Tuesday, March 7, 2017

Is Pimlico worth Saving?

The pundits are unanimous in declaring that from a strictly economic perspective Pimlico would be dead and that the Laurel Park race course also owned by the Stronach Group would be the logical choice.
But the story goes, this isn't a strictly economical question because its about the Preakness, the Triple Crown, about history, nostalgia, Baltimore branding, about world fame, about Park Heights and also about the law.
Preakness 2016 (SUN photo)
"We are one of the jewels of the Triple Crown," she said. "That's major. The light that gets shined on Baltimore during that time, you can't get that anywhere else." Mayor Catherine Pugh
The consensus seems to be: it can cost what it wants, but Pimlico has to be renovated and the races have to stay here.

This is an old battle line. Already in 1958 a move to Laurel had been defeated in the State legislature and an actual State law now prohibits moving the race except in the case of an emergency from a natural disaster. It isn't unusual that sports create such irrational positions. Sentiment has kept the Chicago Cubs at Wrigley Field, the Boston Red Sox at Fenway Park and Duke basketball at the Cameron Indoor Stadium.
Pimlico, 140 acres in Park Heights

Pride and sentiment go beyond nostalgia for historic facilities: Cities and States across America have paid big bucks from taxpayer funds to build extravagant stadia just to retain Major League Football, for example. The Raven's Stadium was paid from tax dollars and hardly anybody seems to quibble with it, no matter that study after study shows that the economic payback of such investments is very doubtful. Oakland and St. Louis are still making substantial annual payments on the debts that remain for now-obsolete stadiums that were built to lure the Oakland Raiders and St. Louis Rams away from Los Angeles in the 1990s
Since 2000, more than 45 sports stadiums were either built or renovated, according to a 2010 NCSL study. The average cost to build or renovate a stadium during this time was $412 million. Since the early 1960s, 91 sports stadiums have been built with public funding, and 22 of them were fully paid for with public funds. Twenty-nine of the publicly financed stadiums were funded through a hotel tax, 27 were funded through general obligations, 24 were funded through sales taxes, 23 were funded through bonds and four were funded from lottery or gambling revenues, NCSL said.(PBS)
Preakness 2016 (SUN photo)
But horse racing? Who ever goes to the Preakness? Who actually knows about horses, horse racing, betting or the history of the Preakness? In a time when cussing "the elites" is a presidential matter, why fund horse racing, clearly a sport of the very rich? What's the view of the currently ubiquitous angry white worker on horse racing? Not to mention the residents of Park Heights, a large neighborhood of Baltimore with a whole number of communities ravaged by disinvestment, poverty, abandonment and crime?

It turns out that horses have roots in Maryland and the affinity to horse racing is not limited to the rich. In spite of miserable weather the 2016 race drew a record  crowd of 135,256  and also set a record of  $94.1 million in betting. This attendance makes the Preakness Stakes the largest single day sports even in the State. The Triple Crown series has been held at Pimlico since 1873.The peer events of the Triple Crown are held in Belmont Park (NY) and Churchill Downs (KY). Pimlico is only used an average of 35 days a year but together with the other 5 Maryland tracks horse racing manages to actually have events at an average of 242 days a year. By comparison, the Ravens play at M&T Stadium only about 12 times a year, not counting other events at the stadium such as concerts or the Army-Navy game.
Pimlico as it presents itself on a regular day (Photo Philipsen, 2014)

Recently the Maryland Stadium Authority released a report that says that at least $300 million dollars are needed to fix the Pimlico facilities and this amount doesn't include one of the frequent objections against Pimlico, its surroundings. No hotels, no restaurants, no glitz. Mostly poverty and abandonment. USA Today sports writer Dan Wolken tweeted in 2015 after the toilets backed up during the Preakness: "Besides sentiment, there is no reason for Pimlico to continue to host the Preakness. It can't go on like this."

So how is the economic argument?
Anirban Basu's Sage Policy Group conducted a 2015 study of the economic impacts of Pimlico and the entire Maryland horse racing industry. He concluded that as of 2015, Maryland’s horse industry accounted for about $662.4 million in direct spending and approximately $1.15 billion in total economic activity (i.e., direct, indirect, and induced spending). This spending supported approximately 9,110 full-time equivalent jobs and $481.8 million in total worker compensation. The report estimates that if the current pace of industry expansion continues through 2020, the industry would contribute approximately $1.5 billion in economic impact and support more than 11,000 jobs and $620 million in employee income. The Study stated that local and State taxes from the industry account for $68.7 million annually, mostly income taxes but also sales and property taxes. By comparison, Maryland casinos produced in 2015 a total of $452.9 State revenues. Each of the two industries report that they provide around 5,500 jobs (5,800 horse industry,5,500 casino).
The Sage Group did a similar economic impact analysis for the Ravens and M&T stadium and concluded in 2007 that the team and stadium generated 3,000 jobs and $13 million in State and local taxes.
When history burnt down: The 8-alarm Clubhouse fire of 1966
(SUN archives)

