I just received this comment from Alfie Meek, the Gwinnett County economist who generated the County’s economic impact estimates, in response to a post of mine on the Gwinnett Daily Post’s slanted reporting of the Gwinnett Braves stadium deal.
I respond to each issue one at a time. Here is Dr. Meek.
I have a question. If the bonds used to pay for a stadium are revenue bonds and not G.O. bonds (in other words are backed by a revenue stream that is un-related to taxes and not backed by the full faith and credit of the taxing authority) then why can’t the community claim that “the stadium will pay for itself?” For example, if the bonds are backed by rent from the team, ticket surcharges, naming rights, and parking fees, then how are the local taxpayers harmed?
Are the bonds lacking a full faith and credit commitment? From Tim Tucker at the AJC.
The three major bond-rating agencies have assigned AAA grades to the $33 million in taxable revenue bonds that will fund the stadium. None of the three agencies attribute their rating to projected stadium revenue. All attribute the rating to the county’s fallback position.
“The … AAA rating reflects the security provided by a pledge of Gwinnett County’s full faith and credit and taxing power,” Fitch said in a report on the bonds.
In an interview, Moody’s public finance analyst Baye Larsen said: “The bottom line is they are pledging their full taxing authority, not just one revenue stream.” (Emphasis added)
Your bond-rating agency doesn’t think so. From the stories I’ve read, I have assumed that the bonds are certificates of obligation, which are backed by taxing power but do not necessarily require a referendum.
Second, there is absolutely no way the revenue generated from the stadium will be sufficient to cover the debt. See my Op-Ed in the Atlanta Journal-Constitution, which no one in Gwinnett’s government has challenged. You would think that if my calculations are wrong that someone from Gwinnett would have pointed out my errors. If you want to start claiming otherwise, it is your duty to demonstrate where my work is wrong.
Third, the county’s commissioned feasibility study states that the revenue generated from the stadium will not be sufficient to cover the debt and costs of operation, which is why the study discusses several tax-instrument options. The county has also imposed a car rental tax and has discussed a
property tax increase. Furthermore, the Gwinnett Convention and Visitor’s Bureau is kicking in funds from the publicly-owned arena to cover some of the short-fall. If the revenue from the stadium was sufficient to cover the project, then these taxes and subsidies would not be necessary.
Finally, Jock Connell claims that he was misquoted and admitted that taxes are necessary to pay for the stadium; though, I find it odd that two separate newspapers reported the same “pay for itself from day one” quote verbatim. He claims that paying for itself includes the taxes.
Second, as a professional economist with years of experience in economic impact analysis and analysis of sports-related projects, I object to the notion that the stadium won’t provide economic stimulus. To the extent that it keeps discretionary income from leaving the community, or attracts new income into the community, it certainly will provide stimulus.
As an academic economist working in the field of public finance, I am familiar with the vast literature on economic impact analysis, which finds that public stadium projects transfer income within the locality and do not bring in new income. The academic literature backs me up on this. For example, see this study by Dennis Coates and Brad Humphreys.
Our conclusion, and that of nearly all academic economists studying this issue, is that professional sports generally have little, if any, positive effect on a city’s economy. The net economic impact of professional sports in Washington, D.C., and the 36 other cities that hosted professional sports teams over nearly 30 years, was a reduction in real per capita income over the entire metropolitan area.
Also, while I realize that JC’s point has to do with the reporting of the economic impact and not the economic impact numbers themselves, as the economist that did that particular analysis, I would like to point out that just because the numbers cited in the story above were done by “an employee of the county” doesn’t mean that they are necessarily less credible.
The fact that the author is a county employee does not mean that the numbers are wrong—though, I believe that they are wrong—but it does tell us something about the financial incentives of the author. It is the job of a reporter to seek objective opinions. Your numbers are newsworthy. However, the numbers were not relevant to the story, and even if they were, it is irresponsible just take the word of a county employee.
In conclusion, I have been willing to discuss this issue since the day the deal was announced. Yet, no government official has been willing to respond to me. As a result of the County’s reluctance to explain the deal, reporters have been forced to using open records requests to learn the details of the deal. If you want to debate this in a public forum, I would be happy to do so. I expect that the Atlanta Journal-Constitution would be willing to give you the space to respond to my Op-Ed.
UPDATE: I have verified that the bonds are backed by the full faith and credit of Gwinnett County. County taxpayers are on the hook for any revenue shortfall.