Little Caesar’s arena will open with a Kid Rock concert in September and will then be home to the Detroit Pistons and the Red Wings during their respective seasons. With $300 million public money being used to construct the arena, how much economic impact can the State expect as a result? Unfortunately, not much.
The main reason for this is that the arena will be closed far more often that it is open. Basketball and hockey seasons each only have 41 home games. If there are also a dozen concerts at the arena, the arena will still be closed for 75 percent of the year, even if the games and concerts are all held on different days. Something that is closed far more often than it is open will be unable to support surrounding bars and restaurants that are open all year.
Jobs created by arenas tend to be part-time, low-wage food service jobs. For the new arena, many (if not all) of these jobs already exist at The Palace of Auburn Hills and Joe Louis Area. Thus, employment at the new arena is unlikely to result in a net increase in employment. The lion’s share of the revenue generated by the arena flows to the players and the team owners, many (if not all) of whom live outside of the city.
Even the consumer spending on days when the arena is open is unlikely to generate a positive economic impact and instead, might result in an economic loss. Spending by consumers at the arena simply displaces other spending in the individual consumer’s entertainment budget. Thus, spending at the arena comes at the expense of, for example, the local golf course. The arena’s gain is then the local golf course’s loss. What makes this an economic loss is the fact that the golf course is a private business and thus pays property taxes. In contrast, the Little Caesars Arena is owned by the Detroit Downtown Development Authority and thus, will not pay property taxes, while still using public services. For instance, the City of Detroit has never been reimbursed for game day police patrols. This is a common occurrence. Policing and garbage collection for the World Series cost the City of Chicago $20 million.
We often get a misleading view of sports’ economic impact. We see the areas around the stadiums and arenas on gamedays when they are full of people. We don’t see them on non-gamedays when they are largely deserted, which is the majority of the year. Sports are ubiquitous in pop culture, yet the combined revenues of the four major professional sports leagues only represent about two-tenths of one percent of the national economy. The combined revenues of the four professional Detroit sports teams represent only about 0.35 percent of Metro Detroit’s economy. Consequently, the subsidies given to sports arenas would be more effectively spent on public services and infrastructure that benefit everybody.