A lot of these fiscal impact numbers are derived and indirect. Direct spending and employment is usually pretty accurate, whereas the multipliers used for "indirect" economic benefits are often a matter of debate, especially in an industry that is atypical and highly seasonal. Besides, benefit allocation is another matter, entirely.

Just take casinos: About half of the State revenue from gaming goes into an education trust fund. This has not prevented the current education debate due to the State not fully funding schools as legislated by the "Thornton" formula. In other words, in spite of those massive economic impact figures batted around by the industries, the actual benefits for residents often remain elusive.

A probably more useful fiscal analysis limited to the Preakness Stakes and Pimlico was conducted by The Maryland Department of Commerce Office of Research and is included in the MSA report. It shows just like the Sage Group estimates of the direct, indirect, and induced impacts. In 2015, the Preakness generated approximately $18.9 million in direct spending that produced $33.7 million in total spending (i.e., direct, indirect, and induced). This direct spending was estimated to support approximately 480 full time jobs and $2.17 million in  State and local taxes. That pretty small annual tax contribution surely makes it quite questionable for the State or the City to large amounts towards the $300 million estimated rehabilitation cost.
Pimlico and the surrounding neighborhoods (MSA report)

Can the high cost of Pimlico rehabilitation be justified with a lift that Park Heights would receive from such an investment? Baltimore's own examples don't bode well, including Pimlico itself. The 2008 Park Heights Masterplan by Goody Clancy states:
For
most of the year, Pimlico sits as a collection of empty parking lots.
Even on a race day, few Pimlico patrons venture onto Park Heights
Avenue or visit businesses in the district.
The masterplan suggests as one of its options to make about 15 acres of Pimlico real estate available for a neighborhood center that could also serve the races during events.

If Ridgely's Delight and Washington Village are doing better today than before Camden Yards, it is because of diligent work in those communities combatting abandonment and managing businesses along Washington Boulevard, not thanks to Orioles fans walking or driving through the neighborhoods. Investments in Sharp Leadenhall come from the fact that Federal Hill is spilling over and that the Casino is nearby, not from proximity to the Ravens Stadium that for years did spur only the construction of a nearby storage facility. Economic spill-overs from seasonal and infrequently used sports facilities are hard to prove, if they exist at all.

So is Pimlico worth saving? Maybe if the money mostly comes from the private side. For Park Heights any other public investment, be it in community centers, parks, schools, affordable housing or day care would do more. Even better would be business allocation or mixed use transit oriented development on the Cold Spring and Reisterstown Metro Station parking lots or on the Pimlico site isteself. The 2008 Park Heights Masterplan sees that option very positively:
Masterplan proposal: Mixed use development with business park
Pimlico also offers a far more exciting and significant set of opportunities. If the racing activities are relocated, the site’s 140+ acres would represent possibly the most exciting redevelopment opportunity in the Baltimore region. The site hasexcellent regional vehicular access via Northern Parkway and is a short trip from downtown. Its size and location next to Sinai Hospital and across Northern Parkway from affluent neighborhoods qualify Pimlico as an unparalleled opportunity for large developments of 1,000 or more units of mixed-income housing, possibly in conjunction with significant office and other jobs-producing uses. This new housing or mixed-use  development, framed around a network of streets, squares, and parks that weave well into adjacent portions of Park Heights, would represent an entire new Baltimore neighborhood in which 2-3,000 people live and possibly work. (Goody Clancy masterplan)
The MSA concept includes elements that can benefit the facility as well
as the community, notably a green perimeter walk promenade

The Mayor has expressed great interest in the future of Park Heights. A masterplan exists. A thriving Pimlico within a thriving neighborhood? A fantastic vision! But the neighborhood won't thrive because of Pimlico, if anything it will be the other way round.

Klaus Philipsen, FAIA updated

MSA Pimlico Study Phase 1
Sage Economic Impact Study
BBJ article about MSA's Pimlico Study
Historic Pimlico pictures Baltimore SUN
Why should public money be used to build sports stadiums? (PBS)
Sports stadiums do not generate significant local economic growth, Stanford expert says

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