STADIUM CONSTRUCTION AND MINOR LEAGUE BASEBALL ATTENDANCE

I. INTRODUCTION Arguments espoused by many public officials and team owners in favor of providing substantial, or even excessive, public subsidies for building professional sports stadiums have become familiar. In the market for major league sports teams, new stadiums are often portrayed as a key component in keeping a team in a city and in keeping that team competitive. Team owners often seek public subsidies to offset construction costs of a new or renovated stadium, arguing that their team cannot capture all of the external benefits generated by performance on the field. In a major metropolitan area, these external benefits can be significant even if they are not easy to quantify or capture, and they have been used to justify large public subsidies for stadium construction. While public subsidies should be smaller with smaller stadiums, it is not clear if these subsidies are excessive or if they lead to an inefficient construction decision. Agha (2011) suggests there are public benefits to minor league teams in terms of increased per capita income, although only at certain levels. Examining public funding of stadium construction through the lens of the novelty effect at the minor league level allows us to probe the efficiency of team-level revenue decisions and can help us calculate total impacts if public subsidies are combined with private funds. Like major league baseball (MLB) teams, minor league teams often receive public support to finance the construction of their new stadium. Marcheck (2004) estimates that public funding for minor league stadiums is typically on the order of 85% of the construction costs through the sale of public bonds. These bonds are paid in part by team revenues and while public funding of professional sports stadiums is not without public debate. (see Siegfried and Zimbalist 2000; Coates and Humphreys 2008), most of the attention to this phenomenon has occurred for major league teams. In this article, we focus on identifying and estimating the novelty effect for new and newly renovated minor league baseball stadiums. During our sample period of 1992 to 2006, 100 of the 192 minor league stadiums were new or newly renovated. This is considerably more occurrences of new stadium construction than in studies of MLB stadiums, which is limited to no more than about 30 new or newly renovated stadiums. Further, these observations occur in a shorter period of time, so the degree to which time and "culture" change new stadium impacts is minimized. By looking at new and newly renovated stadiums at the minor league level, we can provide additional depth to the knowledge of the novelty effect as it has not been examined anywhere besides the major league level of professional sports. Proponents of public stadium construction subsidies often suggest that the benefits from new stadium construction for major league teams are larger than just the additional attendance and concession sales that accrue to the team owner. Major league teams will often have fans reaching across a large population, so providing a minimal level of public funding is often thought to be reasonable, but often not to the extent that is provided (Coates and Humphreys 2008). One might think that minor league baseball teams do not often attract support across a large population, so the benefits that accrue from a minor league baseball team would most likely show up only in increased ticket and concession sales and in serving as a training ground for the MLB affiliate. However, recent research by Agha (2011) showed that minor league teams at the AAA and high A level led to increases in local per capita income and new stadiums at the AA level increased local per capita income. In this article, we generate estimates of the benefits from new minor league stadium construction to baseball revenue that can be compared to estimates of major league stadiums and can possibly serve to calibrate the estimates of public benefits accruing from new major league stadium construction including the potential increases in income found by Agha (2011). …