would include baseball complexes and our current obsession, data centers:

[B]y the way, we'll still be bringing jobs and new businesses in from outside the community. The only difference will be that we won't be paying them to come--they will want to be here. If we are successful--and we will be--they will be paying us to come here. (Marohn 2012: pt.2)

Prospect Meadows began operation in 2019, right before the onset of the coronavirus pandemic--certainly not the most auspicious year for any business, though it did receive over $2.6 million in American Rescue Plan Act money (King 2024: 7A).

Now comes word that the firm is asking governments for additional money to pay off debts. Projections of future revenue remain optimistic, but they have not been hitting their targets, and the well-connected, well-funded management of Prospect Meadows have reached out again. In September, the Linn County Board of Supervisors approved a $250,000 grant contingent on additional funding being raised by the firm. The City of Cedar Rapids, whose city limits are about 10 miles from this complex on the other side of the City of Marion, will consider advancing $300,000 that would eventually go to Prospect Meadows from the city's hotel-motel tax fund (King 2024: 1A). 

Local governments are stuck in an unenviable position, because the risk in this venture has already been socialized. As Linn County Supervisor Louis Zumbach points out, "If it isn't a ball field, what does it become? Any other use is going to cost more money" (King 2024: 7A).

The Lingering Question: Is Government Support for Prospect Meadows Responding to a Market Failure?

In a mostly-market system such as America's, government's role is to act when the private market is not meeting some need. This contingency is known as market failure, which admittedly [a] has a certain pejorative sound to it, unintended, but there it is; and [b] is a vague and plastic concept. You will see market failure where I don't, and vice versa. Not wrong, just different. 

Market failures come in a variety of forms but fall into two broad types. Sometimes the conditions for a market don't exist for a good, like clean air (not excludable) or food safety (buyers have insufficient information) or some monopoly (insufficient competition). Other times all of those conditions exist, but the outcomes are politically unacceptable, like recessions (very unpleasant and scary) or access to parks (everyone deserves this regardless of ability to pay). Market transactions can have externalities, effects that fall on people other than the buyer or seller; these can be negative (pollution) or positive (better educated people in your community). There's much more to this, of course, but we are busy people; if you want to know more, take a course in economics.

Prospect Meadows has been making two market failure arguments for public support. One is based on services they can provide to people who would otherwise lack those opportunities. The Kiwanis Miracle League provides baseball games, equipment and uniforms to physically or mentally disabled young people. The Optimist League of Dreams serves 2nd-5th graders whose families were displaced by the 2008 flood.

The second argument is that players and their families traveling to baseball showcases bring an infusion of money into the local economy through hotel stays and restaurant meals. This is the rationale for financial contributions to Prospect Meadows from distant Cedar Rapids. Board chair Tim Strellner claims Prospect Meadows created over $11 million in local economic impact in 2022, resulting in $1 million in tax payments to local governments (King 2024: 7A). That's out of a gross domestic product for Linn County of nearly $20 billion (FRED).

Allowing for some exaggeration, would that economic activity not have occurred but for the showcases offered by Prospect Meadows? Would the several dozen children been inactive but for the opportunities of their programming? Probably no to both questions, but that's the justification for massive government support for this venture.

Conclusions

Government support for Prospect Meadows over the last decade, and continuing into the next one, likely owes more to personal connections, and the tendency of policy makers to be impressed by big splashy plans. I wish we could be more principled: no government money unless a market failure is conclusively demonstrated. I wish the public would be more allergic to situations where profits are private but risk is socialized. 

$300,000 is admittedly a small part of the city's FY25 budget of nearly $900 million. It's only worth mentioning as one probably common case of expenditure that socializes what should be private risk. Collectively these expenditures have opportunity costs, because money spent thusly can't go to street repair or housing assistance or park equipment. None of those will gin up business for our hotels, but that shouldn't be the business of government. They would enable the daily lives of residents, and that should be the business of government.

NEW SOURCE: Grace King, "Prospect Meadows Complex Seeks Public Aid," Cedar Rapids Gazette, 18 September 2024, 1A, 7A