As Nevada raids coffers for $950M, WVU professor pans stadium deals

NFL owners voted 31-1 in approval of the Oakland Raiders moving to Las Vegas, where a $1.9 billion stadium — including $950 million from public funds — should be ready for the 2020 season.

 

COMMENTARY

MORGANTOWN, W.Va. — During the fall of 1995, with Baltimore fans in a tizzy over swiping an NFL franchise, effectively doing unto Cleveland what Indianapolis had done unto them, Brad Humphreys was fresh into his new job at the University of Maryland Baltimore-County.

He owned a Ph.D. in economics and an affinity for sports, so the racket of Browns-becoming-Ravens intersected his passions. And his career soon was redirected by what Humphreys heard from the Baltimore deal-makers selling their plan to arrange public financing for a new stadium.

“The state put out one of these ridiculous economic studies to justify that subsidy,” he said, recalling how revenue projections rang like inflated propaganda. Attracting the Ravens, and building them a spiffy new place to play, would create 4,000 to 5,000 new jobs and raise employee earnings in the city by $200 million annually.

Humphrey thought, “There’s just no way. That much economic benefit from 10 games a season?”

When he discovered scant research on the effects of stadium subsidies, the young economist sought to measure them himself.

“I wrote my first paper on that topic and thought it would be a one-off thing,” Humphrey said. “Instead it became a big part of my research agenda for the next 20 years.”

Seems there’s always another Art Modell leveraging one city against another. No shortage of SuperSonics selling out to Thunder, or Rams boomeranging from Los Angeles to St. Louis and back again.

Now we introduce the Las Vegas Raiders.

A franchise lured to the desert by the sweet promise of $950 million from Nevada lawmakers, a group that in this economic climate looks as foolish as team owner Mark Davis is greedy.

Because there was no pesky referendum requiring Las Vegas residents to approve such a massive gift, Humphreys said the Legislature essentially “did this without consulting anybody except themselves.”

Yet even when stadium debates are put to referendums, the opinions of taxpayers don’t necessarily count. In 1998, after Pittsburgh residents dismissed a tax increase to build new stadiums for the Steelers and Pirates, the Allegheny Regional Asset District board approved an $809 million financing scheme. Called it “Plan B,” though critics preferred “Scam B.”

Said Humphreys: “They just went to Harrisburg and got it out of the Legislature, no matter what taxpayers said.”

Humphreys, who earned an undergrad degree from West Virginia University in 1986, returned to his alma mater as a facility member in 2013. By that point he had authored and co-authored seminal studies on the difference in what sports franchises claim and what they actually produce.

His research has yet to substantiate Baltimore netting any revenue approaching the $220 million it poured into the Ravens’ stadium.

“Those NFL games are really good at moving consumer spending around within a city, so they’ll get a lot of people to turn up on gameday and buy tickets and buy concessions and pay for parking,” he said. “But that’s just local consumer spending that would’ve been spent somewhere else in the city at some other time.”

The jackpot allotment being dealt the Raiders is unprecedented in sports tithing. (Apparently enacting a tax on hotel rooms is a necessary idea if it lures the NFL to town but not an answer for patching Nevada’s two-year, $400 million budget shortfall.)

Still, amid the grandiose, big-spending, fountain spray of Vegas, might $950 million prove a wise investment? After all, it seems easier to recoup money on The Strip than in downtown St. Louis.

Humphrey’s contends the opposite.

“Vegas is a different situation, because it’s already a bigger tourist destination than most other cities. So I think that’s just going to reduce any tangible economic impact that team might have there,” he said.

“Hotel occupancy is already really high in Las Vegas. They’re already getting the tourist in-flow. Whatever out-of-town business they get from fans attending those games is going to poach money from the casinos.”

Combing through Humphreys’ research struck upon key takeaways:

• Examinations of 37 metropolitan areas that were home to at least one pro football, basketball or baseball franchise from 1969-1996 showed “no measurable impact on the growth rate of real per capita income.”

• The professional sports environment produced a negative statistical impact on the level of real per capita income in those sample of metropolitan areas.

Mind you, Humphreys loves sports, and he indexes the spinoff intangibles from a pro franchise — feel-good benefits, a sense of community, the big-league status it affords a city.

“There’s research on that,” he said. “Surveys, where fans were asked ‘If your team was going to go bankrupt or leave town, how much would you be willing to pay to keep your team?’

“But the values that people come up with are in the $30 million to $50 million range. It’s not the size of the $750 million subsidy they’re giving the Raiders, for example.”

Despite pockets of public outcry — like Scam B, or San Diego voters allowing their Chargers to bolt rather than fund a stadium bill — owners and leagues still control the product supply and thereby the leverage. Three NFL teams have relocated during the past 18 months, and such power plays will continue as stadiums once thought functional for a half-century are now deemed outdated by owners after 20 years.

As Humphreys noted in one study, “teams exploit the cities where politics most effectively taps the taxpayers.”

That game continues, and the buy-in only skyrocketed now that Vegas took a seat at the table.





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