January 03, 2005

Road to PSLs paved with good intentions

Better Late Than Never Dept.: Ike Brannon, an economist with the Congressional Joint Economic Committee, has an op-ed in today's Washington Times suggesting that "an aggressive use of personal seat licenses could generate nearly all of the revenue necessary to finance Washington's baseball stadium." Aside from the obvious problem - with D.C. having agreed last week to foot almost the entire cost of the $500-million-plus stadium, that wipes out any incentive for the Nationals to commit any of their own money - Brannon's essay reveals a fundamental misunderstanding about the reasons behind stadium subsidies.

Brannon's plan would have the team selling PSLs (the guaranteed right to buy season tickets, basically) for the 10,000 best seats, with the guarantee that the ticket price for those seats would remain at $25 for the next 15 years. That way, he writes:

The holder of a 20-game package could reasonably assume he could re-sell each ticket for an average of anywhere from $75 to $100; since these are the best seats in the stadium and the boatload of lobbyists will doubtless want to be in this market, this seems conservative.

With the cash from all these erstwhile ticket scalpers in their pocket, plus naming-rights and parking revenues, estimates Brannon, the team could easily clear $600 million, more than enough to pay off stadium construction costs without resorting to public coffers.

While doubtless a tempting argument to free-market advocates (Brannon is a contributor to the libertarian Cato Institute's magazine Regulation), this isn't likely to be so alluring to either MLB or whichever rich dude ends up owning the Nationals. Sure, by cutting top ticket prices to $25 and auctioning off the rights to scalp those tickets to the highest bidder, the Nats could raise tons of money - but at the expense of all the revenue they lose by not just charging $100 a pop themselves. Likewise, the team could also take out loans backed by future ticket revenue, or sell scalping rights to a private company (a la the Chicago Cubs' recent shenanigans), or any of a hundred other mechanisms. But in every case - and devoting naming-rights cash to the cause would have the same problem - the money would end up coming straight out of the team's bottom line.

The reason why baseball teams demand stadium subsidies isn't because they "can't afford it" - most sports franchises these days are owned by billionaires, and Selig himself has a discretionary slush fund worth hundreds of millions of dollars - but because paying for stadiums themselves would cut into their profits. (Admittedly, there's a point at which a revenue-depleted new stadium would make just playing in the existing RFK Stadium more profitable by comparison, but that's another point that Brannon doesn't address.) Heck, if MLB wanted to build a stadium with private cash, it could have done so in Montreal - without having to cough up usurious payoffs to Peter Angelos in the bargain.

With few exceptions, the money to be made off of new stadiums doesn't come from the stadiums themselves, but from the public subsidies that come along with them. Arguing that teams could afford to build their own new pleasure palaces is a bit like arguing that mobsters could afford to finance their protection-racket thugs without hitting up local shopkeepers for payments - maybe, but that sort of defeats the purpose, you know?