By Stephen Young
By Stephen Young
By Stephen Young
By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
As far as they were concerned, economist Mark Rosentraub was just another distinguished speaker, addressing just another monthly breakfast meeting of the 49-year-old group--one made up of architects, planners, builders, and concerned citizens interested in studying and trying to positively influence how the Dallas area grows and develops.
True, the council prided itself on its compelling monthly programs on timely issues (all of which are open to the public). And true, unlike other high-brow civic groups in town, this group had no political agenda, no downtown real estate agenda, no establishment agenda. They just lay it on out there. Just like they did on the morning of January 26 at the Top O' The Cliff Club in Oak Cliff.
"My view is Mark's stuff is reasonable and objective," shrugged council vice-president Royce Hanson, a professor and economist at the University of Texas at Dallas. "It's very mainstream in terms of urban economics...Our group wanted to do this topic, and we simply tried to find someone with a strong national reputation who is a good objective analyst of this situation."
The "situation" being, of course, the current crusade to build a new sports arena. Rosentraub's speech was titled: "If You Build It, Will They Come? If You Don't, Will They Go Away? Cities and Professional Sports."
It was a seemingly mild topic, and Rosentraub himself--though he carries an impressive title as director of Indiana University's Center for Urban Policy and the Environment--is an unassuming man of 44 years with curly hair and a natty suit. But after eating a bountiful breakfast of scrambled eggs, hash browns, and hot biscuits, Rosentraub wiped his moustache clean and rose to deliver a surprisingly potent message. His delivery was folksy--tinged with a bit of Borscht Belt humor (he's originally from Brooklyn).
But his message was downright murderous--at least to the cause of building a new arena.
"When you talk about sports and economics, people will say that sports are an engine that will drive the economy. I respond 'Get Out of My Dreams and Into My Car,'" Rosentraub told the group, referring to a well-known pop tune. "I want to get you out of your dreams about sports."
But it was real hard to do--as the surprised, at times pained, faces of the 60 people in the audience made clear. They stared silently at Rosentraub as he rolled chart after chart onto an overhead projector to buttress his argument that the return on a city's up-front investment on a new sports palace is never worth it.
This was a stunning message. After all, the city council, the city manager, the city-paid consultants and the city's daily news media had all been claiming just the opposite for more than a year. Lose the teams, they had all intoned, and it would be economic doom for Dallas.
"There was sort of a stunned silence in the room," recalls one listener, Cherryl Peterman, the acting director of the city of Dallas' economic development department. "A woman in front of me kept turning around and saying, 'Very sobering. Very sobering.'"
Oh, you could say that.
The most striking thing about Rosentraub's speech to the planning council last month was the absence of three important players in the arena negotiations: members of the Dallas City Council, City Manager John Ware and anyone from The Dallas Morning News.
All but Ware were explicitly invited. Only a single council representative--Mayor Pro Tem Domingo Garcia--showed up.
If they had deigned to appear, they would have learned some exceedingly useful things about the lousy economics of sports arenas, the strong-arm tactics of major-league sports franchises, and the best way for cities to beat the bad odds on both when they sit down at the negotiating table to do an arena deal.
Domingo Garcia not only attended, he listened and took copious notes. Unlike his brethren, he was eager to seek out new information on the topic--information he knew he would never get from the city manager's staff, which is bound and determined to build a new arena.
(This week, City Auditor Dan Paul confirmed what the Dallas Observer has been reporting for three months: the city manager's staff not only withholds crucial information from the council; it lies to the council and plays coverup when it gets caught doing it.)
"We have not heard this side," Garcia told me after Rosentraub's speech. "We just hear that the Mavs and the Stars will have this kind of impact on the economy. And sales will go up in the West End. But we never hear the concerns--that when we make such a heavy investment in the sports sector that we are foregoing other, more profitable infrastructure initiatives."
Rosentraub's position is not esoteric, nor is it too statistically dense for a layman to digest. It is simple common sense, borne out by years of research and analysis of sports arena politics and economics. He began this work as an economics professor at the University of Texas at Arlington in 1975. Since then, he has become a veritable expert on the subject, and his work has been published in scholarly journals and numerous newspaper and magazine articles. He has appeared on ABC's "Nightline" and has two books in the works on the subject.
This is what Rosentraub has to say about Dallas and its current predicament.
