Tag Archives: taxpayer subsidies

The Taxpayers’ Tab for the D.C. Trolley

Washington, D.C.’s taxpayers will be hit with a $3.5 million bill for the first year the District’s two new streetcar lines operate. That’s on top of the $100 million it cost to build them. Unlike the Metro with 79 percent of ridership costs covered by fares, the trolley system is only 30 percent dependent on fares. D.C.’s streetcars will be fueled by subsidies. For the District’s Department of Transportation (DDOT) that’s another way of saying the rail line might be free in some parts of the city. (Based on Portland, Oregon’s “fareless squares”)

Why is D.C. getting a heavily-subsidized transit system that was phased out mid-20th century? The DDOT beleives the planned 37 miles of 8 separate rail lines will connect people with neighborhoods and spur revitalization. The agency cites the effect Portland, Oregon’s streetcars had on property values. According to Randal O’Toole, the trolley revival is an effort by smart-growth planners to push American cities back to the pedestrian era. As he puts it, “Why should we design our cities for the 1.6 percent of people who take transit?” And of course, there’s the fact that it isn’t profitable. That’s another way of saying there’s not enough demand at the price it costs to operate. The D.C. trolley will cost $1.5 billion to complete and become a permanent fixture of D.C.’s budget. The price of trolley nostalgia is permanent taxpayer subsidies.

The Super Bowl as Economic Remedy

It seems obvious that when a city is chosen to host a major event — political convention, Super Bowl, Olympics — this provides a natural economic boost to the city’s economy. If any city is deserving of such a boost it is New Orleans, which will be hosting the 2013 Super Bowl for the first time since Hurricane Katrina. (It will be the 10th time the city has been the site of the championship.)

And like many governments that find themselves chosen for a major sporting event, the Louisiana legislature is deciding if it should spend $85 million in Superdome upgrades. However, the boost is largely symbolic: while New Orleanians may feel a sense of pride over the selection, and the stadium will get another make over, economic gains are very likely to be fleeting and possibly negative.

Much academic work has been done assessing the impact of sporting events on regional economies. The findings generally show little lasting impact on host cities. Robert Baade finds the primary beneficiaries of taxpayer subsidies for stadiums are team owners, and players, not local residents.

That has not stopped cities from competing for the honor. 

University of Maryland economist Dennis Coates, writing in The American, finds since 1990 Major League Baseball has opened 19 new stadiums, the NFL opened 17, and the NBA over 20. These projects are highly subsidized on the federal, state and local levels, with the public bearing as much as 63 percent of the cost.  Coates and fellow economist Brad Humphreys find in an analysis of  of wages between 1969 and the 1990s in metro areas where these stadiums reside is that incomes actually decreased.

Why? Consumer spending on sports replaces consumption of other kinds of entertainment, and the spending patrons undertake has a relatively small multiplier effect in real the local economy. Athletes get the income boost. And to top it off, increased local subsidies to the franchise redirect tax revenues from other use, making the local economy less efficient.

While local and state governments might like to think otherwise, being chosen as a host city may be as much an economic drain as a publicity boon.