ML12338A390
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|---|---|
| Site: | Indian Point  |
| Issue date: | 03/28/2012 |
| From: | Dehring C, Depken C, Ward M Univ of Georgia, Univ of North Carolina - Charlotte, Univ of Texas - Arlington |
| To: | Atomic Safety and Licensing Board Panel |
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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 Leagues Dallas Cowboys search for a new host city in the Dallas-Fort Worth area. We "nd 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 signi"cantly different from zero. (JEL L83, R53, H73)
I.
INTRODUCTION Public expenditures on a project, and the requisite public taxation, may be economically justi"ed if the bene"ts from the project outweigh the costs. Most public projects, such as parks, roads, and police, have public good or external bene"ts that are dif"cult to quantify, making the evaluation of individual projects dif"cult.
Eventually, however, the net bene"ts of the accumulated projects are represented in the cost of admission to the community in the form of housing prices or rents. Positive net bene"t projects raise house prices in aggregate, while negative net bene"t projects lower house prices in aggregate. We measure the net bene"ts from the public consideration of a large discrete project, a professional sports stadium funded by a local sales tax increase.
The public expenditure on sports stadiums has long been controversial, and there is an extensive empirical literature investigating the impacts of new stadiums on local economies.
The overwhelming majority of studies found either no net bene"ts or net bene"ts that are con-siderably smaller than the costs of either a new stadium or hosting a professional sports fran-chise (see Siegfried and Zimbalist [2000] and Rappaport and Wilkerson [2001] for thorough reviews). These empirical results contradict the arguments proposed by advocates of stadium studies: that a new stadium will provide the cat-alyst for an improvement in the communitys
- This analysis was undertaken while Craig Depken was a member of the Economics faculty at the University of TexasArlington. The authors acknowledge helpful research assistance by Joshua Been of the University of TexasArlingtons Graphical Information Systems Program and helpful comments from seminar partici-pants at the 2006 meetings of the Western Economic Association.
Dehring: Assistant Professor, Department of Insurance, Legal Studies and Real Estate, The University of Georgia, Athens, GA 30602. Phone (706) 542-3809 (of"ce), Fax (706) 542-4295, E-mail cdehring@terry.
uga.edu Depken: Associate Professor, Department of Economics, Belk College of Business, University of North Carolina-Charlotte, Charlotte, NC 28223. Phone (704) 687-7484, Fax (704) 687-6442, E-mail cdepken@uncc.edu Ward: Associate Professor, Department of Economics, University of Texas at Arlington, Arlington, TX, 76019.
Phone (817) 272-3090 (of"ce), Fax (817) 272-3145, E-mail mikeward@uta.edu ABBREVIATIONS CPI: Consumer Price Index GLS: Generalized Least Squares MLS: Multiple Listing Service NCAA: National Collegiate Athletic Association NFL: National Football League Contemporary Economic Policy (ISSN 1074-3529) doi:10.1111/j.1465-7287.2007.00077.x Vol. 25, No. 4, October 2007, 627-638
2007 Western Economic Association International 627 ENT000169 Submitted: March 28, 2012 United States Nuclear Regulatory Commission Official Hearing Exhibit In the Matter of:
Entergy Nuclear Operations, Inc.
(Indian Point Nuclear Generating Units 2 and 3)
ASLBP #: 07-858-03-LR-BD01 Docket #: 05000247 l 05000286 Exhibit #:
Identified:
Admitted:
Withdrawn:
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ENT000169-00-BD01 10/15/2012 10/15/2012
attributes. Nevertheless, new stadiums continue to be built with public funds.1 We contribute to a small but growing liter-ature focusing on the impact of professional sports venues on residential property values.
Speci"cally, we investigate two sets of stadium announcements concerning the National Foot-ball Leagues (NFL) Dallas Cowboys search for a host city in the Dallas-Fort Worth Metroplex. These announcements provide a quasi-natural experiment to test whether the announcement that a stadium might be built in a particular area has any immediate impact on the sale prices of residential properties.
Because a stadium is costly to relocate, we treat the announcements of potential stadium relo-cation as changing the probability of a large discrete event and test for accumulated and dif-ferential impacts of stadium announcements on contemporaneous residential property values.
We "nd that property values increased in the city of Dallas after the announcement that the Cowboys might move from the city of Irving to a new stadium in downtown Dallas, which would have replaced the aging Cotton Bowl.
However, in Dallas County, which would have paid for the stadium with new taxes, residential property values decreased after the announce-ment of the Fair Park stadium proposal. Con-sistent with these results, when the Fair Park stadium proposal was abandoned, properties in the city of Dallas declined in value, while the property values in Dallas County re-bounded. In the end, the accumulated net effect of the stadium announcements for both Dallas City and Dallas County was zero, consistent with a return to the status quo ante. When analyzing three announcements concerning a potential new stadium in Arlington, we "nd that the accumulated impacts of the stadium announcements re"ected between 1.3 and 1.5 percent reduction in residential property sales prices in Arlington, ceteris paribus. In other words, at each point in which it became more certain that Arlington would contribute local tax dollars to a new stadium for the Cowboys, property values in Arlington fell. While the reduction in property values re"ects the combi-nation of an expected localized amenity effect and an expected tax effect, we cannot reject the null hypothesis that the expected amenity effect was equal to zero before stadium con-struction commenced.2 II.
