Kalamazoo Event Center and Dueling Economist
I wrote a piece about 2 weeks ago on the proposed Kalamazoo event center. In that piece I discussed one proposal to fund the event center and a parking garage which was to apply an additional 1% tax on restaurant food and beverages sales.
Southwest Michigan First CEO Ron Kitchens believes the center would be a boon to Kalamazoo and the tax on the residents would be made up from the economic boon to the local economy. If so then why wouldn’t private investors pay for the event center themselves and then there would be no need for a tax increase?
Well according to an article in the Michigan Capitol Confidential news site these stadiums and event centers financed by the taxpayer never really end up in favor of the taxpayer.
As quoted in the article, the conclusion of a 2017 paper by economists Dennis Coates, who teaches at the University of Maryland, and Brad Humphreys, who teaches at West Virginia University, examined existing academic studies on the topic and found:
Sports subsidies cannot be justified on the grounds of local economic development, income growth or job creation, those arguments most frequently used by subsidy advocates.
In response from a Kalamazoo County Board Commissioner John Gisler who expressed concerns that a new $125 million events center in Kalamazoo would shift economic activity away from areas outside the city of Kalamazoo and the fact that Kalamazoo already has two centers which seat thousands of people for events and the proposed center would add an additional 8,000 seats, Southwest Michigan First CEO Ron Kitchens stated:
There’s a whole litany of economists who I would equate to the folks who see the writing on the wall and they claim it’s a forgery. For every economist who says ‘This never works,’ there are thousands of them who believe that it does.
Well then the question would be which economist have been proven to be correct and which ones have not. Let us look only at data and the facts when making the decision to build a new event center in Kalamazoo or not.
At that same meeting, Commissioner Gisler cited William Kern, who is an economics professor at Western Michigan University, which is based in Kalamazoo. In an interview with Michigan Capitol Confidential news site, Professor Kern said that economic impact studies put out by non-academics may talk about the benefits of publicly funded events centers and sports facilities. But the consensus among academic economists, is that these projects don’t bring major economic benefits to the region.
It’s either that [Kitchens is] appallingly ignorant of this research, which he should know about if he’s considering a project of this sort…I more suspect that it’s just a case where he has his interests that he wants to promote and anything that stands in the way of those interests, he’s going to attempt to knock down.
The decision really should come down to facts not feelings. There was a 2017 survey of economists from across the political spectrum, they found a “strong consensus that the costs of stadiums outweigh the benefits”.
Also there is a 2011 book on sports stadiums subsidies written by Roger Noll and Andrew Zimbalist from the Brookings Institute which concluded that bad economic reasoning is used to give intellectual support for taxpayer-funded stadiums. In fact they are quoted in the book stating:
A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment…No recent facility appears to have earned anything approaching a reasonable return on investment.
I say when you are looking to go to the taxpayer to fund anything, your argument to the public for or against a new tax should be based on sound economic theory and data from, in this case, a city in which a new event center was funded by the taxpayer and it either worked in favor of the taxpayer or it did not.