The MC: The Mackinac Center Blog

Study: New Sports Facilities Do Not Increase New Business Openings

Research discredits idea for ‘catalyst’ or ‘transformational’ developments

A rendering of Little Caesar's arena.

The Detroit Pistons today are scheduled to announce that they will be returning to Detroit from their home in Auburn Hills. They will share space in the new Red Wings stadium but are looking to build a practice facility. The local Downtown Development Authority is involved in the transaction somehow, but details about its specific contribution are unclear. Like any DDA, the Detroit authority can provide taxpayer incentives and other assistance to private business operations.

The new Red Wings stadium — which is still under construction — was dubbed a “catalyst” development by Lansing lawmakers in 2012 when they granted financial favors to the hockey team’s owner. The idea behind a “catalyst” development is that it is a big enough and powerful enough project to inspire more development.

But a study published in the Journal of Sports Economics, titled “Do New Sports Facilities Attract New Businesses?,” finds that new sports facilities are not business catalysts. This study is an important new contribution to the research on how professional sports affect the economies of major cities. It suggests that Michigan laws (passed or proposed) to promote “catalyst” or “transformational” projects that involve sports teams have no impact on the creation of new businesses. They also have little, if any, impact on employment.

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The study looks at 13 new sports stadiums that have opened in a dozen metropolitan statistical areas from 2002 through 2006, including Detroit’s Ford Field. It tracks businesses and workers at the census tract level, a narrower and more focused look than previous studies. The authors hoped to measure an impact from the opening of a new professional sports facility to “the number and composition of business establishments near new sports facilities.”

Instead, they found no impact on new businesses and some (though weak) evidence of higher employment at new businesses “compared to those new businesses located farther from the facility.”

This study is yet another in a long line of academic research that demonstrates the ineffectiveness of professional sports stadiums (or teams) — subsidized by taxpayers or not — in bringing about sustained economic development. The mountain of evidence that stadiums and teams don’t facilitate growth is clear, but lawmakers race to support them anyway.

In light of this scholarship, the Michigan Legislature should cease to subsidize, directly or indirectly, the efforts of professional sports teams and their owners. The Legislature should act in light of this new study and kill or modify a proposal that has already passed through a state Senate committee and could help private developers finance construction projects — such as a new Major League Soccer stadium in Detroit.

Most recently, a Michigan Senate committee approved legislation (SB 1061 and 1062) backed by businessman Dan Gilbert and designed to help public dollars finance private projects. Gilbert is the founder of Quicken Loans, among other companies, and has been acquiring properties in Detroit.

He is interested in bringing a Major League Soccer team and new soccer stadium to Detroit. Those are part of a larger project, which he would pursue along with Detroit Pistons owner Tom Gore. The centerpiece of the $1 billion project would be a new soccer stadium, but it would be accompanied by offices, restaurants and hotel accommodations.

The Senate legislation doesn’t mention sports stadiums or Dan Gilbert by name, but the proposed stadium project would appear to qualify for public support. Indeed, the bill contains some tailor-made attributes: It must be for a mixed-use project in a city with “a population of at least 600,000.” The project must also be worth at least $500 million. Whether the proposed legislation actually contributes to another Detroit stadium or some other project, it amounts to crony capitalism on steroids.

The facts are that most empirical and anecdotal evidence, along with economic theory, suggests that these laws and related programs do little if anything to facilitate new economic development over time. It’s time for lawmakers to stop granting favors to sports stadium owners.


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After Election Season, Economic Liberty Please

Lesson from a state-by-state study: Liberty promotes prosperity

The economic well-being of the people in a state is encouraged or hindered by the laws and policies that their legislature and governor enact. Each election brings a new set of officials who have a chance to reset the ways that government affects the economy. Given that, it’s prudent to remind the officials who will take office in January what policies have been shown by history to promote economic liberty and in turn, prosperity.

One valuable measure of economic liberty is produced by the Canada-based Fraser Institute and titled “Economic Freedom of North America.” This report ranks American and Mexican states as well as Canadian provinces in terms of economic freedom. Fraser’s newest report is due out next month so this is a good time to review where Michigan was and is in absolute terms, where we are relative to competing states and where we should go from here.

