Published: August 27, 2008 12:12 pm         

Assessing economic development programs

You name it, Rusty Knale will argue against it. We’re at the delicatessen.  He buys the hot pastrami on rye.  I’m going for the chopped liver on pumpernickel.

“I’m wondering,” I say, “if the new Honda plant at Greensburg is going to do more for the people of Indiana than the Lucas Oil Stadium in Indy.”

“No.” he answers quickly. “Remember that Dean Martin song, ‘Memories are made of this’?  How many people will the new Colts’ stadium hold?”

“I hear 63,000 to as many as 75,000 depending on the type of event,” I say.

“And,” he continues, “how many cars will Honda make? Maybe 200,000 a year, tops?”

“That’s a number I’ve heard,” I say.

“So,” Rusty says, “with just eight football games a year and nothing else, the stadium provides in-person memories for more people than can buy these Greensburg Hondas. Memories are valuable; look how much people spend on vacations, cruises, weddings, funerals — all for the memories.

“Memories don’t pay the rent,” I protest.

Rusty is having too much fun to be interrupted.

“Do you really think that $600 million, or whatever the public portion is for the stadium, is too much?” he asks.

 “Honda,” I reply, “is funding its building with its own $550 million up-front. The subsidies or tax breaks Honda gets are relatively minor and based on performance. Lucas Oil Stadium is a public facility paid for by ordinary citizens. The Colts don’t even pay rent. All they promise is to stay for 30 years as a publicly-subsidized private business. You have to wonder what such promises are worth.”

“Harsh words,” Rusty says. “Don’t expect to see any complimentary tickets in your mail.”

“At least,” I say, “Honda is providing high-paying jobs for folks in Decatur and surrounding counties.”

Rusty laughs.

“Honda will employ, at capacity, 2,000 or so. Those Honda workers would have to average $58,000 each to exceed the Colt’s $116 million salary cap for players. Do you expect Honda workers to make that much?”

“Maybe,” I say. “Well, what about this business of building the stadium with tax money?”

“That,” Rusty bellows, “is a foul falsehood. The stadium was built with bonds that will be paid off in the future through voluntary taxation.”

I explode, “What’s ‘voluntary’ taxation?”

Cool as his beer, Rusty says, “The funds to pay the principal and interest on the bonds come from future taxes on dining out in Marion and surrounding counties. In addition, there are higher taxes on hotel rooms, auto rentals and sporting events. There is even money from the sale of Colts license plates. And all of those are voluntary taxes because you don’t pay if you don’t eat out, don’t use hotel rooms or rental cars or don’t buy Colts plates.” 

I shake my head in disbelief. He proceeds with his warped view of stadium finance.

“Note that I said future taxes. Most of the money will be collected in the next 20 years or so. Thus, future visitors and citizens of Central Indiana will be paying for the stadium while they are enjoying it. If you don’t want to pay, don’t visit or eat in the Indianapolis metro area.”

“I could understand the public paying for the Hoosier Dome; that brought the Colts to Indiana,” I say. “But did we actually have to pay for another stadium to keep the Colts? Have athletic fields become like sewers and schools? Something every community must have?”

Rusty is getting bored and changes subjects, “I think the NCAA should license betting on college basketball and football games. A portion of the money would go to the NCAA and some to the schools people bet on. Then Indiana could tax that betting just like any other type of gambling.”

“Gambling and the NCAA don’t mix,” I protest. “It corrupts the wholesome purity of amateur sports. Next will be performance bonuses for coaches on top of generous salaries.”

“But think of the jobs added at NCAA headquarters to monitor the betting,” Rusty responds as he finishes his pickle, wipes his mouth, pushes back from the table, and prepares to leave.

Morton J. Marcus is an economist, writer and speaker formerly with the Kelley School of Business at Indiana University. He can be reached at mortonjmarcus@yahoo.com