A NEW DALLAS COWBOYS STADIUM: WHERE AND WHEN?
In April 2001, the Dallas Cowboys an-nounced that they were interested in obtaining a new publicly subsidized stadium to replace the aging Texas Stadium. Built in 1972, Texas Stadium lacks many of the modern revenue generating aspects of new stadiums, particu-larly modern luxury suites and a closed or retractable roof. During the spring and sum-mer 2001, team owner Jerry Jones entertained initial proposals from a number of cities in the Dallas-Fort Worth Metroplex, including cur-rent home Irving, Grapevine, Arlington, Grand Prairie, and Dallas. These preliminary discus-sions were tabled after the September 11, 2001, attacks in New York City and did not come back to public light until late 2003.
At that time, the Cowboys once again pub-licly mentioned their desire for a new stadium and suggested that the stadium could be built in Irving, near Texas Stadium. The response to this proposal by the city of Irving was not encouraging. Because of Irvings relatively small tax base (population of 130,000 in 2000) and its inability to raise the sales tax rate beyond the state-mandated cap, the city of Irving alone was unlikely to be able to "nance its contribution to the anticipated $1 billion project.3 This, in turn, caused the Cowboys to look beyond Irving for a new home.
In the early months of 2004, a number of cit-ies indicated their desire to contend for the new stadium, but it was equally apparent that these cities suffered the same problems as Irving too small of a tax base and/or little room under
- 1. During the 1990s and through the early 2000s, cities across the United States have engaged in what could be termed a venue building spree. A little more than 50%
of the 122 teams in the four major professional leagues in the United States have moved into a new or substan-tially renovated venue since 1990. In aggregate, these new venues cost an estimated $13.45 billion in current
($16 billion in 2005 CPI adjusted) dollars. Public dollars have contributed $10.27 billion, or two-thirds, to the construction and maintenance of new sports venues.
- 2. The Dallas Cowboys did not relocate to another metropolitan area, therefore any metro area-wide amenity effect was unaffected by the selected stadium site.
- 3. The State of Texas has no state income tax. The state levies a 6.25% sales tax to fund the state government.
Cities are allowed to add up to an additional 2% sales tax to fund local government and special projects such as road maintenance and stadiums. As of 2004, the city of Irving had a 1% sales tax for local government and a 1% sales tax to contribute to the Dallas Metro Transit system. There-fore, the city of Irving had no room under the existing state-mandated sales tax cap of 8.25%.
628 CONTEMPORARY ECONOMIC POLICY
the state sales tax limit. In March 2004, it was suggested that Fair Park in downtown Dallas, home of the 72-yr-old Cotton Bowl, could be possible site for a new Cowboys stadium.
The possibility that the Cotton Bowl would be replaced by a new retractable roof stadium generated considerable excitement in the Dallas community. A new stadium in Fair Park would move the Dallas Cowboys back to their origi-nal home town (rather than playing in a suburb of Dallas) and would ensure both the annual University of Texas and the University of Oklahoma football game and the annual Cotton Bowl would remain in Dallas. More-over, a new stadium would allow Dallas to contend to host any number of events, in-cluding a National Collegiate Athletic Associ-ation (NCAA) championship football game, a Super Bowl, or an NCAA Final Four. Fair Park also has the advantage of an existing infrastructure able to handle large events.4 The Fair Park proposal called for the County of Dallas to increase its sales tax rate by one-half of 1% to pay for the stadium. A countywide sales tax increase was proposed to expand the tax base enough to cover the anticipated construction costs. However, not-withstanding the excitement generated by the stadium proposal, one considerable problem became apparent. The city of Dallas was con-tractually obligated to retire the public debt it incurred to build the $410 million American Airlines Arena (home of the National Hockey Leagues Dallas Stars and the National Bas-ketball Associations Dallas Mavericks) before spending any additional tax dollars on a new professional sports venue of any kind. This contractual obligation removed the city of Dal-las, but not the rest of Dallas County, from the tax jurisdiction for a new football stadium.5 When it became clear that the city of Dallas would not be contributing any tax proceeds toward a new stadium, the remaining Dallas County population and city of"cials cooled to the idea of building a new stadium in Fair Park. The Fair Park proposal was of"cially abandoned in the public media on June 6, 2004. Thereafter, the Dallas Cowboys publicly renewed their search for a new host city.
On July 17, 2004, the mayor of Arlington announced that he had been in negotiations with the team about the potential of building a new stadium in Arlington. In many ways, Arlington is also a good place to locate a new stadium. Arlington is located between Fort Worth and Dallas, has access to multiple inter-states and highways, and the city already hosts the Texas Rangers Major League Baseball club and a Six Flags amusement park. Arlington is also the third largest city in the Dallas-Fort Worth Metroplex (after Fort Worth and Dallas), and its approximate $4 billion annual economy and 360,000 people provide a suf"-
ciently large tax base to subsidize a stadium.
