“If it is true the city didn’t push for an inflation adjustment, then that’s poor policymaking and I’d be upset with lawmakers as a resident.”
That’s what Geoffrey Propheter, Professor at the School of Public Affairs at the University of Colorado (Denver) wrote us about the proposed SAR (Stadium Area Redevelopment) deal that St. Petersburg Mayor Ken Welch wants city council to approve. There are no such inflation adjustments for the largest ticket items in the proposed deal.
In response to an inquiry to Propheter about whether he had been accurately quoted in this Tampa bay Times article last week, he expanded on his statement and agreed to let us publish his comments.
Propheter’s name appears on almost 50 academic papers over the last dozen years (list of publications), including 14 on sport facilities, the economics of such facilities, subsidies for such facilities, and impacts that sports facilities have on the economy.
His 2023 paper “Social equity and subsidies for Major League sports” showed that social inequities can be caused by subsidizing professional “big league” sports. Inequities arise in the area of eminent domain, budgetary trade-offs, negative externalities, and community benefits agreements.
Without further ado, here are Professor Propheter’s general comments regarding what things to look for in things like the SAR.
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To your question about the annual budget process being year-to-year and the team having a long-term lease. I agree they are different, but the difference in time horizon does not excuse, in my opinion, failing to adjust for inflation in both cases.
Public budgeting should escalate expected costs on the expenditures side due to inflation in a transparent way in year-to-year cases as well as in long-term cases. That way, residents would have a better sense of what increases in costs are due to politics and what are due to inflation.
By not adjusting for inflation, regardless of the time horizon, lawmakers enjoy the benefit of masking political spending decisions behind inflationary pressures.
It is controversial in the year-to-year case because of the reasons I offered: no one does it and there are no readily available indices that measure governments’ cost of to provide baskets of services over time.
You can extend this logic to the long-term lease: what number should we use and on what basis would that number be decided? Teams and governments usually benchmark lease payments to the CPI, but that’s for lack of a better alternative. That was a point I’ve made before. It doesn’t mean “don’t use CPI,” but it does mean that you should just be transparent about that it is technically the wrong index because it’s not measuring relevant cost pressures. But I think it is better than nothing.
My recollection about the conversation with the Times reporter was that I provided two perspectives on the inflation adjustment, since I was asked an open-ended question about how I felt about a lack of an inflation adjustment for the team’s proposed annual payment.
The first comment I made was a general one about government budgeting that I get often: governments in the US don’t budget for inflation on the expense side (see above explanation). One thing I didn’t say that perhaps I should have for completeness is that sometimes, depending on forecasting practices in the jurisdiction, the revenue side will implicitly account for some inflation. Since expenditures, in theory, are set equal to or near expected revenue, if you build inflation into revenue forecasts, then your expenditures will reflect that inflation.
That doesn’t mean you’ve adjusted for cost pressures, though. Inflation is an upward force on costs, which can work their way into prices but rarely is it a dollar for dollar change because of supply and demand forces.
The second comment I offered was about the police getting a 5% annual escalation. I said I found that odd that police were getting it while the base rent was not being escalated since it suggests different political actors pushed harder than others. It would appear the cops pushed harder than the city council.
There’s perhaps a public relations component to the Rays decision here to accept 5% escalation since generally it doesn’t buy you long-term public good will to shirk supporting certain government workers (teachers, cops, EMS, sanitation, etc.) And this illustrates my point about why it is odd: the 5% escalation for cops offers taxpayers some protection for increases in police expenses. I assume the police are unionized there, and suppose if in their next contract they get a 10% raise, then 5% will cover half of the additional public cost for the security at the stadium. The other half will fall on taxpayers.
There are obviously more moving parts than these; I’m just giving it as an example. Compare that with sanitation workers. Assume they are unionized, and if their contract increases wages 10%, taxpayers must cover the full increase even though sanitation workers provide services to the stadium and area. This logic applies to any government service being provided in the stadium or induced by the ancillary development. If a bunch of kids move into the area, it’ll shift school demand patterns, but the property TIF [Tax Increment Financing] sucks up property tax revenue for debt service, not for on-going public services. So taxpayers broadly will have to pay for the public services in the TIF.
The elaboration I’m offering you here wasn’t part of the conversation with the Times since it wasn’t relevant to the question I was asked. But I do know that I said the police getting 5% and the city apparently not trying to get an inflation adjustment is odd.
That the police got an escalation means the city could have gotten one, too, and I surmised it’s because the city didn’t try. I don’t know if that’s true; it’s pure speculation. But if it is true the city didn’t push for an inflation adjustment, then that’s poor policymaking and I’d be upset with lawmakers as a resident.
Whether I would be upset enough to vote someone out of office or recall them, I don’t know. For as controversial and expensive sports facility subsidies are, rarely do lawmakers’ political future turn on their subsidy vote (Miami offers some recent rare exceptions to this rule).
There are other things related to the subsidy agreement I can see residents being upset about, so I guess add this to the list if it’s true. To know if it’s true you’d have to find someone in the negotiations to go on record, or if these meetings were recorded (I doubt it, unless secretly), then listen to all the tapes.
Consider it this way, more concisely: my general comment about budgeting and inflation is the peas, not the steak. The steak is that there should be an escalation of rent with time that covers in full inflation plus any increase in government costs to provide the stadium.
Sometimes, jurisdictions push for the rent escalation and are successful; rarely do they incorporate inflation into their budgeted expenditures.
On the inflation part, it’s not a question of should there be an inflation adjustment—yes, there always should be — but instead what should that adjustment be and on what basis should it be determined and set? This would require a public discussion and data analysis process to figure it out, and since it’s controversial anyway, using the CPI would be better than nothing.
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