The 2015 report ranks Michigan 27th out of the 50 states. That’s a middling rank, though it has at least improved since 2010 when we were ranked 40th. Midwest sister states Illinois, Wisconsin and Ohio all ranked below Michigan at 33rd, 38th and 40th, respectively. Indiana bested all Midwestern states by a significant margin, ranking 18th overall.

The index is built around information in three major categories: spending by governments, the type and level of taxes, and laws and public policies about labor. The categories have a total of 10 variables attached to them, such as the amount government spends compared to the personal income of its citizens, the highest income tax rate and minimum wage laws. Each variable is given a score from 0 to 10, with 10 representing the highest amount of liberty and zero the least. The score for each category is then the average score of each of its variables.

According to objective statistics, economic liberty and human well-being tend to go hand-in-hand. So the index the Fraser report created can show Michigan residents how well they are doing compared to people who live elsewhere.

Experience suggests that if Michigan appears high in the rankings, its people will grow wealthy and have many opportunities. Take a look at the states and provinces that scored in the bottom 25 percent for liberty. In the 2013 report, their per capita personal income was 7.7 percent below the average of all provinces and states. On the other hand, income in the places that ranked in the top 25 percent for liberty was 6.7 percent above the average. It’s unlikely that the difference in income for those two groups was caused by mere coincidence.

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The index also tells policymakers where their state or province is weak, so it should be required reading for everyone who has the power to change government policy.

According to the 2015 Economic Freedom Index of North America (which uses data through 2013), Michigan scored a 6.6 out of 10 in government spending, a 6.9 for its tax policies and a 6.8 in labor market freedom.

Michigan’s ranking in the three categories and the 10 different variables within them suggests that the Great Lake State is not a leader or laggard in any key policy area. It ranks high at 8.0 for its low “top income tax rate” but Ohio and Indiana scored likewise. Conversely, the state ranks low in the “insurance & retirement payments as a percent of personal income,” which measures the taxpayers’ obligations to state and local government workers. Michigan scored a 5.0, but Ohio, Illinois and Wisconsin all ranked lower, meaning Michigan is not as hampered in this area as much as some of its neighbors.

One area where the Great Lake State could make relatively easy and marked improvement in is the variable of “income tax and payroll revenue as a percent of personal income.” Currently Michigan has a score of just 6.0. This is the best score among sister states but it should be much better.

In 2007 Gov. Granholm and the Michigan Legislature approved a “temporary” personal income tax hike of 11.5 percent. It was supposed to be rolled back by 0.1 percent a year, starting in 2011 and ending in 2015 at 3.9 percent. But Snyder and the Legislature scrapped this mandate after letting a single cut of one-tenth of a percentage point take place. Michigan workers are still owed a personal income tax cut.

Rolling the state income tax rate back to 3.9 percent, if not taking it even lower, would go a long way to spurring economic growth, too. Ultimately, Michigan’s personal income tax rate ought to be rolled back to zero.

The Economic Freedom Index of North America makes for a useful policy guide. It is not only chock-a-block with useful, very transparent data, but its rankings correlate highly with widely popular measurements, such as growth in personal income.

Lansing politicians would be wise to review its findings and act accordingly.


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Un-Making a Murderer

Preventing crimes provides huge cost savings

A friend asked how much money we would save if we enacted good criminal justice reform. The answer is, “It’s complicated, but it’s much more than you might think, and the money may not even be the most important reason to do it.”

Good criminal justice policy doesn’t just save money — it saves lives. Preventing crime and managing or rehabilitating criminals is a core function of a valid government and a critical ingredient in a healthy society. Administering justice and building stronger communities is good for victims, perpetrators, and for those who will never directly experience crime. It’s impossible to put a price tag on social cohesion, peace of mind, and trust in the rule of law, but these things are invaluable for making our society and economy function.

But our friend wants to get down to brass tacks. Surely we can calculate the financial implications of these policies, right?

Well, sort of. It’s difficult to give a dollar figure because policy changes enacted today won’t achieve their full impact for months or years. And the social and economic factors that affect the crime rate — which has been steadily declining in recent years —can change independently of our policymaking. Finally, we must estimate the ripple effect of a crime or a change in criminal justice policy.

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That last point is interesting and important. We have options to reduce our current spending on criminal justice and corrections services. But we shouldn’t forget that finding a way to provide the same services for less money is not as powerful as reducing our demand for those services. So yes, let’s make sure that our criminal justice system is cost-effective. But let’s also do whatever we can to make the criminal justice system less necessary. Small steps toward that goal offer massive benefits.

