The Impact of Stadium Announcements on Residential Property Values: Evidence from a Natural Experiment in Dallas-Fort Worth
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United States Nuclear Regulatory Commission Official Hearing Exhibit Entergy Nuclear Operations, Inc. In the Matter of: (Indian Point Nuclear Generating Units 2 and 3) ASLBP #: 07-858-03-LR-BD01 Docket #: 05000247 | 05000286 ENT000169 Exhibit #: ENT000169-00-BD01 Identified: 10/15/2012 Admitted: 10/15/2012 Withdrawn: Submitted: March 28, 2012 Rejected: Stricken: Other: THE IMPACT OF STADIUM ANNOUNCEMENTS ON RESIDENTIAL PROPERTY VALUES: EVIDENCE FROM A NATURAL EXPERIMENT IN DALLAS-FORT WORTH CAROLYN A. DEHRING, CRAIG A. DEPKEN and MICHAEL R. WARD* We investigate the impact of a potential new sports venue on residential property values, focusing on the National Football League’s Dallas Cowboys’ search for a new host city in the Dallas-Fort Worth area. We find that residential property values in the city of Dallas increased following the announcement of a possible new stadium in the city. At the same time, property values fell throughout the rest of Dallas County, which would have paid for the proposed stadium. These patterns reversed when the Dallas stadium proposal was abandoned. Subsequently, a series of announcements regarding a new publicly subsidized stadium in nearby Arlington, Texas, reduced res- idential property values in Arlington. In aggregate, average property values declined approximately 1.5% relative to the surrounding area before stadium construction commenced. This decline was almost equal to the anticipated household sales tax burden, suggesting that the average expected amenity effect of hosting the Cowboys in Arlington was not significantly different from zero. (JEL L83, R53, H73) I. INTRODUCTION projects raise house prices in aggregate, while negative net benefit projects lower house prices Public expenditures on a project, and the in aggregate. We measure the net benefits from requisite public taxation, may be economically the public consideration of a large discrete justified if the benefits from the project outweigh project, a professional sports stadium funded the costs. Most public projects, such as parks, by a local sales tax increase. roads, and police, have public good or external The public expenditure on sports stadiums benefits that are difficult to quantify, making has long been controversial, and there is an the evaluation of individual projects difficult. Eventually, however, the net benefits of the extensive empirical literature investigating the impacts of new stadiums on local economies. accumulated projects are represented in the cost The overwhelming majority of studies found of admission to the community in the form of housing prices or rents. Positive net benefit either no net benefits or net benefits that are con- siderably smaller than the costs of either a new *This analysis was undertaken while Craig Depken stadium or hosting a professional sports fran- was a member of the Economics faculty at the University chise (see Siegfried and Zimbalist [2000] and of Texas—Arlington. The authors acknowledge helpful research assistance by Joshua Been of the University Rappaport and Wilkerson [2001] for thorough of Texas—Arlington’s Graphical Information Systems reviews). These empirical results contradict the Program and helpful comments from seminar partici- arguments proposed by advocates of stadium pants at the 2006 meetings of the Western Economic Association. studies: that a new stadium will provide the cat- alyst for an improvement in the community’s Dehring: Assistant Professor, Department of Insurance, Legal Studies and Real Estate, The University of Georgia, Athens, GA 30602. Phone (706) 542-3809 (office), Fax (706) 542-4295, E-mail cdehring@terry. uga.edu Depken: Associate Professor, Department of Economics, ABBREVIATIONS Belk College of Business, University of North Carolina– CPI: Consumer Price Index Charlotte, Charlotte, NC 28223. Phone (704) 687-7484, GLS: Generalized Least Squares Fax (704) 687-6442, E-mail [email protected] MLS: Multiple Listing Service Ward: Associate Professor, Department of Economics, University of Texas at Arlington, Arlington, TX, 76019. NCAA: National Collegiate Athletic Association Phone (817) 272-3090 (office), Fax (817) 272-3145, E-mail NFL: National Football League [email protected] 627 Contemporary Economic Policy (ISSN 1074-3529) doi:10.1111/j.1465-7287.2007.00077.x Vol. 25, No. 4, October 2007, 627–638 Ó 2007 Western Economic Association International 628 CONTEMPORARY ECONOMIC POLICY attributes. Nevertheless, new stadiums continue property values in Arlington fell. While the to be built with public funds.1 reduction in property values reflects the combi- We contribute to a small but growing liter- nation of an expected localized amenity effect ature focusing on the impact of professional and an expected tax effect, we cannot reject sports venues on residential property values. the null hypothesis that the expected amenity Specifically, we