Category: Trumpism

Trump’s tariffs and budget cuts will make stadiums more unaffordable — but will cities stop funding them?

access_time personNeil deMause

Washington, D.C. Mayor Muriel Bowser still really wants to build a Commanders stadium using an as-yet-undisclosed pile of public money, but she has a little problem: The district is facing a potential $1 billion budget deficit over the next three years. Not that that usually stops cities from pouring money into sports venues — when times are good it’s usually “we can afford this” and when times are bad it’s “we can’t afford not to do this” — but the, uh, disconnect is great enough that even local TV stations are asking questions, literally:

7News On Your side reached out to Bowser and asked her the following questions:

  1. How will this forecast affect talks with the Commanders about a new stadium?
  2. Will Mayor Bowser push the team to take on a larger share of the bill for a new stadium?
  3. Will this forecast lead to more spending cuts or higher taxes for residents?
  4. Will this forecast push the mayor to back away from any new stadium deal requiring the use of taxpayer dollars?

So far the response from Bowser — as well as the D.C. council, which was presented with similar questions — has been crickets.

Anyway, this does complicate Bowser’s plans to lure Josh Harris’s Commanders back to the city with gobs of taxpayer money. And how did D.C. end up in such a huge budget hole, anyway? Funny story:

D.C.’s Office of the Chief Financial Officer, in its new revenue forecast released Friday, estimates the city will bring in $21.6M less this year and an average of $342.1M less over the following three years than its December forecast predicted. The total decline adds up to just over $1B in reduced revenue between now and the end of fiscal year 2028.

The report cites the Trump administration’s recent moves to slash the federal workforce as the primary reason for the declining projections, along with the domino effect that is expected to have on the local economy.

This raises a larger question: What impact will the mayhem that Donald Trump and Elon Musk are committing across the federal government have on stadium and arena construction? We’ve already seen predictions that Trump’s tariffs on both Canada in particular and imported steel and aluminum in general will cause construction prices to soar. Throwing local government budgets into the wood chipper would only compound the problem, as cities and states would be chasing ever-more-expensive stadiums with ever-shrinking treasuries.

And yet! It’s important to remember that one of the things that kicked off the entire stadium-subsidy racket — and, before it, the auto-plant and computer-chip-factory rackets — in the 1980s was Ronald Reagan slashing federal funding to local governments. With no way of creating jobs by spreading around federal dollars, city mayors increasingly turned instead to offering their dwindling supplies of cash to corporations as a way to try to steal jobs from the city down the road, launching the economic war among the states. It didn’t work — raiding your neighbor while they raid you is a zero-sum game — but that hasn’t stopped it from becoming ingrained as the business of local government, and it was all set off by local government having too little cash, not so much that it didn’t know what to do with it.

So, will a Trumpcession tank team owners’ stadium plans? It’s way, way too soon to tell. It’s going to change the entire climate around construction of more or less everything, though, as well as state and local governments’ fiscal plans, so things will be different, if not necessarily better. At the same time, Trump’s tax cuts are making the rich much richer, so you would think that team owners could better afford to pay for stadiums themselves — but, again, this whole scheme isn’t about who can afford them, it’s about how to get someone else to pay for them so owners can keep more money for themselves. Kleptocracies work in mysterious ways.

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Trump threatens to move convention out of Charlotte if demands not met, like former sports owner he is

access_time personNeil deMause

A former sports team owner threatened yesterday to move a planned event out of town if his arena demands weren’t met, and the only surprise, really, is that the culprit was the president of the United States:

Let’s for the moment ignore the bit where the nation’s leader is demanding to pack 20,000 people into an indoor arena during a pandemic where the one thing we know is that packing people into indoor spaces is the worst possible thing you can do. (And the bit about “building the Arena to a very high standard,” since in fact it was Charlotte taxpayers who just spent $27.5 million on upgrading the Hornets‘ arena.) Instead, I’d like to focus on Trump’s claim that if he isn’t allowed to fill the Charlotte arena to capacity, he will take his “jobs and economic development” and go elsewhere. How many jobs do political conventions create, anyway?

