In medieval times, knights were counted on to “[p]rotect the weak, defenseless, helpless, and fight for the general welfare of all.” Well, consider this–besides vaccine for plague and collapse of Byzantium–as an example of how times have changed. The White Sox Triple-A affiliate Charlotte Knights are asking for handouts from a hapless public, the very people who one thousand years ago knights were sworn to protect!
A little while back I wrote about the Double-A Birmingham Barons new stadium deal (about which so many in B’ham remain, troublingly, “enthusiastic”). Since tax subsidy narratives are kind of like formula fiction (i.e. same plot points and stock characters) it might be worth perusing that post to familiarize yourself with the genre.
Since then, I’ve taken in an article from the Econ Journal Watch* from September 2008 by Dennis Coates and Brad R. Humphreys titled “Do Economists Reach a Conclusion on Subsidies for Sports Franchises, Stadiums, and Mega-Events?” Spoiler alert! The answer is a resounding, “Yes!” And the conclusion is: “The case for sports subsidies is weak, prima facie.” That last part is Latin for “we’re academics and can’t just come out and say it’s all bullsh*t.”
*I don’t like citing sources that are not accessible to the public, and Econ Journal Watch is not available on ProQuest through the Chicago Public Library website or on jstor.org at public libraries onsite. But because this article illustrates so clearly and thoroughly such an important point—there is a consensus in the community of economists that stadium subsidies cannot be justified—I’m making an exception. Because few people can access the article, I’ll quote more of it at length in this post.
Coates and Humphreys cite a 2005 survey of American Economic Association members asked of agreement with the following statement:
Local and state governments in the U.S. should eliminate subsidies to professional sports franchises.
58% of economists surveyed “strongly agreed” with this statement, 28% “agreed,” about 10% were “neutral,” and only 5% “disagreed.” Sports subsidies represented one of about 20 policy issues addressed by the survey, and was a matter of “exceptional consensus,” write the authors. “The sports question, in fact, received the largest ‘strongly agree’ response in the entire survey.”
Hmmm, I’m still feeling a bit skeptical, anything else?
“There now exists almost twenty years of research on the economic impact of professional sports franchises and facilities on the local economy. The results in this literature are strikingly consistent. No matter what cities or geographical areas are examined, no matter what estimators are used, no matter what model specifications are used, and no matter what variables are used, articles published in peer reviewed economics journals contain almost no evidence that professional sports franchises and facilities have a measurable economic impact on the economy.”
Well, apparently officials of Mecklenburg County, NC missed the memo. The county, which cites property taxes as its largest revenue source, has already pledged $8 million for construction costs and $24 million in property to the Knights for a stadium in uptown Charlotte (the team currently plays in Fort Mill, SC). And now team owner Don Beaver and the Knights want $11 million from the city, which would mean taxpayers will be on the hook for more than half of the $78 million proposed stadium project.
“The introduction of a ballpark will be a super-catalyst for development,” Michael Smith of Center City Partners told Charlotte City Council members in March, predicting that the stadium would spark $300 million in new development.
The Knights claim that a new stadium will likely mean doubling annual attendance to 600,000 and tripling revenue to $12 million. Economist John Connaughton, hired by the team to study the potential economic impact of a new stadium in Charlotte, suggested an even greater increase in revenue, $13.5 million, based on computations made by his “economic-impact software.”
It’s unclear whether or not this software was in fact some version of Maxis’ SimCity, and if residential and commercial development around the stadium in “Funkytown” was later swept away by user-induced, computer generated, natural disasters in a moment of boredom.
I’ve made the point before that the emergence of these privately funded studies is typical during the stadium subsidy public-relations waltz. Coates and Humphreys call it “promotional literature.”
“Calls for subsidies at the local level come from interest groups and their consulting firms—which we call ‘promoters’ of subsidization—who talk up local benefits of sports franchises, stadiums, and mega-events….The promotional literature often suggests that if the city attracts or retains a sports franchise, its people derive specific economic benefits from the presence of the team, including more local jobs, higher local income, and increased local tax revenues….and are generally called “tangible benefits” in the literature.”
Buuuut . . .
“The clear consensus among academic economists is that professional sports franchises and facilities generate no ‘tangible’ economic impacts in terms of income or job creation and are not, therefore, powerful instruments for fostering local economic development.”
Despite consensus among economists, the Charlotte Chamber of Commerce formally supports the Knights’ move uptown, citing the organization’s “opinion” in a letter to the city council that the stadium would “create minimal risk to Charlotte taxpayers while providing a reasonable opportunity to help grow jobs and the tax base for benefit of the entire community.”
The problem with this multi-faceted postulation is all of its facets. The evidence is overwhelming that taxpayers are at great risk every time new stadiums are subsidized by governments in markets of all sizes, catering to teams at all levels: Oklahoma City, Mobile, Orlando, Tulsa, Indianapolis, and Chicago just to list a few I could find links for during a White Sox broadcast commercial break.
Coates and Humphreys have dispelled the myth of “job creation” by reviewing twenty years of academic literature within which it’s been a recurring theme. According to the authors, “The large and growing peer-reviewed economics literature on the economic impacts of stadiums, arenas, sports franchises, and sport mega events has consistently found no substantial evidence of increased jobs, incomes, or tax revenues for a community associated with any of these things.”
