Bettman says feh on economists, can’t you see publicly funded arenas are the bee’s knees?

Good morning! Are you ready to have NHL commissioner Gary Bettman commissionersplain to you about why public subsidies for sports venues are great and you are wrong if you think otherwise? I sure hope so, because Bettman was off and running yesterday in an interview with Yahoo Finance sponsored by Prudential (or maybe an interview with Prudential sponsored by Yahoo Finance — it’s so hard to tell from the backdrop):

There are academicians who agree with this and disagree with this in theory, but I disagree with them: Having a professional sports team as your anchor tenant, if you do it the right way, can literally transform a city. Look at Chinatown in Washington, D.C., after the Verizon Center was built. Look at L.A. Live, built around Staples Center. Look at what’s happened in Edmonton, where they’re revitalized downtown. Look at what’s going on in Detroit. All of these around new arenas, where an entire area of a city has been vitalized, or revitalized, created a new tax base, brought businesses, residences, people downtown to live.

This argument — look at what’s going on around new arenas, who are you going to believe, some number crunchers or your own eyes — requires ignoring a lot of things: that “revitalization” often only takes place because the land was being held fallow in anticipation of new development in the first place; that D.C.’s Chinatown is now unaffordable to its former Chinese-American residents because it’s been remade as a playground for arenagoers; that even the most active arenas are dark about half the year and more than half of each day, and so may not be the best thing for local businesses unless they’re running a pizzeria that can get people in and out super-quick; and, yes, that those number crunchers have found time and again that any arena-related increase in tax receipts in one neighborhood is countered by a corresponding decrease elsewhere in a city, since you’re just moving spending around, not creating it out of thin air. On the other hand: Look! An arena! Lots of people! What’s not to like?

Bettman then pivoted to his real point, which was how sad it is when a team owner wants a new arena, and for some reason some crazy mayor won’t give him one:

And Calgary, the Flames were trying to do the same thing, and they have been spectacularly unsuccessful in reaching an agreement with the city on how to move forward. And they’ve announced that they are no longer pursuing a new building, which is unfortunate, because they’re playing in the oldest building in the league, and at some point their sustainability gets jeopardized if they don’t have the same types of facilities, amenities, revenue-producing opportunities that other franchises have.

Sustainability — we’re now into another of the items in the stadium-grubbers’ playbook, which is how can we compete without a new building like all the other kids have? Of course, the Flames owners are currently turning a profit of about $20 million a year and say they can only afford a new arena if someone else pays half the costs, so really the only “revenue-producing opportunity” here is to get public cash. Still, it’s the oldest building in the league (note: not actually the oldest arena in the league), don’t you know that old things are bad?

Anything else on your mind, commissioner?

When you’re creating new taxes that wouldn’t otherwise exist but for the development of an arena and the surrounding area, I don’t think it’s unreasonable to devote some or all of those taxes to paying off what’s been created, and which otherwise wouldn’t exist.

This is the argument for TIFs, and I already typed in all the dialogue from the Odd Couple “Casino Night” episode to explain this once, so go read that again to explain why it’s nonsense. Or just re-read Geoffrey Propheter’s study linked above to see why “otherwise wouldn’t exist” is nonsense. But then, who you gonna believe, a guy with a spreadsheet or a man with a fancy backdrop and a job that requires him to say these things?

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18 comments on “Bettman says feh on economists, can’t you see publicly funded arenas are the bee’s knees?

    1. Cities should coordinate to finish their arenas on the same day, so there can no longer be an “oldest arena in the league.”

      1. Yes, but somebody would still be done a few hours or minutes ahead of the rest! I hate that phrase because of the laziness plus the implication that age automatically means a building isn’t usable any longer. However, I was surprised to learn that something built in 1983 truly was the SECOND oldest arena in the NHL. The only one older is Madison Square Garden but Bettman isn’t counting it because it just got a complete makeover on the inside. For a league that has had its struggles they’ve somehow managed to keep getting new facilities built and remodeled.

  1. The arena in Detroit doesn’t compare to LA live or Chinatown in D.C.. It doesn’t have rail to the airport. It only has a part time bus from downtown to the airport on weekdays.

    1. This is true in almost all cities. Everyone looks at LA live and says “wow, we gotta do that here”.

      Except you can’t rebuild LA in any other city without rebuilding all the “other” reasons for people to go to LA.

