PB: What do the 4 stadium/arena deals have in common?
SDM was going to review the March 19 village council video again, but mercifully the village website is down for Kaptain Kreepy’s annual examination.
So, we will write about the proposed soccer stadium that certain “leaders” suggest should be located at the Port of Miami.
SDM got to thinking about what connects the dots between the Heat’s American Airlines Arena, the Marlins fiasco, err…Pepsi Palace or whatever it’s called, the proposed soccer stadium and even the Dolphins’ Joe Robbie Stadium – a/k/a Sunlife Stadium. Do you know the answer? Opportunity Cost.
As we’ve written in these pages before, opportunity cost is an Economics 101 concept meaning “the loss of potential gain from other alternatives when one alternative is chosen.” The example given by the all-knowing Google is “idle cash balances represent an opportunity cost in terms of lost interest.”
In each example of these stadiums, including glaringly the proposed soccer stadium, the public lost out – or will lose out – on alternative gains that could have been realized if the public resources allocated to the facilities were used for other purposes.
One should note that SDM doesn’t mean merely monetary gains either. The fact is that every time a public dollar or asset is misallocated, some other use of that public dollar or asset is crowded-out of the budget.
For example, Miami-Dade County Commissioners have chosen to fund special events that benefit their districts through their district office allocations. Each time they do so, less money is available to pay for meals-on-wheels to the elderly as an overused example.
The point is that public dollars – even when tax increases are considered – are finite…they can only be spent once. (Most pols hate to hear this, especially in Washington.)
On the low end of the opportunity cost spectrum sits the Dolphins facility – at least for now. When Joe Robbie built his stadium with mostly his own money (what a concept), he nevertheless utilized public money in at least two categories: (1) he financed part of the stadium using industrial revenue bonds issued by the county, which gave him a lower interest rate – a deal open to everyone, by the way; and (2) the county and state provided major roadway improvements to make entering and exiting the stadium much easier.
Now, if the new Dolphins ownership gets its way, the modest public support given their facility will balloon as will the opportunity costs. But as of today, the Dolphins were small players in the misallocation of public funds.
On the other end of the spectrum sits the Marlins and Heat facilities, which took public land and tied up three or four tax sources for eons to come. As we have written here before, Forbes contends the total cost of the Marlins facility will top out north of $4 billion. Even at present value, public taxpayers have lost out on the gains that could have been realized had those tax dollars been spent on more widely useful public purpose.
But there’s another often overlooked component of the Marlins debacle and the Heat giveaway – the gift of prime public land made to them without even a whiff of a public bid. SDM doesn’t know how much just the Marlins land was worth, but let’s give it a low figure of $40 million.
Such a sum would amount to about 10% of the City of Miami’s total annual revenues. Imagine if that land had been sold to a private person, placed on the tax rolls, and the resulting monies used to pay for myriad need of one of America’s poorest cities?
The soccer stadium proposal offers an even starker opportunity cost analysis. The soccer proposal, led by superstar David Beckham, would remove from the Port of Miami’s inventory its only opportunity to diversify its economic base. Forget the actual dollar value of the land, which has to be staggering.
Miami-Dade County, by giving land to a sport that has failed repeatedly in South Florida, would tie-up and perpetually hamper one of its two largest employment generators! The only benefit of the deal is that it may make the Marlins deal look good by comparison.
SDM Says: Fisherman have learned that to land the big ones you have to hide the hook behind something shiny and deceptively tasty. Mr. Beckham and his team have obviously chartered in these waters before.