Some local officials and the Hagerstown Suns baseball club want to build a new city stadium, paid for by the city, county, state and the Suns. As a baseball fan, I hope this happens; a taxpayer-funded stadium would be a nice government subsidy to me. But local residents should wonder whether the Suns and I, and other stadium users, deserve it.
Providing subsidies is a duty of government. But subsidies should only pay for important goods and services that people are somehow obstructed from buying or selling privately. Policy analysts call these situations “market failures.”
For instance, people benefit when the local humane society gathers and cares for stray animals; strays are a nuisance and a health hazard. Yet it’s hard for the humane society to get people to pay their fair share for this service — some will refuse to pay and thus “free ride” off their neighbors’ payments. The “free-rider problem” is a classic market failure, and thus many local governments subsidize the humane society with tax money.
However, government often pays subsidies where there is no market failure. Instead, people have simply decided privately that the goods are not worth the cost, but political leaders — for whatever reason — want them anyway. For instance, nothing prevents airlines from operating commercial flights at Hagerstown Regional Airport, except that local residents don’t have enough demand for the flights to make them profitable. Nonetheless, the federal government pays more than $1 million a year to Cape Air to provide four daily roundtrip flights to Baltimore. Similarly, Washington County will provide $75,000 a year in subsidies to Allegiant Air to provide twice-weekly roundtrips to Orlando, Fla. The subsidies are simply welfare payments to the airlines, airport and travelers — and to politicians, who can say, “See what cool stuff I’ve wrought?” But it’s unclear why any of them should get welfare.
So is a new stadium an appropriate subsidy? And if so, should local residents provide it? (Just because a subsidy is theoretically appropriate doesn’t mean that government must do it.) To decide that, local residents should ask stadium supporters the following questions, and then make a decision based on the answers:
What market failure prevents the Suns or someone else from building a stadium privately? If there is none and the Suns simply want taxpayers to pick up part of the cost, then why should the Suns get welfare?
What public goods do the Suns and other stadium users provide? Could other entities — say, a restaurant or minor league hockey team — provide similar goods? If so, should they be subsidized?
Empirical studies have shown that stadiums and similar projects do not contribute to local economic growth. Instead they redirect spending toward the stadium, away from other local entertainment. Why are the Suns and other stadium users more deserving of those dollars than movie theaters, bowling alleys, bars and restaurants, etc.?
The Suns would pay $300,000 a year to rent the new stadium. Would that money and other stadium revenue cover operating costs? And depreciation (maintenance plus timely renovations)? And payments on government bonds to finance the stadium?
Would the stadium have a dedicated depreciation fund and schedule so that it remains in good condition?
Who would be responsible for overseeing them?
The Maryland Stadium Authority has been criticized for financial losses, mismanagement, and poor accountability and project oversight. What involvement would the MSA have with the stadium project?
I’m sure local residents have many more good questions. I hope stadium supporters can provide good answers. Like I said, a new stadium would be a nice subsidy to me. If Hagers-town builds it, I will come.
But shouldn’t I, and other stadium users, pay for it?
Thomas A. Firey is a senior fellow for the Maryland Public Policy Institute and a Washington County native.