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Reason Foundation

Indianapolis Star

Questionable Benefits of a New Indy Stadium

Purported benefits are another snow job

Samuel Staley
January 2, 2005

State and local lawmakers will be weighing the costs and benefits of the proposed stadium and convention center scheme over the next several weeks. During this time, however, they should recognize the purported economic benefits for what they are: another snow job.

As residents continue to dig out of the pre-Christmas record snowstorm, local elected officials are touting the economic benefits of the $500 million stadium for the Colts and the $275 million expansion of the convention center. Studies commissioned by the city claim the "investments" will generate a 10-year economic impact of $2.3 billion.

Even if these projections are accurate, they amount to little in the broader picture. Academic researchers have reached near consensus that these publicly financed projects are little more than economic white elephants.

The reasons are pretty clear. Take the projected employment impacts. The city suggests that the two projects will generate 9,100 new jobs region-wide. More than half are temporary construction jobs and would likely have been created elsewhere in the metropolitan area. About 4,200 are considered "permanent," but these numbers assumed the Colts would leave if the new stadium weren't built and include an estimate of 2,700 new jobs if the convention center's expansion is completely successful.

Yet, these rosy economic effects are miniscule in the bigger picture. The Indianapolis region employs 903,000 people. The "new" permanent jobs represent less than 1/2 of 1 percent of the economic base. Most of these jobs will be low-wage, part-time jobs keyed to specific events.

Past assessments of Indianapolis' sports-centered Downtown development strategy have concluded the same thing: "While there were important achievements which should be attributed to Indianapolis' sports strategy," notes a research team from IUPUI on similar investments between 1974 and 1992, "on balance it seems fair to conclude that there were no significant or substantial shifts in economic development."

Benefits are even less likely now. The recent recession has prompted significant re-prioritization within the events and convention industry. Some high-profile destinations such as Orlando, Atlanta, Chicago or Las Vegas continue to experience high demand. Smaller and less-developed markets such as Dallas, Houston, Cincinnati and Boston are struggling to compete.

While Downtown Indianapolis has many admirable assets, they are unlikely to give the city the boost it needs to bring enough new business to reverse these trends.

Advocates also point to the impact of past investments on the immediate Downtown area. This impact should not be trivialized, but it should also be kept in perspective. The stadium and convention center projects amount to a massive public investment in a tiny area of the city. No other neighborhood could reasonably expect a similar commitment from the city, county or state.

Yet, even these impacts are small. Most of the dollars spent in Downtown restaurants and retail stores would have been spent elsewhere in the region. Even the city-sponsored economic impact study recognized that just 20 percent of those attending a Colts game came from outside Indiana, only half of those out-of-state residents planned to stay in a hotel, and only 12 percent of the Hoosiers traveling from outside Indianapolis planned on spending the night in the city.

On the other hand, the mayor and others appear to have done an admirable job of working out a deal that does not rely on region-wide tax increases. While a repeal of the sales tax used to finance the current stadium is not near, local officials have proposed shifting the burden to two highly targeted groups — gamblers and tourists.

Of course, these financing proposals come with their own liabilities. Gamblers, particularly those playing pull-tabs and slot machines, tend to be lower income. This raises an obvious equity issue about whether moderate-income residents should be subsidizing entertainment for middle-income and wealthy families.

The city also has proposed funding the new facilities by boosting the innkeepers tax by 50 percent, doubling the auto rental excise tax, increasing the Marion County admissions tax by 20 percent and eliminating the limit on the Professional Sports Development Area Revenue Cap. These significantly higher costs will likely discourage some would-be travelers, too, furthering minimizing the potential economic impact.

In the end, state legislators, the City-County Council and the residents will have to decide whether these higher taxes, fees and subsidies to wealthy athletes and team owners are necessary to maintain a "big-city image" for the nation's 12th-largest city with one of the Midwest's most robust economies.

Samuel Staley is director of urban and land use policy at Reason Foundation and co-editor of the book "Smarter Growth: Market-Based Strategies for Land-Use Planning in the 21st Century."


Samuel Staley is Research Fellow


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