How not to evaluate how much public money to spend on a stadium, in seven easy steps

I’ve often said that cities should calculate what sports teams are actually worth to them before writing a blank check for a stadium or arena — you know, like Naheed Nenshi has tried to do in Calgary — so when Andrew Dunn, editor-in-chief of something called the Charlotte Agenda (“Charlotte Agenda exists to make Charlotte the smartest, most human city in the world”! Also: “We believe in drinking beer at work”!), set out to do just that today for a Carolina Panthers stadium deal, gotta give him at least some props, right? Let’s see how he did:

  • “Economists generally agree that the costs to taxpayers outweigh the benefits of all the additional spending on construction, hotels, restaurants, tickets and concessions.” He can read! Good start!
  • Notes that Charlotte paid $87.5 million in 2013 for a six-year lease extension for the Panthers, which means “the going rate is at least $13.75 million per year to make a team stay put.” He doesn’t note that that was one of the worst returns on a stadium subsidy in history, so maybe his reading doesn’t extend to this site.
  • “I believe that the Panthers are worth public money.” That’s kind of assuming your conclusion there, but in case he means “something, even if it’s only a penny,” I’ll allow it.
  • “I’ll grant that Charlotte’s government will never be able to directly recoup in employment and sales taxes the money it puts toward the Panthers. But putting public money toward pro sports shouldn’t be analyzed that way. Think of it more as a marker of what kind of city we want Charlotte to be.” Followed by an assertion that the Hornets and Panthers “put the Charlotte name in the national consciousness and touched off a business boom,” his sole presented evidence being a 1994 Chicago Tribune article in which a Hornets season-ticket holder says that the teams put Charlotte on the map.
  • “An investment in the Panthers is not using the same money that would build affordable housing.” This because the city could use hotel and rental car tax money that is earmarked for promoting tourism, notwithstanding that if general fund revenue ends up being used on a tourism project because the hotel and rental car tax fund is all spent on a football stadium, it’s absolutely taking away from money for things like affordable housing.
  • “Let’s figure out what we’re willing to do before a new ownership group gets involved. They’ll buy the team knowing what support they can count on from the community.” I.e., let’s make an offer before we’ve even been asked for anything. Where figuring out what a team’s presence is worth to a city (and, just as important, whether it has any better options for leaving if you don’t lavish its owners with cash) is a great preparatory step for negotiations, up and telling new team owners, “Hey, we have a check this big waiting for you!” is a terrible, terrible idea. What were we just saying about bidding against yourself?
  • “Perhaps both sides will come out in the black.” Uhhh, remember bullet point #1 back up there? Where you wrote that economists agree a win-win situation almost never happens? Maybe his reading doesn’t even extend to the very editorial he’s writing.

Overall grade: D, maybe C-minus for a good essay topic, but the execution needs a lot of work. To do this right you need to analyze the actual return on a stadium investment in tax revenues, the emotional value of an NFL team to a community, any measurable impact on business activity as a result of the presence of sports teams (though those economists back in the first paragraph have it covered for you: there is none), what other options the team has to move, and so on. Instead, Dunn’s analysis comes down to: Economists say stadiums don’t pay off, but I really like football, and there’s tourism tax money just sitting right there, so somebody just offer something already, I can’t take this uncertainty! Sounds like somebody needs another beer.

8 comments on “How not to evaluate how much public money to spend on a stadium, in seven easy steps

  1. Neil,
    I read your work faithfully even though it’s preaching to the choir. When Bud Selig and his political cronies were angling for Miller Park, forget putting it down town, they claimed that the stadium would put Milwaukee on the map because of the city’s support of the Brewers. Moving to the east coast after twenty-five years in Milwaukee, may I say that Selig’s line of thought was and is bullshit. It’s 2018, and Milwaukee still conjures up images of Happy Days, Laverne and Shirley, and Harley Davidson. The Brewers are the tiniest of afterthoughts.

  2. If all local, state, and federal government was run sanely, there would be no subsidies whatsoever for professional sports franchises. We would then have a truly free market environment that would lead to teams residing in the locales that were most profitable to them. It is that simple.

    • It is, but it only takes one idiot (stone) to start an avalanche of stupidity (rockslide).

      At some point legislation will be passed that prevents states from bidding against each other to lure businesses of any kind. Some would argue that that sort of legislation already exists but is not enforced.

      Either way, it tends to be the Federal gov’t (and thus federal taxpayers) that is ultimately paying the most for these projects either through aid for cities/districts that are bankrupt in part because of their disgraceful and incompetently negotiated sports deals, or through loss of tax revenue on TEBs which are used to fund vanity projects for billionaires who could and should fund them themselves, or down to cities using infrastructure funding that was supposed to be used for public infrastructure for stadia, then lobbying the feds or states for infrastructure money because the cities are “in crisis”.

      As noted previously, if you put money for your gas, electric and phone bills in three separate jars, then use the money in the electric jar to pay your gas bill, the money in your gas bill jar does not become surplus or ‘new’ revenue.

  3. I especially like the 4th point. If in 1994 the arrival of the Hornets put Charlotte on the map, presumably it was removed from the map in 2002 when the (original) hornets left.

    Then again maybe it is in bad taste to speak of putting cities on and taking cities off the map when you’re talking about a team that now plays in New Orleans, because Katrina.

  4. Is the company that owns the Sacramento Kings having trouble paying its bills? Possibly. Actually, no, they are clearly having trouble paying their bills. That part is settled. A better question is, Should the City be worried?