Category: Oklahoma City Thunder

While initial arena talks heated up in and around D.C., the people of Oklahoma City finished voting in a referendum on whether to give Thunder owner $850 million in tax money toward a new $900 million arena, and, uh, it passed by a little bit:

That is what’s called a landslide, which is pretty impressive for a deal that will extend a 1% sales tax surcharge for six years to pay for almost the entire cost of a new arena to replace one that is only 21 years old and was already renovated in 2008. Especially when nearly half of all sports venue funding referendums fail, and that includes ones where the team owner is putting up more than 6% of the cost.

So WTH happened? Let’s piece together what we can:

• 58,000 total votes is not a ton in a city of almost 700,000. State voter registration data is reported in such a confusing format that it’s not easy to tell how many of those are registered voters, but the turnout rate for a special election with not much else on the ballot clearly wasn’t high. That makes it easier for highly motivated voters — read: fans who were afraid of the Thunder leaving town, construction union members, etc. — to have a disproportionate impact.
• Mayor David Holt put on a full-court rhetorical press from the beginning, memorably arguing that the seven-year tax surcharge was “a temporary one-cent sales tax that will not raise taxes.”
• The Greater Oklahoma City Chamber of Commerce equally memorably declared that the Thunder are worth $590 million per year in economic impact, a figure so insane that it took until now for J.C. Bradbury to believe that’s what they were actually saying.

Regardless of the reasons, the peorple, or at least about 8% of them, have spoken, and Holt can now rightly boast that “Oklahoma City is and shall remain a Big League City” and have $850 million in bond payments to prove it. Truly we live in interesting times.

Early voting begins today in Tuesday’s Oklahoma City referendum on whether to build a $900 million Thunder arena with $850 million in public money. What should you, the OKC voter, or you, the non-OKC resident watching in horror from afar, know as the polls open? Here’s what one local TV station thinks is important:

• The arena deal “includes a commitment from the Thunder to stay in Oklahoma City beyond 2050.”
• The $850 million in public money would come from extending a one-cent sales tax surcharge for an additional six years after it was initially set to expire, plus from $70 million in an existing arena reserve fund.
• To anyone who asks why Thunder owner Clay Bennett would only put in 5.5% of the cost, Mayor David Holt says, “Anybody who says, ‘Well, they should do this’ or ‘They should do that,’ this is what they’ve agreed to. These are the terms by which they will agree to sign a long-term agreement in Oklahoma City. Any ideas beyond that have already been rejected. So, we have to move forward in agreement. We can’t make anyone do anything. They have other options.” (Holt did not specify Bennett’s other options, mayors seldom do.)
• “The owners should be embarrassed that they only put out $50 million like that’s a meaningful contribution,” counters Kennesaw State University economist J.C. Bradbury. “The public’s going to pay for it, but the private part will keep all the money. That’s not a partnership. That’s exploitation.”

The arena deal also could include a community benefits agreement about wage guarantees for arena jobs, but any such CBA would only be negotiated after the $850 million was approved, so Bennett wouldn’t really have much incentive to commit to much, now would he?

The Greater Oklahoma City Chamber says it has spent at least $478,000 in ad buys on its pro-arena campaign; the opposition Buy Your Own Arena campaign says it has “a very, very modest budget.” Turnout is expected to be low, since this is a special election with nothing else on the ballot, which means even a little campaign spending could have a disproportionate impact. Sports spending referendums pass 58% of the time, according to research by University of Colorado economist Geoffrey Propheter (whose new book on sports and property taxes I really owe a fuller review to, still planning on it when I find the time), and bigger campaign spending gaps are generally associated with a higher chance of victory, so it would be nice to know the exact spending numbers, but we likely won’t know those until after the election.

In the meantime, we can all enjoy watching Holt and Bradbury fight it out on RagingTireFire.com (formerly known as Twitter):

If you can't win the debate, change it. No stadium critic is arguing arenas haven't been 100% publicly funded. The argument is that ALL available evidence suggests it's a terrible idea. Plus, several small markets have privately financed venues (Salt Lake City, Charlotte, Vegas). https://t.co/rF0PX1yOml pic.twitter.com/IUKfknAr6t

— J.C. Bradbury (@jc_bradbury) December 7, 2023

But, if the mayor suggests we look to Wikipedia, rather than economics professors at Oklahoma universities, well, at least be right.
MSA: Public % last arena
Milwaukee: 48%
Raleigh: 87%
Memphis: 83%
Salt Lake City: 0%
Buffalo: 44% pic.twitter.com/TpAwsY531Q

— J.C. Bradbury (@jc_bradbury) December 7, 2023

 

It’s time for bad economics theater, Oklahoma City edition! Take it away, Greater Oklahoma City Chamber of Commerce:

Since the OKC Thunder came to town in 2008, Oklahoma City metro’s gross domestic product has grown by 41%, which significantly outpaced other similar-sized metropolitan areas that do not have an NBA team, supporters say.

Nope, that’s not how you do a proper correlation! For that, the chamber’s hired consultants from Applied Economics would have had to look at things like whether the pace of growth picked up from previous years once the Thunder arrived, to try to determine if that GDP growth is due to the team’s presence. Plus, if you’re arguing that this is a reason to spend $850 million in public money to build a new arena, it doesn’t even matter how much the Thunder affect economic growth unless they’d leave without one, which nobody is saying they would.

What else you got?

The study finds an estimated annual impact of $590 million, supporting more than 3,000 jobs. The study also estimates the impact of construction of the new arena, which would generate more than $1.3 billion during the construction period and support more than 10,000 jobs. 

