Natalie Gochnour: Why building a city is like a relay race

As an economist, I’m often asked about the economics of city building and the Smith Entertainment Group proposal

In 1846, the namesake of Parley’s Canyon, Parley Pratt, wrote in his journal about the “shout of joy” he and others felt upon first seeing the Salt Lake valley. Pratt helped start what has become 178 years of city building in Utah. Salt Lake City now serves as the urban center for a multi-state region of more than 4.5 million people. Pratt would be astounded at the thriving city that exists today.

Salt Lake City’s size, stature and success is no accident. The vision, hard work and perseverance of multiple generations created it. Like a relay race, each generation took the baton, ran its lap and passed the stick to the next generation of city builders. Today’s lap calls upon us to invest in a vibrant sports, entertainment, culture and convention district downtown. Let’s not drop the baton.

As an economist, I’m often asked about the economics of city building and the Smith Entertainment Group proposal. Here’s what I say:

First, keep your eye on the ball. Central cities require constant attention and investment because the forces of decentralization often pull people, jobs and commerce to outlying areas. If regions fail to carefully plan, invest, partner and act when the moment is right, the centrifugal pull leaves behind a hollowed out urban core. The deterioration can become a vicious cycle. Economic activity leaves, vacancy rates rise, property values fall and the tax base deteriorates. Urban decay takes hold.

Look no further than Detroit, America’s poster child of urban decline. From 1950 to 2020, Detroit lost nearly two-thirds (65.4%) of its population. In 2013, the city filed for bankruptcy and between 2005 and 2015, foreclosure impacted one in three Detroit properties.

Salt Lake City’s no Detroit, but Utah’s capital city did experience its own share of challenges from 1960 to 1990 when its population declined for three consecutive decades.

It took the building of the Delta Center, the 2002 Olympic Winter Games, TRAX light rail, FrontRunner commuter rail, Goldman Sachs expansion, investments by the Church of Jesus Christ of Latter-day Saints in the LDS Conference Center and City Creek Center, the Eccles Broadway Theater and other major commitments to turn the tide and add population again. The market didn’t rescue Salt Lake City, community leaders did.

(Smith Entertainment Group) A rendering of a renovated entrance to the Delta Center.

Second, never let sports, entertainment and culture leave the core. Why? Because their singularity makes them one of the best tools available to keep an urban center vibrant and strong. A region like Salt Lake City will get lots of shopping districts, employment hubs and town centers. But it will only get one NBA franchise, NHL franchise, symphony hall and traveling Broadway theater. If you want the urban core with its expensive cost structures to compete, it must attract money from outlying areas. I know of no better attraction than one-of-a-kind sports, entertainment and cultural amenities.

Finally, structure private-public partnerships as an investment for taxpayers, not a subsidy for private industry. I’m encouraged by several features of the Smith Entertainment Group proposal.

The commitment to invest $3 billion of private capital in Utah’s urban center will be a boon to the entire state. This amounts to roughly twice the City Creek Center investment.

The partnership calls upon Salt Lake City residents, who receive the lion’s share of the benefit, to directly pay an estimated 20 to 25% of the additional sales tax. This balance seems about right and ensures that visitors, businesses and others in the region help shoulder the remaining 75 to 80% of a statewide amenity.

Importantly, the proposed additional sales tax exempts groceries, minimizing the localized burden on low-income Salt Lakers. Parenthetically, after the statewide vote this November, city residents (along with others) may also be relieved of the 1.75% state sales tax on food, providing further tax relief.

The proposed ticket user fee will pay dividends to Salt Lakers, and by extension the entire region, as it helps fund affordable housing, art installations, improvements to Japantown, and other public initiatives like job shadowing, internships, and workforce training and development.

The lock-box provision requiring Smith Entertainment Group to pay steep penalties if they relocate the Utah Jazz or Utah Hockey Club outside of Salt Lake City during the term of the agreement provides a final important safeguard for city residents.

Taken together, the magnitude of private investment; tax burden sharing; grocery exemption; user fees to help with housing, arts, historic preservation and workforce; and commitment to stay in Salt Lake City make this proposal a solid investment in Salt Lake City’s future.

An important final step will be to make sure the Salt Palace Convention Center and Abravanel Hall acquire the funding to complete the vision.

I want to thank Gov. Spencer Cox, the Utah Legislature, Mayors Erin Mendenhall and Jenny Wilson, the Salt Lake City and County Councils, and Smith Entertainment Group for engaging in the hard, but essential, work of city building. They have my support as they grab the baton and run today’s lap.

Natalie Gochnour is an economist, lifelong Salt Laker, and architect of the vintage 2007 Downtown Rising plan. The views here are her own.

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