Consider a murder, the ultimate criminal act. Imagine a hypothetical scenario in which a policy solution prevents a murder from occurring by investing more resources in community policing. Enacting the policy that prevented a murder helped us avoid over $1.5 million in costs associated with resolving a single criminal act. And that’s just the beginning.

It also helped us avoid spending roughly $35,000 per year incarcerating the murderer for a long time — possibly his whole life. But let’s be conservative and assume that the murder we prevented would have only been a second-degree crime. Assume that the offender would have received a sentence at the top of the recommended minimum range, or 12.5 years, and that he would only have served his minimum time. In that case, preventing a murder works out to $437,500 in avoided corrections expenses.

Since our hypothetical criminal didn’t go to prison, neither was he paroled. So we avoided another $3,600 for a year of parole. Also, the community did not spend any money to provide him with re-entry services, and with no felony conviction, he will not struggle to find employment.

Keeping our non-murderer out of prison protected his family, with great benefit to the rest of us. They didn’t suffer emotionally and financially from his incarceration. That in turn reduced the odds that his child would have committed a robbery — a $19,500 societal cost — and ended up in juvenile detention. The average length of a stay in detention is a year long and the average cost to the state and county is $200 per day, or $73,000. That’s another saving. We also kept his family off welfare, saving $28,872 per year during the term of his incarceration, or $360,000.

Meanwhile, during the 12.5 years that he wasn’t in prison, he contributed $26,500 in state income taxes (4.25 percent of a $50,000 income, a little more than the state average), and $21,025 in local property taxes. (The property tax example comes from Genesee County’s 2.1  percent tax rate on an $80,000 home.) He also persuaded his child to get a job and finish school, helping her into a productive, law-abiding future.

Using this back-of-the-napkin math, we find that our hypothetical averted murder saved us nearly $2.5 million in costs and lost revenue, not to mention the emotional and social trauma the community would have experienced. That’s an incredible achievement. And it goes to show that criminal activity touches many aspects of public and personal life.

Crime is complicated and destructive and expensive. But smart policies can translate small changes into big savings and foster stronger communities whose growth will compound well into the future. So it’s important that we get it right.


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New Pure Michigan study questions advertising expenditure

Michigan taxpayers have spent a whopping $261 million on tourism promotion over the past decade with little to show for it, other than some feel-good commercials and flashy billboards highlighting the most photogenic parts of the state.

Such is the finding of a new Mackinac Center for Public Policy study on the effectiveness of state-funded tourism promotion efforts like Pure Michigan.

“Michigan taxpayers may love seeing their town or favorite destination highlighted but they deserve to know they're paying a hefty price tag for those ads with very little to show for it,” Michael LaFaive, co-author of the study and director of the Morey Fiscal Policy Initiative told Mlive.

The study, which was covered by media across the state, looked at programs throughout the country and found that for every dollar of taxpayer money spent on tourism promotion, 98 cents is lost. As explained by Wood TV, the findings are far different than those touted by the state.

Those numbers are polar opposite to the findings behind the Michigan Economic Development Corporation, which runs the campaign. The MEDC has never released the mathematics behind its findings, but commissioned studies through Canada-based Longwoods International to examine Pure Michigan’s success. A 2015 study found that every $1 the state spent on advertising generated $7.67.

How Longwoods arrived at that return on investment is unknown. It refuses to reveal its methodology, though that is the standard for scientific study and despite the fact Pure Michigan is funded by taxpayers. LaFaive and study co-author Michael Hicks urged the legislature to stop funding Pure Michigan until the MEDC can prove it is worth the cost to taxpayers.

Read the full study here.

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Read the coverage in Mlive here.

Watch and read full coverage by Wood TV here.

Read Michigan Radio’s coverage here.

Read WNEM TV’s coverage here.


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Ballot-Selfie Ban Stands In Way of Free Speech

Riley pens op-ed in The Detroit News

Michigan voters may have turned out in record numbers to last week’s election, but those who followed the law left their cell phones home, or at least in their pocket or purse.

That’s because ballot pictures, or selfies, that have become popular among social media users are currently prohibited in Michigan and 16 other states. In a recent op-ed for The Detroit News, Mackinac Center Policy Analyst Kahryn Riley wrote about the ballot-selfie ban and argued they should be allowed as a matter of free speech.

