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THE WASHINGTON TIMES
The San Juan Shuffle
July 20, 2003
No doubt much to the chagrin of the folks who have been running Major League Baseball into a ditch during the past 30 years, Arlington County's Board of Supervisors has effectively told them that their jurisdiction can do much better without a big-league franchise. In a letter released on Friday, county Board Chairman Paul Ferguson told Virginia baseball officials that big-league baseball simply could not compete with other available development options.
The Arlington board hurled a dagger through the heart of the argument long advanced by those who have sought to use hundreds of millions of dollars in public funds to subsidize the construction of state-of-the-art ballparks for billionaire ownership groups and millionaire ballplayers. Citing "economic advantages of competing development opportunities," the letter, which was signed by four of the five county supervisors, informed Virginia baseball stadium officials that an alternative development project could generate more than three times the annual tax revenues likely to be produced by the stadium.
For years now, those who want to use public funds to subsidize baseball by building the league's palatial ballparks have argued that subsequent baseball-related tax revenues would more than cover the initial subsidy outlay. (Never mind that those optimistic predictions have rarely been fulfilled.) They have called it a "win- win opportunity." But this argument ignores the most important financial issue - the notion of opportunity cost, which is a fundamental law of economics. In essence, the opportunity cost of pursuing one option is represented by the foregone benefits of pursuing an alternative option.
What Arlington County is telling Major League Baseball is this: The annual opportunity cost to Arlington taxpayers of building a baseball stadium is $7 million. For the prime Arlington site most coveted by Virginia stadium officials, a study commissioned by the county found that a hotel-apartment-retail complex anchored by a convention center could generate $10 million in annual tax revenues. Baseball-related taxes, which would be used to retire bonds issued to build the stadium, would be $3 million, or $7 million per year less.
Fairfax County has told Major League Baseball essentially the same thing. Its board of supervisors voted to nix a proposed stadium in Springfield. Now, only the least appealing of the five primary Northern Virginia sites remains - an outpost in Loudoun County.
The Arlington letter comes only days after baseball missed its self-imposed deadline of the midsummer All-Star Game to render a decision about what to do with the financially distressed Montreal Expos franchise. In February 2002, shortly after Commissioner Bud Selig's threat to eliminate two teams, Major League Baseball purchased the Expos for $120 million. Ever since, the 29 owners have been seeking to sell the team. But first they have been trying to extort commitments from competing states and localities to subsidize a ballpark for the new ownership group. The more money the 29 baseball owners can extort from taxpayers, the more money the prospective ownership groups will have available to bid for the Expos, who are playing 22 "home" games in San Juan, Puerto Rico, this season.
Until recently, the areas competing for the franchise have been Northern Virginia, Washington, D.C., and Portland, Ore. Virginia now seems less and less likely. And Oregon is experiencing extreme financial difficulties. (The state had to close its schools early this year, putting a damper on taxpayer enthusiasm for a big stadium subsidy.) That would appear to increase the District's chances. But baseball owners have suddenly proposed to add San Juan to the mix. Having been seemingly rejected by Northern Virginia, where the annual median family income in Fairfax and Arlington counties is about $100,000 and $80,000, respectively, the geniuses are now eyeing Puerto Rico, where the median family income is a relatively paltry $16,000.
This is a bluff District officials should call before they consider approving anything more than basic infrastructure improvements to lure a franchise. If baseball relocates the Expos to San Juan over the District, which is the hub of the nation's fifth- largest market and one of its wealthiest metropolitan regions, it will be prima facie evidence that the sport is truly being run by fools.