Category: Pittsburgh Penguins

There are two pieces to any public spending proposal: Where will the money come from? and Where will the money go? While they often get lumped together, especially by proponents hoping to argue that tax money isn’t really tax money — I recall, for example, supporters of Washington, D.C.’s gifting of public cash to a Nationals stadium insisting that as it would mostly come from a tax on city businesses, nobody else should complain — they can almost always be separated in subsidy discussions, and should be — there was nothing stopping D.C. from raising business taxes and spending them on something else, except now it can’t because it’s already used that to fund a private baseball stadium.

With that in mind, let’s visit Pittsburgh, which is embarking on a knock-down drag-out fight over hotel taxes, whether to raise them, and how to spend them:

• VisitPittsburgh, which is a tourism promotion nonprofit run by local Pittsburgh businesses, is proposing a 2% surcharge on hotel stays anywhere in Allegheny County, with the proceeds put in a pool for “promoting tourism.” The tax would be estimated to provide $6.5 million a year.
• The Pennsylvania state senate is proposing a “tourism improvement district” in Allegheny County that would be allowed to impose a hotel-tax surcharge, with the actual amount determined by a board of hotel operators, because that’s how taxation works, like how sales-tax hikes are determined by a board of consumers. (Ed. Note: This may not actually be how taxation works.)
• State Sen. Wayne Fontana, the board chair of the city-county Sports and Exhibition Authority, says he won’t approve the tax surcharge unless VisitPittsburgh agrees to give up a cut of the hotel-tax money it already receives for tourism promotion, and instead give it to the sports authority, which runs Pittsburgh’s money-losing convention center (this is a tautology, as pretty much all convention centers lose money) and pays for maintenance on the Pirates and Steelers stadiums and Penguins arena, currently out of ticket taxes.
• In fact, Fontana would like to see all the hotel tax money dispersed by the sports authority, which he’s portraying as bringing all tourism-and-sports-related spending under one roof, and never mind that it would just happen to be his roof.
• VisitPittsburgh President and CEO Jerad Bachar says if the sports authority gets control of the money, he’s worried that not enough of it will go to tourism promotion, so the proper solution, clearly, is to let him have the money and decide how it’s spent, since he’s an upstanding individual and not susceptible to “politics” like the authority board chair.

In a sensible world, questions would now be asked, in the halls of power and newspaper pages alike, about several things: Will spending more on hiring people to promote tourism (40% of VisitPittsburgh’s expenses are for salaries) really benefit hotels and other businesses dependent on tourism enough to be worth a 2% hotel-tax hike? Do Pittsburgh’s three sports stadiums and its convention center really need more money for maintenance and operations, and what would happen if they didn’t get it? Could a hotel tax surcharge be used for other things that might do even more to help Pittsburgh businesses and residents? This is not that sensible world. Instead, we have the public official who controls the city and county’s stadium/convention slush fund and the nonprofit CEO who controls the tourism spending slush fund fighting over who gets to direct the slush, because surely allocating it as part of the normal government spending process that is (in theory) open to public debate would be entirely crazy.

There’s almost certainly a longer article that could be written about how it came to be that fighting other cities for tourist visits became seen as one of the roles of local government — I may see if Heywood Sanders has anything to say about that, in fact. But for now, appreciate that there’s a fight going on over giving money to Pittsburgh sports venues, and it would very clearly be money that could be spent on a very specific other thing if not used for sports, and that other thing may be as big a waste of money too, but that doesn’t necessarily mean that spending it on sports is a good idea, either. Sorry if that doesn’t provide you with an easy white hat to root for, but moral ambiguity is all the rage these days, embrace it!

Check it out, the owners of the Pittsburgh Penguins, Steelers, and Pirates, seeking $800,000 a year in county money for a slush fund for improvements to their venues, have teamed up to pay for a study showing how much the teams contribute to the city’s economy, and their hired hands have determined: a hell of a lot! $6 billion over five years’ worth of a lot! Do we dare try to analyze their methodology without actually seeing the report itself, because the teams haven’t released that? I’m game if you are! Let’s begin with this from the Pittsburgh Post-Gazette’s article on the report:

They commissioned accounting firm PricewaterhouseCoopers to produce an economic impact study that measures their value on several fronts, including direct and indirect spending, tax revenue and jobs.

That’s not a good sign: PwC is an accounting firm, not an economic analysis firm, so it’s unlikely they tried to account for the substitution effect whereby if Pittsburgh residents didn’t have pro sports to spend their money on, they wouldn’t just stuff it under their mattresses instead. A serious economic impact study would look at, say, spending during years when there’s a labor stoppage vs. spending during years when all the teams are playing, but we can probably safely assume that didn’t happen here.

[Penguins CEO David] Morehouse said the teams brought nearly 4 million people, counting concerts, to the city in 2017 to eat at restaurants, to stay at hotels, and to partake in other activities.

“Counting concerts”? How are the teams credited with people in Pittsburgh going to concerts? (People even go to concerts in cities with no major-league sports teams! It’s a true fact!) And the total attendance of the three teams in 2017 was only about 3.2 million, so clearly a lot of these people “brought to the city” were already in the city, which makes bringing them there not such an impressive accomplishment.

“You can’t just talk about Pittsburgh’s revitalization and then say these greedy sports bastards over here. I mean, if you’re going to tell the positive story about what’s happening in Pittsburgh, we’re part of it and we shouldn’t be the ones having to say it,” [Morehouse] said.

“But if we’re going to have to say it, we’re going to say it with the largest numbers we can possibly justify! Wait, did I say that last part out loud?”

Frank Coonelly, the Pirates president, doubts Pittsburgh would be one of 20 finalists for Amazon’s second headquarters if it did not have pro sports teams. Only one finalist for the online retailer’s new location — Austin — is without at least one pro sports team in its region.

This is not actually true: Montgomery County, Maryland, isn’t home to any pro sports teams either, nor is northern Virginia, though I suppose one could squint and give them credit for the teams nearby in D.C. But mostly, this is selection bias: Amazon is looking for a major urban area to put its new headquarters in, and there simply aren’t that many major urban areas without major sports teams: There’s Greenville and Grand Rapids, I suppose, but somehow I don’t think they would have made the cut even if they had acquired teams. (Oklahoma City and Buffalo, which are similar sized, didn’t.)

The GumGum analysis found the three teams generate 513.3 million in “combined impressions” a year, whether through TV broadcasts, social media, or print publications.

To get that kind of “postcard” exposure — whether it’s shots of the city skyline, the bridges, or other local landmarks — through paid advertising would cost nearly $41.5 million.

So basically the teams want to be credited for every time they got the name “Pittsburgh” mentioned in the national media, regardless of whether it was in a positive or negative light. I could note that there are other things that got Pittsburgh mentioned nationally lately that you really don’t want to start crediting for ad impressions, but I probably shouldn’t go there.

When the Penguins were fighting for a new arena a dozen years ago, a move to Kansas City made more sense — the deal was better and the city had a larger population, Mr. Morehouse said.

But, but, your own owner said it was a bluff! Get on the same page here, guys!