Quote:
Originally Posted by Corndogger
Why does new investment have to come from outside of the city? That's not the way to look at this. It's the incremental increase in revenue to the city that matters. If Company X was going to build a hotel on the outskirts of Calgary and then decided to build it in the new entertainment district that would be a shift of the tax base but it would very likely also result in more tax revenue for the City. That's what matters. So does whether or not people are willing to spend more of their disposal income in this area.
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I'm sorry but your counter argument makes no sense and milomilo is absolutely correct. Like most cities, Calgary derives most of it's revenue from property tax, which is based on the assessed value of a property. If a hotel chain was planning on building $100 million of hotel properties in Calgary, and because of Calgary's new arena, decided to build those near the area as opposed to some other neighborhood, there is no real gain in tax revenue for the City of Calgary; $100 million of investment nets the same property tax to the municipal government, regardless of where it goes within the city itself.
You acknowledged it yourself: it's just a shift of the location of the tax base, not its size. The only way the new arena would help the municipal government from a revenue standpoint is if it attracted external investment that would have otherwise not occurred, as correctly noted by milomilo. Whether or not that will occur is unknown at this time, but the economic literature surrounding the topic of sports teams tends to suggest that stadiums and professional sports teams don't have much of an impact, if any, on the larger economy.
Think of it another way, perhaps from a household example. Let's say the Calgary Flames make the playoffs and everyone in Calgary is excited, so everyone is out buying burgers, beers, jerseys, playoff tickets, bobble heads, and hats. Are the playoffs a good thing for Calgary's economy? The average person might say yes, but when you think it through a little more the positive effects become a little less clear. Unless the Calgary Flames making the playoffs somehow increased the average person's income on aggregate, people simply modified the timing or location of their consumption during the playoff season. Instead of buying a beer two weeks from now, perhaps you buy a beer at the restaurant while watching a playoff game. Instead of buying new shorts and a hat a month from now at the mall, you spent that money now to buy Flames jersey at a downtown sports store. Can you see where I'm going with this? Unless this "shock" to the economy raised income, your simply shifting the timing of consumer choices which, on aggregate, will have had no effect on the economy whatsoever in the long run.
The same thing applies to infrastructure and mega projects - unless the project itself is acting as a catalyst or attractant for private investment that would have not otherwise occurred if the project wasn't done, the effect on the economy is zero. To think otherwise can lead to falsely attributing economic growth to certain things (like mega projects) when that growth would have happened regardless of whether or not the mega project would have taken place.
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