The Real Score: Curveballs and casinos rarely save cities

MGM Springfield casino's logo decorates the front facade on Main Street in Springfield, Mass.  Massachusetts' first Las Vegas-style casino is throwing itself a birthday bash, Saturday, Aug. 24, 2019, with Aerosmith, New England Patriots cheerleaders and a five-tier cake. But one year after opening, MGM Springfield has underperformed and shed hundreds of jobs. Some business owners also say the promised downtown revival hasn't materialized.  (AP Photo/Charles Krupa, File)

MGM Springfield casino's logo decorates the front facade on Main Street in Springfield, Mass. Massachusetts' first Las Vegas-style casino is throwing itself a birthday bash, Saturday, Aug. 24, 2019, with Aerosmith, New England Patriots cheerleaders and a five-tier cake. But one year after opening, MGM Springfield has underperformed and shed hundreds of jobs. Some business owners also say the promised downtown revival hasn't materialized. (AP Photo/Charles Krupa, File) AP

FILE - In this July 11, 2019, file photo, spectators watch near an artist's rendering during a groundbreaking ceremony for Polar Park, a new minor league baseball stadium in Worcester, Mass., to be home for the Boston Red Sox's Triple-A affiliate in 2021. On Monday night, Nov. 26, the club announced the team would be called the WooSox, when it moves to Worcester from Pawtucket, R.I., where it has been known as the PawSox. (AP Photo/Elise Amendola, File)

FILE - In this July 11, 2019, file photo, spectators watch near an artist's rendering during a groundbreaking ceremony for Polar Park, a new minor league baseball stadium in Worcester, Mass., to be home for the Boston Red Sox's Triple-A affiliate in 2021. On Monday night, Nov. 26, the club announced the team would be called the WooSox, when it moves to Worcester from Pawtucket, R.I., where it has been known as the PawSox. (AP Photo/Elise Amendola, File) AP

By BRETT ALBERT

For the Gazette

Published: 04-29-2024 8:38 PM

About 10 years ago, the two major urban centers of central and western Massachusetts decided to engage in new regional industrial policy to spur on their local economies. Worcester and Springfield had been effectively hollowed out by decades of American deindustrialization, and the respective leaders of the cities felt direct action was necessary to reverse this structural decline.

Both enjoyed significant prosperity during the Gilded Age of America and peaked in their wealth during the postwar era, with Springfield residents outpacing the nation in household wealth and Worcester still serving as a critical manufacturing hub of the region. But by the 1980s, both cities were hemorrhaging their people to the suburbs and their industries to cheaper production markets.

Worcester’s decline began to slow in the early 2000s, while Springfield’s continued through the Great Recession.

With that as our backdrop, it’s understandable why city leaders felt the need to take direct action to shake off the postwar decades. Worcester decided to invest directly in bringing the Pawtucket Red Sox into Kelley Square, while Springfield chose a different path and accommodated the entrance of MGM into the South End neighborhood.

These industries are often used by cities as tools for regional economic development. Indeed, this was the logic underpinning Worcester’s sales pitch to the PawSox: We want minor league baseball in our town so badly that we’ll give you nearly $200 million of public money to build here, because we believe the jobs that will be created will pay down this cost over time.

Whereas Springfield negotiated a lucrative host agreement with MGM — thereby structuring payments to the city as opposed to paying the private organization subsidies from the city — they still viewed the entrance of gambling into the regional economy as a key cog in its redevelopment. As ground broke on the new operation on Main Street, the economists who were paid by the project proponents promised hundreds of direct jobs at the facility, with potentially thousands more to come from positive spillover effects.

Now that both entities have been open to the public for several years, it’s a reasonable time to look back and check out how these promises and projections turned out.

Let’s start with the results from Worcester. The original tax subsidy to lure the franchise from Rhode Island was a $100 million offer, but that ballooned to $189 million by January 2020 as more costs were discovered. Although city officials promised that public taxes wouldn’t be used to fund this subsidy, that pledge was entirely reliant on tax revenues increasing significantly in the special district surrounding the newly built Polar Park.

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The tax revenue growth hasn’t materialized even close to the level it would need to be to cover the debt payments for the city — and frankly, it was absurd to assume it would. To understand why, we need to grasp the lessons of the broken window fallacy.

As the economic parable goes, a young boy picks up a rock and proceeds to hurl it through the window of the local baker. The townspeople gather around to condemn this young man for his actions, but unfortunately for all, there was a contrarian economist in the crowd.

The economist told the crowd that they needed to calm down, as this boy had done nothing wrong. Instead, think of the economic stimulus he just provided. The baker will now need to pay the glassmaker to repair their window. The glassmaker will take that revenue and buy shoes for his children. The cobbler will take that money and stock back up on inventory. The ripple effect of this will continue along the regional economy, thus improving the finances of every household.

Of course, this is a silly thought exercise. If the boy hadn’t smashed the window, the baker would have simply spent that money elsewhere in the economy. In this sense, the window smashing didn’t create net new economic activity; it shifted where the consumption would occur locally. We simply see the new window go up with our eyes, while the unseen opportunity cost remains hidden to the public.

The same logic applies for our WooSox investment. While it’s always easy to see the brand-new stadium downtown and the flocks of fans going through the turnstiles, it’s more difficult to assess the locals who avoid the area when games are occurring, or the projects that went unfunded because of budgetary constraints introduced by the massive tax subsidy provided.

A bit closer to home, Springfield opted to allow MGM to build a new casino in the heart of downtown. As part of this deal, MGM promised hundreds of jobs directly to the Springfield community, along with significant annual payouts to local communities.

While the jobs have failed to materialize, these community impact payments have come under new scrutiny as MGM seeks to potentially exit its investment in the city. These payments are fairly limited to the gaming industry. After all, what private business has to pay surrounding towns millions of dollars each year just for the right to continue existing? A parasitic one.

At their core, the community host agreements give away the whole game. MGM delivered about two-thirds of the direct jobs they promised, but these community impact payments were designed to mitigate the projected harm MGM might do to surrounding locales.

This wasn’t due to projections of increased traffic or commute times, but rather the expectation that increased supply of local gambling options would likely increase gambling addiction in the community.

We often have dreams of casinos being magnets that draw in visitors from all over, but several years in they tend to devolve to little more than locals shoveling money into a multinational furnace.

Unfortunately, neither baseball nor baccarat have proven to be effective anchors of regional economic development. Rather, it’s the incremental and boring stuff — improved schools, expanded public transit, affordable housing, accessible cultural amenities — that rebuild urban centers and lead to renewal.

So moving forward, don’t look to the slots as your leading indicator of future civic success. Look to the schools.

Brett Albert is a senior lecturer in the McCormack Department of Sport Management at UMass. He can be reached at balbert@isenberg.umass.edu.