Arena Considerations

The following was published in the Toledo Free Press on February 15th.

As Lucas County residents consider the possibility of a new arena, they will be inundated by proponents who will say that a sports arena is an economic development catalyst in an area – sort of the “you build it and they will come” mentality. While some of that statement may be true – just look at the new businesses that are surround 5/3 Field – overall, most studies show that arenas are not the economic panacea that many proclaim.

A study by Dennis Coates and Brad Humphreys, economics professors at the University of Maryland Baltimore County, found that most studies ask the question: what will happen if a new franchise and stadium enter the community? The problem, they say, is that stadiums simply displace dollar-for-dollar spending that would have occurred otherwise. The correct question to ask, then, is: how much stadium-related spending results in a net gain in spending?

When asking the right question, their study found that the professional sports environment has a statistically significant impact on the level of real per capita income and that overall impact is NEGATIVE.

Many other stadium economic impact studies show that most of the revenue generated from a new arena is merely money not spent by the same people elsewhere in the area. And the Coates/Humphreys study concluded that stadiums and sports teams were actually a tool for redistributing income in which the people from the suburbs subsidize businesses in the city. While these studies look primarily at major league sports arenas, if even the major leagues can’t attain an increase in spending in an area, what makes us think that minor league teams in Toledo will be able to do so?

Additionally, public spending on arenas diverts money that could be spent on other, essential services that government must, by law, provide. Such public funds could be spent on maintaining local infrastructure, increasing the quality or provision of public health/safety/education, attracting new businesses to the area, a new jail, or even reducing the tax rates we all must pay.

Based on the estimated costs, some entity must pay between $3.2 and $6.3 million in interest and principle for the construction of a new arena. Think of the water and sewer lines, roads and other infrastructure that could be done for $3.2 million to $6.3 million each year. How many shovel-ready sites for development could we prepare for that amount of money? If the County had $3.2 million to $6.3 million each year to spend on low interest loans to help purchase equipment for business expansions, how many jobs could local business owners provide? How far would that amount go to cover any unexpected reductions in our local government funding from the state?

When it comes to making a decision about a new arena in Toledo, the public needs to be given all the facts – not just a rosy picture. From an economic development perspective, a new arena will not be as successful as most politicians would want you to believe. From a financial perspective, a new arena is not self supporting, and public entities don’t have the leeway in already tight budgets to support it. Furthermore, I believe that most taxpayers will not support a new or additional tax to pay for a new arena, considering all the other obligations competing for their limited earnings.

So, should the County build a new arena at this time? I believe that we should focus on government’s mandated responsibilities first. But since I’m in the minority on this, at least let’s not decide to go forward without a vote of the people – after all, they’re the ones who’ll end up footing the bill.