Wednesday, March 04, 2009

Now we get it: Bloomberg thinks poaching companies over state lines is bad, but poaching teams is not so bad

When Smith College sports economist Andrew Zimbalist, Forest City Ratner's paid consultant, calculated (report in PDF) expected tax revenues from the planned Atlantic Yards arena, one key element was what Zimbalist called the "recapture of tax revenues presently generated in New Jersey," current home of the Nets basketball team.

And, as I've pointed out, both the Governor's office and the Empire State Development Corporation issued 3/4/05 press releases relying on Zimbalist's findings.

The city's press release cited a then-unreleased study by the NYC Economic Development Corporation, perhaps because of wariness about appearing to endorse a partisan study. But that study (PDF) also said new revenues would rely on "recaptured spending in New York City."

The new game in town

Guess what: the same people who boosted AY now warn that recapture of tax revenues across state lines is a bad idea. Consider an article in Monday's New York Times, headlined New York Vulnerable to Poaching in Recession, which noted how New Jersey was offering incentives to companies to move there.

The Times reported:
Those discussions have infuriated Mayor Michael R. Bloomberg, who complained publicly about New Jersey’s efforts in a news conference last month. And they have been sharply criticized by some economists, who assert that such incentives mainly benefit established companies with lobbying clout and are not very effective in creating new jobs.

“Propping up the big guys and helping them stay big doesn’t really promote economic growth,” said Kevin C. Gillen, an economist at the Wharton School of the University of Pennsylvania. He said much job growth comes from small businesses and fledgling companies.

Multiyear tax-abatement programs are often ineffective, Mr. Gillen said, because “they tend to work a lot better in the short term than the long term and often wind up being used to retain employers rather than to attract new firms.”

(Emphasis added)

The article focused on attempts to retain Pepsi, which was angered by a proposed New York State obesity tax on soft drinks. Assemblyman Richard Brodsky, who has been a foe of sports facility subsidy deals (at least those involving the New York Yankees and New York Mets), commented, “It’s never effective or helpful when companies play a locational card, and we’re working cooperatively with the governor and with Pepsi to make sure the right thing happens.”

Whatever that means.

Bloomberg and the "free market"

During a 1/23/04 appearance with WABC radio's John Gambling, Bloomberg defended such poaching.

Caller: When you’re talking about taking Jets and Nets from New Jersey, how are you not hurting anybody?

MB: Well, I suppose that--nobody wants to lose a team, everybody wants to gain a team. The Jets used to play at Shea Stadium, moved to New Jersey, New York got hurt, now they want to come back. The Nets--these teams want to go where the audience will support them.

JG: It’s a free market.

Bloomberg seconded Gambling, apparently unmindful of how team owners seek new facilities to maximize luxury boxes and marketing opportunities.

MB: It’s a free market; they’re privately owned. The Nets have not done well in New Jersey; their parking lot’s half full. Y’know, they’ve not sold out in a long time. The Jets don’t like sharing a stadium. But these are private ventures. The city likes to have economic activity. But the city’s not in the sports business, and shouldn’t be. I’d love to have it come here… In Brooklyn, they’ve never forgiven Walter O’Malley.

JG: And it looks as though that this is going to impact, obviously, the plans that they had for the Nets and Devils over there in Newark, but again, it’s a free market, and that’s the way this one works.

If it were a free market, then, what about the direct subsidies for Atlantic Yards (now up to $205 million from the city, plus $100 million from the state) and the special benefits cited by the Independent Budget Office?

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