Friday, April 30, 2004
Risk Remains a Question in Stadium Finance Plan
Mike Meyers, National Economics Correspondent of the Minneapolis Star Tribune, discusses why economists have problems with the tax increment financing proposed by MInnesota Gov. Tim Pawlenty as the state's share of financing for the new Twins stadium. Meyers notes that to produce the $7 million/year of incremental tax revenues promised by the Twins, the club would have to generate over $100 million/year in new revenues.
Even assuming the club's own records can show such an increase in stadium-related spending, the revenue isn't "new" if it's simply being diverted from other sources. If the residents of Minneapolis-St. Paul spend $50 million more on the Twins that they would otherwise have spent on restaurant meals, movies and the like, the actual net economic effect is $0, as the additional taxes from Twins-related revenue are offset by declines in tax revenue from other forms of leisure spending.
Tax increment financing also involves a guarantee from the Twins that tax revenues will rise sufficiently to cover the club's obligations. The language of any such guarantee, and the collateral posted by the team to ensure that it will timely pay any shortfall, are crucial. In additional to usual-suspects Andrew Zimbalist and Roger Noll, the article quotes a Vanderbilt economist who's equally skeptical about the economic benefits of new stadia:
John Siegfried, a Vanderbilt University economist, said almost any stadium deal is likely to end up a "loser to the general treasury" because the new venues quickly lose their novelty with the public, as has been the case in a number of cities where big first-year gains in attendance weren't sustained."If the new stadium is what attracts people, then they should install the seats backward because they [fans] could get a better look at the stadium," Siegfried said.
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Mike Meyers, National Economics Correspondent of the Minneapolis Star Tribune, discusses why economists have problems with the tax increment financing proposed by MInnesota Gov. Tim Pawlenty as the state's share of financing for the new Twins stadium. Meyers notes that to produce the $7 million/year of incremental tax revenues promised by the Twins, the club would have to generate over $100 million/year in new revenues.
Even assuming the club's own records can show such an increase in stadium-related spending, the revenue isn't "new" if it's simply being diverted from other sources. If the residents of Minneapolis-St. Paul spend $50 million more on the Twins that they would otherwise have spent on restaurant meals, movies and the like, the actual net economic effect is $0, as the additional taxes from Twins-related revenue are offset by declines in tax revenue from other forms of leisure spending.
Tax increment financing also involves a guarantee from the Twins that tax revenues will rise sufficiently to cover the club's obligations. The language of any such guarantee, and the collateral posted by the team to ensure that it will timely pay any shortfall, are crucial. In additional to usual-suspects Andrew Zimbalist and Roger Noll, the article quotes a Vanderbilt economist who's equally skeptical about the economic benefits of new stadia:
John Siegfried, a Vanderbilt University economist, said almost any stadium deal is likely to end up a "loser to the general treasury" because the new venues quickly lose their novelty with the public, as has been the case in a number of cities where big first-year gains in attendance weren't sustained."If the new stadium is what attracts people, then they should install the seats backward because they [fans] could get a better look at the stadium," Siegfried said.
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