Keep Those Subsidies Flowing

The stadium game refers to the prisoners’ dilemma-type game played by cities in their quest to attract/keep sports teams, a subject frequently touched on here at TSE.  In a comment to this TSE post on planned vs. spontaneous order and a subsidy given to keep the Power and Light district in Kansas City up and running, Don Coffin alerts us to another in an infinite series of gifts given to sports teams.  This one involves the NBA’s Indiana Pacers who were in negotiations with the city of Indianapolis on  a new lease for Conseco Fieldhouse.  According to the article, Pacers officials had hoped to get a 20-30 year agreement with the city, but were unable to come to terms on such a lengthy agreement.  The negotiations ended with a short-term agreement in which the Pacers will receive a $10 million arena operating subsidy per year for the next three years as well as money for capital improvements to the arena.

Given the weakness of the national economy, this deal is atrocious.  The state of Indiana ranked 39th out of the 50th states in June 2010 unemployment rate and this helps in what way?  If the Pacers are such a great boon to the Indianapolis economy, why do the Pacers need a public subsidy (I ask that rhetorically)?  Next they’ll be selling this as part of the national economic recovery package complete with orange road signs proclaiming as such.

You can argue that the Pacers generate an intangible benefit to the city of Indianapolis – civic pride or a source of commonality, for instance. – that justifies some subsidy of some size.  I don’t deny the intangibles as a possible reason for a subsidy.  But I am not convinced that the value of the intangibles isn’t somehow captured by the Pacers.  For example, the Pacers may capture some of the intangible benefits when they sell Pacers gear that fans can proudly wear wherever they may roam.  The same goes for every sports team, pro and supposedly amateur.  If so, then the argument for public subsidies loses much of its steam.

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Author: Phil Miller

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2 thoughts on “Keep Those Subsidies Flowing”

  1. I doubt many fans ‘proudly wear’ Pacers gear these days. As a season ticket holder for the last 5 seasons, it was becoming embarrassing to admit that I continually spent money on a team that has been on a downward spiral for so many years.

    I happen to live one block from Conseco Fieldhouse, where the Pacers play. I can tell you of one tangible externality the Pacers woeful performance has created – downtown residential property values close to the arena no longer carry a premium due to their proximity. It used to be a great selling point for condominiums in the area, when the Pacers consistently made the playoffs. No longer the case.

    Despite their abysmal performance, it would certainly be even worse if the Pacers relocated and left Conseco Fieldhouse empty – both for my property values, as well as for the restaurant and bar commerce around the Fieldhouse. Even with their sub-500 performance, the neighborhood is built around Conseco Fieldhouse.

  2. I doubt there would be much of an impact on downtown bars if the Pacers left: yes, there are some people who wouldn’t ordinarily head downtown, but do so early (or head out after the game) to eat or drink outside the arena, but how many of those people would go out on a Tuesday or Friday night anyway? For that matter, how many of those people go to a Pacers game instead of going straight to a bar? Which is better for the local economy, the group of four that spends $200 in Conseco and $40 at BWW or the group that spends $160 at BWW?

    I certainly don’t believe too many people head out specifically to watch Pacers games in bars. That time has long past, I’m afraid … and many of those people would simply watch some other game, or perhaps none at all, if there were no local TV.

    I suppose you could even make the argument that the long-term impact on neighborhood property was (and always would have been) negligible. Sure, initially there’s a spike when people were all excited about the new arena (and perhaps also about the franchise), but eventually all new arenas become old. What’s going to happen in 20 years (or 15 or 10) when Conseco is “outdated” and Mr. Simon or his successor comes to the mayor with hat in hand, begging for a billion for a new playground? More land will be claimed, the old arena will be demolished, a new one will be built, and another area will look bright for a brief period of time. (I think there’s no question that downtown looks vastly better now than it did 20 years ago, but that has to do with a lot more than just the arena … and frankly you don’t have to get too far from either of the new stadiums to see parts of Indy that got zero benefit from that construction.)

    Thankfully Indianapolis has major-league teams in only two of four sports. I can’t imagine what cities like Detroit and Minneapolis have to go through, fighting off leeches in four different sports. I find it hard to believe that it is possible to point to specific benefits for people who live in a city that shells out money for professional playgrounds … I’ve lived in Indianapolis for almost 20 years, and even as an avid sports fan, I can’t identify anything personally benefiting me from living in the city where the Colts and Pacers play. I can, however, identify direct and indirect costs I’ve paid involuntarily because of those teams. (A 20% increase in sales tax to help pay for the RCA Dome … yeah, that worked out really well for the city.)

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