Image courtesy of The Center Square
Does a move of Phildelphia's NBA team make economical sense?
Philadelphia Mayor Cherelle Parker released four reports on the impact of a new Sixers arena in Center City this week, but economic experts say its conclusions are inaccurate and lead to incorrect assumptions about the proposed project.
Several estimates of projected costs for the arena fluctuate between $1.3 billion and $1.9 billion. A taxpayer subsidy proposal for the arena has not been announced.
The economic impact analysis referenced by Parker was completed by marketing firm Convention, Sports and Leisure, which is owned by Dallas Cowboys and New York Yankees venture Legends Hospitality Management.
The company has been hired across the country to produce reports that conclude cities will receive economic benefits from paying for new sports stadiums and arenas. Economists who study those projects, however, consistently show that the promised public benefit is never realized.
“Econ imp studies are useless even if done well, bc they don’t tell you anything about tradeoffs,” wrote the University of Colorado Denver’s Geoffrey Propheter on X, formerly known as Twitter. “Lawmakers’ public service responsibility is to weigh tradeoffs of alternative policies, so a report that says nothing about tradeoffs is useless. Stop asking for these things.”
The CSL report was paid for by project developers through the city of Philadelphia as part of a four-report analysis of community impact, design review, transportation impact and economic impact.
CSL’s report claims the proposed 76 Place at Market East arena would bring the city 53 additional annual events, including 35 concerts with 463,000 attendees; 15 family shows with 118,000 attendees; and three additional sporting events with 32,000 attendees.
Economist Victor Matheson of the College of Holy Cross – who has extensively studied new arenas and the impact of building new facilities on event totals – said comparing Philadelphia with New York City and Los Angeles is “complete economic malpractice” in an analysis reprinted by the stadium subsidy blog “Field of Schemes.”
“The proposed Philly arenas are like 6-7 miles apart, maybe 20 minutes even in traffic,” Matheson wrote. “The Forum and Honda Center in LA are about 60 miles apart and Prudential Center in Newark is about 50 miles from UBS Arena on Long Island and both are way over an hour separated during normal traffic conditions. Any suggestion that a 2nd Philly arena will generate business like additional arenas in those two places is absurd.”
A separate analysis of a new arena from Comcast Spectator, which owns the Philadelphia Flyers, pointed out that there were no comparable markets with two arenas and there is not sufficient event potential to support a second facility
“Ultimately the lack of events and net revenue reduces the value of the venue and in turn, creates a long-term reliance on public tax dollars for upgrades to stay competitive,” the report says.
That analysis said that any taxpayer subsidies toward a new arena would not bring returns for the city.
“For markets of similar size, the average taxpayer subsidy is 46%, or ~$600 million for a $1.6+ billion project,” the report says. “The estimated economic value, or impact, of 76 Place to the City/County of Philadelphia over 30 years is $134 million, or a present value of $63 million. Any taxpayer contribution to the project of more than $63 million negates any positive impact.”
CSL's analysis claimed that a new arena would generate $390 million in present-value tax revenue for the city, state, and school district, including construction and a 30-year lease. That would send $197 million to Philadelphia, roughly $52 million to the district, and nearly $141 million to the state itself.
Economist J.C. Bradbury of Georgia's Kennesaw State University said that consultants such as CSL are part of a "snake-oil business of selling placebos that customers desire."
"The economic prostitutes who peddle economic impact 'studies' don't even bother to get any training in the subject," Bradbury wrote. "They don't have to when media outlets and policymakers credulously accept their bogus fantasy documents as real research. Has CSL ever predicted anything correctly?"