For one thing, if we lost the Mavs and the Stars tomorrow, it wouldn't hurt the Dallas economy a bit--the effects would be negligible.
To prove his argument, Rosentraub produced 1991 statistics (the most current available) that he obtained from the U.S. Department of Commerce showing the importance of professional sports to the strength of the Dallas County economy.
Of the $30.7 billion in total payroll dollars generated countywide, 29 percent was generated by service industries (such as EDS and UPS), 18 percent by manufacturing, 12 percent by finance, insurance and real estate, 11.5 percent by the wholesale business (such as trucking) and 11.5 percent by transportation (like D-FW Airport). Only .16 percent--just over a tenth of one percent--came from professional sports. The numbers remain consistent when you look at the number of actual jobs created countywide. Of the 1.1 million jobs held in 1991, only .07 percent resulted from pro sports. (The addition of the Stars to the equation would have neglible effect.)
"Professional sports is nothing more than a frill," Rosentraub says. "On the other hand, if you don't have manufacturing, services, finance, insurance, real estate and transportation, you're not going to have sports. You couldn't afford it. You wouldn't have enough money to support it. You'd be Abilene."
While the residents of City Hall have spent much of their time and energy trying to keep economically insignificant pro sports franchises from leaving Dallas, they have allowed, on a daily basis, some of the economic heavyweights Rosentraub describes to walk right out the door. Last month, while the Morning News wrote front-page stories and editorials on the arena crusade, the announcement that Mary Kay Cosmetics--a corporate resident of Dallas for 32 years, with 500 full-time employees at its Regal Row headquarters building--was moving from Dallas to Addison barely rated a story on the business page.
Although Mary Kay officials say that Mayor Steve Bartlett worked extremely hard in the end to keep the headquarters in Dallas (the company is keeping two warehouse operations here), they also point out that it took city officials three years to respond to their requests for a right-hand turn lane from Regal Row onto the Stemmons Freeway service road.
"The real danger in all of this is if you start believing the economic myth of sports, the result is you divert a city's attention from its quest for its real economic advantage," Rosentraub told the planning council. "If you don't build sports facilities, but you're thinking of making other kinds of investments, there are things that will give you a greater return. And you must stay focused on what really drives corporations to locate to a place: an educational system, a transportation system, an energy system."
What did Peterman, the acting head of the city's economic development department, which employs 23 people and spends $1.2 million a year to get the most bang for the city's investment buck, say about Rosentraub's numbers and his common-sense interpretation of them?
"Very interesting," she told me last week. "It's a contrarian point of view. [But] I do think there are negative impacts if we don't have the teams that would be felt by local restaurants and the West End."
Peterman, slated to become head of the city planning department on March 1, said she has no numbers, no hard evidence, to back up her claims. "I don't know enough about it to disagree."
Restaurants, in truth, contribute only a tiny portion of jobs and salary dollars to our total economy. While Rosentraub does agree that individual mom-and-pop bars in the West End will suffer if the teams relocate, restaurants and hotels contribute so little to the economy countywide that the loss of the teams would have zero effect.
"The West End merchants will suffer, but is the loss so large that it will affect the Dallas economy?" he says. "No. Look at the numbers." (The numbers show that only 2.8 percent of all payroll dollars countywide came from restaurants and entertainment in 1991; one percent came from hotels. Likewise, restaurants and other entertainment made up 7 percent of total jobs countywide; hotels 2 percent.)
But if the teams stay, West End merchants could be hurt, too. "You have to be careful--you put restaurants [inside] a new arena, which Dallas wants to do, and you can hurt the West End," Rosentraub says. "You put a TGIF, a Taco Bell and a McDonald's in there, and that's a problem for the West End. In Toronto's Skydome, McDonald's serves 20,000 meals a game and employs 1,500 people to do it."
Rosentraub makes another interesting point. While arena proponents talk ad nauseam about the considerable "economic impact" of a new sports arena on area restaurants, arena concessions and hotels, Rosentraub says the word "impact" should be the first clue that the argument is specious.
"Economists will use code words--if they use the word 'impact,' impact is nothing," Rosentraub says. "If I steal a watch, that's economic impact--I have it, you don't. Growth is something. Impact is just stirring up the pot."
For example. To believe that a new sports arena will spark increased spending on food, you have to believe "that people are going to become larger and eat six meals a day," Rosentraub says. "You're going to eat dinner regardless. If you eat in Don Carter's new arena versus Mark Rosentraub's restaurant, that's impact. He has more. I have less. No growth."