As usual, that’s not really economic impact, it’s just economic activity, which is totaling up any spending that takes place by anyone who goes into the arena, even if it’s money that would have been spent somewhere in town anyway. (There’s also probably a large multiplier built in: If the arena is in use 150 nights a year, which seems about right from looking at its calendar, then you’re talking about at least $200 in spending per ticket sold, which would be a lot.) And as for that $1.3 billion during the construction period, yes, spending $900 million on an arena is going to mean at least $900 million in money being spent, though the local goverment spending that same amount of money on something else — or even just returning it to taxpayers to let them spend it — would have an impact, too.

But don’t just listen to me, an economics journalist. While the chamber was presenting its consultants’ figures, outside the opposition group Buy Your Own Arena was holding its own press conference with economists from Oklahoma University, who said … okay, seems like most of the press preferred the scene inside, where there were probably snacks, but one quote did sneak into one local TV report:

“There’s a lot of research that says that shows that these sports arenas don’t pay off for host cities, and that’s not a positive return on investment,” said Cynthia Rogers, Economics Professor at The University of Oklahoma.

So what do the real impact numbers for Oklahoma City look like? Fortunately, we have Geoffrey Propheter’s 2012 paper on the impact of NBA arenas, which found:

Propheter did note that a handful of cities (Atlanta, Boston, Chicago, Denver, Indianapolis, and Oklahoma City) appeared to see income gains, but this was likely the result of “income transfers from the suburban area around the central city” — i.e., the same money was being spent in the region, it was just being spent downtown instead of at the local Olive Garden.

And Propheter later elaborated:

Oklahoma City, he notes, does show a correlation between building the Ford Center and an increase in resident income, but because it also built a whole ton of other downtown development at the same time, it’s impossible to say whether the arrival of the Thunder caused it or not.

So to recap: Oklahoma City landed the Thunder in 2008 after spending $89.2 million to build an arena and another $103.5 million to upgrade it, and the team was popular and the city continued to grow. This, the local chamber of commerce now argues, is why the city has to spend $850 million to tear down its 21-year-old arena and build a new one. Make your own selection of which logical fallacy is being applied here, there are lots to choose from.

As expected, the Oklahoma City council approved a public vote on a new Thunder arena yesterday, voting 7-2 to put the measure on a special ballot on December 12. Following the council vote, Mayor David Holt exulted in the plan, but mostly in the spectacle of democracy itself:

“I just think that when it comes to the concerts, major league sports, quality of life, the economic impact and growth, the international brand, the economic ability to help all people … and the philanthropy, the fact that we can do all that without a tax increase I think is a win-win,” Holt said.

“But the people get to decide,” Holt said. “I think that’s the most beautiful thing of all.”

As for what the people will actually be deciding on, the spending breakdown, as a reminder, would be:

• Public money: $850 million.
• Rich dude who owns the Thunder: $50 million.

Nikki Nice, one of the two councilmembers to vote against putting the arena deal on the ballot, took particular notice of that ratio:

“The math is not mathing as far as 95% and 5% is concerned,” Nice said. “72 months is a long time for people to have to pay for something that they may never get to experience.”

(Not entirely sure that last sentence parses, but “the math is not mathing” deserves to be a t-shirt, if not a magnet.)

There’s already a “no” campaign for the December vote at buyyourownarena.com. Also here’s me talking about the Thunder arena proposal last week, not for the first time and almost certainly not for the last. It’s going to be a long next 11 weeks.

It’s been a little under two months since Oklahoma City Mayor David Holt said he wanted to build a new arena for the Thunder because their 22-year-old one that was just renovated 12 years ago “will keep getting older.” (And now, it’s older still!) At the time, he said he would fund ¯\_(ツ)_/¯ million dollars in arena construction by extending the 1% sales tax surcharge that built the Thunder’s old arena and which was supposed to expire in 2028, instead keeping it in place until ¯\_(ツ)_/¯. But now, the mayor has more details:

• The arena will cost “a minimum of $900 million.”
• Most of that will be paid out of a temporary 1% sales tax surcharge running from 2028 to 2034.
• Another $70 million will come from leftover money in a city arena fund.
• Thunder owner Clay Bennett will kick in a whole $50 million.

The best part of Holt’s press release, though, is this:

The plan for the new arena and the commitment from the Thunder is conditional on passage by Oklahoma City voters on December 12 of a temporary one-cent sales tax that will not raise taxes. The temporary tax will start after the conclusion of MAPS 4 and will not increase the City’s current sales tax rate.

That’s right, “a temporary one-cent sales tax that will not raise taxes.” Roll that around in your mouth for a while.

On the one hand, it’s easy to see what Holt’s comms department was going for here: Nobody likes to ask people to vote to raise taxes, so saying “No no no, these are the same taxes you’re paying now, it’s just that you weren’t going to keep paying them but now you will” is at least confusing enough to maybe cast some doubt into voters’ minds. But come on: Is there anything more Quimbyesque than arguing that establishing a new tax to give public money to the local billionaire isn’t really raising taxes because it just replaces the old tax that gave public money to the local billionaire?

If the city council approves it on September 26, the sales tax surcharge will go to a special election on December 12, at which point it’ll be up to voters to decide if they buy Holt’s “no new taxes” spin. There was apparently a poll conducted on this back in March, but the only news outlet that covered it was the Oklahoman and that page is officially the most heavily paywalled article I’ve ever seen — if any Oklahoman subscribers can share in the comments what the results said, the world would very much appreciate it.