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Home Pete Toms THE POLITICS OF SPRING TRAINING: A GOOD INVESTMENT?

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THE POLITICS OF SPRING TRAINING: A GOOD INVESTMENT? PDF Print E-mail
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Pete Toms Article Archive
Written by Pete Toms   
Sunday, 25 October 2009 16:01

Spring Training

A Florda Senator recently suggested publicly that the state and local governments should invest in MLB spring training to slow the recent migration of clubs to AZ.  The News Service of Florida reported (HT Ballpark Digest);

Sen. Mike Fasano, R-New Port Richey, told the News Service of Florida Monday that while the state probably cannot allocate money to lure new baseball teams to train in Florida as it has done in previous years, at least two will soon be in position to move from Arizona and the state and local communities should try to convince them to come here in other ways.

“We have an obligation to do what we can as a legislative body to keep the teams we have in the Grapefruit League and make sure they stay here,” Fasano said after being notified of the possibility of the relocations during a recent committee meeting. “Florida once was – and still is – the spring training capital of the world, and we need to keep it that.”

AND

“It’s going to be tough to be talking about giving major sports franchises tax incentives when I’ve got constituents who are wondering how they’re going to pay their electric bill,” Fasano said. “It’s going to take dollars and incentives that we don’t have.”

But that does not mean the state should not step up the plate in other ways, he quickly added.

“This is a conversation that has to be developed,” he said. “Maybe (the solution) is having some type of long-term plan, something where we don’t have to implement it until the economy gets better.”

Competition between AZ and FLA to lure MLB spring training to their states began in the late 1980’s.  It was then that local governments in FLA began making significant public investments in baseball facilities to compete within their state for spring training.  In 1993 the Cleveland Indians left AZ for FLA, signalling the beginning of the interstate competition that has continued to the present.  Prior to the Indians move to FLA, there had been an extended period of stability in the  Cactus League with the same eight franchises comprising the circuit.  Much has changed in the past sixteen years.  2009 spring training saw a record fourteen franchises in the Cactus League.  When the Cincinnati Reds move to AZ for 2010 spring training, there will be an equal number of clubs in the Grapefruit and Cactus Leagues.  The competition between AZ and FLA to attract MLB spring training is now focused on the Cubs and Brewers, both Cactus League clubs with leases soon to expire. (If the Cubs pay a $4.2 million penalty to Mesa they can leave as early as 2012, the Brewers lease expires in 2012)

While the competition for Cubs and Brewers spring training (especially the Cubs) is spirited (both in AZ and FLA), the debate over how much (if any) economic benefit is derived from these investments continues.  Earlier this year, Charles Fountain wrote in The National Review Online (HT The Sports Economist);

Take in a Grapefruit League baseball game this year, and a Florida State University researcher might ask you how much money you’re spending and just how and where you’re spending it. The Florida Sports Foundation commissioned the surveys in an effort to update a nine-year-old study that showed spring training brought a $450 million benefit to the Florida economy.

That $450 million figure has been a comfort to Florida legislators, who have twice passed legislation to spend a total of $150 million on the construction and improvement of spring-training facilities. Similar studies in Arizona have spurred that state’s legislature to approve more than $250 million for the same purpose. In both cases, state-level spending was matched dollar-for-dollar by local funds, which brings the public investment in spring training to roughly $800 million over the last decade.

Select Read More to see other details on the business of Spring Training by Pete Toms

In the aforementioned piece from “The News Service of Florida”, The Florida Sports Foundation (“the official sports promotion and development organization for the State of Florida”) has concluded that the economic benefits of spring training to Floridians exceeds their previous estimate of $450 million.  Sports Foundation spokesman Nick Gandy is quoted, “We did a survey this past spring that showed that there’s $750 million of economic impact (from spring training), so this is something worth hanging onto,”

Freelance journalist David Moulton reported recently in the Naples Daily News on efforts to bring Cubs spring training to Collier County.  (The piece contains an Editor’s Note that Mr. Moulton is active in publicly advocating that local officials support efforts to bring Cubs spring training to Naples)  Mr. Moulton quotes Craig Bouchard, a Chicago businessman and also one of the principals in the coalition to bring Cubs spring training to Naples.

“This effort will inject $50 million annually into the county, which would contain its spring training site, player rehabilitation, a minor league team, their minor league operations headquarters and a host of other functions year-round,” he said. “We hope to structure a deal that runs a minimum of 30 years. That’s $1.5 billion in economic impact, not counting inflation.”

Also from Mr. Moulton’s article, “Arizona’s most recent study said the Chicago Cubs’ direct economic impact to Mesa was $31.1 million annually. The impact for Arizona was figured to be $52.2 million annually.”

There is an extensive body of research from independent “sports economists” that consistently discredits the conclusions of the research into the economic benefits of spring training (often referred to as “advocacy studies” or “fantasy documents” by opponents of “public dollars for private stadiums”).  The two groups reach drastically different conclusions when calculating the following fundamentals to the equation.

  • Ÿ  the multiplier effects of stadium construction, fan spending and jobs at the stadium
  • the number of days per year that the stadium is in use
  • Ÿ  estimates of how many tourists attend games
  • Ÿ  estimates of how many tourists’ principal motivation in visiting AZ or FLA is spring training
  • Ÿ  estimates of the duration of the tourists stay in the county/state
  • Ÿ  estimates of the amount of money spent per day / per tourist
  • the number of times a city’s name is mentioned in media reporting on the team and the dollar valuation of it

The debate over the amount of dollars that tourists spend as a result of spring training is particularly important because new facilities often receive public financing with the expectation that there will be a resulting increase in revenues from hotel and car rental taxes. The “sports economists” often argue the “opportunity cost “ of investing public dollars in these facilities. More plainly, could the government(s) make better use of the money.