The usual lazy way (or self-interested way, if you’re in the business of staging conventions) of calculating convention economic impact is to add up all the visitors to a city and multiply it by how much you think they spend, which results in numbers as high as $230 million. The better way would be to look at all the cities that have hosted conventions and see if there was any discernable change in job growth or personal income as a result — and sports economists Robert Baade, Robert Baumann, and Victor Matheson did just that in 2008, finding that “the presence of the Republican or Democratic National Convention has no discernable impact on employment, personal income, or personal income per capita in the cities where the events were held confirming the results of other ex post analyses of mega-events.”

In other words, political conventions are much like the Super Bowl: They bring a ton of people into town, but they also drive away other potential visitors who steer clear of the convention week crowds (and convention week hotel prices), as well as local residents who may stay at home if they think restaurants and such will be too crowded. As Baade, Baumann, and Matheson noted, “During the week of the 2004 Republican National Convention in New York City, for example, attendance at Broadway shows fell more than 20 percent compared with the same week a year earlier despite the presence of tens of thousands of visiting conventioneers and journalists.”

(Matheson and Baade also previously crunched the numbers for the NCAA tournament, another brief “mega-event” similar to political conventions, and found that the men’s tournament appeared to have a small negative impact on host cities’ economies, which is impressively bad.)

Reached via email, Matheson further observes that political conventions don’t even provide the “feel-good” effects of a major sporting event, where residents at least report an increase in warm fuzzies from having been in proximity to greatness. (The 2016 Rio de Janeiro Olympics, he notes, seem to have been an exception.) Political conventions, by contrast, are generally remembered in story and song for less cheery reasons.

Now, there’s an obvious caveat here, which is that a pandemic economy is not a normal economy; hotel stays in North Carolina are way down what with much of America not leaving the house, so there may not be many tourists to drive away with a convention (though that’s already starting to change as the state slowly reopens). Matheson writes:

No one is going to fill those rooms up if the convention were to not take place. Hotel occupancy across the country has essentially fallen to zero, so the crowding out effect of mega events has disappeared during COVID-19, leading to real economic damage done by the cancellation of sporting (and political) events.
This also gives Trump’s threat slightly more teeth. In normal times, Trump’s threat to move the convention would be just another inane bit of bluster from a guy who likes to make threats he has no ability to carry out. There would be no city in the country with available hotel rooms and convention space that you could move the event to with this little notice. Nowadays, however, there are probably 30 different cities that actually have availability to host an event like this with last minute notice.

A chunk of the convention spending that advocates like to crow about, however, is from going out on the town during the event: Another paper by Matheson (with co-authors Lauren Heller and Frank Stephenson) found that convention-goers would have to spend seven times as much on food and entertainment as on hotel rooms to justify the most common economic impact claims. Restaurants, though, remain limited to 50% capacity in North Carolina, and if my experience getting takeout food in Brooklyn last night is any guide, there’s plenty of demand for restaurant food from bored, hungry locals right now, so it’s extremely likely that at least some Charlotte residents would choose to stay home rather than line up to sit six feet from Republican convention visitors from who knows where, with their icky who-knows-where germs.

Gov. Cooper hasn’t yet responded to Trump’s demands beyond a brief press statement saying North Carolina will make its decisions based on “data and science,” which certainly could be read as “Yeah, yeah, the president is tweeting at us, give him 24 hours and he’ll be off tweeting at clouds instead.” But don’t sell Donald Trump short: In his time as New Jersey Generals owner, he surely learned something about ways to leverage his power to get concessions from his foes. Or, you know, not.

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Trump plan could create huge incentive for governors to rebrand stadiums as “infrastructure”

access_time personNeil deMause

I followed up on Monday’s quick take on what Donald Trump’s infrastructure tax-break plan could mean for stadium subsidies with a longer investigation for Vice Sports, and after speaking to a half-dozen experts in the field, the conclusion is: This is mostly a plan to coerce states into outsourcing roads and other big public projects to private companies, but if it means funneling money to things like stadiums and calling it “infrastructure,” they’ll probably take that too.

While some [public-private partnerships] have worked out well, the failures have been of epic proportions. A few years ago, Texas contracted out State Highway 130 to a private developer, which skimped on construction costs by installing cheaper asphalt rather than sturdier concrete, resulting in what the Austin Statesman described as “a rumbling, dangerous washboard effect that tends to last for a couple of seconds each time.” Despite a much-ballyhooed 85-mile-per-hour speed limit, the road’s builders filed for bankruptcy earlier this year, sticking the federal government with a half-billion-dollar tab for its piece of the P3.