Arlington built the Rangers baseball stadium in 1994, following a public referendum in 1991, and the city paid off the last of the base-ball stadium bonds in early 2001. Afterward, in accordance with state law, the city of Arlington reduced its local sales tax rate by the one-half of 1% that would have been dedicated to servicing the baseball stadium debt. Therefore, in early 2004, the city of Arlington was unique among area cities in that it had a large tax base and room under the state-mandated sales tax cap.6 On August 17, 2004, the Arlington city council approved a ballot initiative to be decided during the November 3, 2004, general election. The ballot initiative was announced to include two elements. The "rst would ap-prove up to $325 million in public money to contribute to land acquisition and construc-tion costs for a new retractable roof football stadium for the Dallas Cowboys. The second part authorized the city to increase the local sales tax by a half cent, increase local hotel taxes by 2 percentage points, and increase Arlington-based car rental taxes by 5 percent-age points to "nance the citys contribution to the stadium. The ballot initiative was ap-proved by the voters of Arlington on Novem-ber 3, 2004, with 55% voting in favor and 45%
voting against. The precise stadium location was determined in early 2005, and in April 2005, the city of Arlington began collecting the additional taxes. The new stadium is sched-uled to open for the 2009 football season.
During the stadium campaign, pro-stadium activists solicited an economic impact study and produced television, radio, mass mailings, and newspaper advertising that touted the
- 4. Fair Park is home of the annual Texas State Fair, the largest state fair in the United States.
- 5. The city of Dallas passed the referendum to build a new basketball/hockey arena in 1998 and does not antic-ipate retiring the debt for that stadium until well after 2020.
- 6. At the time the stadium proposal was announced, the prevailing local sales tax rate in Arlington was 7.5%.
DEHRING, DEPKEN & WARD: THE IMPACT OF STADIUM ANNOUNCEMENTS ON RESIDENTIAL PROPERTY VALUES 629
economic impact "gures generated in their study. Ultimately, they out-spent antisubsidy activists $6 million to $43,000. The Cowboys were large contributors to the pro-stadium pro-ponents, had players post yard signs, and the famous team cheerleaders attended campaign events to encourage passage.7 Proponents predicted that the new stadium would bolster Arlingtons entertainment-focused industry and that the two-stadium complex would be an attractive area in which people would want to live. This, in turn, led some to claim that the new stadium would not only contribute to the quality of life in the city of Arlington but also cause an increase in property values.
III.
THE POTENTIAL IMPACTS OF A NEW STADIUM ON PROPERTY VALUES Land use externalities are costs or bene"ts generated by land uses that "ow outside mar-ket transactions. Because externalities have been shown to be capitalized into house prices, they provide the justi"cation for municipal zoning. In the absence of zoning, the market will over-allocate land to negative externality-producing lower uses. Externalities can in-
"uence prices in two ways: scale effects and boundary effects. Scale effects relate to the absolute amount of the externality-producing use, while boundary effects relate to the prox-imity to the externality-producing use.8 Two articles have investigated the impact of a professional sports franchise or sports venue on house prices. Carlino and Coulson (2004) discussed the public good facet of professional sports teams, what they term nonexcludable bene"ciaries.
The perceived bene"ts that might accrue to those who will never attend a game relate to an enhanced sense of civic pride, which should cause an increased will-ingness to pay for local housing, among other things. In their examination of monthly rents in 60 metropolitan statistical areas in 1993 and 1999, Carlino and Coulson found rental pre-miums in both the central business district and the surrounding suburbs of cities that host NFL franchises.9 Tu (2005) examined the impact of FedEx "eld, the home of the NFLs Washington Redskins, on surrounding house prices pre-and post-stadium construction in Landover, Maryland. Tu compared prices within 3 miles of the FedEx "eld site across three time periods:
predevelopment, development, and postdevel-opment, where the development period starts from when the Landover site was "rst revealed as a possible site of the stadium. Predevelop-ment, he found that properties closer to the pro-posed stadium site had lower value relative to those located further away from the proposed site. However, this gradient became less pro-nounced following the stadiums development, suggesting that a positive externality was gener-ated by the new stadium for properties located closertothestadium.Tuestimatedanaggregate increase in property values of approximately
$42 million generated by the new stadium.
In the case where a new stadium is funded with a local sales tax, any capitalization in local residential property prices identi"ed with the stadium project is the sum of three possible effects: a negative tax effect, a (potentially) positive incremental civic pride effect com-mon to the city residents from hosting the team,10 and an ambiguous externality effect.11 Any positive externalities created by a stadium could be discrete or related to proximity, such as income-earning opportunities, for example, selling parking space, or access to other ame-nities such as nicer restaurants or hotels.
Potential negative externalities would include diminished view, traf"c congestion, noise, loss of privacy, and crime. Accordingly, the impact of a new stadium on house values is ambigu-ous ex ante and is therefore a question to be resolved empirically.
Our analysis is closest to that by Tu, but we differ in that we focus on announcements that
- 7. This lobbying is consistent with Depken (2006) who found that much of the public cost of a new profes-sional baseball stadium is capitalized in the value of the franchise.
- 8. There is a large literature investigating land use externalities. A small sample includes estimating the effect of water amenities on house prices (Brown and Pollakowski, 1977; Cassel and Mendelsohn, 1985; Darling, 1973; Knetsch, 1964; Lansford and Jones, 1995) and the effect of public open-space externalities on house prices (Correll, Lillydahl, and Singell, 1978; Dehring and Dunse, 2006; Espey and Owusu-Edusei, 2001; Irwin, 2002; Weicher and Zerbst, 1973). The effects of potentially negative externalities such as transmission towers, power lines, group homes, airports, and land"lls on residential prop-erty values have also been examined.
