Assessment of Wichita’s Intrust Bank Arena’s success premature

Any rational assessment of the success of the Intrust Bank Arena in downtown Wichita must realize that the arena is in its honeymoon period. Will the parade of big-name stars playing to a packed arena continue for long? Will the Wichita Eagle and local television stations continue to breathlessly announce every upcoming event?

Until initial enthusiasm dies down and the arena has a track record of a year or more, we simply have no idea what the financial performance of the arena will be. That’s what’s important.

This premature glowing assessment of the arena’s success is dangerous in that it leads us to believe that there is a positive role for large government projects in Wichita. Worse, people are lead to think that taxation is a good way to pay for such things. As an example, the one cent sales tax used to pay for the arena is presently touted as a model for funding other government spending, ranging from Governor Parkinson’s proposal for a sales tax to fund state government to what surely will be a proposal for a sales tax to fund the revitalization of downtown Wichita.

Proponents say that the sales tax was painless, so why not do it again? Some were sorry to see it expire. As the sales tax that funded the arena was nearing its end, Sedgwick County Commissioner Tim Norton “wondered … whether a 1 percent sales tax could help the county raise revenue.” (“Norton floats idea of 1 percent county sales tax,” Wichita Eagle, April 4, 2007)

But the tax was not painless. Undoubtedly, the employment landscape was shifted in Sedgwick County because of the tax, and that caused some people to be unemployed. My post Prepare for sales tax-induced job effects now reports on what happened in Little Rock when that city’s arena was built. It would be reasonable to think that similar effects happened here.

Last year in Portland, a proposal to build a new minor league baseball stadium was found to produce a net job loss. An economics consulting firm reported: “Thus, the Lent’s project would have a net impact of a 182 job-year loss on the City’s economy (a gain of 175 from the construction less a loss of 357 due to reduced spending by households and businesses because of higher taxes).”

It also concluded that “If those individuals who put their money into baseball via taxes are allowed to put that money into the private market, that same amount of money would actually yield more jobs.” Reportedly, Portland’s mayor “appears to have sat on” the study and was not eager to release it.

This effect — a shiny, highly touted public works project being much more visible than private dispersed economic activity — was known long ago and explained by Henry Hazlitt in his classic work Economics in One Lesson:

Therefore for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $1,000,000 taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project.

We were also told that the arena would be a driver of downtown development. But in its first test, the Wichita City Council evidently didn’t believe what arena boosters told them, as it voted to grant several million dollars in subsidy to the developer of a hotel just a few blocks from the arena. Will all future development around the arena — if it happens — require similar subsidy?

6 Comments

  • Dismal Scientist -

    I am sick of all the cheerleading that is going on in the local media about all the big name acts at “Interest Arena” . Bob you are right, the newness has not worn off yet. Yeah, lets get past the first year and see where we are on this white elephant. Something tells me that those of us that are part of the producer segment of society in Wichita will be paying for this arena long after the sales tax has “sunsetted”. What a waste of money!

  • We have a saying in business. “One day does not a week make”
    and 5 or 6 successful concerts (not counting Taylor Swift) does not a success make of an arena that should last 50 years.

  • Kevin Streeter -

    I only know for sure two things about this.

    1. I helped pay for this.

    2. I will never use it.

    This arena was paid for by the less well off and used by the more well off.

  • One can surely understand that a museum, for example, might be an asset for a city by drawing in tourists, or enhancing the many assets a community has for making it a worthwhile place to live. And yet, the same person might never have a desire to actually go to a museum. It sounds like there are a lot of WHINERS out there!

  • Actually we have to wait 3 years, the industry standard. Since the north townships voted it down 5 to 1, how about we sell it to the City of Wichita, so they can truly call it “Wichitas downtown arena”, which I heard it called on Channel 12 today. The wrestling tourney will never fly here again. Many were turned off at the proffiteering parking, and have a great free parking venue at the Bi-Cenntial Center at Salina, or maybe the Harvey County complex will be going by then. In any case this building will be torn down in 35 years , not 50, as this was the age of Britt Brown 35.

  • Wichitator -

    The Intrust Bank Arena is enjoying its honeymoon. The new and bright facility that $205 million can buy will soon become a settled part of downtown.

    This facility was supposed to stimulate downtown economic development. It, like the Empire State Building that opened I believe in 1930 or 1931, also opened in the middle of a severe economic downturn. The arena is performing quite well during these troubled economic times. Will it continue to do so in six months or a year? Stay tuned.

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