Good Money After Bad
I was absolutely astounded several years ago when the city of Glendale (a suburb NW of Phoenix) agreed to shell out $180 million to build an arena to try to keep a pro hockey team (the Coyotes) in town. Now, they are considering doubling their investment:
Will the Glendale City Council vote to shell out nearly $200 million in a deal aimed at keeping the Coyotes in town for at least 30 years?
But there is nothing simple about the decision facing elected officials in the West Valley city that has yearned to build its reputation as a sports and entertainment hot spot.
The deal involves Glendale taxpayers giving $100 million to Matthew Hulsizer, a Chicago businessman poised to buy the Phoenix Coyotes from the National Hockey League.
And, the Arizona Republic's Rebekah Sanders reports that "Glendale would pay Hulsizer $97 million over the next 5 1/2 years to manage the arena, schedule concerts and other non-hockey events."
Unbelievable. The value destruction here is amazing. A few years ago, the Coyotes were only valued at $117 million. So the government will have subsidized an entity worth just north of $100 million with $400 million in taxpayer dollars? Nice investment. Of course they have a BS study about net economic impact of the Coyotes, with a sure-to-be exaggerated figure of $24.5 million a year. But even accepting this figure, they are spending $400 million for at most $24.5 million in economic impact, which at best maybe translates into $2-3 million a year in extra taxes. That works, how?
Losing more than 40 major events, that is hockey games, per year at the arena would be a punch-in-the-gut to bars, restaurants and retail shops that also call Westgate home.
Here is a hint: I pretty much guarantee the buyout value or moving cost of these businesses is less than $200 million. But here are the most amazing "economics"
that would only further jam up Glendale, which counts on sales tax revenues those businesses generate to pay off the debt it has amassed in trying to build its sports empire.
So we are going to spend $200 million to make sure we can keep up the debt service on the previous $180 million? So where does the $200 million come from. I am increasingly buying into Radley Balko's theory that the media is not liberal or conservative, just consistently statist. Here is the comment on the Goldwater Institute's legal challenge
City officials also may face a legal challenge from the Goldwater Institute over the conservative think-tank's belief that the deal Glendale has cooked up violates state laws that prohibit government subsidies to private entities.
That, of course, means that the city will rack up untold legal fees to defend their deal.
Waaaaa! More legal fees. Is that really their biggest concern? How about the strong possibility that Goldwater is correct, or a mention that they have won in court recently in similar cases. But we will end with this happy thought:
Now, if they say yes to the $200-million giveaway, they may keep the team in town but are only piling on to that massive debt.
And as their initial deal with the team and previous team owners has proven, there are no guarantees that the $200 million will be enough.
Postscript: Local papers have never seen a sports team subsidy or new stadium they did not love. Given the quality of their news departments, local sports teams sell newspapers.
PS#2: Long ago I wrote a post on subsidies for business relocations and the prisoners dilemma.
