It looks like after eight years of sitting empty, the city of Detroit is going to finally tear down Tiger Stadium. As someone who grew up a Tigers fan and having been to a number of games at the corner of Michigan and Trumball, it is sad to see it go. On the other hand, the economist in me sees how much money has been wasted by the city of Detroit in keeping it (the city bought the stadium for $1 a number of years before the Tigers built their new ballpark). The people who want to keep the stadium have proposed scores of ideas of what it could be used for condos, stores, etc or use it to host minor league baseball games), but the problem is no one wants to spend any of their own money to carry them out. To make matters worse, the article points out Senator Carl Levin (D-MI) wants to put an earmark in the budget to appropriate some federal money to at least keep part of the stadium.
The problem I find with the whole situation is no one seems to understand the idea of opportunity costs. When doing a cost/benefit analysis of whether the city should let the stadium sit idle while waiting for someone to offer to development the site, city officials and fans of the stadium think since the city owns the stadium, the only costs associated with it sitting empty are the annual costs for security and upkeep. Yet there are far more costs then that. First of all the amount spent on the upkeep is money not available for other city obligations. Second, there is the cost of the lost interest the city could receive on the money spent on upkeep. If the city had sold the stadium in 2000 it would have received some amount of income from the sale. Since they did not sell the stadium in 2000, the revenue not received from the sale is a cost, along with the annual interest not received on the revenue. In addition, if the city had sold the lot to a private developer, each year it would generate property taxes. The missed opportunity of the property taxes, along with the lost interest on those taxes is another opportunity cost of the city letting the stadium sit empty. Then there is the lost revenue associated with any development of the site and the subsequent economic activity. This includes lost sales and income taxes from any jobs created from the site.
So when tallying the true costs to the city, all of these factors needs to be taken into account. The city is at fault in that it sounds like when trying to sell the stadium and lot they put some conditions on it sale, which limited the number of potential private developers who might want to risk investing in a bad part of the city. The city of Detroit is millions of dollars poorer as the result of a small percent of romantics who don’t desire to see an old baseball stadium (built in 1912) torn down.