No Blinders This Time???
According to a Miami Herald Editorial dated January 27, 2013, the crucial element that makes the Miami Dolphins Owner Stephen Ross’s new stadium roof plan different from the Marlins debacle is that “Ross has offered to open up the team’s ledgers, to the extent possible under NFL rules.”
The still-unwise editorial squad then goes on to justify a give-away of $199 million tax dollars to a private company based on “fairness.” SDM swears this exact word is included in the nonsensical editorial.
Look, if SDM ran the sinking ship known as the Miami Herald, the temptation to kiss the Dolphins’ back side might be too much to resist. SDM suspects the Herald would up and die even sooner without the sports section. But this is no excuse to miss the boat – again – on why public monies should not subsidize wealthy sports franchises.
The real issue at hand here is a term we all remember from Econ 101: opportunity cost. For those of you asleep that day, opportunity cost is the missed opportunity for gain one suffers by making an investment choice. A simple example: SDM can invest in stocks or bonds. One of the investments will pay off at a greater return than the other. If SDM chooses the investment vehicle that pays off at a lower return, then the difference between the return from SDM’s choice vs. the return on the other investment is SDM’s opportunity cost.
The reason the Marlins deal was – and the Dolphins deal, though at much reduced financial exposure level, is – a bad one is because this community’s elected and business leaders failed to investigate the opportunity cost. Just imagine who might have stepped up to the plate – SDM begs your forgiveness for the pun – if the community had placed over a billion dollars and free land on the table for all comers to bid upon. Makes one sick to think about it now…
Thus, the Marlins lesson was not whether their books showed that they needed the money – frankly, the fact that they didn’t need the money argues in favor of loaning them money. The true lesson is that the community – assuming it is foolish enough to subsidize private businesses – should offer the same package of benefits to everyone and then take the best deal on the table.
The Dolphins deal – like the Marlins deal and the Heat deal before it – is objectionable because it pre-cooks the outcome. It’s as if the Dolphins were your pet dog urinating on a tree, thereby claiming it as its own before anyone else has a chance to mark the territory. Instead of a pissing contest, let SDM set out the questions a careful political analysis might ask before giving away such an enormous sum:
- Should the Miami bed tax be raised at all? Will raising the tax hurt the yield by driving away business? One should never assume raising a tax will not change purchasing patterns.
- If the tax can and should be raised, by what increment should it be increased? Just because the Dolphins need $199 million does not mean that the tax should be raised so as to fund that amount.
- Is the Dolphins roof project going to pay a return to the community? The Marlins deal didn’t and it is arguable whether the Heat deal did. Can we take a minute to calculate a rate of return on our money?
- In addition to the monetary rate of return, are there other non-monetary returns that justify spending the money on the Dolphins stadium? Government shouldn’t be driven solely by business rates of return, but surely we can ask that all the returns on investment - both monetary and non monetary - be fully quantified, can’t we?
- And finally: are there other investments that would return more than the Dolphins’ roof? How do these alternatives compare given the types of returns the community desires?
SDM Says: The greater Miami community has done more than its fair share to subsidize professional sports teams. Fairness to the community dictates taking sufficient time to make a decision that considers any opportunities we may lose if we toss away one set of blinders only to have them replaced by yet another set. You can bet Mr. Ross doesn’t invest his money without calculating the opportunity cost first.