- 9. Coates, Humphreys, and Zimbalist (2006) sug-gested that Carlino and Coulsons estimation results are based on relatively few observations and are therefore not as robust as claimed. In a rejoinder, Carlino and Coulson (2006) suggested that this argument is incorrect.
- 10. Hakes and Hutmaker (2006) found that fans nearest the stadium value the team the most.
- 11. See Oates (1969), Bloom and Yinger (1983), and Man and Bell (1996).
630 CONTEMPORARY ECONOMIC POLICY
a stadium might/will be built in a particular area, all of which are predevelopment, rather than pre-and post-stadium construction.
We implicitly assume that housing markets ex-hibit informational ef"ciency, such that any expected net externality effects are capitalized in house prices well in advance of the actual project completion. Our article also differs from that of Tu in that we investigate the immediate impact of stadium announcements on property values. Tu found that FedEx "eld enhanced proximate property values by ap-proximately $42 million in aggregate, which re"ects a pure amenity effect. In contrast to the Cowboys stadium, FedEx "eld was essen-tially privately funded, implying no local tax effect generated by the stadium.
Our use of announcement dates rather than project completion dates is not without prece-dent. For example, Colwell, Dehring, and Lash (2000) used announcement dates to test the effect of group homes on neighborhood house prices. They measured the announce-ment date as the day the public was "rst made aware that a group home was to be opened in the area. Similarly, Dehring (2006) used ordi-nance dates, rather than the effective dates of regulation, to investigate the effect of coastal construction code changes on vacant land development in Florida. Using announcement dates avoids potential speci"cation bias when the purpose of the empirical analysis is to iden-tify the impact of policy changes on property values. To the degree that property markets incorporate new information in a timely fash-ion, property value adjustments might have already occurred by the time the policy changes actually take effect.
IV.
DATA AND METHODOLOGY Our test of the impact of stadium an-nouncements on residential property values combines hedonic pricing models, event study methodology, and difference-in-difference estimators. Hedonic pricing reveals the im-plicit price of housing and location attributes, as well as any price effects from the stadium.12 Because each announcement increases or decreases the probability that a stadium would be built in a speci"c location, each is allowed to have an impact on property values (MacKinlay, 1997). We employ a difference-in-difference identi"cation strategy to distin-guish the net amenity effect before and after each announcement.
There is a large literature on hedonic pric-ing models of houses. These studies typically "nd that in large metropolitan areas, most of the variation in house prices can be explained by a houses age, size, and the qual-ity of local public schools. Other factors include the availability of parking, whether the property includes a swimming pool, and the time of sale. Following standard practice, we include these controls as well as the varia-bles of interest to measure stadium effects.
We investigate the impact of "ve separate stadium announcements, two of which con-cern Dallas and three of which concern Arling-ton. The "rst two announcements represent the stadium potentially coming to and then leaving the Fair Park district near down-town Dallas. The "rst (second) of these an-nouncements is associated with an increased (decreased) probability that a new stadium would be built in downtown Dallas. Three additional announcements center on the pro-posal to build a stadium in Arlington. These announcements correspond with the dates on which the mayor of Arlington announced his previous negotiations, the city council vote to approve a ballot initiative, and the af"rma-tive ballot initiative outcome (Table 1).
Our estimation strategy is based on each event changing the probability of different sets of houses being affected by the proposed Cow-boys move. After 2003, it was increasingly likely that the Cowboys franchise would relo-cate somewhere within the Dallas-Fort Worth metropolitan area. At the time, there may have been six or seven viable sites, implying that each had an ex ante nontrivial positive prob-ability of being chosen. We assume that the "rst Dallas announcement increased the prob-ability that the team would locate to Fair Park and that the second announcement reduced this probability to zero. We further assume that the probability of the team relocating to Arling-ton increased with the next three announce-ments during the summer and fall 2004.
One obvious difference from standard event studies is that we cannot track daily changes in the value of a single house but must draw inferences from prices of different houses. Another is that we are not calculating the return relative to the general market as one
- 12. Rosen (1973) is the groundbreaking hedonic pric-ing study, but see Sirmans, Macpherson, and Zietz (2005) for a thorough review of hedonic pricing in real estate.
DEHRING, DEPKEN & WARD: THE IMPACT OF STADIUM ANNOUNCEMENTS ON RESIDENTIAL PROPERTY VALUES 631
would do when analyzing abnormal stock returns. Any price effect from a proposed sta-dium should be re"ected in the prices of houses bene"ting, or suffering, from the expected net effect at the time of the announcement. For example, the public expense of the Fair Park stadium was to have been funded by taxation within Dallas County. All else equal, we expect this tax effect to cause a reduction in Dallas County house prices after the "rst announcement and a commensurate increase after the second announcement.
We employ a generaldifference-in-difference identi"cation strategy to calculate the effects of stadiums. For example, for the "rst announce-ment, we include a Dallas County dummy vari-able, an announcement date dummy variable, and the Dallas County dummy variable inter-acted with the postannouncement period. Since the measured effect of the interaction represents the differential impact of the stadium on houses in Dallas County relative to either general announcement effects independent of location or Dallas County effects at different times, we identify it with the expected effect of increased taxation to "nance the stadium on Dallas County houses.
