Sports stadia provide a visible example where promises of economic development are used to drain tax revenue from the public. This unseemly practice received a boost from the Supreme Court's decision in Kelo, which equated "economic development" with "public use" in eminent domain cases.
The stadium game shows that much mischief can be carried under the banner of economic development. But stadiums have company as case studies for Kelo. Like stadia, convention centers have been shamelessly promoted as engines of economic development, excessively so. Here's Steven Malanga in the City Journal:
Dozens of new centers have opened over the last decade, creating a nationwide glut in convention space. ... Some 40 more projects now in the pipeline will only worsen the convention-center glut, a recent Brookings Institution study concluded.
An investment glut, of course, gives rise to failed projects, and city convention centers are no exception. For example, Malanga reports that at Boston's new convention center, "bookings and attendance are only one-sixth of what the city projected. Taxpayers now find themselves on the hook not only for the center's construction cost but also for its operating deficit." (Naturally, the center is subsidized, and was built using the power of eminent domain.)
Boston is not an isolated case. The problem is systematic, and as with stadia, so is the use of pie-in-the-sky economic projections. As in our post a few days ago, Malanga criticizes the credulous Justice Stevens for taking these glossies at face value:
Writing for the majority in Kelo, Justice John Paul Stevens seemed suitably impressed, pointing out that the city of New London, Connecticut, whose use of eminent domain was at the heart of the case, had carefully studied the proposed public development project and believed it could offer a big economic payoff.
But the track record of government-sponsored economic studies supporting the construction of stadiums and convention centers is dismal. Urban policy expert Heywood Sanders of the University of Texas at San Antonio analyzed more than 30 studies supporting convention center construction and found them "consistently flawed and misleading." They offer "no real basis for public investment and serve to bias public decision making and choice," Sanders observed.
Let's reflect for a moment on the apparently mothballed plans for a stadium on Manhattan's west side. Wait, that was to be a stadium and a convention center combined! The boondoggle to top all boondoggles! The scholar in me wishes the thing had gone ahead just so someone could document the waste it was sure to generate.** Malanga made an excellent case for that expectation in "How Not to Develop the Far West Side."
Professor Sanders' work appears to inform Malanga's writing and is thus worthy of attention. "Flawed Forecasts" is a good candidate for further reading, as is his Brookings Institution paper on the convention center glut. Next time I have library access, I'll check out "Convention Myths and Markets: A Critical Review of Convention Center Feasibility Studies," Economic Development Quarterly, August 2002, pp. 195 to 210.
Memo to Supreme Court Clerks: Put these on Justice Stevens' reading list.
**Malanga reports in his Kelo piece that the California legislature is setting up a Frankensteinian sports authority, armed with the power of eminent domain. Perhaps they'll come up with an even better boondoggle.