On ABC News’ This Week yesterday, Gov. Scott Walker defended his proposal to spend $250 million of taxpayers’ money to build a new arena for the Milwaukee Bucks:
“Our return on investment is three to one…” Walker said. “It’s a good deal.”
The Bucks franchise, valued at $600 million, is owned by a group of billionaire financiers in New York. But no matter what it’s worth, Walker’s statement is at wide variance with the findings of independent economists.
Economic projections for subsidized stadiums are always vastly overstated. As Dennis Coates and Brad Humphreys wrote in a 2004 Cato study criticizing the proposed D.C. stadium subsidy, “The wonder is that anyone finds such figures credible.”
And indeed the Washington Examiner reported in 2008:
Attendance at Nationals Park has fallen more than a quarter short of a consultant’s projections for the stadium’s inaugural year, cutting into the revenue needed to pay the ballpark bonds and spurring a D.C. Council member to demand the city’s money back.
Several Cato studies over the years have looked at the absurd economic claims of stadium advocates. In “Sports Pork: The Costly Relationship between Major League Sports and Government,“ Raymond Keating finds:
The lone beneficiaries of sports subsidies are team owners and players. The existence of what economists call the “substitution effect” (in terms of the stadium game, leisure dollars will be spent one way or another whether a stadium exists or not), the dubiousness of the Keynesian multiplier, the offsetting impact of a negative multiplier, the inefficiency of government, and the negatives of higher taxes all argue against government sports subsidies. Indeed, the results of studies on changes in the economy resulting from the presence of stadiums, arenas, and sports teams show no positive economic impact from professional sports — or a possible negative effect.
In Regulation magazine, (.pdf) Dennis Coates and Brad Humphreys found that the economic literature on stadium subsidies comes to consistent conclusions:
The evidence suggests that attracting a professional sports franchise to a city and building that franchise a new stadium or arena will have no effect on the growth rate of real per capita income and may reduce the level of real per capita income in that city.
And in “Caught Stealing: Debunking the Economic Case for D.C. Baseball,” Coates and Humphreys looked specifically at the economics of the new baseball stadium in Washington, D.C., and found similar results:
Our conclusion, and that of nearly all academic economists studying this issue, is that professional sports generally have little, if any, positive effect on a city’s economy. The net economic impact of professional sports in Washington, D.C., and the 36 other cities that hosted professional sports teams over nearly 30 years, was a reduction in real per capita income over the entire metropolitan area.
Stadiums, arenas, convention centers, arts centers, the story is the same. In 2011 the Washington Post reported that the financial projections for a government-funded arts center, Artisphere, in Arlington, Virginia, didn’t seem to have panned out.
A 2014 report by Don Bauder in the San Diego Reader is worth quoting at length:
Would you take advice from a gaggle of consultants whose forecasts in the past two decades have been off by 50 percent?
Of course you wouldn’t. But all around the U.S., politicians, civic planners, and particularly business executives have been following the advice of self-professed experts who invariably tell clients to build a convention center or expand an existing one.
A remarkable new book, Convention Center Follies: Politics, Power, and Public Investment in American Cities, published by the University of Pennsylvania Press, tells the amazing story of how one American city after another builds into a massive glut of convention-center space, even though the industry itself warns its centers that the resultant price-slashing will worsen current woes.
The author is Heywood Sanders, the nation’s ranking expert on convention centers, who warned of the billowing glut in a seminal study for the Brookings Institution back in 2005. In this new, heavily footnoted, 514-page book, Sanders, a professor of public administration at the University of Texas/San Antonio, exhaustively examines consultants’ forecasts in more than 50 cities….
The worst news: “These expansions will keep happening,” as long as “you have a mayor who says it is free,” says Sanders.
Or a governor:
“We would lose $419 million over the next 20 years if we did nothing, if we said, go on, move somewhere else, which the NBA said they would do,” Walker continued. “In this case, we don’t raise any taxes. There are no new taxes, only existing taxes. And we get a three to one return.”
The project will be funded by existing taxes on hotel rooms and rental cars, though the Wisconsin Center Board has the authority to raise the rate, he said.
“In this case, we take the tax, the revenues on hotels and rental cars that are currently paid for the convention center and allow those to continue to be paid for a new arena,” Walker said. “It’s not a new tax.”
This wasn’t the worst thing Scott Walker said to Jonathan Karl on ABC. He also said he wouldn’t rule out re-invading Iraq. But any presidential candidate who believes that taxpayer-subsidized stadiums are “a good deal” shouldn’t be anywhere near the federal Treasury.
An earlier version of this post relied on an erroneous quotation by ABC News in the first and last paragraphs. The post has been corrected to reflect the video with Walker’s actual language.