So what's a city to do?
Rosentraub put it succinctly at the end of a two-hour interview over coffee at the Melrose Hotel. "If Dallas is really going to...be crushed by the teams leaving--if everyone has to be on Valium because of it--that's a whole different issue. But if the issue is economic impact, this is a no-brainer. Let them go. You'll make money if they go. Because you'll spend fewer taxes and do something better with the money."
Clearly, no one in Dallas is getting that message. And unless there's a spontaneous taxpayer revolt over this issue--the likes of which this city has never seen--this city council will ignore the economic facts and build an arena.
What, therefore, is Rosentraub's advice to citizens?
Rosentraub told the planning council something he's told lots of other cities that find themselves in arena wars with sports-team owners. Instead of giving away the keys to the vault, like most cities do, he says, they should strike a sensible bargain. Make a good, sound business deal. After all, the private sector does it all the time.
"Categorically, I can tell you that arenas can be built without any public dollars whatsoever," says Rosentraub.
Indeed, after three years of contentious haggling, the owners of Philadelphia's hockey and basketball teams put together a deal late last year for a new $216 million sports arena that will be built with a taxpayer subsidy of only $6.5 million--and that's a loan at 3 percent. There's a state grant of $20 million, too, but the private sector is footing the rest of the bill--$46 million from the hockey team owner who owns the city's current arena, and $145 million from three insurance companies who have clients seeking long-term investments. A local bank has also paid $40 million in a 29-year agreement that will put the bank's name on the building and a bank branch inside.
One other attractive element of that deal--the old arena, located next door, is being preserved and will be used for concerts, circuses and other entertainment shows. Both arenas will be privately owned and operated. (The Dallas City Council has never been briefed on that arrangement--a taxpayer dream.)
But if Dallas officials are determined to make the public foot most of the bill for a new arena, then Rosentraub has some specific advice. Since the value of a sports franchise increases greatly after a new arena is built, Rosentraub suggests that cities offer to pay "50 percent of the cost of the stadium in exchange for 50 percent of the increased value of the sports franchise." That way, if and when Don Carter sells the Mavericks, the city gets half the money--and if and when Don Carter wants the city out of his basketball business, he'll have to pay the city half the value of his team to get them out.
"So if you negotiate with the Mavericks, say 'we'll build you an arena--we'll split it with you--and we'll take half the value.' And that's a deal common in business."
Domingo Garcia was so impressed with Rosentraub's idea that in a closed-door meeting of the city council arena negotiating team earlier this month, he presented the idea to his fellow council members and City Manager John Ware. Who promptly dismissed it. "John looked at me and said, 'Domingo, I tried that, and it dropped like a lead balloon in terms of a response from Carter.'" End of discussion.
Garcia is not giving up. Two weeks ago, he wrote Ware a memo formally asking him to bring Rosentraub back to Dallas to brief the city council directly--if Ware wanted, he could even make it a debate and include another economist with opposing views on the subject.
Rosentraub told me last Sunday that he hasn't been invited yet--so far, he's gotten a call from Assistant City Manager Ted Benavides, who wanted a copy of his planning council speech, which Rosentraub dutifully faxed him. He even turned over the names of other economists who could engage in a spirited debate with him. He hasn't heard back.
Rosentraub's cautionary words are getting out, though. (No thanks to the News, which interviewed Rosentraub at his request--he's collecting material for one of his books--but gave him only six paragraphs at the end of a front-page puff piece on what the loss of the sports teams would do to the West End.)
Councilman Bob Stimson got a videotape of Rosentraub's speech, and he has since loaned it to councilmember Donna Blumer, who viewed it and told me last week, "The numbers Rosentraub used were devastating--I was very impressed."
She was so impressed that she told Mayor Bartlett that she believed the entire council could benefit from a visit from Rosentraub. Bartlett responded to that and other cautionary arena comments, says Blumer, by "calling me Diane Ragsdale"--the former councilwoman. "He said that she used to impede progress with the force of her arguments. That really took the cake."
Bartlett can keep squealing--he's already busy trashing Rosentraub to anyone who will listen, unwilling to give a platform to an intelligent advocate of a view that differs from his own. But one thing is certain.
"If you invite me, I will come," shrugs Dr. Mark Rosentraub.