Charlotte, Raleigh both want a Major League Baseball franchise, but who’s ready for the big leagues?
Wake Forest professor, economics expert and baseball enthusiast Todd McFall has been studying sports for two decades. He has been widely quoted in national, regional and local news on topics ranging from golf’s economic rebound to NASCAR rebranding to the lopsidedness of baseball’s World Series. In this Q&A, McFall looks at the options for Major League Baseball expansion in North Carolina through an economic lens.
Charlotte and the Raleigh-Durham area are both strong contenders for a Major League Baseball expansion team. What is attractive about these two areas?
Both Charlotte and Raleigh-Durham are going to be incredibly strong contenders for an expansion team. Both locations are experiencing large population growth and are attracting the kind of labor force that can afford to go to games consistently. There’s also no worry about fan interest; people in North Carolina have been asking about a baseball franchise for years. It just makes sense for baseball to move into this area—the Southeast—to take advantage of the new economic activity that has sprouted up over the last 20 years in both Charlotte and Raleigh. I think we’re on the precipice of getting a team, and that’s just thrilling.
What are the primary strengths and weaknesses of Charlotte and Raleigh?
The strengths and weaknesses are really interesting when you compare them. Charlotte is very rapidly becoming one of the centers of finance in the U.S., which is going to be incredibly attractive to Major League Baseball for finding sponsorships and buyers for luxury boxes—that’s instant revenue. Raleigh-Durham (the Triangle) is centered more on health technology and computing services, and while sponsorships aren’t as obvious, the real advantage is the entrepreneurial expertise and strong interest from folks like Carolina Hurricanes owner Tom Dundon. He runs a top-shelf professional franchise and seems ready to lead the way, while I have a harder time figuring out who the interested investor in Charlotte is right now.
If I’m trying to figure out where to expand, the top three things I’m going to consider are: First, is there political support for investing in a multi-million dollar project to help mitigate the cost with tax breaks on land and support for stadium construction? Second, will there be infrastructure improvements that will allow fans to conveniently get to the stadium? Third, what kinds of jobs are in these areas, and do they provide the disposable income to allow people to attend the games and enjoy the experience?
What will be the biggest challenge in financing a new stadium?
Stadium financing is a tricky question that’s only gotten trickier. Initially, it was a $1 to $2 billion interval, but now, it would be naive and fanciful to think it will only cost a billion dollars because steel, wood, concrete and labor have all gotten more expensive. We should be anticipating a ticket price in the $2 billion range for the construction. It’s inevitable that there will be public funding from state and local governments. These subsidies mitigate the risk for the potential owner and, frankly, are necessary to show Major League Baseball that the area is willing to put up money against the four or five other municipalities they are pitting against each other. Historically, the payoff is often not positive because the subsidies are usually larger than the benefits that come from the economic activity created by the team, but if either city wants a team, they’ll have to put up some public money.
Downtown/uptown versus a suburban area—how does the choice affect the local economy?
Well, it’s not going to really matter that much for the kind of economic activity we see within a municipality. The extent to which a downtown or uptown location is more attractive might be a calculation. The economic activity near the park is simply shifted from other places. The economic fact is that baseball fans who come to the park aren’t going to go bowling or play golf or go to certain restaurants as much as they would have if attending the games weren’t an option. People will substitute away from other leisure spending because their budgets only go so far, and they want to use that money to go see the games. This substitution of spending is something that sports economists have really developed a consensus on. So, as a whole in the municipality, it’s very hard to detect any change in economic activity that comes from the creation of a professional franchise.
How does expanding into the Southeast benefit the MLB players?
If I were a player, I’d be over the moon about this! The reason is simple: now there are two more franchises that are going to bid for my services, which makes it much more likely I’m going to get a raise. More competition in the market for my talent means I’ll come out on the better end financially. It also does something really important: it puts more pressure on the franchises that aren’t taking the job seriously—the ones that just don’t put out a proper major league baseball team every year. They’ll have even more competition in the form of a Charlotte or Raleigh team, which is good for the integrity and competitiveness of the league.
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