http://www.sacbee.com/content/opinion/story/14308788p-15199049c.html
Daniel Weintraub: Does a new arena benefit you? Where do you live?
By Daniel Weintraub -- Bee Columnist
Published 12:01 am PDT Sunday, August 27, 2006
Story appeared in Forum section, Page E1
Sacramento County voters who are serious about evaluating the proposal to build a new arena for the owners of the NBA Kings will soon discover what every credible study on the subject has concluded: new arenas add little or nothing to the economies of the regions in which they are built.
Most of the money patrons spend is unloaded inside the arena. It goes to the owners of the teams and the players they put on the court, and then is promptly transferred out of the area.
Whatever local economic benefit there might be is typically a transfer from the broader region to the neighborhood around the arena. Fans from outlying areas might come downtown to shop, eat and drink before and after a game. Much of the money they spend on those extras, and indeed the cost of the tickets themselves, would be spent closer to home if the arena and the team did not exist.
In the case of the Sacramento arena proposal, however, this economic fact of life might be no small thing. The transfer of wealth from the suburbs to the inner city just may be the best economic argument for building the arena.
The proposal to increase the sales tax in the county by one-quarter cent to build an arena calls for the project to go downtown in the railyards owned by Union Pacific. That property had been rumored to be on the verge of transformation for a decade or more, but every proposal to develop it with a mix of housing and retail development fell through. Approval of the new arena would almost certainly be the spark needed to jump-start the construction of a vibrant new neighborhood on the north side of the existing central business district.
The transfer of money from the suburbs to the city would begin with the construction of the arena. The project is expected to cost about $500 million, perhaps $600 million over seven years after financing costs are figured in.
The city of Sacramento accounts for only about one-third of the sales tax generated in the county. So if it costs $600 million to build the arena, $400 million would be coming from the suburbs. Only about $200 million would be generated by sales within the city of Sacramento.
Not all of the money spent for construction would stay within the city limits, but some of it would. A feasibility study done for the city four years ago estimated that about 20 percent of the money spent on labor and materials would go to city residents and firms. That would be at least $100 million, using the current cost estimates. And after that money is circulated through the local economy, the ultimate benefit could be twice that.
So the construction of the arena, from a standpoint of city taxpayers, might well be a wash. About $200 million would be raised in sales taxes and the same amount generated in economic activity. Normally you wouldn't get such a one-to-one pay off like that, but in this case you do -- thanks to the contribution of the $400 million coming from the suburbs.
Once the arena opened, a similar phenomenon would occur as fans spend entertainment dollars voluntarily. The 2002 study estimated that a new arena would generate about $49 million in annual spending in the city (compared to about $34 million at Arco), about 1,350 jobs and at least $6 million in tax receipts.
The Kings have never revealed the precise demographic breakdown of their fan base, but it is widely believed that most of their ticket buyers come from the Sacramento County suburbs and beyond. So, again, much of the money spent in and around the new arena would be a transfer of wealth from suburban residents to downtown businesses and workers.
If you live in one of those outlying communities, then, there is still little reason to support this deal from an economic perspective. The transfer of sales tax and entertainment dollars would be a net drain on your neighborhood. But if you are a resident of the city of Sacramento and especially if you would benefit from a resurgent downtown, the numbers, when viewed from that narrow perspective, might actually pencil out.
About the writer: The Bee's Daniel Weintraub can be reached at (916) 321-1914 or dweintraub@sacbee.com.
Daniel Weintraub: Does a new arena benefit you? Where do you live?
By Daniel Weintraub -- Bee Columnist
Published 12:01 am PDT Sunday, August 27, 2006
Story appeared in Forum section, Page E1
Sacramento County voters who are serious about evaluating the proposal to build a new arena for the owners of the NBA Kings will soon discover what every credible study on the subject has concluded: new arenas add little or nothing to the economies of the regions in which they are built.
Most of the money patrons spend is unloaded inside the arena. It goes to the owners of the teams and the players they put on the court, and then is promptly transferred out of the area.
Whatever local economic benefit there might be is typically a transfer from the broader region to the neighborhood around the arena. Fans from outlying areas might come downtown to shop, eat and drink before and after a game. Much of the money they spend on those extras, and indeed the cost of the tickets themselves, would be spent closer to home if the arena and the team did not exist.
In the case of the Sacramento arena proposal, however, this economic fact of life might be no small thing. The transfer of wealth from the suburbs to the inner city just may be the best economic argument for building the arena.
The proposal to increase the sales tax in the county by one-quarter cent to build an arena calls for the project to go downtown in the railyards owned by Union Pacific. That property had been rumored to be on the verge of transformation for a decade or more, but every proposal to develop it with a mix of housing and retail development fell through. Approval of the new arena would almost certainly be the spark needed to jump-start the construction of a vibrant new neighborhood on the north side of the existing central business district.
The transfer of money from the suburbs to the city would begin with the construction of the arena. The project is expected to cost about $500 million, perhaps $600 million over seven years after financing costs are figured in.
The city of Sacramento accounts for only about one-third of the sales tax generated in the county. So if it costs $600 million to build the arena, $400 million would be coming from the suburbs. Only about $200 million would be generated by sales within the city of Sacramento.
Not all of the money spent for construction would stay within the city limits, but some of it would. A feasibility study done for the city four years ago estimated that about 20 percent of the money spent on labor and materials would go to city residents and firms. That would be at least $100 million, using the current cost estimates. And after that money is circulated through the local economy, the ultimate benefit could be twice that.
So the construction of the arena, from a standpoint of city taxpayers, might well be a wash. About $200 million would be raised in sales taxes and the same amount generated in economic activity. Normally you wouldn't get such a one-to-one pay off like that, but in this case you do -- thanks to the contribution of the $400 million coming from the suburbs.
Once the arena opened, a similar phenomenon would occur as fans spend entertainment dollars voluntarily. The 2002 study estimated that a new arena would generate about $49 million in annual spending in the city (compared to about $34 million at Arco), about 1,350 jobs and at least $6 million in tax receipts.
The Kings have never revealed the precise demographic breakdown of their fan base, but it is widely believed that most of their ticket buyers come from the Sacramento County suburbs and beyond. So, again, much of the money spent in and around the new arena would be a transfer of wealth from suburban residents to downtown businesses and workers.
If you live in one of those outlying communities, then, there is still little reason to support this deal from an economic perspective. The transfer of sales tax and entertainment dollars would be a net drain on your neighborhood. But if you are a resident of the city of Sacramento and especially if you would benefit from a resurgent downtown, the numbers, when viewed from that narrow perspective, might actually pencil out.
About the writer: The Bee's Daniel Weintraub can be reached at (916) 321-1914 or dweintraub@sacbee.com.
