October 27, 2010
Memphis Chamber: Grizzlies arena is Grrrr-eat!
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.
April 22, 2009
White elephant watch: Arenas that time forgot
When Memphis' Pyramid arena was set to open in 1991, sports promoter Sidney Shlenker promised: "It''s going to be a monument like the Statue of Liberty or the Eiffel Tower, a signature for the city. The difference is this will have something to do inside it."
Mmm, not so much. While the Pyramid was initially home to the University of Memphis basketball team, and hosted concerts and like, all those activities fled to the new FedExForum once it was built by the city to lure the Grizzlies in 2004. Shlenker, who promised to repay the city's construction bonds on the Pyramid from proceeds of events there, instead soon declared bankruptcy, leaving Memphis saddled with the bulk of the $62 million debt. Now Shelby County is debating whether to sell its share in the empty arena to the city, which would only reshuffle the taxpayer deck chairs, while officials hold out hope that a Bass Pro Shops superstore could fill the building. Of course, that idea has only been kicking around since 2005, and city negotiator Robert Lipscomb didn't exactly sound optimistic it would get moving anytime soon, saying only of the impending county sale: "Well, it's always easier when you have to deal with one entity as opposed to two."
Of course, at least Memphis got 13 years of use out of its arena, which is more than Bradenton, Florida can say. The Gulf Coast town's arena, originally intended for the Gulf Coast Swords minor-league hockey team, never got any further than being partly built before financing fell through in 2005, and construction halted. Now the site is being put up for auction, and the partly built arena will likely be razed, in part because it no longer meets state building codes for hurricane resistance — ironic given that one reason given for building the arena in the first place was as a hurricane shelter.