Competition for NBA 76ers arena raises questions of public interest

The Philadelphia 76ers, like many teams before them, want a new arena.

The NBA franchise has pledged to build a $1.5 billion arena in Center City Philadelphia with no government subsidies, but many Philadelphians remain vocally opposed. New Jersey made a $1.3 billion offer to build the stadium in Camden, right across the Delaware River.

Between proposals from the Sixers, Philadelphia and New Jersey, who's getting a good deal? Economists aren't sure anyone is.

New Jersey's offer, outlined in a letter from New Jersey Economic Development Authority CEO Tim Sullivan that was published by NBC10 Philadelphia, includes two $400 million tax subsidies using the state's 2021 Economic Recovery Act: one grant for the arena and one for the team to build residential, retail and office development.

The state would give the team one or more parcels of land, the site of a former state prison, potentially for free, the letter said. But that's not all.

"We are also prepared to work with the legislature to enable the structuring of up to $500 million of special-purpose bonds supported by fees and surcharges on tickets, concessions and parking (with no impact to New Jersey taxpayers) to support the development of an arena," the letter said, adding that the state would expect a community benefits agreement.

The New Jersey Economic Development Authority declined to elaborate on the proposed bond deal.

The team said it will consider the offer in a statement.

"We appreciate Governor Murphy and the NJEDA for presenting a thoughtful and compelling vision for the revitalization and economic growth of Camden," the statement said. The team's headquarters and practice facility are already in Camden. "We must take all potential options seriously, including this one," the statement said.

Sixers owner Harris Blitzer Sports & Entertainment owns the only major league team with New Jersey in its name, the Newark-based Devils of the NHL.

New Jersey's offer, when factoring in the value of the land, opportunity cost for other economic development projects and interest on the bonds, could cost the state $1.4 billion or as much as $2.1 billion, according to University of Colorado economist Geoffrey Propheter.

What would the 76ers spend to receive such an offer? The team hasn't yet made a proposal for Camden. But the Sixers' plans for Philadelphia total $1.85 billion.

Those plans include $1.55 billion for the arena, currently dubbed 76 Place at Market East, which will have shops on the ground level, link to a subway station with trains running beneath, and the event level starting on the second story.

The Sixers also plan to build a $250 million apartment complex with affordable housing next to the arena, and would pay $50 million to support neighboring Chinatown in what press releases from the team describe as the "largest legally binding Community Benefits Agreement in the history of Philadelphia."

The team's economic impact study suggests the arena would generate $1 billion for the city and school district over 30 years, and its location ? in a block occupied by a dying mall, right next to a subway station ? will support economic development and the troubled SEPTA public transportation system.

Philadelphians aren't buying this: a recent poll found only 18% of respondents supported the proposed arena.

The assertion that taxpayers won't contribute to the arena has some caveats.

State law allows stadium owners to donate the land their stadium sits on to the government and make payments in lieu of taxes, which must amount annually equal to 2% of the costs of the construction project, plus more if the developer agrees.

The big pro sports venues in Philadelphia pay PILOTs instead of taxes. The Wells Fargo Center, where the Sixers and the NHL Philadelphia Flyers currently play, pays $2 million per year, instead of the $3.5 million it would pay based on its property assessment, according to the Philadelphia Inquirer.

The Sixers have declined to say how much they plan to pay in PILOTs, but that it would be at least double what the Wells Fargo Center pays now. Propheter said his best estimate, based on the team's proposal for the stadium, is $3-5 million. The tax bill for the arena, Propheter estimated, would likely fall between $6.6 million to $12.9 million, without adjusting for inflation.

Over 30 years, the stadium would actually avoid $48.8 million to $181 million of taxes thanks to PILOTs.

But that's not the only cost to the city. A two-page study summary from a University of Washington professor suggested the arena would actually cost Philadelphia nearly $1 billion of tax revenue over 30 years, plus $100 million of state tax revenue.

