Why Baseball Needs New York to Just Say No

Article excerpt

THE YANKEES CAN AFFORD $500 MIL FOR A NEW STADIUM--AND THEY DON'T EVEN NEED ONE.

All of baseball is watching the New York Yankees, and not just because, with an extraordinary first-half start, they're on track to set a major league record this season with 122 victories. A more mundane drama--one that since 1982 has been played out in cities across America to the rune of $5 billion in taxpayer money--is unfolding, as George Steinbrenner joins the long line of team owners who have held up their city governments for new facilities. Steinbrenner wants to leave legendary Yankee Stadium in the Bronx for a site in Manhattan that might cost more than $1 billion to develop. Short of that, he's threatened to move the team to New Jersey or anywhere else that will insure him bigger profits. In early July he threw down the gauntlet to Bronx Borough President Fernando Ferrer, saying, "If he can guarantee we'll get 3 million [in 1998 attendance], then I'll sit down and talk about the Bronx," to which Ferrer dutifully responded with suggestions for ways the City of New York could buy up hundreds of thousands of tickets to make George's day.

This kind of bluster by team owners and scared-rabbit responses from city officials is nothing new. But, as with so many things, New York is different. The Yankees are the richest team in baseball. Even playing in their supposedly antiquated ballpark, they earned $28 million more than any other team in Major League Base ball (MLB) in 1996, the last year for which complete data are available. Their twelve-year, $500 million cable and TV contract, the biggest in history for a sports franchise, means they make huge amounts of money even if attendance does not reach the "magic" 3 million level (which makes Steinbrenner's challenge to Ferrer particularly disingenuous). With the revenue they generate right now, the Yankees can pay more for players than any other team. In fact, when baseball teams in most other cities demand new ballparks, a driving force is the need to earn more to compete with the Yankees for the best players. The Baltimore Orioles, Colorado Rockies, Texas Rangers and Cleveland Indians each demanded a stadium to earn sufficient revenue to attract the same number of high-quality players as the Yankees. Each team received sweetheart deals that saddled taxpayers with hundreds of millions of dollars of additional taxes, but none of those teams earn as much as the Yankees. And this is why whatever New York does will affect taxpayers and baseball fans everywhere. If voters in the New York region can restrain their elected leaders from giving the Yankees a subsidy, other teams will have less need to demand more welfare. In addition, New York can save baseball's competitiveness by saying no, since an even wealthier, subsidized Yankees team could rob other cities of their stars and thus weaken the game.

And there is something more. True, with revenues that already dwarf those of every other team, the Yankees do not need a new stadium. But if they do want a new stadium--and no one has ever analyzed this before--the revenue potential from a new ballpark is so large that without any public money, the Yankees could afford to finance a stadium that costs as much as $500 million and still make a profit of from $7 million to $32 million a year.

Before going into specifics, one question must be answered. Why do frugal taxpayers and conservative politicians agree to give teams subsidies? The sports leagues are monopolies, and they can demand subsidies by insuring that the number of teams is always less than the number of cities that want one. Those without teams dangle subsidies to convince teams to move, and those with teams provide subsidies to avoid losing franchises. Also, by limiting both the number of teams in large markets and revenue sharing, the leagues guarantee that teams in smaller markets are always at an economic disadvantage. Smaller-market teams then demand subsidies to generate sufficient revenue to compete with big-market teams for players. …