Heywood Sanders and Neil deMause: Monumental's Questionable Arena Numbers
This week, Michael is joined by Professor of Public Administration Heywood Sanders, as well as journalist and blogger Neul DeMause (author of Field of Schemes) to break down the one-page jobs report for the proposed Alexandria arena, recently shared by Monumental after months of requests. They discuss the plausibility of the estimates, the questionable assumptions, and the lack of commitments for if the estimates don't pan out--and why they're skeptical about putting millions of taxpayer dollars into the project.
Episode Transcript
Michael Pope
I'm Michael Pope. And this is Pod Virginia, a podcast that's finally received an answer about those 30,000 jobs that are supposedly going to be at the proposed Arena in Alexandria. Yes, that's right. The city of Alexandria finally got back to my request about these jobs that were made almost two months ago. What kinds of jobs are these? And how much money are they going to pay? We've got a great panel of guests here to go through the data that the city of Alexandria finally shared with me after two months of pressing and pressing and pressing and calls and emails. Our first guest is Heywood Sanders, Professor of Public Administration at the University of Texas in San Antonio; thanks for joining us.
Heywood Sanders
You're very welcome.
Michael Pope
We are also joined by Neil DeMoss, co-author of the book Field of Schemes, which is also the title of his blog. Thanks for joining us,
Neil deMause
It's great to be here.
Michael Pope
So the city of Alexandria, Finally, after two months of constant, constant calls and emails and text messages from Me, personally has finally gotten back to me with a one-page document that doesn't really give a lot of detail but does give us a little bit of an indication of these 30,000 jobs, which are mostly office jobs. Heywood Sanders, why is it a problem that two-thirds of the jobs are supposedly going to be created by these arena office jobs? Why is that a problem?
Heywood Sanders
The first thing to note is that the claim of 30,000 jobs includes what your one-pager clearly identifies as indirect and induced jobs. And while those are terms of art in the economic development and promotional community, those aren't jobs that come directly out of this project. They're not people who are working in buildings in Potomac yards on this particular site. They're downstream jobs created by the spending of the people who are on this site. So, the actual direct job number, which is what most people think of when folks talk about a project creating jobs, is 13,440. Of that number, only about 2,000 have anything to do with the Arena, concert venue, and functions that are the kind of lead about this particular project. Everything else in this one-page document is linked to retail employment and multifamily employment, which means new residential units on the development side and what they term mixed-use employment. And that's almost entirely offices. There are lots of questions about when and how new retail multifamily and new mixed-use employment, particularly offices, is actually going to happen, particularly in the current environment for office and retail activity.
Michael Pope
Neil deMause, I'll throw it to you here. What was your reaction to this long-awaited one-page document that we finally got? Does that spell out some of the details about these 30,000 jobs?
Neil deMause
Spells out may be an overstatement. Like Heywood, I've looked at an awful lot of these reports over the years. I've seen a lot of these one-pagers, and I can immediately recognize this. This is one of these documents where they're not sitting there and actually figuring out, okay, if we build a stadium, how much development will be generated? It's like, okay, we're going to build a bunch of office buildings, the office buildings can hold whatever, 15,000, 30,000 people; if those many jobs are created, how much would that be worth? It's this complete hypothetical of, if we build 15,000 chairs worth of office buildings, clearly, that'll be 15,000 new jobs, and then we'll look up what the multiplier is for office jobs. Oh, look, it's x2, let's call it 30,000. I honestly thought the best comment about any of this was from the economist JC Bradbury, who called these clown documents. And that's his style on Twitter, but I don't think he's wrong. Basically, these are PR documents that are designed not to analyze the actual economic impact. But to say, how can we find a big number and justify it in some way?
Michael Pope
Well, if it's a PR document, it's a failing PR document because I asked for these numbers on January 4, and so they sent me this one-page document on February 27. Heywood Sanders, do we typically find this level of lack of transparency, lack of answering questions, and retreat into silence? Is this standard operating procedure for this kind of thing?
Heywood Sanders
Well, as Neil can chime in on the market feasibility or economic impact documents that we typically see for an arena, stadium, convention center, or large public investment venues, we usually see a pretty elaborate analysis of new visitors to the community new activity generated by the Arena, there's nothing of that here. And there's nothing of that here, in large part, because this Arena is not going to do anything different than the existing Arena in downtown DC is already doing; it's just going to get moved a bit. So apparently, the folks who put this deal together have decided that rather than trying to sell this in terms of the Arena, they're selling this in terms of this grand proposed notion of all of the things that will happen outside and around the Arena in the larger development site. And that's worked in some cases in other cities. But the problem here is that there's no particular reason for assuming that the retail employment, the multifamily slash residential employment, or the mixed-use employment that is apparently mostly office has anything to do with the Arena. In fact, I think almost any reasonable observer would suggest that an arena is likely a detriment to all of that kind of stuff.
Michael Pope
Explain that last comment. How could an arena be a detriment?
