Opportunity Costs

The debate over Sacramento’s proposed downtown arena is usually framed as a dichotomy between “pro-arena” and “anti-arena.” (Sometimes it’s also framed as “pro-Kings” or “anti-Kings.”)

Even this public debate between R.E. Graswich and me is positioned that way. It’s a false dichotomy, of course. One can be pro-Kings, pro-arena – and anti-subsidy.

But what’s often lost in the debate is the idea of opportunity cost. If the city of Sacramento commits $258 million (or hundreds of millions more by some accounts), that’s money it can’t spend on other services to the public (like police and fire). Or other construction projects (like light rail). Or other industries (like housing in the downtown region). And many people believe that providing needed services or investing that money in other ways could be far more beneficial to downtown and the citizens of Sacramento than a basketball arena.

For example, William Burg took up the challenge of how to spend $250 million to make downtown a more vibrant area. His article in Sacramento Press outlined a three-step approach:

Step 1: Build the Downtown/Riverfront Streetcar: $130 Million.
Step 2: Add market-rate housing along the right-of-way: $70 Million.
Step 3: Complete the 800 K Project: $30 Million.

He cites examples such as the Pearl District in Portland, as well as Tampa, Florida where a streetcar project “spurred $600 million in additional public projects and $700 million in private investment.”

Today (November 21, 2013) on the Zócolo Public Square website, writer Joe Matthews suggests another approach: Opening a new Cal Poly Sacramento campus. “Don’t build a money-pit arena for the second-rate Kings,” he writes; instead, “make an investment that will transform (and maybe save) California’s capital city”:

A new basketball arena might bring a few more fans to downtown Sacramento (although fewer people attend Kings games each year than visit the average Apple retail store), but not much else. A Cal Poly campus in the very same place would bring new high-paying jobs (via faculty and administration) and educated people to the region.

Underscoring the ideas in these two articles is this: An arena may satisfy the entertainment appetite of many Kings fans, and it may bring some excitement to downtown Sacramento, but it also comes with a cost more than the money itself. The cost is the lost opportunity to invest in projects that would have greater long-term impact in the region.

Ed. note: This blog post was originally published on the Sacramento Arena Debate website.