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

Is a baseball complex a public good?

Baseball [picture from commons.wikimedia.com]

[ADDED 8/8/14: My Economics colleague Rick Eichhorn points out that a baseball complex cannot by definition be a public good, because it cannot be, in economist-speak, "non-rival and non-excludable." So to be precise, I am asking: Can a baseball complex provide a public good, that being economic vitality, from which all (baseball players or not) benefit, and which the market on its own cannot provide? As you will see from the following, I am dubious. Quite dubious, really.]

The Iowa Transportation Commission recently awarded a $1.266 million RISE (Revitalize Iowa's Sound Economy) grant to a baseball/softball complex planned northeast of Marion, on State Route 13 near County Home Road. The grant is in addition to a $750,000 grant from the City of Marion, and Linn County's effective donation of the (county-owned) land. The business owners hope to raise an additional $4.5 million in public funds, in all amounting to somewhat more than half the cost of the $11 million project. The rest of the funding would be raised from private sources.

PMBF president Jack Roeder, formerly general manager of the Cedar Rapids Kernels minor league baseball team, projects the 17 fields will host local leagues, travel tournaments for high school prospects, and (at the specially constructed Miracle Field) games for people with physical disabilities. They anticipate 120,000 visitors annually, half from out of the area, $25 million in direct spending, and creation of 200 full- and part-time jobs.

It is a good idea to take claims of future economic benefit with a grain or two of salt. There are unknowns beyond this:

1. Is there a shortage of baseball/softball facilities in the area? The complex would add to an existing stock of area ball parks, including Diamonds Sports Complex in Cedar Rapids, which consists of four diamonds and is also located on Route 13, about eight miles south of the proposed Prospect Meadows Ball Fields location.
2. Could the project have been done without public funds? The non-profit West Michigan Sports Commission just opened a similar, though smaller, facility in Grand Rapids, funded entirely with corporate, private and non-profit money.
3. Will the development exacerbate sprawl, which Marion has already done to a fare-thee-well? The RISE grant is for road-building, at a time when the region (just like most of the country) is having a difficult time keeping up with maintenance of existing infrastructure.
4. Is travel baseball a good idea, or does it put excessive strain on young arms as they chase the dream of professional contracts or college scholarships?

Besides not knowing the answers to any of those questions, I have to admit to rather blinkered vision. If you've spent any time on this blog you've detected a strong bias towards downtown and neighborhood development. (I like trails, too, but don't talk about them as much.) I don't spend much mental energy on either amateur baseball or on Farthest Marion. So take that into account when you read the following.

There is a role for government in economic development. But just because markets do fail from time to time doesn't mean everything we don't have is the result of a market failure. Iowa State University economist David Swenson, in a paper explaining the origins and use of tax increment financing (not yet a factor in the ball field case), lists five factors encouraging state and local governments to go beyond traditional regulation and service provision, beginning in the 1980s: (1) rural household dislocation and out-migration, (2) large losses in traditional manufacturing capacity, (3) absence of economic diversification, (4) statewide depopulation, and (5) erosion of small town commerce and social institutions (pp. 2-3). Not all of these pertain to metropolitan Cedar Rapids, of course, but enough do that we participate in the nationwide scramble for new enterprises. This scrambling is not always well-advised or fiscally efficient. Again Swenson:

[T]remendous increases in competition for capital development among the states and cities have led states and local governments to use more types and greater inducements to support growth.... It has now evolved that for any city or state to be competitive, there must be a substantial "standing offer" of incentives on the table or business will look elsewhere.... As the economic development process is informationally asymmetric, that is, the firm has all of the knowledge and the awarding governments only know what the firm tells them, one must assume that all governments, state and local, frequently make inefficient decisions regarding public subsidy of development, and that public resources are therefore not used for the best purposes (pp. 4-5).

How, then, should local governments approach economic development? Adam Smith, in his brilliant and authoritative though occasionally ponderous Wealth of Nations, published in 1776, recognized the existence of market failures. In Book V, he explains it is the duty of the sovereign to erect public works and institutions, which are unprofitable to private investors but needed by society. (For example, roads and bridges are needed to facilitate commerce, and schools are needed to promote the instruction of youth.) But even so, he is ambivalent about government activity in this area, fearing that officials will respond to political power rather than to genuine social need. Funding public works through user fees such as bridge tolls, for example, ensures bridges "can be made only where that commerce requires them, and consequently where it is proper to make them" (V.i.iii, Art. 1). The genuineness of social need is a matter of perception, of course, which gets us away from the mechanistic operations of the economic marketplace and puts us in danger of manipulation.

