Andy Larsen: How much are you willing to pay to help the Millers and Smiths build new stadiums?

The majority of research is against public financing of stadiums. Here’s why.

(Rick Egan | The Salt Lake Tribune) Los Angeles Kings fans celebrate after a Kings goal, in Hockey action between the San Jose Sharks and the Los Angeles Kings, at the Delta Center, on Thursday, Oct. 5, 2023.

Utah’s billionaires are about to ask for your money.

So how much would you be willing to pay to build a Major League Baseball stadium in Salt Lake City?

In Utah, lawmakers have made it clear that they’re going to look to use at least some public financing to help fund two future projects. A bill regarding the Miller family’s ballpark plans along North Temple is currently being written. Meanwhile, Utah Jazz owner Ryan Smith’s plans to land an NHL franchise and build a new hockey arena have also been supported by a unanimous Senate resolution.

How much would you be willing to pay for that building?

Before you answer that, here’s what you need to know about using taxpayer dollars to help pay for arenas, ballparks and stadiums.

The majority of research is against public financing of stadiums

I can’t emphasize enough how clear the evidence is here. Even from public financing advocates, you’ll usually get little argument on the fact that taxpayer money going toward stadiums has no real economic backing. Two different major surveys of economists have been undertaken on this subject, once in 2005 and one in 2017. Both times, over 80% of economists agreed that public subsidies were a bad idea, while only 3-4% said they were good. (The rest were neutral or didn’t know.)

A 2022 analysis of 130 studies in the field has the best breakdown of the research:

• From 1969 to 2011, and across major American sports and districts, there was no correlation between an area’s wages, income, or employment rates and whether that area had a pro sports team.

• Gaining a team didn’t impact wages, income, or employment. Neither did losing a team.

• Teams making the postseason also didn’t impact income. When sports teams went on strike or were locked out ... it didn’t impact an area’s income either.

(AP Photo/David Goldman) In this Thursday, March 9, 2017, photo, construction workers walk past a mixed-use area to feature restaurants and retail stores at SunTrust Park, the Atlanta Braves' new baseball stadium in Atlanta.

• Studies did find evidence of increased eating and drinking establishments within a mile of a newly built arena or stadium, but found that a larger area’s overall number of establishments was unchanged. Businesses often moved to a stadium district, but left their old homes behind.

• Arena districts saw increases in food and drink sales, but other businesses in the area suffered. In Sacramento, retail businesses near their new arena had shorter lifespans than those outside the district. In Oklahoma City, food establishments did well, but entertainment businesses saw revenue fall.

• Tax revenues often did increase in the area immediately surrounding a stadium, but a significant percentage of that growth came from decreasing tax revenues elsewhere in the community.

• The more public financing that went into an arena or stadium, the more team owners spent to build it. For every $1 million given from governments, historical data shows owners have raised the cost of the building by $200,000 to $500,000. When arenas are privately funded, team owners find a way to build frugally; when they’re publicly funded, they find ways to lavish their new buildings with additional amenities.

But what about?

Why then do stadiums and arenas still get publicly funded by governments who otherwise tout fiscal responsibility? Owners and lawmakers have cobbled together a tremendously useful set of distracting explanations — “new” ways of looking at the financing or its benefits.

I call these the “But what about?” questions.

But what about ... tax-increment funding?

This is the sneaky approach around raising taxes or just using money from the public coffers for stadiums. Instead, the government draws a circle around the new stadium or arena and declares that area a redevelopment district. Within that district, a tax baseline is established. Then, future tax proceeds above that baseline go to paying off the stadium’s construction loans.

This is a popular approach because elected officials get to tout that no current public money goes to the project and that no taxes are being raised.

But as we’ve seen, building a stadium or earning a team doesn’t result in increased wages, income, or employment for an area overall — only perhaps for the immediate surrounding area of at most a few block radius. As a result, paying with a TIF scheme means that other districts get less tax revenue.

Furthermore, there’s what economists call the “but-for” problem. The idea of redevelopment districts is that a little investment can turn an area around, and that’s probably true. But governments need to prove that this wouldn’t happen without their input for TIF schemes to make sense, otherwise it’s just wasted future tax revenue.

