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The Dueling Narratives of Red Bull Arena and Pro Sports Rent Seeking

Red Bull Arena: The Cathedral of American Soccer or a drain on Harrison's finances?
Red Bull Arena: The Cathedral of American Soccer or a drain on Harrison's finances?

There was a New York Times story a while back that made waves in the MLS blogosphere. The story asserted that Newark got the short end of the urban development stick by building a minor league baseball stadium, while Harrison got it absolutely right with Red Bull Arena.

Ignoring the fact that the timelines don't really match up, as there's only a slim chance Newark actually had any choice in the matter, it looks like things didn't work out quite so well for Newark's neighbor on the other side of the Passaic, either.

Harrison, the gracious host of tomorrow's U.S.-Ecuador game, was newly crowned as the fourth most likely city to go bankrupt. The city's credit rating was downgraded to junk bond levels and has a $6 million budget gap. The city had plans to lay off 17 percent of its police and 29 percent of its firefighters to close the gap, prompting Deadspin to call Harrison "one of the poorest, most lawless places in America."

To add to Harrison's issues, in June Bloomberg reported Red Bull is challenging their taxable status, allegedly owning $1.4 million to the city in property taxes. Red Bull says the Harrison Redevelopment Agency owns the land and thus isn't on the hook for the property taxes involved.

Hyperbole aside, that wooshing noise you've been hearing throughout the article is Bloomberg, Deadspin and the Times missing out on the bigger story: the rent seeking on the part of professional sports franchises and the cities that believe stadium building is the way to urban renewal, even though it rarely if ever works. If only because Red Bull's $1.4 million isn't going to completely fix the debt problem and Red Bull Arena should be the least of Harrison's fiscal concerns.

Make no mistake, the Red Bulls were going to build that stadium and they were going to cut a deal with whatever city was willing to plunk down the financing. Harrison wanted the development and was quite obviously more desperate for it than the rest of North Jersey.

Red Bull could've built the $200 million stadium with its own money - the Jets and Giants did so with $1.6 billion MetLife Stadium (granted, the plans were in place before Red Bull bought the team). But when there are towns and cities willing to give someone money because of their high hopes for development, seemingly ignorant of the evidence that it's not a good idea, one can hardly fault them for taking them up on their offer. Let's all remember, though, that it's not out of the question to expect a team financed by, as Bloomberg points out, a man on Forbes billionaires list, to build their own stadium. Especially when the guys in charge are willing to pour big money into marketing and payroll.

But to lampoon the Red Bulls as the reason Harrison is languishing in debt is half-addressing the problem at best and at worst ignoring it completely. Harrison has bigger problems, especially when the plan moving forward is, according to Mayor Raymond McDonough, "it'll work out in the end."

"It'll work out in the end" is well and good for the average citizen, but not for the chief executive of a city on the verge of bankruptcy. It smacks of a void in civic leadership and it's even more worrisome when the blind optimism is coming from a guy in charge for 16 years. Harrison has been counting on borrowed money and state funding to meet expenses. The Bloomberg piece alludes to Harrison having had revenue problems since the 90's, and it was the revenue problems that prompted the city to designate a third of the city for redevelopment in 1997. One would imagine if Red Bull isn't responsible for the property taxes on Red Bull Arena, none of the developers building are on the hook for property taxes, either. If that's the case, this could be an ongoing issue for the city until they come up with a way to fix it.

If Red Bull owes the taxes, they should pay them (with interest), but even with Red Bull's $1.4 million, Harrison still has a $4.6 million budget gap, still lacks police, firefighters and the other laid off civic employees and still has a financial strategy built on the solid foundation of optimism. To point at the stadium and say "that's our problem" is ignoring the much bigger problems and circumstances at hand.

If anything, it's something to think about.