If that’s not enough, the Charlotte Observer revealed that the Knights currently employ a mere 25 full time staff members, 30 players and coaches (most of whom do not reside locally, and do not redistribute their income in the Charlotte area), and 135 part-time employees at the stadium. The Observer noted that two minor league teams that had recently moved into new ballparks in the area added only 25 new front-office staff members between them.
Lastly, stadium construction hardly benefits the entire community. As Frank Rashid, who spent 12 years fighting Michigan’s intention to spend $145 million on a new ballpark for the Tigers, explained to my guy Neil DeMause: “Public subsidies for stadiums are a great deal for team owners, league executives, developers, bond attorneys, construction firms, politicians and everyone in the stadium food chain, but a really terrible deal for everyone else…The case is so clear against this being a top priority for cities to be doing with their resources, I would have thought that wisdom would have prevailed by now.”
When it comes to stadium subsidies, “prevailing wisdom” is a contradiction in terms. I mean, it’s not like this is a radically new stance for economists. Here’s what Coates and Humphreys write about Adam Smith’s position on the subject in a doorstop called The Wealth of Nations written before American independence:
“In writing of ‘public diversions,’ meaning displays ‘to amuse and divert the people by painting, poetry, music, dancing; by all sorts of dramatic representations and exhibitions,’ Smith favored the state’s ‘encouraging’ such activities, but … made no mention of subsidization—whereas he did countenance subsidization when it came to the schooling of children.”
Alright, that thing about apples is not true, but speaking of schooling the children, this is true: According the Observer last month, Charlotte Mecklenburg Schools, the same local governments content to fork over $40 million to the Knights, are facing a $100 million deficit in public school funding. CMS is planning on closing 11 schools, mostly serving African American communities, and laying off 560 teachers next year.
In the meantime, the Charlotte Mecklenburg Library, once recognized “among the top libraries in the country in a national index of public library service from the Library Journal,” has seen its budget slashed form $41.2 million to $25.4 million over the last four years. The cuts have meant reducing hours by 50% and forcing 180 job cuts, which has “fundamentally altered its ability to provide services to the community.” Those services include the “Job Help Center,” a public resource available to around 60,000 unemployed in Mecklenburg County, which the Library Journal describes as “a marvel.”
The evidence against the public subsidizing of sports stadiums, and the dire need for funding in more pressing areas of public service, had me searching for a voice of reason in the Charlotte Mecklenburg area. You know, to restore my faith in humanity. And then I found this guy:
Jerry Reese: a Charlotte attorney who has sued the Knights in an effort to thwart their plans for an uptown stadium not once, not twice, but six times. Reese lost his case against the Knights five times, appealed and lost five more times. His sixth lawsuit against the club’s stadium lease is pending.
I can get behind this right? Fighting the good fight. Truth to power and all that?
“He is motivated,” writes Observer associate editor Peter St. Onge,”both philosophically and financially, to want something different for Charlotte than minor league baseball. . . .”
Mmm hmm, great. But what was that about being motivated financially? Forget it, I interrupted, go ahead.
“He is driven, he says, by a belief that Charlotte should think bigger . . .”
“a perspective this city has long embraced. . . .”
Don’t tell me.
“The battle began in 2006, when Reese unveiled a site development plan that he said could bring a major league baseball team to Second Ward, on the southeast edge of uptown.”
Turns out, Reese is attempting to derail the minor league stadium plan as part of an effort to lure a major league team to Charlotte. You see, Reese doubles as a real estate broker and apparently the Florida Marlins contacted him in 2006 about relocating the team to Charlotte, in a move that I can say unequivocally was an effort by Jeffery Loria to create leverage with the politicians in South Florida so that the Marlins’ owner could get his $360 million in public financing for the stadium in Miami. I say unequivocally because, as a White Sox fan, I’m well versed in leverage as it has been heralded and utilized by this man.
Well, they say hell hath no fury like a wealthy attorney scorned. And Reese has made every effort to sabotage the Knights with litigation and attorney fees since 2007. Once the Knights are cast aside, Reese’s new master plan will go into effect: a $4 billion dollar project called “Brooklyn Renaissance” that will include 100 acres of retail, commercial, housing, and a major league baseball stadium. One can only imagine how much public money Reese would want for that! Anyways, keep dreamin’ Jerry.
Clearly, Reese is not the against-all-odds hero in this stadium subsidy story. I need a person who, because of principles and good judgment and university access to academic journals, refuses to yield to the insanity. But my search turned up few candidates. In fact, the only person of sound mind I can find in Charlotte is this dude: David A. Arnott. The “A” stands for astute, presumably. Arnott is a SportingNews.com contributor and proud winner of the Charlotte Bobcats Ultimate Fan video contest.
“It looks like the Charlotte Knights are full of crap and are trying to pull one over on the city and county,” writes Arnott on his blog. “Here’s how we know . . . they’re bandying about a wildly optimistic (see: fake) attendance projection . . . and that their revenue could triple . . . . We know that those numbers are fake because no minor league team has managed to maintain that over time, no matter how awesome its ballpark. . . . I’m left to conclude the Knights probably don’t believe they’ll double attendance and triple revenue; if they did, they’d simply get the thing done themselves . . .”
The Knights, the Mecklenburg County Board, and the Charlotte Chamber of Commerce versus a freelance writer with 408 Twitter followers. Well, it’s a start.
Oh, and I don’t want to forget an army of American economists, who have politely concluded that “we seem to have reached the classic paradox in which economists reach a conclusion but are unable to make economic wisdom decisive in public policy decisions.”
That’s academic-speak for “Wake up people!”