Our estimating equation is represented as:
lnPRICEi 5 bFEATURESi dANNOUNCEi uTAXJURISi gANNOUNCEi
TAXJURISi ei; 1
where b, d, u, and g are vectors of parameters to be estimated and ei is a composite zero-mean error term that facilitates neighborhood "xed effects and spatial correlation.
The dependent variable ln(PRICE) is the logarithm of the sale price of the house. The vector FEATURES includes both structural and location attributes including structure age, aged squared, amount of living area, area squared, the number of baths, the existence of a pool, number of parking places, and dummy variables for the public schools serving the school. The vector ANNOUNCE includes the appropriate dummy variables, for the sample analyzed, indicating whether the sales price was agreed upon after each of the "ve an-nouncements. The variable TAXJURIS is a dummy variable, indicating that the home is within the jurisdiction of the proposed tax intended to fund the public share of the sta-dium building expense.
For the Dallas Fair Park proposal, we include two separate dummy variables: one for the city of Dallas and one for all the other cities in Dallas County. The initial Fair Park stadium proposal included a countywide sales tax to pay for the stadium. However, the city of Dallas likely would not have contributed to the football stadium until it had retired its debt for the basketball-hockey arena built in 1998.
It is not clear if homeowners in the city of Dallas anticipated higher taxes or not. If the market anticipated tax burdens correctly, the announcement of the stadium coming to Dallas would have been a pure amenity effect in the TABLE 1 Dallas Cowboys Stadium Announcements Date Description Announcement 1 April 30, 2004 Proposal to build a stadium at Fair Park in downtown Dallas. The proposed stadium would replace the aging Cotton Bowl, and the public contribution to construction costs would be "nanced by a half cent sales tax throughout Dallas County. Ultimately, the city of Dallas would not contribute to this additional tax because of contractual obligations to retire its debt for the American Airlines Arena.
Announcement 2 June 9, 2004 The Fair Park proposal of"cially abandoned.
Announcement 3 July 17, 2004 Arlingtons mayor announces that he has been in secret negotiations with the team about building a new publicly subsidized stadium near the existing baseball stadium in Arlington.
Announcement 4 August 17, 2004 Arlingtons city council approves a stadium ballot initiative for the November 2004 general election. The ballot initiative asks voters to approve up to $325 million toward land acquisition and construction costs for a new stadium located near the existing baseball stadium in Arlington. The ballot initiative also includes a one-half cent sales tax in Arlington as well as additional hotel and car rental taxes.
Announcement 5 November 3, 2004 Arlington voters approve ballot initiative on November 3, 2004, and the additional taxes are instituted on April 1, 2005.
632 CONTEMPORARY ECONOMIC POLICY
city of Dallas, similar to the effect found by Tu (2005), while property value changes in the rest of Dallas County would have been a net effect.
When the Fair Park stadium proposal was aban-doned, the reverse pattern would be expected.
For the Arlington stadium proposal, we de"ne TAXJURIS as the city of Arlington.
We identify each announcement in Arlington as signaling an increased likelihood that a sta-dium would be built in Arlington. Thus, if the proposed stadium had a net positive (negative) expected impact on the communitys attributes, we anticipate each announcement to correspond with an increase (decrease) on house prices in Arlington, relative to the surrounding areas.
Three points regarding the tax jurisdiction indicators are worth mentioning. First, for both stadium proposals, the public contribution to the stadiums cost was to be "nanced by an in-crease in the local sales tax rate. Citizens of one city or county may well be taxed in propor-tion to their taxable purchases within the juris-diction. However, some owners of houses in the tax jurisdiction may purchase taxable items outside the jurisdiction. The converse is true for homeowners in nearby cities. Because the land area of Dallas City, Dallas County, and Arling-ton is large relative to normal shopping distan-ces,weexpectthemeasurementerrorfrom these border regions to be small. Second, using a dummyvariable,weareimplicitlyassumingthat the tax burden is roughly proportional to the house value. This is likely to hold since both housingvalueandexpendituresontaxableitems are likelyto be highly correlatedwith household income. Third, there may be a positive amenity effectfromhavingonestownassociatedwiththe team,regardlessofthedistancetothestadium.In thiscase,themeasurementofthetaxjurisdiction effect is the net of the tax and amenity effects.
We employ a generalized least squares (GLS) estimator that takes into account pos-sible heteroscedasticity and spatial autocorre-lation. Since we cannot reject that the error term has a common component at the city level, our estimator allows the variances to dif-fer across geographic areas. We include a "xed effect for the public elementary school that a homeowners children would likely attend.
The elementary school almost always identi-
"es a middle and a high school as well.13 However, it is likely that there is also spatial correlation that in"uences the variance of house properties as well. We therefore use a robust GLS estimator that allows for "xed effects (mean shifters) and clustering (variance shifters) based on elementary schools. The estimator we employ uses a great deal of infor-mation as there are 745 elementary schools in-cluded in the Dallas-centered sample and 649 elementary schools included in the Arlington-centered sample.
