The problem with all the current arena/stadium proposals
There are currently three proposals floating around the Nevada Legislature to build a new stadium or arena in Las Vegas. Backers of the proposals claim a new facility could be used to lure a professional sports team to Las Vegas.
Caesars Entertainment has proposed a 20,000-seat arena behind the Imperial Palace. That proposal is going to the voters, because the Legislature voted it down earlier in the session.
Texan businessman Chris Milam has bought the Las Vegas 51s and is proposing to build a ballpark, a stadium and an arena across the I-15 from Mandalay Bay.
And UNLV now has a proposal, with a lobbying team that includes former Republican governor Bob List, to build a 40,000-seat stadium by UNLV.
Now, these proposals differ in locations, primary backer, the size of the facility and whether the new building would be a stadium or an arena. But they all have one problem in common.
Each of them wants the Legislature to authorize taxpayer financing for at least a portion of the project.
Leaving aside the inherent problem of government giving your money to a private business, this is a perfect example of why government shouldn’t pick the winners and losers in the economy.
Instead of pitching the merits of their plans to investors, these developers are going to politicians. Let’s compare how the two processes work.
Investors, because they are spending their own money, have a strong incentive to examine whether a project makes financial sense and would bring the best return on their dollars. This process unfolds millions of times every year and is one of the most important – and powerful – features of the free market. Occurring spontaneously among individuals, this process usually prevents poor uses of scarce resources and directs those same resources into the areas individual consumers want the most. Now, this process will produce some failures, but the financial impact of those failures is limited to those who chose to spend their money on it.
Politicians, on the other hand, are spending other people’s money – yours and mine. This makes it more likely that a shoddy project will get pushed forward, because, instead of examining whether a project makes financial sense, many politicians (excluding those committed to free-market principles or who have a working knowledge of Nevada’s constitution) examine whether a project makes political sense. Those factors include good short-term PR, campaign contributions, quid pro quos with lobbyists or other lawmakers, and getting re-elected.
If a project goes bad, there are very few consequences for individual politicians – they aren’t held financially liable and they are regularly able to move on to higher office. And often times they are no longer even in politics when the destruction their decision caused becomes apparent several years down the road. As a result of all of these factors, the politicians make “investments” that private investors would reject as a financial loser. Even if some consider a particular project a “success,” you still have the constitutional, economic and philosophical problems of forcing taxpayers to subsidize someone else’s business.
Instead of turning to the Legislature and demanding taxpayer dollars to subsidize their businesses, developers interested in building a stadium or arena in Las Vegas should put their (own) money where their mouths are.