Sports and Politics: A Lucrative Partnership

“Action expresses priorities.” 

― Mahatma Gandhi

When Detroit filed for what is the largest municipal bankruptcy in United States history last week, one of the items that immediately garnered public attention was the potential for pensions for current retirees who had worked for the city. A pension shortfall accounts for $3.5 billion of the city's $18 billion in debt, and the city's emergency manager, Kevyn Orr, has called for "significant" pension cuts.

But even with pensions possibly getting the axe, along with who knows what else in terms of services for the already downtrodden city, or even masterpieces at the Detroit Institute of Art, Detroit still seems ready to shell out more dollars then Detorit rapper Eminem has F-bombs in his music to help pay for a new arena for the National Hockey League's Detroit Red Wings. Detroit's Downtown Development Authority intends to use $284.5 million in property taxes captured within its 615-acre downtown district to pay off the bonds issued by the state to build the 18,000-seat arena.

Michigan Gov. Rick Snyder (R), said the plan as an investment in Detroit's future, saying a new arena "should increase the tax base of the city longer term, and should increase the employment opportunities for Detroiters." But if that's what Detroit and Michigan lawmakers are banking on, they are setting themselves up to be sorely disappointed.

People are speaking up, pointing out that when the Detroit Tigers received a new stadium in 2000, the resulting boom was so good, by which of course I mean that bad, that when the City issued $80 million in 30 year bonds to pay for part of the $300 million to construct Comerica Park, they would spend the first 12 years only knocking out about $15 million of their debt. Even after a refinance job, they City is still on the hook for over $60 million dollars.

"Sports stadiums typically aren't a good tool for economic development," Victor Matheson, an economist at Holy Cross and an expert in sports economics, told Travis Waldron and me last year. As Matheson wrote in a study with economist Robert Baade, "Researchers who have gone back and looked at economic data for localities that have hosted mega-events, attracted new franchises, or built new sports facilities have almost invariably found little or no economic benefits from spectator sports." This is particularly true of a hockey arena, because it's hockey... The only thing I could picture being worse is if the city vested a quarter of a billion dollars in constructing a WWE arena.

Is there a common thread here? In fact there is, both the Tigers and the Red Wings are owned by Mike Ilitch (pictured above) who founded the Little Caesar's pizza chain and whose family have a net worth of $2.7 billion, according to Forbes. The Red Wings are the sixth most valuable NHL franchise. Yet public money is being ponied up to give them a new home. Wouldn't a person who believed in their product be willing to pony up their own capital to invest in their team(s). Being a Cubs fan, I present you with my case and point in the form of the Ricketts family, who are spending $500 million on their own money to renovate historic Wrigley field and create a new retail center in Chicago (That's not to say they didn't try to get some public money first).

This certainly isn't a problem that is unique to Detroit. The city of Glendale, Ariz., recently decided to give a huge package of subsidies to the NHL's Phoenix Coyotes, despite the fact that no one goes to see the team and the city is slashing public services.

And don't think that it is just Major League teams that have it's priorities disproportionately tied to sports. In March 2007, the Solon, IA High School Football/Track Complex committee presented the concept to their Board of Education, and the Board gave approval to initiate fund raising activities for the project, a new football and track field, complete with new locker rooms, press boxes, and a weight room. The estimated cost for this project was at about $4.5 million dollars, largely from private donations. But with over $800,000 coming from school funding. In the 2007-08 school year, massive state budget cuts hit Solon along with many other school that created projections of hundreds of thousands of dollars in debt.

But Detroit's decision is even more ridiculous given its pending bankruptcy. On one hand are pensioners making tens of thousands per year for their work for the city; on the other is a billionaire who owns an immensely successful restaurant franchise and two professional sports team. Thus far, the city appears to have prioritized taking care of the latter.