This is a version of a letter that I have been sending to (mostly) Wichita-area newspapers, television stations, and radio stations. Some have expressed some interest and have even assigned reporters to look into this, but so far no stories have appeared.
February 11, 2005
The Wichita Eagle
Dear Ms. Chishenhall,
I am writing to express my concern over the lack of reporting on some important issues regarding the downtown Wichita arena tax.
My research has uncovered several findings, which I summarize here:
1. The WSU Center for Economic Development and Business Research study does not include depreciation costs, even though Government Accounting Standards Board Statement 34 requires governments to depreciate their assets. Incredibly, the CEDBR at WSU was not aware of this requirement when they prepared the study that was used to promote the proposed arena. They admitted this when I called it to their attention.
2. The WSU study did not allow for the substitution effect. This is the term used to describe what research has found: that much of the new economic activity such as bars and restaurants that might appear around a downtown arena would be bars and restaurants that have moved from other parts of the city. There is little or no new economic activity, just movement of existing activity. Mr. Ed Wolverton, President of the Wichita Downtown Development Corporation, admitted this oversight in a television news story.
3. Arena proponents cite economic benefit as a reason why the community as a whole should pay for the construction and operation of the arena. I have found no research that supports the claim of economic benefit. There is, however, ample research to the contrary. For example, in a paper titled “Professional Sports Facilities, Franchises and Urban Economic Development” (UMBC Economics Department Working Paper 03-103) by Dennis Coates and Brad R. Humphreys of the University of Maryland, Baltimore County we find this quote:
“Siegfried and Zimbalist (2000) recently surveyed the growing literature on retrospective studies of the economic impact of sports facilities and franchises on local economies. The literature published in peer-reviewed academic journals differs strikingly from the predictions in ‘economic impact studies.’ No retrospective econometric study found any evidence of positive economic impact from professional sports facilities or franchises on urban economies.”
I created a handout I made for the legislators that provides more information. A link to it is here:
There has been much recent news about the financial performance of publicly-owned institutions. Often government leaders proclaim their ignorance about what the facts of the matter were, and then your newspaper has to editorialize about government leaders not doing due diligence before committing to projects. Mr. Brownlee wrote such an editorial just this week.
Here we have a final opportunity to examine the issues involving the wisdom of a taxpayer-built arena before it is too late. I am not asking that you believe what I have said just on my say-so. I believe, however, that the people of our town would appreciate someone with the skill and experience of your reporters performing an investigation to see if they reach the same conclusions I have.