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Economic projections for subsidized stadiums are always vastly overstated.
See
Scott Walker Defends Corporate Welfare for NBA by David Boaz of Cato.
"On ABC News’ This Week yesterday, Gov. Scott Walker defended his proposal to spend $250 million of taxpayers’ money to build a new arena for the Milwaukee Bucks:
“All across the nation when they do projects like this,” Walker said. “It’s a good deal.”
The Bucks franchise, valued at $600 million, is owned
by a group of billionaire financiers in New York. But no matter what
it’s worth, Walker’s statement is at wide variance with the findings of
independent economists.
Economic projections for subsidized stadiums are always vastly overstated. As Dennis Coates and Brad Humphreys wrote in a 2004 Cato study criticizing the proposed D.C. stadium subsidy, “The wonder is that anyone finds such figures credible.”
And indeed the Washington Examiner reported in 2008:
Attendance at Nationals Park has fallen more than a
quarter short of a consultant’s projections for the stadium’s inaugural
year, cutting into the revenue needed to pay the ballpark bonds and
spurring a D.C. Council member to demand the city’s money back.
Several Cato studies over the years have looked at the absurd economic claims of stadium advocates. In “Sports Pork: The Costly Relationship between Major League Sports and Government,” Raymond Keating finds:
The lone beneficiaries of sports subsidies are team
owners and players. The existence of what economists call the
“substitution effect” (in terms of the stadium game, leisure dollars
will be spent one way or another whether a stadium exists or not), the
dubiousness of the Keynesian multiplier, the offsetting impact of a
negative multiplier, the inefficiency of government, and the negatives
of higher taxes all argue against government sports subsidies. Indeed,
the results of studies on changes in the economy resulting from the
presence of stadiums, arenas, and sports teams show no positive economic
impact from professional sports — or a possible negative effect.
In Regulation magazine,
(.pdf) Dennis Coates and Brad Humphreys found that the economic
literature on stadium subsidies comes to consistent conclusions:
The evidence suggests that attracting a professional
sports franchise to a city and building that franchise a new stadium or
arena will have no effect on the growth rate of real per capita income
and may reduce the level of real per capita income in that city.
And in “Caught Stealing: Debunking the Economic Case for D.C. Baseball,”
Coates and Humphreys looked specifically at the economics of the new
baseball stadium in Washington, D.C., and found similar results:
Our conclusion, and that of nearly all academic
economists studying this issue, is that professional sports generally
have little, if any, positive effect on a city’s economy. The net
economic impact of professional sports in Washington, D.C., and the 36
other cities that hosted professional sports teams over nearly 30 years,
was a reduction in real per capita income over the entire metropolitan
area.
Stadiums, arenas, convention centers, arts centers, the story is the same. In 2011 the Washington Post reported that
the financial projections for a government-funded arts center,
Artisphere, in Arlington, Virginia, didn’t seem to have panned out.
A 2014 report by Don Bauder in the San Diego Reader is worth quoting at length:
Would you take advice from a gaggle of consultants whose forecasts in the past two decades have been off by 50 percent?
Of course you wouldn’t. But all around the U.S., politicians, civic
planners, and particularly business executives have been following the
advice of self-professed experts who invariably tell clients to build a
convention center or expand an existing one.
A remarkable new book, Convention Center Follies: Politics, Power, and Public Investment in American Cities,
published by the University of Pennsylvania Press, tells the amazing
story of how one American city after another builds into a massive glut
of convention-center space, even though the industry itself warns its
centers that the resultant price-slashing will worsen current woes.
The author is Heywood Sanders, the nation’s ranking expert on
convention centers, who warned of the billowing glut in a seminal study
for the Brookings Institution back in 2005. In this new, heavily
footnoted, 514-page book, Sanders, a professor of public administration
at the University of Texas/San Antonio, exhaustively examines
consultants’ forecasts in more than 50 cities….
The worst news: “These expansions will keep happening,” as long as “you have a mayor who says it is free,” says Sanders.
Or a governor:
“We would lose $419 million over the next 20 years if we
did nothing, if we said, go on, move somewhere else, which the NBA said
they would do,” Walker continued. “In this case, we don’t raise any
taxes. There are no new taxes, only existing taxes. And we get a three
to one return.”
The project will be funded by existing taxes on hotel rooms and
rental cars, though the Wisconsin Center Board has the authority to
raise the rate, he said.
“In this case, we take the tax, the revenues on hotels and rental
cars that are currently paid for the convention center and allow those
to continue to be paid for a new arena,” Walker said. “It’s not a new
tax.”
This wasn’t the worst thing Scott Walker said to Jonathan Karl on ABC. He also said
he wouldn’t rule out re-invading Iraq. But any presidential candidate
who believes that “All across the nation when [politicians spend
taxpayers’ money] on stadiums, it’s a good deal,” shouldn’t be anywhere
near the federal Treasury."
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