Kempner: Team owners go wild inside the public money machine


Imagine the millionaire and billionaire owners of Atlanta’s top pro sports teams standing together in a glass booth, each holding empty pillowcases.

A buzzer blares.

Cash starts blowing up from gaps in the floor. The owners scramble to stuff as many floating bills as they can in their pillowcases and suit pockets.

Metro Atlanta politicians inevitably turn on that kind of public money machine when team owners want prettier, more lucrative palaces to play in.

This always causes a scuffle between critics convinced it’s a bad and unfair gamble and boosters who say these “public-private partnerships” — the ahh, the Triple Ps — are good for the economy and community image.

We’ve waded into a Triple Crown of Triple Ps. As my colleagues have pointed out, three mega sports deals are lined up for $700 million in upfront public subsidies all at the same time: new stadiums for the Atlanta Falcons and Braves and, now with a proposal announced earlier this month, a renovated Philips Arena for the Atlanta Hawks.

(The basketball team’s focus on “renovation” is heartening. It feels way better than the plans to turn the better-than-fine Georgia Dome into rubble once the new Falcons football stadium opens. You can measure wealth and waste by what gets thrown in the trash.)

This is not the way the free market, or even the semi-free market usually works. But it’s how the sports game is often played around the nation.

Team owners are celebrities who get to ride government elevators while most other business owners trudge up the stairs.

Subsidies for sports go well beyond standard tax breaks often offered to companies that create new jobs. The teams do business in buildings where they don’t pay property taxes. They get to keep essentially all the revenue generated by everything from concerts to monster truck events inside publicly owned venues they operate. They pocket money on naming rights. They negotiate so that a hefty chunk of their place of business is paid for by the public for decades. And if they get antsy, they know there’s a good chance they’ll snag an even better deal the next time around.

So now is a good time to figure out which of the latest big venue agreements is the best deal — or, maybe, least worst — for the Atlanta communities involved.

I asked two local experts to give the deals a quick look. There are various ways to weigh this stuff, economics professors J.C. Bradbury of Kennesaw State University and Bruce Seaman of Georgia State University told me.

In terms of upfront construction costs, Cobb is getting grand slammed by the Braves. The public will pay way more for construction of SunTrust Park, than for the Falcons’ Mercedes-Benz Stadium or the Hawks at Philips Arena.

But as a percentage of project costs, Atlanta is laying out the most with the Hawks, covering nearly three-fourths or more of the upfront price to renovate Philips.

Of course, it also matters what communities are getting for the money and how much risk they are taking on over time.

Bradbury treats government stadium deals like a used towel left on a locker room floor.

“Locals are just reallocating how they are spending their local dollars,” he told me.

“It is pretty much a settled question in the economic community that there are no economic benefits from subsidizing professional sports.”

That’s not how his peer at Georgia State views it.

Yes, Seaman said, leagues around the nation have exaggerated their impact and offered “delusional” projections about the goodness stemming from big events like the Super Bowl. But he also said some stadium deals have higher economic upsides for communities than their costs.

He’s done paid consulting work for owners of all three of the major Atlanta teams. But he told me that doesn’t make him a shill for them. In fact, he said, they always argue with his numbers.

As different as Seaman and Bradbury are, they came up with the same back-of-the-envelope ranking, from a community economic impact perspective, of the three deals:

Braves best (Seaman)/ least worst (Bradbury).

Then the Falcons, followed closely by the Hawks.

But before Cobb gets all puffed up, both economists said the reason the Braves venue came out on top is that it moved to a new part of the metro area, which shifted some spending that wasn’t there before. Compare that to leaders of the Hawks and Falcons, who hadn’t shown any intention of leaving the city, so in the economists’ minds there’s no significant economic gain from existing team operations. The benefits of the Falcons and Hawks deals is primarily from construction work and, Seaman said, from the increased opportunity to land events like the Super Bowl.

Seaman predicted the positive community economic impact of the Braves and Falcons deals will exceed the public costs. The Hawks deal “is harder to argue that it will be an ongoing net plus over time.”

Then he offered this less-than-hearty endorsement: “I don’t think any one of these is a horrible situation.”

Team leaders, of course, stress the benefits of their own projects.

The Hawks hope to further boost development in their area of downtown and see room to attract more top-notch events to the arena. Hawks CEO Steve Koonin, by the way, told me he thinks the ranking is “incomplete and sloppy.”

Falcons CEO Rich McKay points out that $1.3 billion of the $1.5 billion cost of the Mercedes-Benz Stadium won’t be paid by the public and that the team will shoulder long-term risk in maintaining the venue. (Falcons owner Arthur Blank also is investing $15 million in nearby Westside Atlanta communities beyond other giving he’s made there.)

Derek Schiller, the Braves’ president of business, highlights how the team has partnered on a $550-million development of offices, apartments, restaurants, shops and a hotel beside SunTrust Park. “It creates taxes and jobs that weren’t previously there,” he said.

Of course, there’s still the question about why elected officials treat sports teams better than most businesses.

I asked Seaman. He shared some economic jargon, but his answer partly boiled down to happiness. Sports can make fans happy and give us something to rally around.

When sports turn magical, we cheer and agonize together, even if we never get a ticket to a game. We speak the communal language of the smitten.

Politicians don’t want to mess with that.

Whatever. Braves, your trophy is in the mail.



Reader Comments ...


Next Up in Business

The Justice Department is suing AT&T to block its $85 billion bid for Time Warner
The Justice Department is suing AT&T to block its $85 billion bid for Time Warner

The Department of Justice is suing to block AT&T's $85 billion bid for entertainment conglomerate Time Warner, setting the stage for one of the biggest antitrust cases to hit Washington in decades. The suit is fraught with legal and political risks for both sides. Several Democrats have expressed concern that antitrust officials could be seeking to...
Business stories of the week: Amazon, 2018 priorities, Phipps Plaza
Business stories of the week: Amazon, 2018 priorities, Phipps Plaza

The week had no shortage of business headlines among Atlanta area companies – or perhaps companies that want to become Atlanta area companies. From the Amazon second headquarters search to major development projects, here are some of the big business headlines you might have missed from the past week. Georgia and Atlanta area economic development...
More job cuts coming to Atlanta as part of Coca-Cola restructuring
More job cuts coming to Atlanta as part of Coca-Cola restructuring

Atlanta-based Coca-Cola plans to cut an additional 179 jobs in its hometown as part of a broader restructuring the beverage giant announced earlier this year. In filings with the Georgia Department of Economic Development’s Workforce Division, Coke identified layoffs at three corporate offices in the city effective by the end of December...
Atlanta’s Phipps Plaza makeover plan shifts into overdrive
Atlanta’s Phipps Plaza makeover plan shifts into overdrive

The reinvention of Phipps Plaza into a mixed-use entertainment and shopping complex has been in the works for more than a decade. But the announcement Tuesday of a $200 million-plus expansion, including a flagship Nobu hotel and restaurant, will take that the makeover to a new level, officials with mall owner Simon hope. In Nobu, Phipps will add...
4 of the best ways to turn your home into a cash cow
4 of the best ways to turn your home into a cash cow

Your house is a large expense with many associated costs like a mortgage payment, insurance, maintenance and more. It provides a roof over your head, of course, but since it usually costs you money each month, why not put it to work for you and earn some cash in the process? The following are four ways your house can make you money: If you're planning...
More Stories