Smith's argument remains valid today, even as the scope of government necessarily has expanded greatly since 1776 in order to keep pace with economic and technological change. Faced with this reality, we can either deny any governmental efficacy and reject its role entirely, or tolerate its great inefficiencies and hope that occasionally the interests of the powerful will coincide with ours, or figure out some way of making government work efficiently in the general interest. That's a tall order, but here are a couple of suggestions by way of procedures that I think will improve governmental responsiveness:

1. Empower metropolitan regional governments (see Calthorpe and Fulton, ch. 4). Political arrangements should be scaled to reflect the realities of people's lives and our economies. Regional planning and revenue-sharing will reduce the ability of private interests like Physicians Clinic of Iowa to play municipalities off against each other, so that a win for Cedar Rapids (or Hiawatha) is a win for the whole region. It thus eliminates one of the main drivers of sprawl.
2. Economic gardening (see Hamilton-Pennell; Marohn, pt. 2). Rather than having other taxpayers subsidize the creation of new businesses, what can we do to enhance the success of existing businesses? By providing technical and information assistance to small businesses, Littleton, Colorado (which pioneered this approach 25 years ago) has grown its economy without special subsidies or breaks. As Chuck Marohn of Strong Towns points out, this involves an accumulation of small efforts and results, none of which is individually photogenic. But where tried it has brought results at a much lower cost than falling for the big promises of those who happen to be politically well-placed. Marohn concludes: [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.

I oppose public funding for Prospect Meadows Ball Fields, for the same reason that I opposed the $10 million local governments are sinking into redoing Westdale Mall. They are substantial public investments without a public goods rationale, responding to the political influence of private power rather than to genuine social need. I'm ambivalent about the $250 million extension of Route 100, but find the public goods arguments I've heard so far to be weak.

Our common life in the next century requires a role for government, but only if it's done right. We simply must find a better way.

SOURCES

Peter Calthorpe and William Fulton, The Regional City: Planning for the End of Sprawl (Washington: Island Press, 2001).

"City of Marion Pledges Support for Prospect Meadows Ball Fields," Cedar Rapids Gazette, 22 February 2013, http://thegazette.com/2013/02/22/city-of-marion-pledges-support-for-prospect-meadows-ball-fields/

Pat Evans, "Sports Complex Forecasts $20M Economic Impact," Grand Rapids Business Journal, 1 August 2014, http://www.grbj.com/articles/80252-sports-complex-forecasts-20m-economic-impact

Christine Hamilton-Pennell, Strengthen Your Local Economy Through Economic Gardening (ICMA Press, 2010). An excerpt is here; more information on the "Growing Local Economies" website [http://growinglocaleconomies.com/economic_gardening].

Chuck Marohn, "From the Mayor's Office," Strong Towns, 22 March 2012, http://www.strongtowns.org/from-the-mayors-office-strateg/

Rick Smith, "Cedar Rapids' Prospect Meadows Project Receives $1.3 Million," Cedar Rapids Gazette, 10 June 2014, http://thegazette.com/subject/news/cedar-rapids-prospect-meadows-project-receives-13-million-20140610?utm_source=thegazette&utm_medium=web&utm_campaign=discovery

David Swenson, "Tax Increment Financing in Iowa: Background, Research and Recommendations," presentation to the House Ways and Means subcommittee, 27 February 2012, http://www.econ.iastate.edu/research/other/p14935

Please rise, remove your hats, and pay attention to this commercial

Yesterday I took advantage of a lovely afternoon and got out to my first Kernels game of the year. The Kernels are a low minor league affiliate of the Minnesota Twins, having just switched affiliations after 20 years with the verbosely-named Los Angeles Angels of Anaheim. They play in Veterans Memorial Stadium on the city's southwest side maybe two miles from downtown. The stadium is located in an area devoted to sports facilities, containing in addition the ice arena, the football stadium shared by all the city's high schools, and some tennis courts. (The idea of such special districts is to separate functions that really can't be integrated into a neighborhood structure, although there are neighborhoods right around the area that surely have to deal with parking and noise issues.) The official name of their facility actually is Perfect Game Field at Veterans Memorial Stadium, which allows us to honor veterans while simultaneously selling naming rights. The Angels aren't the only ones who tend to the verbose, I guess!

