I recently had the pleasure of appearing on the Fox Business program "Money" with Melissa Francis to discuss government subsidies for a new entertainment complex that will house the Detroit Red Wings.
Ms. Francis is a talented and gracious host, making the experience on balance a positive one. I was baffled, however, by the apparent beliefs expressed by another guest on the show.
Democratic Strategist Chris Kofinis repeated estimates that the project would create thousands of new jobs in Detroit. He also argued there was simply no other alternative to taxpayers picking up a large portion of the tab, saying that Detroit needs the investment and "you gotta take the risk and the chance."
While erecting a $650 million development will certainly generate a good number of temporary construction jobs, this comes with a cost that will be borne (at least in part) by taxpayers. Being forced to pay this cost may mean foregone employment opportunities elsewhere, potentially making the project a net loser for Detroit, if not the state.
In other words, Mr. Kofinis only looked at one side of the balance sheet, the asset side, and ignored the very real liability side.
Kofinis could not be reached for additional comment.
In addition, while Detroit certainly needs investment, for decades both human and financial capital have been fleeing the city. This is not because of a shortage of subsidies for deep-pocketed developers, but because of the city’s crushing tax and regulatory burdens, coupled with the declining quality of public services. Yet another taxpayer-subsidized development is simply a recipe for more of the same.
Moreover, it’s not fair to drag any taxpayers into taking this "risk and chance." They will receive no direct benefit from the project — and many of them may not even like hockey!
If developers are unwilling to make an investment without government subsidies, that speaks loudly to the quality of the investment. Those who stand to reap all the potential benefits should be equally liable for taking the associated risks.
In this case, a billionaire professional sports team owner looks to benefit directly from favors granted by the political class. It smacks of crony capitalism. As one skeptical member of the state board that oversees corporate welfare expenditures put it in a report published by the Michigan Information and Research Service, "Help me understand how this is a good deal for the taxpayer … it's a good deal for you guys or you wouldn't be sitting here." Members of this body are not known for such skepticism regarding corporate subsidies.
On top of all that, the arguments in favor of big taxpayer subsidies to a billionaire sports team owner have grown increasingly threadbare. Research shows that the presence of a major league sports team has either no impact economically or a negative one. In other words, WingsWorld might hurt Detroit more than it will help.
Finally, Detroit's political class and its enablers have a long history of cheerleading for subsidized projects under the guise of facilitating a "renaissance," "comeback" or "rebirth." To cite just one example, in 2000, current Detroit mayoral candidate Mike Duggan said of a new taxpayer-subsidized stadium for the Detroit Lions: "Twenty years from now when people come downtown, they will look back at this day as the turning point in Detroit's comeback."
Thirteen years later the city has filed for federal bankruptcy protection and lost a quarter of its already depleted population. People need to wise up and realize all these flashy "economic development" projects really are about career development — for the politicians who vote to bankroll them using long-suffering taxpayers' hard-earned money.
"WingsWorld" is not the official name of the development project, but this author's allusion to another great (and at one time, taxpayer subsidized) failure, Autoworld.
(For more on the stadium proposal, see my essay, "WingsWorld.")