Under Trump’s proposal, more for-profit companies getting involved in building public roads would probably be the best-case scenario. Without strict limits on what qualifies for the Trump tax breaks, all sorts of projects for private benefit could end up being rebranded as “infrastructure.” We’ve already seen mayors and business leaders propose everything from affordable housing (this from the mayor of D.C.) to “Internet of Things technology” (this from the CEO of IBM, which makes—you guessed it—said technology) as infrastructure projects…

You can probably see where this is going. John Q. Governor decides that he wants a slice of that sweet, sweet Trump money so he can show voters that he can get benefits for his state. He doesn’t need another toll road, and no private investors are looking to build a new sewage system because sewage doesn’t pay the bills (and also, ick). However, the local arena shuffleboard team is asking for a new stadium, and shuffleboard arenas are infrastructure, right? Like, the kids can use them to practice for pro shuffleboard careers? Plus, jobs. Jobs are totally infrastructure!

Do I think that Trump is definitely going to unleash billions of dollars of federal sports subsidies on top of the couple billion a year currently being spent by local governments? No. Do I think that he’s set to open a giant loophole that every sports team owner is going to try to figure out how to drive a stadium through? Yeah, that one.

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Trump’s “infrastructure” plan could unleash a flood of new sports stadium subsidies

access_time personNeil deMause

Ever since election day, there’s been talk that one Donald Trump policy proposal swiped from the Democratic playbook would be a massive program of federal spending to, as his website says, “pursue an ‘America’s Infrastructure First’ policy that supports investments in transportation, clean water, a modern and reliable electricity grid, telecommunications, security infrastructure, and other pressing domestic infrastructure needs.” Some local officials have responded enthusiastically, with New York Gov. Andrew Cuomo saying he hoped this would lead to increased funding for long-planned public transportation projects like bridges and airports.

According to an op-ed in Friday’s Washington Post, though, Trump’s actual plan wouldn’t actually involve any increased funding to public construction projects. Former Obama stimulus-spending czar Ronald Klain, citing a report by two Trump policy advisors, writes:

The Trump plan doesn’t directly fund new roads, bridges, water systems or airports, as did Hillary Clinton’s 2016 infrastructure proposal. Instead, Trump’s plan provides tax breaks to private-sector investors who back profitable construction projects. These projects (such as electrical grid modernization or energy pipeline expansion) might already be planned or even underway. There’s no requirement that the tax breaks be used for incremental or otherwise expanded construction efforts; they could all go just to fatten the pockets of investors in previously planned projects.

If you’re a regular reader of this site, this should be sounding familiar: Tax kickbacks to projects that might take place anyway are the M.O. that has helped create the $2-billion-a-year sports stadium and arena subsidy industry — not to mention a slew of other subsidies to businesses from auto plants to airplane factories, plus the innumerable construction projects that receive tax increment financing even though they’d still be built without it.

What would be new under the Trump plan would be a massive federal outlay for these kinds of privately built projects. (Right now the main way the federal government subsidizes local private construction projects like stadiums is via tax-exempt bonds, which amounts to a whole bunch of money, but not nearly as much as if the feds were subsidizing projects directly.) The Trump policy paper, by leveraged buyout king Wilbur Ross and UC-Irvine economist Peter Navarro, is maddeningly unspecific about what projects would qualify for Trump income tax credits. But given that the rebates would be limited to projects that private-sector builders were interested in building — and that it’s likely to be left up to local governments to determine what to use the tax credits for, as the Trump policy report promises to “provide maximum flexibility to the states” — don’t expect to see a whole lot of new bridges when there are for-profit housing developments and, yes, sports stadiums to be built that would be far more lucrative for their builders.

At minimum, the Trump plan would be a way to coerce state and local governments to deal in private developers on otherwise public projects, with the private contractors getting to extract a “10% pretax profit margin” (it’s unclear whether that’s a guarantee or just an estimate). But if it ends up just being a way to subsidize private construction projects by rebranding them as “infrastructure” — something that has already been used to justify local-level stadium subsidies in the past — then we could easily see a whole lot of sports team owners lining up with their hands out. If the Trump plan moves forward, we’re going to need to keep a super-close eye on the arcane details of how the eligibility rules are written; it’s either that or trust state and local government officials to decide what to use the federal tax rebates for, and we’ve seen how well that’s worked before.

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