Election laws and the secret ballot are supposed to serve voters, not the other way around. The state chose to create a legal emergency rather than communicate a simple rule change to election workers, suggesting that it is more concerned with keeping the status quo than with supporting new ways to exercise the right of free speech.

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Riley argued that people who wish to share their vote with others through a ballot-box picture should have the option to do so, just as those who wish to keep their vote private should be given privacy.

Read the full op-ed in The Detroit News here.


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Labor Reform Wins Big on Election Day

Mackinac experts discuss results in Wall Street Journal, others

While all eyes were on who would win the presidency on Election Day, something interesting and perhaps unexpected was happening down-ballot: union members were defying union leadership and voting for candidates and measures likely to increase employee freedom in the future.

Mackinac Center’s F. Vincent Vernuccio, Chantal Lovell and Jarrett Skorup wrote about the opportunity for pro-worker reform in a series of op-eds published by national news outlets following the election. In The Wall Street Journal,Vernuccio and Lovell explained that shifts in the party makeup of legislatures and executive branches could result in right-to-work legislation passing in Missouri, New Hampshire and Kentucky.

The fight is far from over, but the country is moving away from union dominance. Since 2012, four states have enacted right to work, and more may be on the way. Those who support workers’ freedom have reason for optimism—and vigilance.

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Reform could spread beyond those states when the existing Supreme Court vacancy is filled, as the pair wrote in an op-ed for the Washington Examiner.

With one seat on the Supreme Court already vacant and more expected to open up in the next few years as aging justices retire, President-elect Trump — already dubbed the "Nominator-in-Chief" — has great power to shape the future of public sector unionization. If Trump nominates one of the roughly two dozen people he pledged to consider to replace the late Justice Antonin Scalia, it's likely public employees nationwide would earn freedom from being forced to support politics they disagree with.

All this momentum suggests a widening rift between union members and leadership. In this election, members rejected the preferred candidates and positions of their unions, Vernuccio and Skorup detailed in The Washington Times.

Unfortunately union leadership, through their political giving, endorsements and support, have discounted members who disagree with them. Right-to-work can provide a remedy. If union leadership does not listen to their members, their membership can simply stop paying. Instead of going “all in” on one political party, union leaders should focus on what they are supposed to do in the first place: represent the interests of their members.

Read the full op-ed in The Wall Street Journal.

Read the full op-ed in the Washington Examiner.

Read the full op-ed in The Washington Times.

Read an article about labor reform and the election at Inside Sources.


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Michigan Employers Create Thousands of Jobs without the Aid of Politicians

Economic development programs just transfer money to a lucky handful

The public expects politicians at all levels to create jobs. But this is a tough thing to demonstrate. The decisions made by business owners to add jobs tend to be done without asking for permission from politicians.

The same goes for closing down a business or shedding jobs. And the jobs created by taxpayer-funded economic development programs — those that politicians take credit for — have a negligible impact on the large and permissionless job creation that drives Michigan’s economy.

For example, in the first three months of 2016, according to the Bureau of Labor Statistics, Michigan private sector businesses added 196,117 jobs and eliminated 179,106. That equates to adding about one job for every 18 in the state and losing one out of every 20. A similar amount of “job churn” happens each quarter.

Nevertheless, job-promising politicians are under pressure to show that they are, in fact, creating jobs, and they often don’t get credit for the job creation that happens without their help. That’s one reason why every state has an economic development apparatus, such as the Michigan Economic Development Corporation, that awards favors to a handful of select businesses.

The efforts of these economic development programs only amount to a blip when considering the total amount of job creation that happens statewide. Over the same three-month period in which Michigan companies added nearly 200,000 jobs, the MEDC announced that it had awarded support to companies to create just 425 jobs.

Not only is this less than 1 percent of all the jobs created, but these job pledges rarely materialize.

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On top of that, these special deals cost taxpayers millions of dollars — dollars that might have had larger economic impacts if spent on something else or just left in the hands of taxpayers to spend or invest themselves.

Despite this reality, some business groups are asking state lawmakers to spend even more taxpayer dollars on targeted business subsidies. But as these data show, if lawmakers want to improve the state economy, they need to look at broad-based improvements to the state’s business climate — taxes and regulations which affect a large portion of the state’s private sector, not just a lucky few.


