海角大神

Wednesday, Wisconsin governor鈥攁nd GOP presidential hopeful--Scott Walker聽committed more than $400 million in taxpayer money聽to help build a new basketball arena for a group of wealthy investors.

Walker, like many pols before him, fell for the promise of huge economic returns from a state-of-the art sports arena (in this case, a gym for the perpetually mediocre Milwaukee Bucks). In this case, he agreed to $250 million in public financing for a $500 million facility to replace the existing arena. Taxpayers would also owe an additional $170 million in interest payments on the public bonds that would finance the project.

The deal has generated enormous controversy. Democrats are mad because Walker has been slashing funding for public education and because the son of one of the team鈥檚 owners gave Walker鈥檚 political action committee $150,000. Republicans are furious because another owner is a big campaign 鈥渂undler鈥� for Hillary Clinton. And fiscal conservatives are upset because they think the entire project is corporate welfare.

But what鈥檚 really wrong聽is Walker鈥檚 economic analysis. He confidently calculates an enormous return on that public investment.聽According to聽The Washington Post:

鈥淭he return on investment is 3 to 1 on this, so we think this is a good, solid move as a good steward of the taxpayers鈥� money here in Wisconsin,鈥� Walker said Wednesday morning after he signed the legislation. 鈥淭his is just simple mathematics.鈥�

It may be simple math, but it isn鈥檛 very good economics. And Walker ignores some important parts of the story. He didn鈥檛 have to. An April, 2013聽report聽released by聽the city's聽Legislative Reference Bureau did a nice job demolishing claims of big returns from similar projects.

Understand who goes to sporting events and how they spend their entertainment dollars. Reams of聽research on the economic value of arenas and stadiums聽reach the same basic conclusion: The effects are modest because most fans who attend games are overwhelmingly local. If they can鈥檛 go to a shiny new arena to watch a pro basketball game, they鈥檒l go to a bar or out to dinner or a movie. 聽Or maybe they鈥檒l go to a college game. They are unlikely to sit home in the dark.

To look at it another way, fans may increase business for bars and restaurants in the arena鈥檚 immediate neighborhood but to the detriment of eateries elsewhere in the greater Milwaukee area.

In effect, local consumers substitute one entertainment dollar for another. What they don鈥檛 spend on pro basketball, they鈥檒l spend on something else. Thus, projections of big increases in jobs, sales, and taxes begin to fall apart.

Stadium backers counter that extra dollars will come from out-of-town fans who otherwise would not travel to Milwaukee to spend their money. 聽But research suggests this claim is not supportable either. And, frankly, it is hard to imagine many fans traveling very far to watch the Bucks play a regular season NBA game on a Tuesday night.

Having lost the 鈥渟ubstitution effect鈥� argument, backers try out another claim: High profile sports boost the local economy by increasing聽civic pride. This is an interesting theory largely unsupported by the research. Or, instead of reading the papers, you could ask Bostonians who just told the US Olympic Committee what it could do with its plans for the summer games in Beantown.

Then, there is the jobs argument. But the only permanent high-paying jobs pro basketball teams produce are for 15 players and a handful of front-office executives. Most arena jobs are very low-wage hospitality positions. Few players are likely to be tax-paying Wisconsin residents, though pro athletes do pay state tax on the income they make from each in-state game.

Finally, it is important to consider what might happen if the new arena is not built. Boosters assume that the alternative is an empty lot. But that ignores the possibility that other development in that space could be even more productive than an arena that the local team will use for just 41 nights-a-year and some rock bands will try to fill for concerts.

Walker is not the first governor to be seduced by the siren song of big-time sports. And he won鈥檛 be the last. But perhaps his profile as a presidential candidate will generate enough attention to prevent other state and local officials from making the same dumb decision.

The post聽Why Did Scott Walker Commit $400 Million for a Pro Basketball Arena?聽appeared first on聽TaxVox.