Thursday, November 29, 2012

Indianapolis Council President Suggests "Bipartisan" Support for Multi-Million Dollar Taxpayer Giveaway to Pacers

The last three years, the City's taxpayers gave the Pacers $10 million per year, as well as spent $3.5 million to upgrade the Bankers Life Fieldhouse.   A recent Indianapolis Business Journal article though discusses the Pacers getting a $20 million "cash infusion" from the league as a result of the new collective bargaining agreement.
Bankers Life Fieldhouse

In the article, Capital Improvement Board President Ann Lathrop refused to comment.  However, the IBJ noted that in 2010, members of the CIB said that the $33.5 million was a "temporary fix," until local officials could see what would happen with the NBA's new revenue plan.

Now that the details of the deal are known, including that the Pacers will receive $20 million more, we taxpayers are off the hook for an extension of the three year deal, right? So our tax dollars spent on the Pacers can now be spent on such things as police officers, libraries, parks, etc., right?   Democrats who tend to favor more money spent on such services, will stand up for taxpayers against the billionaire owner of the Pacers who wants a handout, right?

If you think so, you don't know Indianapolis politics.  Both parties are in bed on the corporate welfare, pay-to-play nonsense that dominates the city's politics.  In the article, Council President Maggie Lewis indicates that the Pacers have "bipartisan support" and that they understand the "financial benefits" of the Pacers.

It is amazing how much smarter Indianapolis city-county councilors and others are than those economists who have studied the issue in detail and found little evidence the professional sports positively impacts local economies:

This is from a 2004 article on the subject:
Maggie Lewis, President,
Indpls City-County Council

CHAMPAIGN, Ill. — If you build it, they will come … with wallets bulging, eager to exchange greenbacks for peanuts, popcorn, hot dogs and beer, and T-shirts and ball caps with team logos.

At least that’s the theory embraced – time and time again – by mayors and city council members hoping to lure professional sports teams to their cities by promising to build new arenas for the teams. But one guy who’s not buying it is sports economist Brad Humphreys, a professor of recreation, sport and tourism at the University of Illinois at Urbana-Champaign.
That’s because Humphreys and colleague Dennis Coates, a professor of economics at the University of Maryland, Baltimore County, haven’t uncovered a single instance in which the presence of a professional sports team has been linked to a boost in the local economy.
“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,” Humphreys and Coates wrote in a report issued last month by the Cato Institute in Washington, D.C. The institute commissioned the professors to study the economic impact of a deal proposed by Anthony Williams, the mayor of Washington, D.C.; under terms of the agreement, the Major Baseball League would move the Montreal Expos to the nation’s capital in exchange for a new, city-built ballpark. 
The professors based their report on new data as well as previously published research in which they analyzed economic indicators from 37 major metropolitan areas with major-league baseball, football and basketball teams.
“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,” Humphreys and Coates noted in the report.
The researchers found other patterns consistent with the presence of pro sports teams. Among them:

• a statistically significant negative impact on the retail and services sectors of the local economy, including an average net loss of 1,924 jobs;
• an increase in wages in the hotels and other lodgings sector (about $10 per worker year), but a reduction in wages in bars and restaurants (about $162 per worker per year). 
Those employed in the amusements and recreation sector appeared, at first glance, to benefit significantly from the presence of a pro team, with an average annual salary increase of $490 per worker, Humphreys said. However, he added, “this sector includes the professional athletes whose annual salaries certainly raise the average salary in this sector by an enormous amount. 
As it turns out, those workers most closely connected with the sports environment who were not professional athletes saw little improvement in their earnings as a result of the local professional sports environment.”
Numerous later studies earlier than this article and since say exactly the same thing.  Of course when the CIB had a study commissioned prior to the three year deal, it didn't hire a university economist who might have actually told the public the truth.  The CIB also didn't look at any studies previously done by academics.  Instead the Board hired a firm that promotes the hospitality industry to give a "homer" report saying what the CIB proposed doing was a good idea.

The dishonesty of the folks at the CIB know no limits.

The article continues:
"Though Pacers officials say the expense of operating Bankers Life Fieldhouse is an albatross, there is an upside for the franchise.  It gets to keep revenue from all events there, from concerts to ice shows.  Pacers officials decline to say how much those events generate, but they've said it's not enough to cover expenses for the 18,165 seat venue." 
Let's clarify what is going on..  We taxpayers own Bankers Life Fieldhouse.  We taxpayers subsidize the Pacers to the tune of $10 million a year to run that building.  The Pacers get to keep 100% of the revenue from the Fieldhouse.  The Pacers, however, refuse to tell the public how much it makes from events held at that building which we taxpayers own.  The Pacers though want us to accept that the team is losing money and we should give them tens of millions more in annual subsidies.  The CIB refuses to demand the Pacers give this information and simply accept that the Pacers are losing money and taxpayers should pay millions more to the billionaire team owner.  The City supports giving away the tax dollars even though we don't have money in the budget to pay for a new IMPD recruit class and are desperately short of police officers and crime is rising.

Only in Indianapolis.

7 comments:

Jeff Cox said...

