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Paying for Goodman's Sports Fetish

December 21, 2006

Tags Free MarketsInterventionism

 

No taxpayer is safe if a Task Force is meeting somewhere. Such is the case in Southern Nevada today, now that a Special Events Center Task Force has handed over its final report to Clark County Commissioners and the Las Vegas City Council.

The task force is comprised of Pat Christenson, president of Las Vegas Events, Clark County Manager Virginia Valentine, Las Vegas City Manager Doug Selby, Karlos Lasane II, regional vice president of government relations for Harrah's, Boyd Gaming President and Chief Operating Officer Keith Smith, UNLV Vice President of Finance & Business Gerry Bomotti and Las Vegas Convention and Visitors Authority President and Chief Executive Officer Rossi Ralenkotter. They found the Thomas and Mack Center to be woefully inadequate.

The T & M is just too old, too small and lacking in parking to compete for major events, argue the task force members. On the other hand, they say, a new $405 million state-of-the-art arena would make money.

So, since a new arena would be such a money-maker, some developer is likely on the verge of putting one up, post haste, to reap the benefits, right?

Well, no. The task force determined that taxpayers would have to foot some of the money to make a new arena building a reality. Plus, that $405 million price tag doesn't include land, infrastructure or parking.

Moreover, according to the group's consultant firm, Conventions, Sports & Leisure International, keeping a pro sports franchise playing in the new arena would require an on-going subsidy of $27 million per year — much of that subsidy going to the franchise owner. If the new arena just booked concerts and rodeos, taxpayers would only be on the hook for $11 million a year.

"What's at issue here is to make this into a world-class city," Las Vegas Mayor Oscar Goodman said, defending his fetish for bringing a pro sports team to Las Vegas. Goodman reached for the oft-used canard that a new arena with a pro sports team would revitalize downtown Las Vegas. How having fine upstanding citizens like Ron Artest and Allen Iverson playing basketball downtown will make Las Vegas a world-class city is beyond comprehension. Besides, Las Vegas is already the most recognizable city in the world. And promoters have already proven that public monies are not needed to draw top-flight basketball to the entertainment capital of the world. Two of the nation's top-ranked college teams — Florida and Kansas — played at the privately financed Orleans Arena while the National Finals Rodeo filled the T & M recently, and top-ten ranked Wichita State plays in a tournament at the Orleans over the Christmas holiday.

What America's Happiest Mayor is really after in attempting to bring a pro team to Las Vegas is what economists call "indirect" externalities. York College Dean William T. Bogart lists such as: "positive image of the city generated by television, the civic unity and pride provided by professional sports, the benefit to local nonprofit organizations of athletes' involvement in fundraising, and other intangible benefits."

So while $405 million is very tangible — which Webster defines as "capable of being precisely identified or realized by the mind," or "capable of being appraised at an actual or approximate value" — the benefits of a new arena occupied by a pro sports team, cannot be precisely identified or given a value.

Worse yet, as University of Maryland economics professors Dennis Coates and Brad Humphreys — like many others — conclude based upon their research, subsidies of sports facilities may actually reduce incomes and "be a drain on local economies rather than an engine of economic growth."

Coates and Humphreys point out that public funds going to subsidize pro sports teams are funds that are taken from other more productive uses. This same substitution effect is present in private spending: if households spend money on attending ball games, they can't spend that money on other uses. Team owners and their multi-million-dollar athletes will receive consumers' dollars rather than local businesses.

The professors also find employees may accept lower salaries to work in cities that have pro-sports teams, and that employees in pro-sports cities are probably less productive due to time spent discussing game results and team prospects.

"These differences could, over a period of many years, lead to differences in income per capita," contend Coates and Humphreys.

Wealthy team owners and their wealthy employees will be the only winners if the new arena idea moves forward.

The losers, once again, would be taxpayers.


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