Retirees Get Cross-Checked by Stadium Subsidies

As public workers face cuts to their pension benefits, professional sports teams rake in the funding. What gives?

David Sirota

Despite the city's struggles, Detroit is still pitching in to help replace the Joe Louis Arena, home to the Red Wings, with a new $283 million stadium. (Nichole Yeary / Flickr / Creative Commons).

As states and cities grap­ple with bud­get short­falls, many are bet­ting big on an unproven for­mu­la: Slash pub­lic employ­ee pen­sion ben­e­fits and pub­lic ser­vices while divert­ing the sav­ings into lucra­tive sub­si­dies for pro­fes­sion­al sports teams.

An analysis by the Washington, D.C.-based National Institute on Retirement Security notes that spending resulting from pension payments had 'a total economic impact of more than $941.2 billion' and 'supported more than 6.1 million American jobs' in 2012.

Detroit this week became the most promi­nent exam­ple of this trend. Offi­cials in the finan­cial­ly dev­as­tat­ed city announced that their plan to slash pub­lic work­ers’ pen­sion ben­e­fits will move for­ward. On the same day, the bil­lion­aire own­ers of the Detroit Red Wings, the Ilitch fam­i­ly, unveiled details of an already approved tax­pay­er-financed sta­di­um for the pro­fes­sion­al hock­ey team.

Many Detroit retirees now face big cuts to their pre­vi­ous­ly nego­ti­at­ed retire­ment ben­e­fits. At the same time, the pub­lic is on the hook for $283 mil­lion toward the new stadium.

The bud­get maneu­vers in Michi­gan are part of a larg­er trend across the coun­try. As Pacif­ic Stan­dard reports, Over the past 20 years, 101 new sports facil­i­ties have opened in the Unit­ed States — a 90 per­cent replace­ment rate — and almost all of them have received direct pub­lic fund­ing.” Now, many of those sub­si­dies are being effec­tive­ly financed by the sav­ings accrued from pen­sion ben­e­fit reduc­tions and cuts to pub­lic services.

In Chica­go, for instance, May­or Rahm Emanuel recent­ly passed a $55 mil­lion cut to munic­i­pal work­ers’ pen­sions. At the same time, he has pro­mot­ed a plan to spend $55 mil­lion of tax­pay­er mon­ey on a hotel project that is part of a sta­di­um devel­op­ment plan.

In Mia­mi, Bloomberg News reports that the city approved a $19 mil­lion sub­sidy for (a) pro­fes­sion­al bas­ket­ball are­na” and then, six weeks lat­er, began con­sid­er­ing a plan to cut as many as 700 (librar­i­an) posi­tions, includ­ing a fifth of the library staff and more than 300 police.”

In Ari­zona, the Phoenix Busi­ness Jour­nal reports that region­al gov­ern­ments in that state have spent $1.5 bil­lion on sports sta­di­ums, are­nas and pro teams” since the mid-1990s. Mean­while, leg­is­la­tors are con­sid­er­ing pro­pos­als to cut pub­lic pen­sion benefits.

In New Jer­sey, Gov. Chris Christie is block­ing a planned $2.4 bil­lion pay­ment to the pen­sion sys­tem, at the same time his admin­is­tra­tion has spent a record $4 bil­lion on sub­si­dies and tax breaks to cor­po­ra­tions. That includes an $82 mil­lion sub­sidy for a prac­tice facil­i­ty for the Philadel­phia 76ers.

The offi­cials pro­mot­ing these twin poli­cies argue that boost­ing sta­di­um devel­op­ment effec­tive­ly pro­motes eco­nom­ic growth. But many cal­cu­la­tions rely on ques­tion­able assumptions.

In a 2008 data review by Uni­ver­si­ty of Mary­land and Uni­ver­si­ty of Alber­ta, researchers found that sports sub­si­dies can­not be jus­ti­fied on the grounds of local eco­nom­ic devel­op­ment.” In addi­tion, a 2012 Bloomberg News analy­sis found that tax­pay­ers have lost $4 bil­lion on such sub­si­dies since the mid-1980s.

Sports sta­di­ums typ­i­cal­ly aren’t a good tool for eco­nom­ic devel­op­ment,” said Holy Cross econ­o­mist Vic­tor Math­e­son in an inter­view with The Atlantic. Take what­ev­er num­ber the sports pro­mot­er says, take it and move the dec­i­mal one place to the left. Divide it by ten, and that’s a pret­ty good esti­mate of the actu­al eco­nom­ic impact.”

Of course, while sta­di­um sub­si­dies are pro­mot­ed in the name of eco­nom­ic devel­op­ment, pen­sion ben­e­fits are rarely described in such terms — even though the data sug­gests they should be. Indeed, an analy­sis by the Wash­ing­ton, D.C.-based Nation­al Insti­tute on Retire­ment Secu­ri­ty notes that spend­ing result­ing from pen­sion pay­ments had a total eco­nom­ic impact of more than $941.2 bil­lion” and sup­port­ed more than 6.1 mil­lion Amer­i­can jobs” in 2012

Despite that, retire­ment ben­e­fits are often the first item on politi­cians’ chop­ping blocks. Pen­sions, after all, may sup­port local economies, but they don’t result in shiny new stadiums. 

In a sports-obsessed coun­try, that makes those pen­sions a much big­ger polit­i­cal tar­get than any tax­pay­er hand­out to a bil­lion­aire team owner.

David Siro­ta is an award­win­ning inves­tiga­tive jour­nal­ist and an In These Times senior edi­tor. He served as speech writer for Bernie Sanders’ 2020 cam­paign. Fol­low him on Twit­ter @davidsirota.
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