Our data include two samples of residen-tial property sales in the Dallas-Fort Worth Metroplex from January 2004 through March 2005. The residential property sales data were collected from the Multiple Listing Service (MLS). We subtract 30 d from the closing date, reported by the MLS, to more closely align house contract dates with the announcement effects.14 To avoid undue in"uence of outlier properties, we excluded observations that corresponded to houses more than 70 yr old, more than 7,000 square feet, less than 500 square feet, or with more than seven bathrooms. Both the Dallas-and Arlington-centered samples were further limited by excluding properties beyond 20 miles from the proposed stadium site. The Dallas-centered sample ultimately comprises 42,351 observations; the Arlington-centered sample comprises 32,061 observations. The descriptive statistics of the data are provided in Table 2. The "rst two columns report the mean and standard deviation of our depen-dent and independent variables for the Dallas-centered sample. The second two col-umns report the descriptive statistics for the Arlington-centered sample.
V.
EMPIRICAL RESULTS AND DISCUSSION We estimate the difference-in-difference model described in Equation (1) including ele-mentary school "xed effects. We accommo-date spatial correlation in property values by clustering the error terms by elementary
- 13. Evidence suggests that there is a high correlation between property value and the quality of the public schools (Downes and Zabel, 2002).
- 14. This is not always guaranteed to directly align house sale dates with announcement dates as closing times can differ. However, the average time to close is approximately 30 d, and we anticipate that any other measurement error introduced by our adjustment is not systematically related to the stadium announcements.
Therefore, the adjustment would only in"uence the ef"-
ciency, but not the consistency, of our estimation results.
DEHRING, DEPKEN & WARD: THE IMPACT OF STADIUM ANNOUNCEMENTS ON RESIDENTIAL PROPERTY VALUES 633
school. The full estimation results are detailed in Tables 3 through 5.
The primary hedonic regression results are provided in Table 3. The left column provides results pertaining to the Dallas sample, cen-tered on the Cotton Bowl in downtown Dallas, whereas the right column provides results pertaining to Arlington, centered on the Ballpark in Arlington (the approximate site of the proposed Cowboys stadium). The hedonic regression results are consistent with the results obtained using data from other large metropolitan areas. For instance, in both the Dallas and the Arlington samples, each additional year of age reduces the average property by approximately 1.3%, although this decline is tempered a bit by the positive coef"cient on the quadratic of age. Likewise, each additional 20 square feet adds approxi-mately 1% to the value of the house, although this increase is also tempered by the negative parameter estimate on the quadratic of square TABLE 2 Sample Descriptive Statistics Variable Dallas Sample Arlington Sample Mean SD Mean SD Log of price 11.97 0.61 11.86 0.64 Age (yr) 23.26 17.15 22.64 18.56 Square feet 2,165.00 911.09 2,078.58 877.65 Pool (1 5 yes) 0.17 0.38 0.15 0.35 Number of bathrooms 2.52 0.92 2.42 0.88 Number of garage spots 1.79 0.83 1.76 0.83 Number of storeys 1.33 0.48 1.30 0.48 February 0.09 0.29 0.08 0.27 March 0.08 0.27 0.08 0.27 April 0.08 0.28 0.09 0.28 May 0.08 0.28 0.08 0.28 June 0.09 0.29 0.09 0.29 July 0.09 0.28 0.09 0.29 August 0.08 0.28 0.09 0.28 September 0.07 0.26 0.07 0.26 October 0.07 0.25 0.07 0.26 November 0.06 0.24 0.07 0.25 December 0.07 0.25 0.07 0.26 Time trend 7.11 3.58 6.89 3.43 Dallas City 0.23 0.42 Dallas County 0.46 0.49 Arlington 0.13 0.33 Announcement 1 0.63 0.48 Announcement 2 0.52 0.49 Announcement 3 0.39 0.48 Announcement 4 0.30 0.46 Announcement 5 0.10 0.31 Dallas Announcement 1 0.17 0.37 Dallas Announcement 2 0.14 0.35 Arlington Announcement 3 0.06 0.23 Arlington Announcement 4 0.05 0.21 Arlington Announcement 5 0.02 0.13 Number of observations 42,351 32,061 Elementary schools 745 689 Notes: Data re"ect residential property sales from January 1, 2004, through February 28, 2005, with complete data, and located within 20 miles of the Cotton Bowl for the Dallas sample and the Ballpark in Arlington for the Arlington sample.
Data obtained from the Dallas-Fort Worth Metroplex MLS. January is used as the reference month. Dummy variable means do not sum to 1 because of rounding.
634 CONTEMPORARY ECONOMIC POLICY
footage. In both cities, a pool on the property adds approximately 8.5%, each bathroom adds an additional 5%, each covered parking spot adds 5%, and an additional storey, hold-ing square footage constant, reduces the aver-age property value by approximately 9%.
The primary empirical results of interest, those pertaining to the stadium announce-ments, are reported in Tables 4 and 5. For the Dallas sample, we focus on the "rst two announcements: the Cowboys might relocate to Fair Park (Announcement 1) and the Cow-boys will not relocate to Fair Park (Announce-ment 2). In this case, the city of Dallas would enjoy the amenity bene"ts of the stadium but would not have contributed to the stadium sub-sidy. However, the rest of the County of Dallas would have paid for the stadium without enjoy-ing any proximity amenities associated with the stadium. Therefore, for the Dallas sample, we control for both Dallas and Dallas County announcement effects. In the case of Arlington, we focus on the last three stadium announce-ments: the city was in negotiations with the team (Announcement 3), the Arlington city council approved a ballot initiative concerning the stadium (Announcement 4), and the af"r-mative outcome of the November 2004 ballot initiative (Announcement 5).
