Why the right economic argument, combined with the the secondary gain, make approving the stadium the right bargain to strike for Atlanta.
You get very few opportunities to change the direction of a major city. And most of Government’s job is to get out of the way. But there are a few decisions the state can make to allow a city to maximize its ability to attract and retain people and jobs. This is one.
The economic arguments that are made in favor of a new stadium are, in general, overblown. It provides a ton of short term construction jobs, and then a smaller number of low paying jobs thereafter. People come into the city to go to the events and they do spend money – so there is actual economic gain. However, these studies that are produced by the team or some interested party generally overvalue the economic impact of large events and of visitors because they include revenue that may have gone to some other Atlanta event if the Falcons stadium weren’t here (what economists call “substitution”).
They count “possibles” as “certains” and maybe double-count here and there, all to try and make the stadium look like a good investment. And all that is because they (and we) are using the wrong metric: whether the stadium itself will make money.
However, what teams and interested parties generally do not argue is the economic affects of the team leaving. Even a discussion of that possibility can result in blow-back for the team. But the NFL intentionally keeps the number of teams in the league beneath the number of cities than can actually support a team, so there will always be a teamless city willing to pony up to steal yours away. And when the always available Los Angeles has finally agreed to put money into a new stadium (as happened in September), that becomes a real threat.
Teams moved a lot in the 90’s and it has not happened since, mostly because expansion satisfied the appetites of Charlotte, Jacksonville, and Houston and prevented them from becoming suitors of existing teams. Houston presents a similar situation to Atlanta. They refused to build a new stadium, lost their NFL team for a few years (thus losing the tax revenue), and then ended paying for a new stadium AND a massive franchise fee.
But let’s ignore the fact that this is an NFL team and consider any other business that we want to stay in the state.
Georgia spent $84 million in incentives to lure the Caterpillar plant here from China. It will create 300 jobs by the end of 2013, with plans to increase to 600.
That’s probably money well spent. It will employ people from 2013 until Caterpillar renegotiates the incentive package in 2020. Caterpillar will reportedly kick in $200 million in plant construction.
That’s $140k per job. These jobs pay an average of $35k, with state income taxes at 6% that brings back money to the state at $2100 per year. With 600 jobs per year, the state will be paid back in 67 years. Of course, the plant won’t still be there then, and the incentives will need to be renewed in eight years.
Let’s compare that to the stadium. Granted, we are keeping a business here rather than attracting a new one, but the jobs equation should be the same. The Falcons payroll this year is $109 million. That does not include coaches or front office staff. They pay approximately $6.54 million in state income taxes every year. At that rate, it would take 45 years to pay back the public share of $300m. Still a long time, but 1/3rd less than the Caterpillar plant.
Falcons players also buy very expensive homes, and spent a very high percentage of their incomes locally. That creates secondary jobs. (Additionally, outrageous lifestyles that the players both live and create among their friends gave direct rise to the “Real Housewives of Atlanta”, which contributes something to Atlanta’s bottom line, though I can’t say what.)
And since the $300 million the Falcons’ stadium demands is being paid for by mostly Downtown Hotel taxes, the very people it and the GWCC attract are the ones actually paying for the stadium. Maybe we could tax all the people that buy Caterpillars to achieve the same goal?
In addition, the 30% of the bill that the public is responsible for is much lower than the average 62% that the public has been kicking in for stadiums over the last few years. All in all, this is a pretty good deal.
But even though asking whether the stadium itself will make money is the wrong question, sometimes the right plan can get the stadium to break even. Examples include Gillette Stadium in Boston and the economic projection of the Brooklyn NBA team’s new arena call for a break-even projection. Why? Because they follow the new rules of stadium building.
- Must be Downtown.
Not my rule, read Baade and Dye, Chema, and Santo, and to a lesser extent, Coates and Humphreys. Essentially the argument is that you do not get secondary benefit from a stadium if it is in the suburbs.
- Must be architecturally interesting. Current stadium life expectancy is about 30 years. If a new Falcons’ stadium is approved, the Georgia Dome will be replaced at age 25. That can be greatly extended if you manage to build a building that people love. Think Fenway, Soldier Field, Lambeau, the Nou Camp (too far?)
- Direct Secondary benefit in terms of business and housing combined with stadium use (This is how the Brooklyn Nets Stadium is breaking even).
So, building a new stadium can break even (though probably won’t) and will prevent the team from leaving (increases value of the team but concentrates that value in Atlanta), but beyond the immediate economic argument, there are others to consider.
Building the Georgia Dome in 1992 removed a neighborhood from the map and erected a wall that held up North-South and East-West organic transit and communication. With the building of the Multi-Modal hub and the redevelopment of the eastern part of the Gulch into something walkable and useful, the new stadium project can be used to tie in the Western part of the Gulch and make a cohesive plan for Western Downtown. It could be become the public square that Atlanta needs and part of the tourist destination that we crave.
So not only can we transform the Gulch as a byproduct of the stadium creation, we can fix the other major problem Atlanta still has: Why Nobody Visits You Unless You Have Their Grandkids.
Your guest room goes unused a lot, doesn’t it? Mine, too.
I love Atlanta. You love Atlanta. That’s why we have chosen to make it our home. However, it makes a better home than it does a travel destination. We don’t have amazing mountains or pristine beaches When family came to visit when I was a kid, they’d ask me what they had to see while they were here. I never knew what to tell them. Now I can say the Aquarium, or the World of Coke, and maybe seen I can say the Civil Rights Museum, College Football Hall of Fame…but few people come to Atlanta unless there is a convention or family or something else that brings them. Which is why the Falcons stadium and the Gulch transformation are key to keeping the evolution of Atlanta as a tourist attraction going. And that, eventually, brings dollars. And while they cannot be tied to the stadium specifically, it, along with that entire area’s improvement, are necessary to the continued growth of the city.
And lastly, people love the Falcons. On game days, southside and northside, black and white, young and old, all are out there tailgating or on their way to the game. Sports teams bring cities together. They increase the affinity people have for where they leave. The presence of a team has shown to bump up rents across the entire metro area. They help create a shared identity that we need to solve regional problems. That identity encourages investment
And all of the above are jobs that government is best at. The benefits of the stadium are primarily for the Falcons. But the secondary gain is small, but spread over all of Georgia. The argument for the stadium can be expressed in economic terms, but that’s really too narrow a window to see the full effect. Imagining the loss of the team makes it clearer, but it is when you consider what the building can do, as part of an area improvement, that makes it such a valuable investment. The stadium is a good deal. And the best one we can get. And we should take it.