The problem with all of the studies that I have read that claim a sports team does not boost the local economy can be boiled down to two things: 1. The studies typically claim that an entertainment gap left by the absence of a sports team will be filled by other entertainment. That's patently ludicrous on its face. Going to a sporting event is not going to a movie is not going to the symphony is not going to the ballet. They appeal to largely different audiences. 2. A major league sports team is the most visible example of a city having amenities - things to do - that attract educated workers and thus jobs. Educated people don't want to move someplace boring.

A third, though less certain, problem with these studies is that they claim the development around a new stadium or arena is largely just relocated from another part of town, thus no net new development. I have witnessed three instances of new stadiums being constructed - the RCA Dome here, the Gateway Complex (Progressive Field and Quicken Loans Arena) in Cleveland and PNC Park in Pittsburgh. While the amount of development varied, the most being in Indianapolis, the least in Pittsburgh, in none of those instances was the development relocated from another part of town.

In general, the people doing these studies often don't like sports, be it college or pro, and resent their popularity. Economists also tend to discount what people actually like and do and replace it with the economists personal opinion as to what people like and do. Hence these warped studies.

I don't support a subsidy to the Pacers by any means, but most of these studies are laughably bad and should not be considered credible.

Paul K. Ogden said...

It's discretionary spending, Jeff. That money, if not spent on sporting events, is just going to be spent someplace else in the local economy. It doesn't really matter...the person spending it to go to a Pacers game is just going to make a different decision on where to spend his money.

I don't buy for a second more than a handful of people make decision on whether to locate to a city depending on sports teams in that city. Columbus, Ohio does pretty good with no major sports teams.

Resources are limited. If a city is using its limited resources to drive development associated with sports stadiums, it only makes sense that there is less money to go around. Here we're going to give the Pacers money instead of funding law enforcement. That impacts neighborhoods that see the crime rate rise.

Jeff Cox said...

Paul,

Bad example. Columbus, Ohio, has three major sports teams:

1. Ohio State football
2. Ohio State men's basketball
3. Columbus Blue Jackets of the NHL.

Perhaps I should have listed Nationwide Arena as a fourth example. There was NOTHING to do in downtown Columbus until the construction of Nationwide Arena. Today, there is still nothing to do in downtown Columbus - except for the area around Nationwide Arena, which has now filled up with restaurants, bars and shops catering to the Blue Jackets crowd. And, yes, those businesses are being killed by the NHL lockout.

Furthermore, the idea that discretionary spending will just be spent elsewhere in the local economy is merely an assumption. Remember, you're talking to someone who regularly travels to Cleveland, Pittsburgh, Columbus and San Diego for sporting events. This past summer I also went to Chicago and St. Louis for baseball games. Absent those sporting events, I don't go to those cities; that's money those cities don't get. The Pittsburgh Steelers are known for having a fan base that travels extremely well, filling out-of-town stadiums on a regular basis. Both the Steelers and the Cleveland Browns have thousands of season ticket holders from outside their local markets. Absent those teams, that's money the cities don't get.

The authors of those studies tend to not understand how sports fans behave or the money sports fans are willing to spend.

Flogger said...

The subsidies the Pacers, Colts and other Professional Sports teams receive is Corporate Welfare pure and simple.

If downtown Indy looks nice and bright it is because billions have been poured into direct and indirect subsidies to make that way.

The Republican Party who will profess their faith in free markets, lose that faith when the Billionaires of Pro Sports teams need another subsidy.

The Democrats long ago joined the Corporate Welfare Party too.

Professional Sports is under all the hype a bogus Perpetual Motion Machine. The Professional Sports model is a scam.

guy77money said...

Jeff from a former downtown bar rat I can tell you that just a few bars actually make money from the Pacers. When I went to games during the Pacers golden years (Reggie Miller) the restaurants downtown (with the exception of Friday and Saturday) saw very little traffic from Pacers fans. The Pacers and the Colts come no where near generating the income in tax revenues to even pay back the city for the subsidies they are getting. The killer is that most of the games are played in the winter when most people will not go on vacation.
Baseball is a different animal. People will plan their vacation (Kings Island,6 Flags, the Aquarium, the zoos, Jungle Jim's in Cincy and St Louis) make these cities great place to go see a couple of games and have a great vacation.
To be honest we should be giving the Children's Museum 10 to 20 million a year since there are a lot more out of state license plates in the parking garage then there are at Pacer and Colts games. They are also open 52 weeks a year.

guy77money said...

Forgot to mention a baseball game is much more family affordable then a NBA or NFL game.
The other problem with the Pacers is the NBA model is broken. The Pacers will never win a championship as long as the star players can go play anywhere they want. Only the big city teams where the endorsement money, the owners with deep pockets have a chance to sustain a winning team. Why the heck should the tax payers pay for a broken business model and a team that will never (of course the Simon's won't let the city see their books) win a championship.

As for the Colts, they don't play enough games a year to generate enough tax revenue to even come close to paying for the upkeep of Lucas Oil or paying the bonds.

I suspect that the Palladium brings in more tax revenue for Carmel then the Colts do for Indy.

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