Corporate Welfare Apologists Never Give Up

Member Group : Allegheny Institute

Back in 2001, an editorial in Pittsburgh’s liberal/progressive newspaper justified the taxpayer investment in PNC Park and Heinz Field on the basis of a couple of million dollars in projected additional Pittsburgh tax revenue stemming from the presence of the new stadiums. The paper was one of the loudest supporters of the new stadiums including pushing the passage of a new tax to fund them. Indeed, on the Sunday before the vote on the tax in November 1997, the paper’s front page headline in huge letters urged readers to vote "yes" on the new tax. Now the same editorial page has given the stadiums and convention center credit for preventing a collapse of the Pittsburgh economy saying, "we were not willing to let the decline take hold and turn out the lights on Pittsburgh." (Post-Gazette, Aug. 20, 2010).

The 2001 argument that a couple million dollars in additional annual revenue for Pittsburgh somehow justified the hundreds of millions in taxpayer dollars used to build the new stadiums was completely fatuous at the time and looks even sillier with the passage of time. As we noted in a Policy Brief dated September 19, 2001, the PG editorial from 2001 ignored the revenue losses resulting from the elimination of millions of dollars of taxable real estate from the tax rolls. Nor did the op-ed writer consider the opportunity cost of the taxpayers’ investment. At a nominal cost of 7 percent per year, the stadiums would have to produce in excess of $20 million in net taxpayer benefits over and above the benefits created by attendance related spending at Three Rivers Stadium.

A paltry $2 million rise in City amusement tax and parking taxes was not nearly enough to warrant spending over 300 million taxpayer dollars.

More importantly, the recent assertion that the billion dollars spent on the stadiums and convention center prevented a plunge in Pittsburgh’s economy is nothing more than argument by untestable hypothesis. How can we possibly know what would have happened if the money poured into the corporate welfare projects had been left in the taxpayers’ hands or had been used for upgrading and repairing roads and bridges? Economies are not lab experiments; we cannot go back to 1998, create the exact same conditions, not build the facilities and then observe what happens.

However, we can observe what has actually happened over the past ten years or so since the stadiums and convention center were built. Pittsburgh’s population has continued to fall, dropping by 23,000 from 2000 to 2009; and from June 2000 to June 2010 the number of City residents holding jobs is down by 7,600. Inflation adjusted earned income, as measured by taxes paid to the City and accounting for the 25 percent rise in the tax rate, has fallen by 18 percent—assuming inflation averaged 2.5 percent annually over the period. In the meantime, school enrollment has plunged from 38,560 to around 26,000, a stunning 32 percent decline.

During the last decade, the City and its government have benefited from a number of significant supportive factors. It was given new taxing authority by the state; will receive $10 million yearly from the casino; continues to have its outrageously expensive schools heavily funded by the state; receives by far the largest share of benefits from the RAD tax; has large shares of its employment in health care, education and government, all of which are very resistant to downturns or precipitous collapse; enjoys a very rich legacy of cultural and educational establishments derived from the fortunes of entrepreneurs of the past; and finally, it has a very wealthy foundation community providing substantial amounts of funding support for activities in the City.

Despite all these positive contributors to the City’s economic well-being, Pittsburgh’s government is financially distressed with grotesquely underfunded pension plans and in a near constant search for new sources of revenues.

In short, the declines in the City’s population, number of residents holding jobs, school enrollment and real earned income over the past decade have come about despite all that has been done to stave off the declines including enormous expenditures on the stadiums and convention center.

The performance of the Pirates since they occupied PNC Park is an object lesson for voters and elected officials. To wit: do not be taken in by promises of great rewards of spending money on huge corporate welfare schemes.

Jake Haulk, Ph.D., President