Downtown sports and entertainment district, Part 2: Robust public benefits, say team owners and City Hall, without supporting data

The rush is on at City Hall to approve a $1-1.62 billion sales tax transfer to Smith Entertainment Group (SEG) to transform the area around the existing Downtown stadium of the SEG’s Utah Jazz and their newly-acquired NHL franchise. 

Tonight the City Council will hear from representatives of SEG and the Mendenhall Administration as they negotiate an agreement to create a sports and entertainment zone that state law requires be completed by September 1 and the Mayor wants approved in July.

Given the expedited calendar set forth in the enabling legislation from Capitol Hill’s 2024 session, the City is being asked to forgo several of its normal operating procedures. We recently reported on SB 272’s requirements that a financing plan, a master plan, and zoning changes be completed mandates a schedule that violates normal city planning policy. 

In addition, the demands for public benefits, always a part of the city’s requirements when applicants are requesting public funds, may also be shrinking.

Those public benefits–usually revolving around the city’s sustainability, equity, and affordability goals–are used as criteria for awarding city grants and loans.

But applying those city-generated criteria perhaps isn’t necessary, given the “long lasting positive impact” that SEG claims the sports and entertainment zone will have. 

For Salt Lake City residents, who pay 40% of the sales tax collected in the city, the transfer of $1.62B amounts to $106 per person per year. The majority will be paid by visitors and tourists.

Over 30 years, that’s $3180 of collection from every resident, young and old–meaning the average tax on households will be 3180 times the number of members in the family.

There is a wide consensus in peer-reviewed academic literature that publicly-financed stadiums are a bad public investment. Perhaps the creation of a wider sports and entertainment district changes the math. SEG suggests that it does–due to increased tourism, increased tax revenue, and increased property values. 

What SEG wants and supposedly gives: “long lasting positive impacts”

SB 272 establishes expedited review and special zoning rules beyond those enjoyed by property owners in the city’s current zoning categories.

SEG’s initial proposal encompasses the land within the blue rectangle, which includes two blocks of the Salt Palace Convention Center owned and operated by Salt Lake County. We at BSL first reported that SEG had turned its sights on the County-owned property. The green square is a 10-acre surface parking lot that the LDS Church has said is off the table for development.

The Utah Symphony-Opera’s Abravanel Hall is in the eye of the wrecking ball, SEG has asserted.

The Capital City Reinvestment Zone can include up to 10 square blocks.

The Jazz’s arena and the two blocks east are currently zoned D-4, allowing the uses and the building heights that SEG requested in their application. But currently some of those uses, like a stadium, heliport, and street-front parking garages are conditional, requiring Planning Commission approval. SEG wants them permitted by right.

Will this be an obstacle to SEG’s blueprint? Not likely. Planning Director Nick Norris told us, “Most of the zoning necessary to support an entertainment district are already in place due to the Downtown Building Height and Street Activation code changes adopted last year. Any additional changes are still in the conceptual stage.”

Unlimited building height, with design review, is currently allowed in both the D-4 and D-1 zoning districts.

What about public benefits? SEG’s application to the city, received on April 4th, refers to  “the project’s significant and long lasting positive impacts,” including:

•promoting, creating and retaining jobs 

•improving surrounding property values 

•attracting increased outside private and public investment 

•increasing tax revenues 

•improving the overall aesthetic and functionality of the Project Area and surrounding areas 

•enhancing cultural and entertainment opportunities 

•increasing tourism  

•boosting the overall vitality of Salt Lake City 

Such claims are not uncommon to pitches from owners looking for public financing. It remains to be seen whether City Hall will require specific commitments from SEG to meet those goals.

Yet peer-reviewed research on the new model of stadium development, which includes mixed-use development emphasizing food, beverage, housing, office, and entertainment options, offers a sobering assessment for boosters.

For example, claims about the number of jobs created are potentially equivocal and usually unverifiable. As University of Colorado-Denver’s Geoffrey Propheter told Chicago’s Southside Weekly, “Numbers will be thrown around like ‘30,000 jobs’ but that number isn’t really 30,000 jobs. It might mean 1000 jobs lasting thirty years [each], or thirty jobs lasting a thousand years.” 

Currently Chicago is hearing new stadium construction proposals from the NFL’s Bears as well as MLB’s White Sox.

