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Local Government,Opinion

The $100M Stadium Swindle

Jul. 28th, 2003
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RALEIGH -- The various professional sports offer wealthy people the opportunity to indulge their hobbies and increase their stature -- and shift much of the cost to innocent bystanders.

As elected officials in Charlotte and Mecklenburg continue their plans for yet another taxpayer-subsidized arena for the Charlotte Bobcats, it's worth remembering that the costs aren't covered just by local tax revenues, though they play an important role. Because many of these projects become eligible for tax-exempt financing -- various means are employed to transform what is obviously a private-sector development into a "public" one -- there is an implicit subsidy from taxpayers living far outside the metropolitan area where the team is based.

A recent study estimated that the federal treasury is losing about $100 million a year from this practice. Writing in the Cato Institute's Regulation magazine, Michael F. Gorman of the University of Dayton and Ike Brannon of the Joint Economic Committee discuss the fiscal and economic implications of the taxpayers' involuntary munificence.

"A major league sports team creates few new jobs in a city; the vaunted `multiplier effect' that says $1 spent on a sports arena circulates in an economy to create $8 or $9 in new spending is little more than sophistry," they write. Multiplier-effect arguments have been around for hundreds of years, and have been rather easily rebutted for hundreds of years by observing that 1) few potential consumers have money stashed in a mattress ready to be spent, and thus must finance new spending by reducing other spending or saving, and 2) multiplier-effect models can't adequately capture the complex ways that money and economic activity flow in and out of local communities.

Having observed that the pro-sports lobby has been flim-flamming the public for a long, long while, Gorman and Brannon offer a potential way out that folks in Charlotte-Mecklenburg should appreciate: the permanent seat license. Used to help finance the uptown stadium for the Carolina Panthers more than a decade ago, PSLs create a more efficient market for spectators and shift some of the financing cost out of the subsidized and politicized public sector where the economic realities are hidden and the bovine-excrement quotient is high.

"The beauty of [the] personal seat license is that it magnifies the futility of such government spending; with this alternative revenue source, government stadium subsidies become nothing more than transfers from taxpayers to team owners and season ticket holders," the economists conclude.

This is a welcome nod to reality. In the short run, there is probably no way to prevent the sports-crazed and the cynically political huckers who manipulate them from getting their new arenas. If PSLs can be at least part of the mix, however, perhaps folks will catch on to the fact that the remaining tax subsidies constitute outrageous redistribution of income from the relatively poor to the relatively wealthy.

Basically, if you build it, they might come -- to their senses.

Hood is president of the John Locke Foundation and publisher of Carolina Journal.