The Greater Memphis Chamber of Commerce has issued a study claiming to show that the public construction of the FedExForum ten years ago to lure the Grizzlies from Vancouver has been a huge windfall for the city of Memphis. As My Fox Memphis reported the story:
The construction of the FedExForum was hotly debated ten years ago but with its opening, came an NBA basketball team, countless college hoops games, and more than 100 special events every year.
The Memphis Chamber commissioned a study that said all of that combines for an annual $223 million revenue generating impact.
“I think that settles the argument of whether of not it was going to be too costly for our community to attract an NBA team here,” said John Moore with the Memphis Chamber.
Uh, yeah, actually not. First off, that $223 million in annual “revenue generating impact” is actually economic activity — the sum total of all dollars spent in and around the Forum each year, including “the impact of all spending by the Memphis Grizzlies, by the operation of the FedExForum, and all visitor spending, as it flows through the Shelby County economy” — meaning that a big chunk of it is the Grizzlies’ $67 million player payroll, even if Zach Randolph never spends a dime of his salary in Shelby County. The actual city and county tax revenues generated by the Forum are far less: $5.3 million a year, or less than a third of the annual cost of paying off the Forum’s $250 million in construction debt.
Reading the report itself, it also doesn’t appear that the Chamber accounted for the substitution effect, meaning that much of that $5.3 million in new tax money may just be cannibalized from other spending that would have taken place in Memphis even without a basketball arena. There’s also no discussion of the opportunity cost of missing out on what else could have been done with $250 million in public bonds — the Chamber estimates that the total number of jobs created by the project is 1,534, which comes to more than $150,000 per new job, which on the economic impact scale is somewhere between “dismal” and “vomitous.” At that rate, the city would have been better off selling bonds to hire more schoolteachers, or just cutting everybody’s taxes by $10 million a year.
On second thought, maybe the study really does settle the argument of whether the arena was too costly. Just not the way Moore meant it.