      Thus far, “Detroit’s” new arena (they paid for it and own it but do not control it…) is recording similar or slightly lower attendances than the old arena.

      The Palace (a perfectly good building) is being razed so it doesn’t compete with the downtown arena (see: Edmonton) for concerts. And Pistons fans don’t seem all that interested in schlepping downtown to see the team (which, yeah, isn’t exactly wowing it’s fans at the moment either)

      1. Detroit’s new arena isn’t drawing the Piston fans, however, the Red Wing fans are still coming out: 3rd in the NHL in attendance at 97 percent capacity.

        We Hockey fans are dedicated, aren’t we:)

        1. You are…. but the images I have seen during Red Wings games don’t seem to support a 97% capacity figure.

          Is this a tickets sold vs tickets used issue or ?

  2. Let’s say you take the arena transforming an downtown section as fact. One could argue that it’s the perception of the arena (and associated buildings) — and not the sports team that transforms the area. Even accepting Bettman’s argument doesn’t mean that a city (i.e. Calgary) should pay to develop and give away revenue from said arena.

    1. Good point.

      We might make a case for spending, say, $250m on a public recreation/sportsplex in the downtown to bring people in. It could have the same sorts of adjacent development (food, entertainment) based around public recreation (and parents dropping off their kids for swimming or indoor soccer etc) as we have for privately run sports businesses.

      The remaining $150m or so normally committed to subsidize private for profit sports businesses could be used for operating subsidies and upgrades… just like happens with publicly owned arenas leased to private operators as a subsidy to their billion dollar franchises.

      The sunk capital and operating subsidy is the same, but at least it’s the general public who benefits and not a rich old man who owns a hockey/basketball/football franchise

  3. Yeah, just look what’s happening in Edmonton…

    The city had it’s own plan to redevelop it’s downtown and this was hijacked by the Katz group’s plan to develop an arena. They signed land purchase options on about 70% of the land they needed, then used those options to convince the city that it “had no other choice” but to go along with the KSG plan… which included the city raising the money to exercise those options before they expired (and went up in price). Talk about your ham and eggs plays…

    Now the city has committed more than $400m ($280m “expected” from CRL, $138m in “lease revenues”) to this development, when it’s own manager (now fired) said it was unlikely that the city would ever receive it’s capital back in new or improved revenues, nevermind any actual return on investment.

    That’s more than $400m the city could have used for any other purpose if it had just decided not to give it to a billionaire.

    Will the “arena” revitalize the area? To one degree or another, yes. However, there are many other ways that that sort of spending could have revitalized the area as well. The condo towers currently planned/being built would have been built anyway (Edmonton’s downtown has seen the replacement of low rise and single family homes near the downtown with high rise residential buildings for nearly decades now…). Perhaps they would have been in another location, or a slightly different style etc, but it’s all Edmonton development. Why is the city competing with itself to subsidize development in one area over market rate development elsewhere?

    The last info I have for the cost breakdown of the arena is as follows:

    CRL……….. $ 280m
    Ticket Tax $ 125m
    Lease Rev $ 138m
    Arena Corp $ 24m
    Govt Grant $ 25m (this may be city funds also, unsure)

    1. Great follow up, John.

      The development occurring in the terribly named Ice District is all development that was already happening (104 st.) or would have happened in the city somewhere regardless (city offices, stantec office and condos).

      The downside that businesses in the district are now noticing is that customers who are not going to the game are actively avoiding downtown on nights when the arena is in use. Also, the arena is capturing a big chunk of food/beverage spending since you are not allowed to re-enter if you leave.

  4. “…can literally transform a city.”
    Yeah, like the way it transformed Glendale into a high-tax, low-service community. But sure, it will be completely different the next time. Until, of course, the next city finds out that the team ‘cannot and will not’ remain unless you fork over the boodle.

  5. My favorite part of this is the entire “can’t come to an agreement,” idea that the commish floats. I heard about a school that had trouble coming to an agreement with the employee embezzling millions of dollars. When will they stop being unreasonable.

  6. “they’re playing in the oldest building in the league”

    Which, of course, will ALWAYS be true for one team in a given league no matter what.

  7. Coyotes owner is looking for *investors* and already has land selected for a new arena?

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