OKC to rest of state: "Thanks, suckers!"

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Basketball boosters were quite happy to say that a relocated NBA franchise would belong to the whole state, when they were convincing credulous legislators to vote for $60 million in corporate welfare to the billionaire owners of the Seattle SuperSonics (the subject of last week's column in UTW).

Now that the deal is done, the City of Oklahoma City has announced that it will be a condition of the arena lease that the team will bear the name of the city, not the state. (Hat tip to Mad Okie.)

RELATED: Fellow "naysayer" Jim Hewgley sends along a link to a very detailed review of research on the economic impact (or lack thereof) of pro sports facilities and the history of public subsidy for them.

The article's author, Dennis Coates, is professor of economics at the University of Maryland, Baltimore County. His own research studied yearly data for per capita personal income, employment, and wages in metro areas hosting a major league baseball, basketball, or football franchise, looking at the impact of new stadium construction or franchise relocation. He found a decrease in per capita personal income as a result of new sports facilities or teams in a metro area. Here are a couple of possible explanations for the observed decrease (emphasis added):

First, consumer spending on sports may simply substitute for spending on other types of entertainment--and on other goods and services generally--so there is very little new income or employment generated. Sports fans that attend a game may reduce their visits to the movies or to restaurants to free up finances for game tickets and concessions. Patrons of local restaurants and bars who come to watch the games on television also are likely to cut back on their other entertainment spending.

Second, compared to the alternative goods and services that sports fans may purchase, spending related to stadium attendance has a relatively small multiplier effect. This is because spending at the stadium translates into salaries for wealthy athletes, many of whom live outside the city where they play. High-income individuals generally spend a smaller fraction of their income than low- and middle-income people--and much of the spending professional athletes do occurs in a different community than where they earned it. So the money paid to players does not circulate as widely or abundantly as it would were it paid to people with less wealth and more attachment to the city.

Recall that the recently-passed expansion of the Oklahoma Quality Jobs Program to sports teams includes salaries not taxable in Oklahoma in the calculation of the "rebate," thus ensuring that the team still gets a subsidy for non-resident players who are paid out of state and who therefore likely spend most of their money out of state.

Coates reviews research which uses other, more focused measures of economic activity related to projected impacts from the presence of major-league sports teams (e.g., hotel room nights and less sales tax data). He also considers when subsidizing a stadium might be justified, despite the lack of positive economic impact.

The beginning of the article looks back at the beginnings of public ownership of sports venues. The urge to build large memorials to fallen of the Great War and the need for make-work projects during the Great Depression were two contributing factors.

Coats also touches on the hidden costs of public stadium subsidy. Initial construction costs are just the tip of the iceberg.

It's worth reading the whole thing.

FOR MUCH, MUCH MORE: Here's the Heartland Institute PolicyBot's collection of links to studies on public subsidy of sports facilities and convention centers. (Thanks to Brandon Dutcher for calling it to my attention.)

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In two statewide primary races, the leading Republican contenders were both members of the Oklahoma Legislature in 2008. The top candidates for the GOP nominations for Lieutenant Governor and State Treasurer were on opposite sides of the 2008 expansion... Read More

1 Comments

Brian Blackwell Author Profile Page said:

Michael,

Is there any way to bring legal action against the state to get this before the State Supreme Court. It is my understanding that Corporate Welfare is a violation of the provisions of our State Constitution.

About this Entry

This page contains a single entry by Michael Bates published on April 30, 2008 12:06 PM.

"The good times never end when you're in Busytown" was the previous entry in this blog.

Off with his headways! is the next entry in this blog.

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