Is a new sports arena a need or a desire?

A reader of this site challenged me on several points. I won't name him, as I have no permission to do so, but I will quote his e-mail. I imagine his comments are widely shared among supporters of "Forfeit 4 Greater Taxes", so here is my reply.

If the "downtown arena" was not going to be built downtown, would you still be against it? What if it was built in Northeast Tulsa, or West Tulsa, or Broken Arrow? Still against it?

I am not against a sports arena, downtown or anywhere else -- as long as the taxpayers don't have to subsidize it. I believe in the notion of limited government -- limited in its powers, limited in the scope of its activities. There are some societal functions that only government should perform; some that could be done privately, but are more efficiently handled by government; and many more that should be left to businesses, individuals, families, and other private organizations.

The free market is very efficient at creating and satisfying the demand for entertainment. If some entrepreneur wished to build a sports arena, local government should wish him well and give him the same consideration as anyone else developing a new business. A privately funded arena would be built for less money, run more efficiently, and located more conveniently for sports fans than an arena whose location and operation is wrapped up in politics.

Friends who support the general idea of a new arena tell me they want it in south Tulsa, because it would be closer to where they live, and they don't like going downtown. The forces backing this package, however, have been trying to get an arena downtown for years, and that's where the one on the ballot will be.

It should be remembered that Tulsa will soon have five sports arenas ranging in size from about 5,700 seats to about 11,000 seats: Mabee Center, Convention Center, Reynolds Center, Expo Square Pavilion, and UMAC. Each of these venues seats enough to accommodate the crowds at 87% of the events held at the Convention Center from 1999-2002.

I understand a person not wanting to spend money. You might not ever step foot in the arena...even though I doubt that, you would probably go sometime and enjoy an event in the larger arena - that you are currently saying we don't need.

Even if I were to enjoy an event in the larger arena, I don't think it is fair for me to demand that my Tulsa County neighbors subsidize the experience. And that is what you will do if you vote to impose a tax to build a sports arena -- you demand that people who will never set foot in the new arena pay for its construction so that you can enjoy it. Not only that, you impose upon your fellow citizen the increased costs of operating and maintaining a new facility. That money will come out of the the city budget, and that means more important city services will be shortchanged so that you can see Cher at the new arena.

I do not understand how you can say, and tell others, we don't need it. It is inadequate for attracting most of the popular entertainers, inadequate as a sports facility, and inadequate for attracting larger conventions.

It comes down to needs vs. desires. A sports arena may be desirable, but it's not a necessity, and in any event, the free market is amazingly efficient at providing for your desires, if you're willing to pay to have them satisfied.

As for the adequacy of the current facilities, Convention, Sports, and Leisure (CSL) did a feasibility study, paid for by the City of Tulsa and the Tulsa Metro Chamber. CSL asked concert promoters if they would come to Tulsa if the proposed arena were built. Reactions were mixed -- many said Tulsa has sufficient facilities, only one said Tulsa needs a larger facility to draw more shows. Here's a quote from the study (in bold to differentiate it from the e-mail I'm answering):

Promoters were skeptical of a new arena's ability to draw incremental events to the marketplace. A few promoters thought that the Mabee Center (11,575 seats) is as large a facility as the Tulsa marketplace can support.

Promoters believed that to differentiate itself, a new arena facility would have to be larger than any of the existing facilities but they thought major concerts would still skip the Tulsa market since the market probably is not large enough to support that size of facility.

As for Tulsa's attractiveness as a convention site -- the facility is the least of our problems. In a later entry, I'll list the reasons 67% of national and regional conventions said they're not likely to use an expanded downtown Tulsa convention center.

All of the above generate revenue. We can debate forever how much revenue to forecast, but nonetheless its Revenue!

When someone wants you to fork over more taxes to pay for their desires, they try to justify it as economic development: "It will generate revenue!" Anyone who has to balance a checkbook will tell you that generating revenue is not enough -- revenue had better exceed expenses. So let's evaluate this proposal for its economic impact.

When you're talking about replacing or expanding an existing facility, incremental revenue is the key number: If we build it, how much more money will we make than we make now. Currently, the downtown convention center and arena loses about $2 million a year. If the proposed improvements are built, Convention, Sports and Leisure (CSL) estimates the convention center and arena will lose $600,000 a year, combined. That estimate is based on some rosy assumptions (like local companies paying tens of thousands of dollars a year to buy luxury boxes and seat licenses for minor-league hockey games), but even then, it doesn't represent much return for a $183 million investment -- less than 1% annually.

If we only sell 10 luxury boxes (@ $32,500 / year) and 500 club seats (@ $1,100), rather than the projected 20 boxes and 2000 club seats, and if Talons and Oilers attendance is closer to historic averages, the arena and convention center combined would lose closer to $2.1 million a year, no progress from current losses. It's up to the City of Tulsa to make up that deficit.

But what about increases in other spending? CSL projects an incremental impact of $5.2 million a year. Even assuming all of that is retail sales, that's less than $200,000 more in city sales tax, hardly enough to make up that huge operating deficit.

There are a couple of more paragraphs in that e-mail that I have yet to address, but it's late -- I'll save them for later.