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Voters Reject Transit Tax Proposal in Wayne County

Mackinac commentary featured in Detroit media

Voters in Wayne County rejected a ballot measure last week that would have increased their property taxes to fund an antiquated regional transit system.

Detroiters already pay the highest effective property taxes in the country, and the Regional Transit Authority millage would have raised taxes by $4.6 billion. Mackinac Center for Public Policy’s Vice President for Marketing and Communications surmised in a recent Crain’s Detroit Business article that voters said “no” to the measure because it would have focused on transportation technology of the past that wouldn’t have helped public-transit users in the future.

“If our region's voters had been presented with an incremental and thoughtful plan that focused on meeting the requirements of those people who truly need help getting around on a daily basis, it likely would have been successful,” he said.

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In pre-election coverage of the tax proposal, Mozena argued in Deadline Detroit that the measure would have added “another layer of bureaucracy” and would have done more harm than good. He said voters, “should question whether the benefits justify adding to the tax burdens of all homeowners and business owners, especially those whose burdens are already more than they can bear.”

Read the full article in Crain’s Detroit Business.

Read a letter to the editor on the subject in Crain’s Detroit Business.

Read the full article in Deadline Detroit.


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Increase windmill mandates, authorize driverless vehicles, empower airport police

Senate Bill 437, Centrally plan statewide power grid, require more wind turbines: Passed 26 to 11 in the Senate
To re-write the state law regulating electric utility monopolies. The bill is premised on Obama EPA regulations forcing closure of existing coal-fired generating plants and ordering states to re-organize their electric power grid systems (which President-elect Trump has promised to repeal). It would essentially replace a market-driven process for new power plant capacity and site decisions with a centralized state process. On its face the bill retains current provisions that allow other power generators to compete with monopoly utilities for a 10 percent slice of the commercial market, but current choice customers contend that details would end competition. The bill would also increase a mandate that utilities get more power from so-called renewable sources, which could mean hundreds of additional industrial wind turbine towers in many rural communities.

Who Voted “Yes” and Who Voted “No”

Senate Bill 1084, Revise emergency vehicle flashing lights requirement: Passed 37 to 0 in the Senate
To eliminate a requirement that flashing lights be mounted on the roof of an authorized emergency vehicle. These vehicles would still have to have flashing emergency lights; they just wouldn’t have to be on the roof.

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Who Voted “Yes” and Who Voted “No”

House Bill 5181, Give full police authority to airport security force members: Passed 36 to 0 in the Senate
To permit airport security personnel who have the same license as regular police, to exercise full “peace officer” (police officer) powers outside the airport’s grounds, including cases of “hot pursuit” of an individual suspected of violating the law, or in cooperation with regular police officers.

Who Voted “Yes” and Who Voted “No”

Senate Bill 995, Authorize (restricted) driverless vehicles on Michigan highways: Passed 105 to 2 in the House
To expand a law that permits operating automated driverless vehicles on Michigan roads, subject to detailed restrictions and conditions. The bill is part of a package comprised of Senate Bills 995 to 998 that among other things would potentially repeal the requirement that a human operator be present to monitor performance and intervene if necessary, permit “platoons” of driverless trucks traveling together on highways, and create regulations for these and related autonomous vehicle activities. Local governments would be preempted from imposing more restrictive regulations.

Who Voted “Yes” and Who Voted “No”

SOURCE:, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit


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Some Proposals for Criminal Justice Reform in the Legislature

Making Michigan safer, freer and more prosperous

Reeling from a long, noisy election cycle? Step back for a moment to consider the following reforms. These bipartisan proposals would reduce both crime and corrections spending in Michigan, helping our state become safer, freer and more prosperous.

  • The Parole Sanction Certainty Act would build on successes of an existing program for probationers. It would hold paroled prisoners immediately accountable when they don’t meet the terms of their parole, reinforcing an attitude of discipline and a commitment to productive re-entry.
  • The Data Collection and Management Act would pull together information on offenders and corrections practices to help taxpayers and policymakers evaluate what actually works to reduce recidivism.
  • A proposal removing the successor judge veto would prevent judges who had nothing to do with an offender’s case from being able to stop the parole board from granting his release on parole. They would still be able to weigh in with an opinion.

These and other proposals by Michigan’s House and Senate are currently under consideration. In a chaotic political atmosphere, these reforms offer clear benefits and the opportunity for Michiganders to come together to do something positive.


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