Major League City

Baltimore has an aged arena that is insufficient for the needs of the community for such a venue. A study was done to assess the feasibility of replacing the arena with a new facility either in the same or a different location in town.

One of the findings of the study is that Baltimore will never be able to attract either an NHL or an NBA franchise. The rationale is simple and honest. Teams in Philadelphia and Washington in those sports would not be amenable to a competitor so near to them. The report suggests a new facility would be attractive to an Arena football team and minor league hockey. This suggestion comes under criticism as consigning Baltimore to be a minor league city.

Here is my letter to the columnist who made the criticism.

I was wondering what makes a city major league. I assume you don’t mean the tautology that a city is major league because it has major league sports. In that case, the concept of major league city becomes analytically meaningless. It does beg the question, however, of whether one major league franchise is sufficient to be major league, or if two, three or four are really necessary for a city to be major league. If it takes four, LA is not a major league city. That seems rather hard to accept. If it only takes one, then Green Bay, WI is a major league city, and that too is hard to accept. More importantly, what exactly are the benefits to the citizens of being a “major league city”, however that term is defined?

Studies have been conducted of the value of having professional sports franchises using a variety of methodologies. Very few have found the benefits to outweigh the costs, and some have specifically addressed the major league city issue. For example, Bruce Johnson, Mike Mondello, and John Whitehead conducted a contingent valuation method analysis of the value of the Jacksonville Jaguars to the citizens of Jacksonville and, at the same time, of the value to those same citizens of attracting an NBA franchise. Their technique allows them to separate the value from attending games from the value from the mere existence of the franchise. The existence value can be likened to the “major league city” benefits. For neither the Jaguars nor the proposed NBA franchise did this existence value come anywhere near the cost of stadium or arena construction. Moreover, after adding in the benefits from attendance at Jaguar games, the value of the franchise to the city still was well below stadium costs.

Johnson, Groothuis, and Whitehead performed the same analysis on the value of the Pittsburgh Penguins. Again, the value from existence of the franchise was far below the cost of an arena. Aju Fenn and John Crooker conducted a similar analysis on the Minnesota Vikings with the same basic conclusions.

So, while I agree that NBA basketball and NHL hockey provide enjoyment and benefits to fans of all types, those benefits rarely are sufficient to justify millions of dollars of public spending on a new arena.

Studies like that done by KPMG about a new arena for Baltimore have been thoroughly discredited by independent observers. They are much like the predictions of psychics. While a psychic’s predictions of the future are rarely assessed for their accuracy, the predictions of stadium benefits have been thoroughly scrutinized by a wide array of independent researchers. There is almost no support for any of the predictions made by the stadium and arena benefit psychics when those predictions are compared to data on what actually happened. The bottom line is the feasibility studies are more a PR process than a fact finding one. I urge you to not buy into the PR as if it is objective science.

Photo of author

Author: Dennis Coates

Published on:

Published in: