Keystone clowns

                                                 Indy Eleven stadium: Boon or boondoggle?

The Keystone Group developers are miffed that Indianapolis Mayor Joe Hogsett proposes to offer a 20-acre site near the White River, 80% of which is financed by a special taxing district, to the highest bidder. Keystone wants to use the site for a 20,000-seat stadium for the Indy Eleven, a soccer team, as well as for 600 apartments, nearly 200,000 square feet for shops and restaurants, and so forth. The total cost of developing the site would exceed $1 billion.

It is unusual for the taxpayer to foot 80% of the cost of building a sports stadium. In Nevada, the legislature last year approved $380 million for a proposed $2.2 billion stadium for the Athletics in Las Vegas, and even that relatively modest amount has the teachers up in arms. They’d rather spend the money on schools. The $2 billion Allegiant stadium, where the Las Vegas Raiders football team plays, consumed $750 million of public funding. Not pocket change, but again only a little more than a third of the total cost of building the stadium, which opened in 2020. Eighty percent is out of line. Why should the state subsidize sports fans?

Keystone accused Hogsett of “shopping state legislation championed by Indy Eleven, working behind closed doors to offer publicly-owned real estate and public financing to the highest bidder, with assurances that neither the redevelopment of his riverfront parcel [on the White River] on the continuation of the Indy Eleven would be requirements for city support.”  Keystone was founded by the owner of Indy Eleven, Ersal Ozdemir.  

Why shouldn’t Indianapolis demand the best return on its land?  That’s not likely to be a sport stadium.  For the most part, the city would want the use of the land that would provide the greatest tax revenues net of what the city spends on the site. That use is unlikely to be a stadium for a minor sport, because it won’t attract many out-of-towners, whose spending would increase the city’s income. The fans are most likely to be Indianapolis residents. In that case, there may be little net gain in spending and therefore little net gain in sales tax revenues.  The Indy family may spend $100 more on soccer games, and pay for it by spending $100 less on meals at local restaurants.

In general, there is little evidence that building stadiums benefits a city economically.  A stadium has "an extremely small" effect on the local economy, wrote Andrew Zimbalist and Roger G. Noll of the Brookings Institution in 1997. 

The reason is simple: Economic growth depends mainly on knowledge (“human capital,” if you want  the lingo). When workers know how to produce cars faster, their productivity rises. When programmers figure out how to speed up a robot, their productivity rises, too. Nothing about a sports stadium need increase labor productivity.  Perhaps by providing needed recreation, yes.  But the empirical evidence for that is weak, perhaps because today there are so many forms of recreation already to choose from.

The true cost of the stadium to Indianapolis is not the hundreds of millions of dollars spent on it but the amount of education that the money could have provided. Assume conservatively that Indiana assumes $500 million of the cost of developing the site. In Nevada, a pricey state, the total cost of providing a schoolteacher is $81,000 to $86,000 per year. At that cost, spending $500 million on education rather than the stadium could hire nearly 6,000 teachers for a year. Indeed, the number is likely to be greater than 6,000 for Indiana, because it is much cheaper than Nevada. Teachers here don’t demand such high salaries.

Keystone boasts that building the stadium would create 1,000 construction jobs. Well, building schools creates construction jobs, too.  Hogsett has his priorities straight. --Leon Taylor, Seymour, Indiana  tayloralmaty@gmail.com

Notes

For useful comments, I thank but do not implicate Forest Weld. 

 References

Alexandria Burris.  Keystone accuses Hogsett administration of trying to walk away from Eleven Park deal.  Indianapolis Star.  April 25, 2024. 

Andrew Zimbalist and Roger G. Noll.  Sports, Jobs, & Taxes: Are New Stadiums Worth the Cost?  June 1, 1997.  Sports, Jobs, & Taxes: Are New Stadiums Worth the Cost? | Brookings