State's Corporate Welfare Partner Claims Thousands of Economists Support Stadium Subsidies
But economists uniformly oppose dinging taxpayers for projects like $125 million Kalamazoo facility
While calling for a $125 million proposed events center, the CEO of a local economic development group told the Kalamazoo County Board of Commissioners that thousands of economists say that publicly funded facilities are an economic boon for a region’s economy. But a look at research from scholars across the political spectrum finds little evidence to back up that claim.
“Sports subsidies cannot be justified on the grounds of local economic development, income growth or job creation, those arguments most frequently used by subsidy advocates.” That’s the conclusion of a 2017 paper by economists Dennis Coates and Brad Humphreys. Coates, who teaches at the University of Maryland, and Humphreys, who teaches at West Virginia University, examined existing academic studies on the topic.
But Southwest Michigan First CEO Ron Kitchens expressed a different view at an Aug. 8 meeting when he responded to objections raised by Kalamazoo County Commissioner John Gisler.
Gisler expressed concerns that a new $125 million events center in Kalamazoo would shift economic activity away from areas outside the city of Kalamazoo. The city already has two centers which seat thousands of people for events; the proposed center would seat up to 8,000.
According to MLive, Kitchens told the county board, “There’s a whole litany of economists who I would equate to the folks who see the writing on the wall and they claim it’s a forgery. For every economist who says ‘This never works,’ there are thousands of them who believe that it does.”
At the meeting, Gisler cited William Kern, an economics professor at Western Michigan University, which is based in Kalamazoo. In a phone interview with Michigan Capitol Confidential, Kern said that economic impact studies put out by non-academics may talk about the benefits of publicly funded events centers and sports facilities. But the consensus among academic economists, he said, is that these projects don’t bring major economic benefits to the region.
“It’s either that [Kitchens is] appallingly ignorant of this research, which he should know about if he’s considering a project of this sort,” Kern said. “I more suspect that it’s just a case where he has his interests that he wants to promote and anything that stands in the way of those interests, he’s going to attempt to knock down.”
Kitchens told the county board that the area needs a new event center and asked for special favors for its construction. He asked the commissioners to approve a land swap to create a parcel big enough for the project. He also called for placing before voters a ballot proposal, which would levy a 1 percent tax on restaurant food and beverage sales in the county. The tax would, over 20 years, pay off debt incurred for the project.
Michigan Capitol Confidential reached out to Southwest Michigan First via email as well as a phone call, asking Kitchens to provide research describing the positive economic benefits of a publicly funded events center or sports stadium. He declined to comment.
A 2017 survey of economists from across the political spectrum found strong consensus that the costs of stadiums outweigh the benefits. In that survey, 83 percent of the economists either “agreed” or “strongly agreed” that, “Providing state and local subsidies to build stadiums for professional sports teams is likely to cost the relevant taxpayers more than any local economic benefits that are generated.” Only 4 percent disagreed while none were in strong disagreement and the rest were uncertain.
A 2011 book on sports stadiums subsidies written by the Brookings Institution’s Roger Noll and Andrew Zimbalist concluded that bad economic reasoning is used to give intellectual support for taxpayer-funded stadiums.
“A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment,” wrote Noll and Zimbalist. “No recent facility appears to have earned anything approaching a reasonable return on investment.”
About 10 years ago, Southwestern Michigan First proposed a new events center in Kalamazoo. The proposal failed.
In 1974, the Greenleaf Hospitality Group built the Wings Event Center in Kalamazoo. The facility has a seating capacity for 5,113 people during hockey games. When configured for a concert, it can seat up to 6,300. The county is also home to an expo center that can seat up to 4,500.
Gisler doubts that the county board will ask voters to support a 1 percent tax on restaurant meals.
“Right now I’d say it doesn’t look too favorable, but I’ve been wrong about these things before,” Gisler said. “[My constituents] were down on it whenever it first came up and now they’re really down on it.”
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.