TABLE 3 Estimated Values of Housing Characteristics Dallas Sample (1)
Arlington Sample (2)
Age
0.013*** (0.001) 0.013*** (0.001)
Age squared
(103) 0.149*** (0.018) 0.127*** (0.017)
Square footage
(103) 0.511*** (0.018) 0.550*** (0.017)
Square footage squared (106) 0.029*** (0.002) 0.004*** (0.002)
Pool (1 5 yes) 0.081*** (0.004) 0.087*** (0.004)
Bathrooms 0.045*** (0.004) 0.049*** (0.005)
Covered parking spots 0.047*** (0.003) 0.055*** (0.004)
Number of storeys 0.096*** (0.006) 0.098*** (0.006)
Constant 11.10*** (0.029) 10.96*** (0.028)
Observations 42,351 32,061 R2 0.89 0.89 Notes: Dependent variable is log of sale price. Speci"-
cations include monthly dummy variables and a monthly time trend. The Dallas sample is centered on Fair Park in downtown Dallas. The Arlington sample is centered on the Rangers baseball stadium in Arlington. The errors are clustered on elementary schools. Robust standard errors are given in parentheses.
- p,.01.
TABLE 4 Unconstrained Stadium Announcement Effects Dallas Sample (1)
Arlington Sample (2)
Announcement 1 0.008 (0.029)
Announcement 2 0.006 (0.010)
Dallas City
0.008 (0.029)
Dallas City Announcement 1 0.021** (0.011)
Dallas City Announcement 2
0.005 (0.011)
Dallas County 0.012 (0.021)
Dallas County Announcement 1
0.008 (0.007)
Dallas County Announcement 2 0.008 (0.006)
Arlington
0.010 (0.037)
Announcement 3 0.004 (0.008)
Announcement 4
0.004 (0.009)
Announcement 5 0.009 (0.017)
Arlington Announcement 3
0.002 (0.011)
Arlington Announcement 4
0.011 (0.012)
Arlington Announcement 5 0.001 (0.009)
Notes: Dependent variable is log of sale price. All speci"cations include house age, age squared, square footage, square footage squared, number of bathrooms, number of garage parking spots, whether the property has a pool or not, the number of storeys, month-speci"c dummy variables, a time trend, and elementary school "xed effects. The Dallas sample is centered on Fair Park in downtown Dallas. The Arlington sample is centered on the Rangers baseball stadium in Arling-ton. The errors are clustered on elementary schools. Robust standard errors are given in parentheses.
- p,.05.
DEHRING, DEPKEN & WARD: THE IMPACT OF STADIUM ANNOUNCEMENTS ON RESIDENTIAL PROPERTY VALUES 635
The "rst column of Table 4 presents esti-mation results relating to the potential down-town Dallas site. The initial announcement that the Cowboys might relocate to Fair Park in Dallas City corresponded with an increase in property values in Dallas City. On the other hand, this "rst announcement reduced property values throughout the rest of Dallas County (although the parameter estimate is not distin-guishable from zero). When the Cowboys announced that they were not going to relocate to Fair Park in downtown Dallas, the opposite qualitative impacts on property values in the city of Dallas and throughout Dallas County are expected. Combined, these results suggest that there were expectations of amenity effects of a Cowboys stadium in the city of Dallas but that the bene"ts were outweighed by the expected tax burden of the stadium.
The second column of Table 4 reports similar estimation results for the Arlington sample. In this case, only the last three an-nouncement dates are investigated. Because Arlington was the only city in the metropoli-tan area that would charge additional sales tax to pay for the public contribution to the stadium, there is no need for a separate county dummy variable. The results suggest that each of the "rst two stadium announcements con-cerning Arlington correlated with a reduction in residential property values in Arlington rel-ative to other non-Arlington properties within 20 miles of the proposed stadium site. The last announcement event, corresponding with the af"rmative November vote, carries a positive parameter estimate. While none of the three parameter estimates are individually statisti-cally signi"cant, their sum of 0.012 is statis-tically less than 0 at the 8% level. This suggests that the average property in Arlington that sold after the stadium referendum might have fallen in value but rather clearly did not increase in value with the announcements leading up to the referendum.