From the aforementioned piece by Charles Fountain;

Whatever the researchers report, some economists simply won’t buy it. They think these spring-training subsidies are nothing more than welfare for professional-sports franchises, and that the studies constitute nothing more than pseudo-economics.

AND

“Politicians are making these claims, not economists,” said Phillip Porter, a professor of economics at the University of South Florida and the most oft-quoted critic of the economic-impact claims surrounding spring training….

Porter and his colleagues in the academic community express open contempt for the process used in these studies and only a slightly veiled contempt for the people who’ve done them.

“These people may have some economic training, but they’re not professional economists; they’re not Ph.D.-level economists that are looking at how these models are built or how the models are done,” said Porter. “They’re the kind of people who do government-consulting jobs or work in government offices, like the Florida division of tourism.”

AND

In every city or county with a spring-training facility, the bottom-line number on the public ledger for that facility is red. Every lease is different; the one constant is that they are written to favor the ball club. Communities once had more favorable terms, but when they started building new facilities and competing for teams in the 1980s, the balance of negotiating power shifted to the teams, and the leases reflect that. Many leases call for payments of $100,000 to $300,000 per year. Some split revenues from ticket sales, concessions, and parking between the team and the city/county; some give all that money to the team. Virtually all leases call for the municipality to absorb all operations and maintenance costs.

(This 2006 piece from Kathleen McLaughlin for the Sarasota Herald-Tribune argues the same POV as Mr. Fountain and is also very thorough and informative)

Earlier this year, Spring Training Online, used the departure of the Dodgers’ spring training from Vero Beach FLA to AZ to demonstrate that the “sports economists’” have got it wrong.

Sales-tax receipts in Indian River County, where Vero Beach is located, declined $1.8 million in March 2009 when compared to March 2008: $10.8 million in 2008 versus $8.9 million in 2007. Though there was a downtown in the economy from year to year, the biggest change in the local economy was the presence of the Los Angeles Dodgers for spring training -- a partial one, to be sire -- in 2008. Take the Dodgers out of the equation, and you have a significant drop in sales-tax receipts…..

Economists with an axe to grind, of course, say the drop in sales-tax revenues was wholly due to the declining economy, and that spring training has a negligible impact on the local economy. But the numbers don't back up that assertion, and arguing a sales-tax decline of over 10 percent was not impacted by the loss of spring training is a specious argument.

While MLB franchises continue to benefit from the vigorous competition amongst communities in AZ and FLA for spring training, the overall trend appears to be pointing towards governments striking more equitable lease agreements with the big league team.  David Broughton reported earlier this year in The SportsBusiness Journal.

Municipalities in both Florida and Arizona have been quick to fund ballpark projects in recent years, working with developers to create large mixed-use districts. In exchange for funding these facilities, communities have become more aggressive in how they structure the teams’ leases.

“Revenue recovery is key nowadays,” said Mark Coronado, community and recreation services director in Surprise, Ariz., which owns and operates the $48 million facility that lured the Texas Rangers and Kansas City Royals from Florida in spring 2003. “When it comes down to it, we’re all going to provide comparable, quality facilities. But now we all have to figure out how to pay all our debt.”

In Florida, any municipality that wants to qualify for an annual $500,000 spring training facility grant from the state must have in place a lease deal of at least 20 years. Towns in both states are requiring teams to play more games at their ballparks than in years past and are requiring reimbursement for lost games. Clauses seek more night games to drive food and beverage revenue for all sides.

But perhaps the biggest change is that leases are beginning to look more like partnerships than landlord-tenant covenants.

The benefits to MLB franchises from the competition for “spring training” are obvious.  Not only are these new spring training complexes superior training facilities but they also generate more revenue due to better concessions, larger seating capacity and more recently, the inclusion of “premium seating”.  Last year Don Muret reported for The Sports Business Journal on the move of the Dodgers and White Sox spring training to their new and shared “Camelback Ranch” facility in Glendale AZ.

The Los Angeles Dodgers and Chicago White Sox have smashed the ceiling for spring training ticket prices to test the big league premium-seat model at their new Cactus League park.

The two clubs have put a $90-a-game price tag on season tickets for 300 padded seats in the Home Plate Club at Camelback Ranch, their $80 million, 13,000-capacity facility opening in February in Glendale, Ariz. The ticket price includes VIP parking (a $10 value), a $20 food/retail credit, a premium souvenir, complimentary water, sunscreen and a scented towel, an idea the Dodgers got from the nation’s premier golf courses.

The Cubs will be moving to a new, state of the art, spring training facility after 2012.  The approximately $4 million penalty they will pay to Mesa AZ for breaking their lease early is likely to be of little consequence.  (or perhaps be waived entirely if they reach agreement with Mesa on a new facility)  The Cubs are one of the country’s great brands and politicians in both AZ and FLA would be eager to be associated with it.  Also, any loss of a team in a community, rightly or wrongly, associates public officials with a negative perception that they would rather avoid.  At the same time, spring training remains a useful tool in garnering political and popular support for new “multi-use” real estate developments.  There appears no end in sight for the battle over “spring training”.



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