Monday, April 21, 2008

Humpreys on the new Edmonton arena

Dr. Brad Humphreys delivered an excellent address to the Economics Society of Northern Alberta luncheon last Friday. I was lucky enough to be in attendance, and Dr. Humphreys was kind enough to e-mail me his power point presentation.

Just to remind readers of a few facts about Dr. Humphreys:

  • He's one of the foremost experts on the economics of professional sport franchises and new arenas;
  • He was asked to testify before the US congress last year on the economic benefits of new arenas (or decided lack thereof), and;
  • He's been hired by the Seattle Supersonics to help get them out of their lease (the city is claiming the team is an economic boon to the city and the team is using Humphreys' research to prove otherwise).
An in-depth interview with Dr. Humphreys can be found on the Battle of Alberta blog. Trust me, it's worth reading in full.

He basically told the audience (and I am totally paraphrasing - look at the powerpoint if you want his words):
  • To remember that the $450-mil figure doesn't include land purchase or infrastructure costs;
  • These initial estimates historically are overrun by 30%;
  • The owner of the arena is often the biggest beneficiary;
  • New arenas can be use to shift development from other areas of town to around the arena;
  • But that it doesn't always work (ie. St. Louis)
  • Taxpayers often end up subsidizing these things;
  • And don't be surprised to see a phony-baloney economic "benefits" report in the near future;
  • There is no legitimate economic argument that can be made in support of taxpayer subsidization;
  • The only legitimate argument for subsidization is that intangible benefits accrue from the arena ('World Class City', civic pride, etc.);
  • But citizens often aren't willing to provide a large subsidy for these intangibles.

The Edmonton Journal's Susan Ruttan was also in attendance (I saw her) and accurately reports on what was said HERE. (hattip: Grabia)

The Edmonton Sun's John Short may have been in attendance (I didn't see him) and provides a poorly researched rant HERE.

Oh, and to answer your questions Mr. Short:

Short: On taxpayers likely paying for a portion of the arena (What right does he have to that opinion?)

A: Uh, I don't know, how about the fact that the arena report says so, as does much of the peer-reviewed research of a distinguished world-renowned professor.

Short: And what right does he have to tell us that the group appointed by Mayor Steve Mandell to point us in the direction of a new hockey palace did not include land costs and the bill for probable LRT expansion?

A: Again, please, just read the darn report, it says so on page 19. Plus, virtually every news story on the issue has mentioned this.

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