Wednesday, August 06, 2008

Flashback 2005: sports economist Zimbalist on the AY exception

In the June 2005 issue of the Brooklyn-based 'zine Stay Free, an interview (headlined Hoop Schemes) shows sports economist Andrew Zimbalist poking holes in sports facility studies, but insisting his study for developer Forest City Ratner was an exception.

However, a paired interview with Zimbalist's intellectual foil, Neil deMause of Field of Schemes, shows some contradiction in the professor's calculations.

STAY FREE!: Another thing you said was that, when it comes to public financing, the term "self-financing" for stadiums is often misleading.

ZIMBALIST: The evidence on public investments and their fiscal impact on municipal budgets is that they break even at best, but if you throw in all of the resources behind a stadium--the value of the land, tax abatements, rent subsidies, infrastructural maintenance, additional security by the city, additional sanitation--then in the large majority of cases the city or state is putting up tens of millions if not hundreds of millions of dollars to either partially or entirely finance the construction of the stadium. Neither the rental payments nor the revenue-sharing payments that the city gets back cover all of the direct and indirect expenses.

Yet Zimbalist on the Brian Lehrer Show recently insisted incorrectly that Forest City Ratner was merely relying on as-of-right benefits. And, of course, he ignored costs for additional security and incorrectly speculated there would be no additional public contribution.

The AY exception

A little later in the Stay Free! interview, AY came up.

STAY FREE!: But it is probably fair to say that the benefits are oversold.

ZIMBALIST: They are always oversold. Except in the case of my study for the Atlantic Yards arena, of course! What is true is that if this stuff is done properly it can relocate economic activity within a metropolitan area. So if it is your desire as a city planner to develop one part of the city at the expense of another, a stadium or an arena can contribute to that.

...The lion's share of the benefit--or maybe all of it--in my initial study, had to do not with the arena but with the other features of the investment.


Skepticism from deMause

STAY FREE!: Zimbalist said that the Nets arena would be roughly break-even. You said possibly optimistic . . .

DeMAUSE: Yes, in terms of what the city would get back. If the city spent several hundred million dollars on it, it could get back that amount in tax revenue. But that is assuming a lot. It's assuming that a lot of people who are currently going to Nets games in New Jersey are going to switch over and come to Brooklyn; otherwise, people are spending the same amount in the city. The money is just going to the Nets instead of, say, a movie theater. It is a best-case scenario that we make our money back. At that point the question is: are there other things the city could be doing with this money?

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