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Tax-free stadium plan? Beware
San Diegans should cock an eyebrow at claims being made
Two cheers for former San Diego City Council member Carl DeMaio spearheading a plan to build a Chargers stadium without tapping tax money. Such a plan would be welcome, but San Diegans should cock an eyebrow at claims being made. DeMaio and his colleagues released a 41-page pitch for such a project today (June 23).
Here are some factors to eye warily:
Most National Football League owners are billionaires and teams are worth more than $1 billion. But plans such as the one released today have fans buying into the stadium, not the team. Stadiums are not inherently profitable. Why do you think billionaire owners want taxpayers to pay for stadiums? Teams are extremely profitable. A piece of a stadium would probably be a poor investment.
To woo potential investors, promoters will claim the new stadium will be used for Super Bowls, NCAA basketball tournaments, rock concerts, banquets, etc. But this pitch was made for Petco Park, too, and the result has not been impressive. Super Bowls and NCAA tournament hostings are always trotted out in such marketing plans.
Promoters will claim that growing stadium attendance, more hot dogs gobbled, more jobs for vendors and the like will boost the local economy. Not so. Money spent on these new activities will not be spent elsewhere in the local economy. If more people eat hot dogs and drink beer at the stadium, hot dog stands and saloons will lose the equivalent amount of business. Sports stadiums do not create new money or demand.
One scam that almost always arises when a taxpayer-financed facility is being promoted is the concealment of taxpayer costs. Example: Dallas is proposing a new baseball stadium that, city fathers claim, will be a 50-50 split between taxpayers and the team. But a local TV station has said that taxpayers will get stuck with 80 percent of the cost, because of tricky accounting in fine print. Generally speaking, taxpayers pick up 70 to 80 percent of stadium costs, but are always told that their share will be much less.
DeMaio claims that the new stadium will lead to more transient occupancy tax receipts because a new hotel will be built. But fans from out of town are not likely to follow their teams to San Diego. Last year was an aberration when fans from Boston and Pittsburgh came to San Diego to root for their teams. That was caused by San Diegans' disinterest in going to the games — something that should be sobering in any reflection on the need for a new stadium. Generally, hotels do not profit from the nearness of a stadium.
DeMaio and his cohorts say retail sales tax receipts will rise. Yes, they will — at the stadium. But because of the substitution effect, they will be weaker elsewhere.
Beware of comparisons with the 49ers stadium in Silicon Valley. It was greatly financed by rich citizens buying personal seat licenses. But Silicon Valley is an extremely rich area. San Diego can't match it. In 2011 and in subsequent years, the Chargers said they didn't think personal seat licenses would work in San Diego.
Beware of comparisons with Green Bay. Citizens there own the team. But the Packers were grandfathered into the league on that point. The NFL would not permit this to occur elsewhere.
There are other caveats — this is the beginning.
Here's something you might be interested in.
Tax-free stadium plan? Beware
San Diegans should cock an eyebrow at claims being made
Tax-free stadium plan? Beware
San Diegans should cock an eyebrow at claims being made
Two cheers for former San Diego City Council member Carl DeMaio spearheading a plan to build a Chargers stadium without tapping tax money. Such a plan would be welcome, but San Diegans should cock an eyebrow at claims being made. DeMaio and his colleagues released a 41-page pitch for such a project today (June 23).
Here are some factors to eye warily:
Most National Football League owners are billionaires and teams are worth more than $1 billion. But plans such as the one released today have fans buying into the stadium, not the team. Stadiums are not inherently profitable. Why do you think billionaire owners want taxpayers to pay for stadiums? Teams are extremely profitable. A piece of a stadium would probably be a poor investment.
To woo potential investors, promoters will claim the new stadium will be used for Super Bowls, NCAA basketball tournaments, rock concerts, banquets, etc. But this pitch was made for Petco Park, too, and the result has not been impressive. Super Bowls and NCAA tournament hostings are always trotted out in such marketing plans.
Promoters will claim that growing stadium attendance, more hot dogs gobbled, more jobs for vendors and the like will boost the local economy. Not so. Money spent on these new activities will not be spent elsewhere in the local economy. If more people eat hot dogs and drink beer at the stadium, hot dog stands and saloons will lose the equivalent amount of business. Sports stadiums do not create new money or demand.
One scam that almost always arises when a taxpayer-financed facility is being promoted is the concealment of taxpayer costs. Example: Dallas is proposing a new baseball stadium that, city fathers claim, will be a 50-50 split between taxpayers and the team. But a local TV station has said that taxpayers will get stuck with 80 percent of the cost, because of tricky accounting in fine print. Generally speaking, taxpayers pick up 70 to 80 percent of stadium costs, but are always told that their share will be much less.
DeMaio claims that the new stadium will lead to more transient occupancy tax receipts because a new hotel will be built. But fans from out of town are not likely to follow their teams to San Diego. Last year was an aberration when fans from Boston and Pittsburgh came to San Diego to root for their teams. That was caused by San Diegans' disinterest in going to the games — something that should be sobering in any reflection on the need for a new stadium. Generally, hotels do not profit from the nearness of a stadium.
DeMaio and his cohorts say retail sales tax receipts will rise. Yes, they will — at the stadium. But because of the substitution effect, they will be weaker elsewhere.
Beware of comparisons with the 49ers stadium in Silicon Valley. It was greatly financed by rich citizens buying personal seat licenses. But Silicon Valley is an extremely rich area. San Diego can't match it. In 2011 and in subsequent years, the Chargers said they didn't think personal seat licenses would work in San Diego.
Beware of comparisons with Green Bay. Citizens there own the team. But the Packers were grandfathered into the league on that point. The NFL would not permit this to occur elsewhere.
There are other caveats — this is the beginning.
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