Neil deMause
Well, an arena is going to bring in lots of people from outside, whether by car or metro or some other means, but those people don't constitute a particular benefit for folks who are working in an office. Having a sports arena sitting next door to an office building isn't going to make that office building or its tenants any more productive or that space more desirable. A museum might, a good restaurant might, or some cultural center might. But there's no evidence that a sports arena will, period.
Michael Pope
Neil deMoss, I was interested in getting your perspective on the delay here. So, there is a two-month delay in getting information about the 30,000 jobs. In December, the governor is talking about 30,000 jobs; it's the major selling point. Yet, they could not provide any level of detail until two months later. And even then, this is a one-page document we're talking about. You have looked at these kinds of deals all over the country. Is the standard operating procedure this level of lack of transparency?
Neil deMause
It's not uncommon; I've filed an awful lot of Freedom of Information Act requests, and they often will drag their feet when you request numbers like this. Again, if they don't have them already prepared, they have to figure out a way. Okay, how can we present something that we can justify the numbers, but at the same time, it shows what we want it to show? And we live in a world where sports team owners and developers announce things all the time without actually having the backup ready. Look at what just happened with the Oakland A's owner in Las Vegas, where at the beginning of December, he had an announcement ready; it wasn't even an economic document, just renderings and pictures of what the stadium was going to look like. But people were very curious. How are you going to fit an enormous dome stadium on this tiny nine-acre site? And at the last second, did they cancel? Because they said, oh, well, some state troopers had died the previous week, and they didn't want to distract attention from that sad occasion. Okay, fine. It's been three months now, and they still haven't announced anything. And you start to wonder, okay, well, maybe they just didn't actually have it.
Michael Pope
Heywood Sanders, please expand on our lack of knowledge about the assumptions. This is actually a line of inquiry that I have made many times to the city of Alexandria trying to get information about the 30,000 jobs. The communications person who I spoke to after this one-page document was released said that she was not going to comment on the assumptions because the city of Alexandria did not create this 30,000 jobs number; it was the consultant HRNA, and they apparently are going to speak on background, but not on the record. So, that doesn't help me because I need people to speak on the record. So, knowing that we know nothing about the assumptions, they have not talked about the assumptions; Heywood Sanders has explained why that's a problem.
Heywood Sanders
Because there are lots of assumptions in this document. An enormous number of assumptions in this document. You had previously shared with me an earlier document, I think, from last month.
Michael Pope
January 22.
Heywood Sanders
That was a bit longer and marginally less obscure; it actually attaches dates to phases one, two, and three that are included in this particular document. It's interesting to note, for example, that in the mixed-use category, which includes office employment, In phase one, there are 830 jobs. In phase two, there are 1,113. And in phase three, there are 7,745. Most of the job creation alleged in this comes in phase three at the end. But there are no dates attached to phase three. So we have no idea when those jobs might happen. Or if those jobs would happen in anyone's lifetime. It's a masterpiece of obfuscation, in my judgment.
Michael Pope
A masterpiece of obfuscation would make it sound like it was successful obfuscation. I think this is the least successful obfuscation I've ever seen.
Heywood Sanders
Well, I'm going to make some big whopping assumptions here. It either assumes that anybody who reads this is totally naive about these things. Or it's based on the assumption that the governor of Virginia quoted 30,000 jobs some months ago. And they somehow finally had to come up with a document that got close to 30,000. Now, the reality of this is terribly peculiar and enormously misleading. This is a prime development site in an area historically seen as a great deal for new development, and there is a lot of developer interest in the Washington DC metro area economy. Northern Virginia, in particular, is sufficiently robust in terms of retail, residential, and mixed-use office activity. You know, what's striking about this deal is it's not as if Alexandria or the state went out to the marketplace and put this particular site out for development proposals weren't competing bids. They just got themselves one deal from one developer. And, I'm sorry, that's not the way most sensible public officials would do business. It's certainly not the way we do business when we're trying to, for example, sell a house; you don't find somebody and say, Hey, what will you offer me? You put it on the market and see what the nature of the response is. And all of that has been bypassed here.
Neil deMause, I'm curious if you have any thoughts on the lack of knowledge of the project's assumptions. The city of Alexandria won't comment on the assumptions. The consultant won't go on the record. The documents don't tell us anything about the assumptions. Why is that a problem?
Neil deMause
Well, the problem is exactly the reason that you stated. If there's a whole bunch of numbers, and you don't have the backing data, you don't have the footnotes. Then, the numbers can say absolutely anything. And I think that's the goal here. Going back to what Haywood said about the governor of Virginia, I don't think these numbers are supposed to convince anyone. They're not supposed to convince you, or me, or anyone in this conversation. And they're probably not meant to convince any of your listeners. They're meant to be cover for the elected officials. Who can then say, on the one hand, there are 40 years' worth of economists saying there has never been a sports facility that has come close to justifying this kind of public expense? On the other hand, we have these pretty pictures and these charts of the consultants we hired. So, I guess the truth is somewhere in between. It's really meant to dispel all of the people who are saying there's no possible economic benefit to this, all the things that Haywood and I are saying. It's saying, but look, here's a 30,000 job sheet of paper; this must mean something. No, it doesn't mean anything. But if you show it enough times, you hope that some people will be able to say, well, I saw a number that said 30,000 jobs. So I want those 30,000 jobs, I guess; here's our money.
