Open Letter: Against tax-financing approach on new arena

Last Updated on December 10, 2023, 4:01 PM | Published: December 10, 2023

December 4th, 2023 

An open letter to interested parties, 

We, the undersigned professionals who hold a PhD in Economics or Finance, write to express our collective viewpoint on the proposed arena financed with public money and through new debt. The minimum expenditure of $900,000,000 with taxpayers also bearing the burden of any cost overages is an imprudent use of public money. As experts and practitioners in the field of economics and finance, we believe that our insights can contribute significantly to the discourse surrounding this matter.

· The consensus of academic research is that the proposed arena will not affect economic growth and may even detract from some sectors (1,2). This is in direct contrast with the purported evidence put forward by a commissioned report prepared by Applied Economics. The discrepancies between such consulting reports and the analysis of actual outcomes are well known. The report, itself, includes a disclaimer clearly stating that the estimates of possible impacts are not likely to be accurate. 

· The commissioned report lacks sufficient detail to justify the conclusions being drawn from it. Moreover, it is based on outdated economic analytic models and does not address the relevant cost-benefit analysis – how much impact will a new arena generate above those of Paycom Center? Just as no business would continue to operate using Windows ’95, basing the decision to spend nearly one billion dollars on such insufficient analysis is imprudent. 

· Lastly, we reflect on the experience of other cities that have decided to build new arenas or stadiums. Since 2010, 12 new arenas and 12 new stadiums have been constructed. For these, the average public expenditure was approximately 42%. Since 2020, three arenas have been built with no public money (1). The proposed arena in OKC would be the most expensive in over thirty years with taxpayers covering a minimum 95% of costs. The threat that the Thunder will leave the city for a “better” deal does not justify the public footing nearly all the costs. 

It is our professional opinion that a new arena will not have a meaningful impact on economic growth or economic activity in the Oklahoma City metropolitan area. Instead, it will divert public money away from other needs while incurring new debt. Our assessment is grounded in decades of academic research and economic analysis. The vote on continuing the 1% sales tax to replace Paycom center will have important implications for current and future residents of Oklahoma City and any employees of businesses that rely on Oklahoma City services. It is imperative that such decisions be informed with state-of-the-art methods and appropriate cost-benefit analyses. 

It is important to note that we are collectively against this particular tax-financing arrangement and the proposed terms, not the idea of supporting the Thunder and/or building a new arena under different financing plans. Alternatives that involved a larger ownership share or private financing would be superior options for the city. 

A “no” vote on this proposal is not a vote to send the Thunder packing, nor is it a vote to take away the rights of the team to continue to try to improve fan experience, or the City’s ability to attract other high-profile events. Voting no is simply a statement that the current proposal carries too high of a cost to taxpayers with far too little benefit in return. 

(1) Bradbury, J.C., et al. (2023) Public Policy Toward Professional Stadiums: A Review, Journal of Policy Analysis and Management.

(2) Rogers, C., Stitzel, L. (2019) NBA Sweet Spots: Distance-based Impacts on Establishment-Level Sales, Growth and Change.

Cynthia Rogers, PhD  Professor of Economics  University of Oklahoma	Thomas Brown, PhD  Former Dean, College of Business  Oklahoma City University	Travis Roach, PhD  Associate Professor of Economics  University of Central Oklahoma
Greg Burge, PhD  Professor of Economics, Chair  University of Oklahoma	Mary Gade, PhD  Associate Professor of Economics  Oklahoma State University	Brent Norwood, PhD  Associate Professor of Economics  University of Oklahoma
Yuri Hupka, PhD  Assistant Professor of Finance  Oklahoma City University	Mu-Jeung Yang, PhD  Assistant Professor of Economics  University of Oklahoma	Tyler Ransom, PhD  Associate Professor of Economics  University of Oklahoma
Mariya Burdina, PhD  Professor of Economics  University of Central Oklahoma	Daniel Nedelescu, PhD  Assistant Professor of Economics  University of Oklahoma	Zhen Zhu, PhD  Professor of Economics  University of Central Oklahoma
Rui Du, PhD  Assistant Professor of Economics  Oklahoma State University	Neil Metz, PhD  Professor of Economics  University of Central Oklahoma	Jayash Paudel, PhD  Assistant Professor of Economics  University of Oklahoma
Zi Jia, PhD  Lecturer of Finance  University of Oklahoma	Sohee Park, PhD  Assistant Professor of Economics  University of Central Oklahoma	Chintamani Jog, PhD  Associate Professor of Economics  University of Central Oklahoma
Huiying Chen, PhD  Associate Professor of Economics  University of Central Oklahoma	Ibrahim Kekec, PhD.  Lecturer of Economics  University of Oklahoma	Samantha R. Johnson, PhD  Lecturer of Economics  University of Oklahoma
Firat Demir, PhD  Professor of Economics  University of Oklahoma