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Economic Outrage du (Every) Jour

December 27th, 2009, 12:12 am admin Leave a comment Go to comments

You may have been otherwise engaged on Christmas Eve and missed this story in The New York Times by Ken Belson – Stadium Boom Deepens Municipal Woes:

Years after a wave of construction brought publicly financed stadiums costing billions of dollars to cities across the country, taxpayers are once again being asked to reach into their pockets.

From New Jersey to Ohio to Arizona, the stadiums were sold as a key to redevelopment and as the only way to retain sports franchises. But the deals that were used to persuade taxpayers to finance their construction have in many cases backfired, the result of overly optimistic revenue assumptions and the recession. …

But sales tax receipts have fallen so fast in the last year that [Cincinnati's Hamilton] county is now scrambling to bridge a $14 million deficit in its sales tax fund. The public schools, which deferred taking their share for years, want their money.

The teams have not volunteered to rewrite their leases. So in the coming weeks, the county plans to cut basic services, lower its legal bills and drain a bond reserve fund with no plan for paying it back.

I’ve never had a problem figuring out why mayors, city councils or country supervisors have been eager to make sweetheart deals that pour millions of dollars of taxpayer subsidies into the hands of rich – often ultra-rich – sports team owners for new stadiums. There can be many … uh … incentives for them to make such decisions. Free tickets, free VIP parking, their own luxury sky-box seating, perhaps a campaign contribution or two. Moreover, none of them wants to be in office the day the team announces it’s getting a better deal from another city.

What I’ve never been able to understand is what voters are thinking when they participate in their own fleecing for such projects. Team spirit is understandable. But making fat cats fatter – especially when this means socially needed projects and the people they serve have to tighten their belts – seems downright perverse. In good times, this corporate welfare, funded with bonds, may drain the public purse mostly unnoticed. In bad times, the subsidies and tax abatements, which in larger cities may add up to hundreds of millions of dollars in the long run, contribute to the fiscal nightmare of local government.

When Emperor Vespasian began construction of the Colosseum in Rome, he paid for it by confiscating his generals’ portion of the immense plunder stolen from the Jews slaughtered or sold into slavery as a consequence of the destruction of ancient Israel. These days, citizens are asked to loot their own wallets. This happens only after immense propaganda campaigns trumpeting the purported benefits of the new or remodeled edifice and threatening dire consequences to local pride and the local economy if the project should fail to be approved. Barely a step up from extortion by decree.

If these projects were built solely with private money and local governments were asked to streamline the granting of permits, and perhaps loosely interpret a few other laws, no harm, no foul. But the people who truly benefit from these subsidies of the private sector are the team owners and a relative handful of multimillion-dollar players and local politicians.

Oh, sure, the claim is always made that the multiplier effect will redound to the local economy, creating vast numbers of new jobs, attracting tourists and boosting local business. But the pre-project predictions of benefits are inevitably strewn with, shall we say, exaggerations. Meanwhile, the owners lease sky boxes and reserved seating, rent their publicly owned venue for rock concerts and other performances, get cable and broadcast television contracts, and collect their slice of the hotdog and drink and souvenir concessions. So why is it they can’t pay for construction themselves?

Back in the days before sports teams were so immensely profitable, owners built stadiums on their own dime. As the dollars rolled in, their clout with the local powers-that-be increased and soon it became expected that the taxpayers would shell out the bucks. If they are reluctant, down comes the warning that perhaps the team will have to move somewhere it will be more appreciated and not have to play in shabby surroundings. That appeal to civic pride works time and again.

Meanwhile, as the team subsidies continue to flow nationwide, city-funded youth teams slash their budgets and municipal recreation centers cut their hours.

In Cincinnati:

“It’s like the movie where the blob keeps growing and eating away at other elements of county government,” [County Commissioner David] Pepper said. “We’re beginning to cross a line in the sand by taking money from the general fund to pay for the stadiums. Once you put that money in jeopardy, you put the whole county at risk.”

So whose fault is it that, across the country, these operators still have their hand in an increasingly empty public till?

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