NASHVILLE, Tenn. — An economics professor has called into question an impact study used by the city of Nashville in a pitch for a Major League Soccer stadium.
The Tennessean reports the study failed to take into account that sales tax revenue redirected to pay off stadium debt might put a strain on city and state coffers. The financing package approved for the stadium could use more than $3 million of annual sales tax revenue — funds that could be used for other purposes, such as schools, roads or the hiring of about 50 police officers.
The analysis written by the University of Tennessee, based on some basic assumptions provided by an MLS owners group, did not include a so-called substitution effect — what happens after public funds are used to pay off the stadium debt and fans use their limited entertainment dollars to attend soccer games, according to the newspaper.
“It doesn’t seem to be the kind of objective appraisal that the city would need to render a believable opinion on why they should spend public money subsidizing the stadium,” said Robert Baade, an economics professor at Lake Forest College in Chicago.
The Metro Nashville City Council last week approved a $275 million financing package for the new stadium, including $225 million in revenue bonds for the stadium itself and an additional $50 million in bonds for renovations and improvements around the stadium at the current fairgrounds.
MLS is expected to announce two winning bids later this year, bringing the league to 26 teams.
The newspaper said under the plan, team owners will pay $9 million annually toward the $13 million annual debt payment. Nashville Mayor Megan Barry said public investment will be limited to $25 million for stadium infrastructure, plus any annual shortfall. The analysis estimates $77.7 million in ongoing annual economic impact and $15.1 million in sales tax revenue.
Study co-author Lawrence Kessler, a University of Tennessee research assistant professor, said no substitution effects were examined in the economic impact report but “we tried to be as modest as possible” when making assumptions and projections.
Barry spokesman Sean Braisted said city officials were confident that the analysis was an accurate reflection on the economic impact of the stadium on the city. He scoffed at the notion that the stadium would harm other businesses.
“I don’t think you can say these sales tax dollars would be generated in Nashville without the stadium,” Braisted said.
But Geoffrey Propheter, a public affairs professor at the University of Colorado at Denver, said the argument that a sports team increases local area income “has been debunked.”
The economic impact report projects Nashville could expect 27,000 fans per game. The stadium would seat 27,500.
Information from: The Tennessean, http://www.tennessean.com