investigate two sets of stadium effect was equal to zero before stadium con- announcements concerning the National Foot- struction commenced.2 ball League’s (NFL) Dallas Cowboys’ search for a host city in the Dallas-Fort Worth II. A NEW DALLAS COWBOYS STADIUM: WHERE Metroplex. These announcements provide a AND WHEN? quasi-natural experiment to test whether the announcement that a stadium might be built In April 2001, the Dallas Cowboys an- in a particular area has any immediate impact nounced that they were interested in obtaining on the sale prices of residential properties. a new publicly subsidized stadium to replace Because a stadium is costly to relocate, we treat the aging Texas Stadium. Built in 1972, Texas the announcements of potential stadium relo- Stadium lacks many of the modern revenue cation as changing the probability of a large generating aspects of new stadiums, particu- discrete event and test for accumulated and dif- larly modern luxury suites and a closed or ferential impacts of stadium announcements on retractable roof. During the spring and sum- contemporaneous residential property values. mer 2001, team owner Jerry Jones entertained We find that property values increased in the initial proposals from a number of cities in the city of Dallas after the announcement that the Dallas-Fort Worth Metroplex, including cur- Cowboys might move from the city of Irving to rent home Irving, Grapevine, Arlington, Grand a new stadium in downtown Dallas, which Prairie, and Dallas. These preliminary discus- would have replaced the aging Cotton Bowl. sions were tabled after the September 11, 2001, However, in Dallas County, which would have attacks in New York City and did not come paid for the stadium with new taxes, residential back to public light until late 2003. property values decreased after the announce- At that time, the Cowboys once again pub- ment of the Fair Park stadium proposal. Con- licly mentioned their desire for a new stadium sistent with these results, when the Fair Park and suggested that the stadium could be built stadium proposal was abandoned, properties in Irving, near Texas Stadium. The response inthecityofDallasdeclinedinvalue,while to this proposal by the city of Irving was the property values in Dallas County re- not encouraging. Because of Irving’s relatively bounded. In the end, the accumulated net effect small tax base (population of 130,000 in 2000) of the stadium announcements for both Dallas and its inability to raise the sales tax rate City and Dallas County was zero, consistent beyond the state-mandated cap, the city of with a return to the status quo ante. When Irving alone was unlikely to be able to finance analyzing three announcements concerning its contribution to the anticipated $1 billion 3 a potential new stadium in Arlington, we find project. This, in turn, caused the Cowboys that the accumulated impacts of the stadium to look beyond Irving for a new home. announcements reflected between 1.3 and 1.5 In the early months of 2004, a number of cit- percent reduction in residential property sales ies indicated their desire to contend for the new prices in Arlington, ceteris paribus. In other stadium, but it was equally apparent that these words, at each point in which it became more cities suffered the same problems as Irving— certain that Arlington would contribute local too small of a tax base and/or little room under tax dollars to a new stadium for the Cowboys, 2. The Dallas Cowboys did not relocate to another metropolitan area, therefore any metro area-wide amenity 1. During the 1990s and through the early 2000s, cities effect was unaffected by the selected stadium site. across the United States have engaged in what could be 3. The State of Texas has no state income tax. The termed a venue building spree. A little more than 50% state levies a 6.25% sales tax to fund the state government. of the 122 teams in the four major professional leagues Cities are allowed to add up to an additional 2% sales tax in the United States have moved into a new or substan- to fund local government and special projects such as road tially renovated venue since 1990. In aggregate, these maintenance and stadiums. As of 2004, the city of Irving new venues cost an estimated $13.45 billion in current had a 1% sales tax for local government and a 1% sales tax ($16 billion in 2005 CPI adjusted) dollars. Public dollars to contribute to the Dallas Metro Transit system. There- have contributed $10.27 billion, or two-thirds, to the fore, the city of Irving had no room under the existing construction and maintenance of new sports venues. state-mandated sales tax cap of 8.25%. DEHRING, DEPKEN & WARD: THE IMPACT OF STADIUM ANNOUNCEMENTS ON RESIDENTIAL PROPERTY VALUES 629 the state sales tax limit. In March 2004, it was On July 17, 2004, the mayor of Arlington suggested that Fair Park in downtown Dallas, announced that he had been in negotiations home of the 72-yr-old Cotton Bowl, could be with the team about the potential of building possible site for a new Cowboys stadium.