Just five days after news broke that the Kalamazoo County Board of Commissioners is considering imposing a hotel and restaurant tax to finance construction of a 6,800-seat sports arena at an estimated cost of $81.2 million, the Pontiac Silverdome—also constructed with taxpayer subsidies—was auctioned off to a Canadian firm for just $583,000.
Despite having almost 12 times the seating capacity and still being in good condition, the Silverdome was sold for less than 1 percent of the proposed cost for building the Kalamazoo arena.
The taxes proposed to finance the Kalamazoo facility were made possible by a new state law enacted at the end of 2008. The assumption behind this expanded taxing power, and the impetus that also led to the Silverdome being built with public dollars, is that publicly subsidized sports facilities create economic growth. However, both economic research and the real-world experiences of the Silverdome and other similar venues cast this assumption into considerable doubt.
The consensus of economists regarding taxpayer-subsidized sports stadium construction was summed up in 2006 by College of the Holy Cross economist Victor A. Matheson, who noted, “academic economists are nearly universal in their criticism that specialized sports infrastructure does little to promote economic growth.”
Similarly, in a July 2007 article Reason Public Policy Institute researchers Samuel Staley and Leonard Gilroy wrote, “More than 20 years of academic research has failed to find a significant relationship between an investment in a sports stadium and significant job or income growth.”
The authors also cited a 2000 report by researchers from Smith College and Vanderbilt University, which noted, “independent work on the economic impact of stadiums and arenas has uniformly found that there is no correlation between sports facility construction and economic development.”
Stadium’s Value Fell 99.7 Percent
Even if there were significant economic benefits from taxpayer-subsidized stadiums, the impact would often wear out fast, as teams have a habit of quickly discarding the buildings and moving on. In 1975 the Silverdome was completed for $55.7 million, more than $220 million at 2009 prices. That means the investment in the Silverdome depreciated by 99.7 percent in less than 35, years after correcting for inflation.
This happened despite the building still being in good enough condition that the new owner plans to use it for a soccer stadium.
Compared with similar venues paid for and owned by taxpayers, it may be remarkable that the Silverdome is still standing. The Kingdome in Seattle was finished one year after the Silverdome but never made it to its 24th anniversary—it was demolished in 2000.
The Metrodome in Minneapolis, home of the NFL’s Minnesota Vikings and Major League Baseball’s Minnesota Twins, is already the NFL’s ninth-oldest home field, despite being just 27 years old. This year the University of Minnesota’s Big Ten football team moved out, and the Vikings and Twins are making plans to pack their bags very soon.
The University of Minnesota Golden Gophers football team is in its third home since 1981. The school abandoned an on-campus stadium and moved to the brand-new Metrodome for the 1982 football season, partially due to an assumption the indoor facility would boost attendance by offering protection from the weather. However, with the stadium removed from the on-campus atmosphere, the crowds were not much larger than in previous years.
Gopher football’s latest home, TCF Bank Stadium, is on campus and open-air. It cost $288 million to build, nearly half of which is being subsidized by Minnesota taxpayers thanks to a vote of the Minnesota Legislature to approve construction.
Mixture of Teams Proposed
Like the Metrodome, the proposed arena for Kalamazoo is intended initially to house a mixture of professional and college teams. It was announced that the Western Michigan University basketball and hockey teams will share the space with the Kalamazoo Wings, a minor league professional hockey team.
The Wings currently play in Wings Stadium, constructed in 1974, one year before the Silverdome. The WMU Broncos hockey team now plays home games at the on-campus Lawson Ice Arena, also completed in 1974, and the WMU basketball team plays at University Arena, which was built in 1957 and renovated in 1994.
Expanded Tax Authority
As with the new stadium for the University of Minnesota, a taxpayer subsidy for the new Kalamazoo arena was facilitated by a vote of the Michigan Legislature.
According to MichiganVotes.org, 2008 House Bill 6515 expanded “the scope of the law that authorizes local hotel, restaurant, and rental car excise taxes to pay for municipal stadiums.” In addition, it lowers “a certain population standard, allowing Kalamazoo County and Kalamazoo to levy these taxes.”
Thirty-six of 38 members of the Michigan Senate voted to approve this increased taxing power on December 18, 2008. That same day, 54 Democrats were joined by 14 Republicans in the House of Representatives to approve the bill. It became Public Act 532 of 2008 when Gov. Jennifer Granholm (D) signed it on January 12, 2009.
Kenneth M. Braun ([email protected]) is a policy analyst and managing editor of Michigan Capitol Confidential at the Mackinac Center for Public Policy.