One possible problem with the results reported in Table 4 is the assumption that each announcement has a separate and iden-ti"able impact on residential property val-ues.15 This approach might ask too much of the data. A more parsimonious approach is to restrict each stadium announcement to have an identical accumulating impact on res-idential property values, that is, we restrict the parameters on the different announcements to be equal. When imposing this restriction, the dummy variables for the announcement periods are summed.16 Given the results in Table 4, we expect the second announcement effect in Dallas to completely offset the "rst as the Cowboys ultimately did not relocate to Fair Park; this would be consistent with a return to the status quo ante. However, TABLE 5 Constrained Stadium Announcement Effects Dallas Sample (1)
Arlington Sample (2)
Accumulated general announcement effects
0.007 (0.009) 0.001 (0.005)
Dallas City 0.003 (0.029)
Dallas County 0.007 (0.021)
Dallas City accumulated announcement effects 0.012 (0.010)
Dallas County accumulated announcement effects 0.004 (0.003)
Arlington
0.011 (0.037)
Arlington accumulated announcement effects
0.005** (0.002)
Notes: Dependent variable is log of sale price. All speci"cations include house age, age squared, square footage, square footage squared, number of bathrooms, number of garage parking spots, whether the property has a pool or not, the number of storeys, month-speci"c dummy variables, a time trend, and elementary school "xed effects. The Dallas sample is centered on Fair Park in downtown Dallas. The Arlington sample is centered on the Rangers baseball stadium in Arlington. The errors are clustered on elementary schools. Robust standard errors are given in parentheses.
- p,.05.
- 15. As pointed out by a helpful referee, the use of announcement dates in a reduced form framework cannot distinguish between no capitalization effect and offsetting changes in the underlying supply and demand for housing based on the probability of a new stadium being built in a particular area.
- 16. The sum of the dummy variables in Dallas can take a value of 0 or 1; those with a value of 0 sold before Announcement 1, those with a value of 1 sold after Announcement 2. For properties in Arlington, the sum of the announcement dummy variables falls between 0 and 3, that is, the value will be 0 if the property sold before Announcement 3 and 3 if the property sold after Announcement 5.
636 CONTEMPORARY ECONOMIC POLICY
in Arlington, the cumulative impact of the Arlington-speci"c stadium announcements is ambiguous.
In Column 2 of Table 5, the results from the Dallas sample suggest no net impact on property values from the two announcements concerning the Fair Park proposal. This sug-gests that the values of properties surrounding Fair Park returned to the status quo ante when the Fair Park proposal was abandoned. How-ever, in Column 3 of Table 5, the results from the Arlington sample suggest that each of the three announcements corresponded with an average reduction in residential property val-ues in Arlington of approximately one-half of 1%. Therefore, the aggregated impact of the announcements concerning the Arlington sta-dium proposal was an average reduction in Arlington property values of approximately 1.5%, a result that is statistically different from zero (p 5.023).
Although the individual Arlington-speci"c announcement effects are insigni"cant, the signi"cant and negative cumulative effect of the three announcements on the property val-ues in Arlington, relative to the surrounding cities, is striking. Proponents of stadium sub-sidies often allude to the positive externalities the stadium will generate for the host city. If such claims were true, then the impact of an increasing probability that a stadium would be built in Arlington would be expected to increase property values in that city. In our analysis of the announcements concerning a stadium in Arlington, we "nd no compelling evidence of individual announcements in-creasing the value of properties in the city where the stadium would be built. Rather, we "nd a negative and strongly signi"cant cumulative impact of the announcements on property values. Combined, these results cast suspicion on the claims that stadium subsidies are justi"ed by pecuniary and nonpecuniary positive externalities a stadium provides host city residents.
VI.
CONCLUSIONS The aggregated impact of stadium an-nouncements when stadiums are funded by municipal tax dollars is the combination of three distinct elements: the tax burden, which causes a reduction in property values; the overall city amenity effect, which causes an increase in property values; and the proximity amenity effect, which has an ambiguous effect on residential property values. The results pre-sented herein suggest that the aggregated expected city amenity effect and local sales tax burden associated with the proposal to build a publicly subsidized stadium for the Dallas Cowboys in Arlington, Texas, reduced residential property values.
What is the magnitude of the amenity effect for Arlington? A back of the envelope calcu-lation suggests that a household of four with
$50,000 income might contribute up to $60/yr in local sales tax dedicated to the stadium con-struction.17 Assuming a wage growth rate of 4.5%/yr, the 30-yr present value of the tax payments would be approximately $2,000.
During the sample period, the average residen-tial property in the city of Arlington sold for
$120,000. The 95% con"dence interval for the accumulated deleterious effect of the various stadium announcements on average property values in Arlington is ($3,343 to $142),
centered on $1,742. Therefore, the average reduction in property value is not statistically different from the expected additional local sales tax burden. In other words, the general amenity effect in the city of Arlington is not distinguishable from zero.
This result differs from that of Tu (2005) who found a positive amenity effect for prop-erties located within 3 miles of the NFLs Washington Redskins stadium built in 1995.
There may be signi"cant differences between the area of Landover, Maryland, where the Redskins built their stadium, and Arlington, Texas, where the Cowboys are building their stadium. Additionally, the tax effects associ-ated with the Cowboys project did not plague the Redskins project and this might help explain the differences in the results.
Two questions remain unanswered. First, what is the pattern of changes in residential property values in the city of Arlington as the Cowboys stadium is constructed and what will happen to residential property values after the stadium opens? If property values in Arlington increase after the new stadium opens, this might simply offset the reduction in property values incurred when the stadium project was announced. Second, if the prop-erty values fell in the city of Arlington during the stadium campaign, why did the stadium
- 17. Based on IRS State Sales Tax Deduction tables, 2005 Instructions for Schedules A & B (Form 1040).
DEHRING, DEPKEN & WARD: THE IMPACT OF STADIUM ANNOUNCEMENTS ON RESIDENTIAL PROPERTY VALUES 637
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