In addition, “economic impact” figures can be selective in how they collect their numbers. Studies like J.C. Bradbury’s assessment of the Atlanta Braves’ move to Cobb County, and the construction of the The Battery entertainment district, do not flatter the claims that a new stadium and surrounding district will bolster tax revenues, property values, and tourism.

Yet claims by decision makers about the stadium boosting the local economy continue, apparently defying reality. 

Kennesaw University’s Bradbury writes, “much of local spending is diverted from other local establishments. Cobb residents who attend baseball games at Truist Park or restaurants and merchants at The Battery likely would have otherwise spent their incomes at other Cobb businesses, like restaurants, movies, or retail shopping, which would have generated equivalent sales tax revenue for the County and schools.”  

Instead of growing the tax revenue pie, one development usually takes from another. That debate has been live in Salt Lake City for a long time.

The development of the LDS Church’s Main Street malls (ZCMI and Crossroads) and later competitors at The Gateway (with Redevelopment Agency support) brought to the surface whether Downtown retail is a zero- or positive-sum game. In the era where brick-and-mortar businesses face a structural disadvantage in regards to online sales, the scarcity argument is likely to win out. 

To be sure, Bradbury’s analysis found that property values and sales tax revenues do not increase when compared to Cobb’s surrounding counties in the Atlanta area. The conclusion? A new stadium is not the economic catalyst it claims to be.

The Braves, on the other hand, report 2023 revenues of $59 million from The Battery, which is primarily rental income. The Braves’ total 2023 revenue was $641 million, with $582 million coming from baseball sources and $59 million from The Battery, as reported by the Atlanta Journal Constitution.

Southside Weekly reported that the Braves organization claimed $272M in revenue in Q3 of 2023 alone.

Mayor: “Immense public benefits that are challenging to reflect in simple ROI analyses”

When asked by Building Salt Lake about the public return on investment (ROI) of the deal, city decision makers have expressed both confidence and vagueness.The same rosy, ill-defined language has marked SEG’s comments on public benefits.

What might the public demand? Our research on stadium deals in other US cities gave us this list:

•economic performance targets – accountability for revenue-generating claims

•commitment to keep the team in the city

•damages paid if the team moves

•profit sharing with city government

•creating quality jobs (most entertainment and hospitality jobs do not qualify)

•adherence to the city’s current priorities of sustainability, equity, and affordability

The City Council, which has the authority to revise, reject, or approve the agreement negotiated between SEG and the Mayor, has signaled that the public benefit most important to them is a significant contribution to Japan Town.

Victoria Petro, Council Chair, told us, “Although we are still awaiting many details, the Council is aggressively pursuing any opportunity to maximize benefits for every single Salt Laker. That is the first and last calculation for the Council.”

Whether the Council, on the SB 272’s expedited timeline, can “maximize benefits for every single Salt Laker” will be seen.

The Mayor’s office, when asked about public benefits by Building Salt Lake, spoke in the following terms:

“Public financing in this district will not just benefit a sports arena; it will reshape the downtown core to improve east-west connectivity, enhance streetscapes, drive economic activity and, importantly, create an additional inviting space for families downtown. This is about intentionally investing in our capital city to generate immense public benefits that are challenging to reflect in simple ROI analyses.”

“Immense public benefits,” or just something you can’t afford to lose?

Whether Mayor Mendenhall’s Administration of the City Council will demand actual financial public return on the $1.62 billion request by Ryan Smith’s SEG will be seen soon enough at City Hall, given the Mayor’s goal of an agreement passing the Council by the end of July.

Like most stadium financing proposals, it looks like a very good deal for the team owners but not so much the public. Unless, of course, taxpayers are satisfied with Intangible goods.

Having a major-league team in your city raises city prestige, civic pride, and national exposure. Rooting for the same team brings people together, providing the civic glue that is increasingly rare in today’s world.

Despite the dramatic transfer of wealth licensed by SB 272, city decision makers may have no choice but to approve SEG’s proposals. Can it afford to say ‘We want a better deal”?

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Posted by Luke Garrott

Luke Garrott, PhD, has published in The Salt Lake Tribune and the Deseret News, and written features for the Salt Lake City Weekly City Guide and The West View. A former two-term councilman in Salt Lake City's District 4, he lives in Downtown Salt Lake City and grew up in the Chicago area.