(In this picture, swiped from www.kernels.com, we are looking more or less south. Rockford Road runs along the left side. The ice arena appears at the top of the picture. The circly thingy between the ice arena and the stadium is the veterans' memorial. You can see the tennis courts along the right side of the picture. Kingston Stadium is across the parking lot. Note the proximity of houses at the bottom of the picture, across 8th Avenue. A similar neighborhood is across 15th Street from Kingston Stadium.)

The Kernels won, and I ran into two people I hadn't seen in awhile. Kernels' uber-prospect Byron Buxton beat out an infield hit, hit a mammoth home run, and laid down a sacrifice bunt; he's hitting .392, and Twins fans may justifiably salivate for the day he arrives in the majors..

Some post I should talk about baseball, and baseball parks as places. (One of my conversations yesterday, with former Lisbon HS teacher Greg Carter, touched on that very subject.) But today I want to complain about one aspect of an otherwise pleasant experience.

I've been attending baseball games for almost 50 years, and have seen many changes in how they're presented. By now I've gotten used to advertising on the outfield wall, commercials between innings and naming rights for everything that moves (none of which were features of the Wrigley Field of my childhood). I understand that baseball is a business, and that underneath the transplendent experience I had yesterday is some rather vigorous commerce. I get that. I'm OK with that.

I'm not OK with sponsoring the national anthem.

The national anthem ("The Star-Spangled Banner") has been sung at major and minor league baseball games since the 1940s, when the feature was added in hopes of buttering up the U.S. government enough to be allowed to continue to operate during World War II. It's a civil religious exercise that is a little silly on some level, but don't tell that to fans at a minor league baseball park. Minor league baseball and American civil religion go together like hot dogs and buns. When it's time for the anthem, the announcer doesn't need to tell us (though he does anyway) to stand at attention and remove our hats. 

Which is all the more reason NOT TO SELL ADVERTISING ON THE NATIONAL ANTHEM. (I'm sorry, was I shouting? I didn't mean to.) I've seen a lot of minor league games around the country, and the Kernels are the ONLY TEAM I KNOW THAT DOES THIS!! (Oops. I did it again.) The current sponsor is Cedar Memorial Cemetery. So we rise, remove our caps, and get a commercial for the cemetery before the anthem is played. Before Cedar Memorial, the sponsor was Wendy's Restaurants, with the spiel delivered by a retired military officer in uniform. Talk about wrapping commerce in the flag!

(Pledging allegiance to Cedar Memorial Cemetery, 5/20/2013)

The advantage to the sponsor is obvious. Of all the companies that sponsor ads on the outfield wall, goofy goggles races, or ads that play on the video screen before the game and between innings (which everyone born since 1950 has long-since learned to tune out), Cedar Memorial is the only one who is guaranteed a totally attentive audience. This may be great for the cemetery, and the Kernels if they're getting an appropriate premium price for this ad, but it seems grossly unfair to me. Maybe 'business ethics' is an oxymoron. Maybe we should accept the logic of the market, and the superior judgment of the Job Creators, but this seems to cross a line of grotesqueness. They are taking advantage of people's feelings of patriotism, and the reverent behavior that flows from that, to pitch them a product.

I don't know how to act when the commercial is showing. I hate being manipulated, and this manipulation is so blatant I feel duty bound not to go along with it. But how? I've refused to stand during the commercial, but I feel conspicuous, which shouldn't be bad, since I'm standing up (well, sitting down) for my convictions, but as a college professor I feel suspect enough already when it comes to civil religious observations. AND I still have to pay attention to the damned commercial, so I'll know when it's time to stand for the actual anthem
. 

I am dust, and to dust I will return. When I do, it occurs to me I could go far towards securing the financial future of my loved ones by having commercials at particularly sensitive points in the memorial service. Dairy Queen, are you interested? My church, I'm sure, would never go for this, but I bet Cedar Memorial would be fine with it!