The perfect example of this is the development at The Point. You know, I know, and we all know that if the state simply put that land up for sale, it would be gobbled up by developers for housing and whatever else within about two nanoseconds. That development would result in a lot of taxpayer revenue. The state, then, has to show that any taxpayer funding that goes towards the district would result in exceeding that baseline, not the near-zero amount of tax revenue that was garnered when there was nothing on the land.

But what about ... public-private partnerships?

Another way to sell public investment into an arena is by letting the public keep some or all of what they’re purchasing, through a public-private partnership. These can vary, but perhaps the most common current setup is that a government entity technically owns the stadium, then rents it to the team to operate.

Obviously, how much these agreements benefit the public versus benefits the private owners is going to differ based on the specific terms. But in general, these are frequently more tilted towards the billionaires and away from the average Joes than is first considered.

Why? First, stadiums aren’t very useful without a tenant team — just look at how Salt Lake City is struggling to figure out what to do with Smith’s Ballpark since the Bees announced their move. The same would even be true if the Jazz left the Delta Center; many concerts and events would likely go to other arenas.

Second, the structure generally allows the team to hide from taxes. The obvious one is property taxes, since they aren’t charged to public entities. But various incomes can also be hidden from taxation this way, such as stadium naming rights money. For example, researchers estimate that the total savings to the team represent between $106 and $213 million over the first 20 years of the San Francisco 49ers Levi’s Stadium when compared to a totally privately financed and owned arrangement.

But what about ... the social value of these teams to their communities?

This is essentially the argument Gordon Monson put forth in his column this week about the stadiums. Sports are fun, he reasons, and we should support the things in the community that bring us together, bring us happiness.

It’s a really good argument, one I’m very sympathetic to. I love sports, always have. I love them enough to have chased them down this life path, throwing away far more lucrative careers to be a journalist who gets to be around competition.

However: When you get right down to it, there aren’t that many sports-obsessed sickos like Gordon and me. There are a lot of casual fans who care about sports, but in moderation alongside other things in the community. And, of course, there are many people who aren’t fans at all.

So what is the value of that? Well, we can ask people to put it into context. Take the Pittsburgh Penguins, a beloved NHL team that nearly folded in the late ‘90s. Three researchers surveyed residents and asked them frankly: “What is the most you would be willing to pay out of your own household budget each year in higher city taxes to keep the Penguins in Pittsburgh?”

Fans gather outside Consol Energy Center (now PPG Paints Arena) before a first-round NHL playoff hockey game between the Pittsburgh Penguins and the New York Rangers in Pittsburgh, Wednesday, April 13, 2016. (AP Photo/Gene J. Puskar)

If you ask enough people that, and multiply it by the number of households in Pittsburgh, you can get an idea of what the value of the Penguins is to the people of Pittsburgh. And indeed, the survey found that 72% of Pittsburgh residents considered themselves to be Penguins fans, a very high number. But only 51% were willing to pay extra taxes to keep them. Only 38% were willing to pay more than $10 per year.

If you add it all together, you get an estimate that the Penguins are worth about $3 million per year to the community’s residents, if you ask them. Pittsburgh gave a $300 million public-fund check to their new arena a few years later.

This experiment has been repeated a few times since. Jacksonville residents were asked about the value of the Jaguars to its community in 2007, the amortized long-term value of the team was estimated at about $32 million. One researcher asked residents in Minnesota and Michigan to value their seven top pro sports teams, and found long-term values of $10 million to $100 million each.

These are significant sums — but are typically under what the billionaires ask for from governments when building stadiums.

To me, these eight-figure sums are the kinds of figures that we can justify paying, under the right conditions. Giving the Miller family $22.7 million in tax increment funding to renovate the Delta Center makes some sense given the non-economic value the Jazz have to the community — or would have made sense, had the city been able to get it in writing that the Jazz would have to remain at the remodeled venue for longer.

Hundreds of millions? The data doesn’t support it.

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