The Sixers' study focused exclusively on the area immediately surrounding the arena, according to Arthur Acolin, the author. When Acolin widened the scope to study the businesses that would compete with the arena, he found it could put 566 businesses out of business and cost nearly 16,000 jobs.

Sixers fans would spend their money at the arena and surrounding block, rather than venturing into the neighborhoods, and people who would normally visit those neighborhoods will avoid them because of all the traffic he said, and the impact would be felt most brutally in Chinatown.

Residents and businesses in Chinatown have been displaced by large developers before, said Mohan Seshadri, executive director of the Asian and Pacific Islander Political Alliance. The Pennsylvania Convention Center displaced 200 elderly Chinatown residents in 1993, and the coalition views the result as a preview of what the basketball arena could bring.

"When, for example, there is a big convention at the convention center, and there is no parking available in Chinatown because the convention-goers have grabbed all the spots, when you can't get in and out from Chinatown because there's too much traffic, or public transportation is too clogged up, when our elders, when our young people, when those regulars, aren't able to get into Chinatown and out of Chinatown," Seshadri said, "Chinatown actually does less business."

And the CBA isn't persuasive to him. "The idea that $50 million over 30 years could even hope to mitigate the devastation that this arena would cause, it's an insult," Seshadri said.

Acolin argued the arena would also undercut the current stadium district that houses venues for the NFL Eagles, baseball Phillies and Wells Fargo Center.

The three venues, which sit in a shared sea of parking lots, only attract business to the region on nights when they have a game, so moving the Sixers' traffic to a new area could hurt the South Philadelphia economy.

Councilmember Mark Squilla, whose district would house the arena, said the Sixers also want a provision in the legislation for the venue that says if the city grants a subsidy to any other stadium in the duration of the Sixers' lease, it will pay the team the same amount.

The clause would make it impossible for the city to subsidize any future stadiums for the next 30 years, Squilla said, which could be a benefit in the eyes of many councilmembers.

The Sixers have only committed to avoiding city subsidies for their first 30-year lease, Propheter noted. The Washington Capitals and the Carolina Panthers also took no government money when they built their venues.

"But fast forward 30 years later, and what did they do? They hold the city hostage for hundreds of millions of dollars for renovation," Propheter said. "Just because it's built initially with mostly private dollars doesn't mean it stays that way."

The price tag for Philadelphia begs the question of whether Camden would suffer the same hidden costs. Acola said the stadium wouldn't do quite as much damage there.

"What really makes the proposed (Philadelphia) site unique is how many businesses and small businesses are around the proposed arena," Acolin said.

Squilla said Jersey lawmakers likely don't feel like they'd be losing money from the tax breaks: if they didn't offer tax subsidies, the Sixers would never move to Camden, so there would be no taxes to collect.

The city has been struggling for decades, and the state government has a long history of trying to lure businesses there with financial incentives ? including $82 million grant for the Sixers' practice facility.

Propheter disagrees with that reasoning. Every economic development decision comes with an opportunity cost, he said. New Jersey could give the tax credits and land to other businesses, which would have grown the economy more.

"Anything you think you could do with sports, you could do without sports, for cheaper," he added.

The Sixers' lease at Wells Fargo Center expires in 2031. The 29-year-old arena is controlled by Comcast Spectacor, which owns the Flyers, leaving the Sixers at times chafing over their status.

The city is still in negotiations with the Sixers, and will decide this fall whether to introduce legislation to build the stadium, Squilla said.

Squilla said hasn't yet decided whether he'll vote for it. He wants to ensure certain protections for the surrounding economy first, like zoning changes and the creation of historic districts, and if those can't be secured, Squilla says he will oppose the deal.

Seshadri said the stadium and a strong Chinatown are mutually exclusive.

"Our realistic analysis is that this thing is a killer to our community, and there's no way to mitigate it," Seshadri said.