Michael Pope
Heywood Sanders, we were just talking about this, and I want to make sure that I got a grasp on this. Has this kind of public funding for this kind of venue ever been a good deal? Ever, in the history of deals for venues like this?
Heywood Sanders
I hate to be quite that expensive. But again, the mechanism for paying for an arena is a whole lot of other developments that may or may not happen. That may take a long time to happen. If indeed it does, that has nothing to do with what goes on in that Arena.
Michael Pope
Actually, the one-page document they finally shared after two months of pressing had a part of this that says arena phase. And so it has arena/ event day operations. That's like 1,500 jobs. It also has another arena phase activity, which is 2,300 jobs.
Heywood Sanders
That's with the multiplier numbers. The direct number for arena operations is 941.
Michael Pope
That's a very good point.
Heywood Sanders
Including parking security, food concessions, Arena, retail, sales players, et cetera. If you put an arena on that site, you're going to hire parking attendants, security guards, and folks to hand out food at concession stands.
Michael Pope
You just put your finger on something very important, and I want our listeners to know. If you talk about the direct jobs created by the Arena, you're really talking about 2,000 jobs, correct?
Heywood Sanders
Yes.
Neil deMause
And by creating again, we're talking about shifting from DC.
Michael Pope
Shoited, that's a very good point. They're not really created; they're pirated.
Heywood Sanders
Yes.
Michael Pope
And so, what does that tell us about this?
Heywood Sanders
It tells us that this one-page document has lots of numbers in it and a pretty heading at the top with lots of bold colors.
Michael Pope
And it is pretty. Our listeners are not seeing this. It's very colorful, says monumental on the top, and there's an artist's rendering of what it would look like.
Neil deMause
The fonts are beautiful.
Michael Pope
Yeah, like this is a nice-looking document.
Heywood Sanders
Yeah, it's a lovely-looking document. It is full of no substance whatsoever.
Michael Pope
And what do we take from that? Why do you think they didn't give us a 20-page document that had details about the janitors and the hot dog vendors?
Heywood Sanders
Well, they might have given us a document, I doubt 20 pages, that had some detail about the janitors, the security guards, and the hot dog vendors. But the problem is they don't know what's going to happen. They're predicting the future in a very uncertain environment for all of the non-arena activities that are ostensibly going to happen as part of this project. And they can't tell you what those are because they frankly don't have a clue. This is the kind of thing that's often part of a marketing sales pitch for this kind of development. And perhaps there are journalists out there who will write a story that cites there are 29,555 jobs created. And they will thus have achieved what they want. But any observer with any knowledge or understanding of what this is would say this is ludicrous.
Neil deMause
I think this is a trend in this type of sports facility development; it's used as the quote-unquote anchor of the argument. Thirty or twenty years ago, you didn't see it as often. And you saw team owners saying, Okay, we want whatever number of dollars it'll take to build ourselves a stadium or Arena. Somewhere along the way, it was realized, Oh, hey, people don't want to give tax money just for a stadium or an arena. Partly because there's an enormous literature on economics saying that they're not worth anything. But if we say it's a mixed-use development, and we attach other stuff, like housing, commercial development, retail, you know, make the argument, well, how could you say the stadium doesn't have any impact on all this other stuff? I live in Brooklyn; we've seen that here with the Brooklyn Nets arena, where they said, Oh, it's not just the arena arena. You'll have all of this housing; it'll be a whole new neighborhood. The neighborhood took a really long time to develop and still isn't all built up. Then, in Worcester, Massachusetts, they said, Oh, yeah, sure, it's just a minor league baseball stadium. But look at all this housing and other stuff. So this is exactly what you see in city after city after city. We're seeing it in Chicago right now. And then, after all that happens, everything in this entire neighborhood is because of the sports facility. That's simply not true. People do not move to or open offices in a neighborhood because there's a sports team there. And if anything, it's a detriment because of the traffic created. And because it's empty most of the year. Even if you've got two teams and concerts, say maybe, you've got 200 nights a year where something is going on there. Okay, great, that means it's completely dark the other 150 days of the year and all those afternoons. So you would be much better off with a supermarket or a hospital or anything that's creating actual activity, other than a sports venue.
Michael Pope
Heywood Sanders, do you have any thoughts on the land use decisions? This is an extremely valuable property right next to a metro station. It's also a blank slate, which developers love. Because they don't need to worry about existing plumbing or existing buildings, it's an extremely valuable property that will be taken off of the property tax rolls because the public authority will own it. Taxpayers in Virginia will actually own this property, and that'll be taken off the tax rolls. That's the land use proposal that we're talking about. But there could be other things there, such as a grocery store; it's actually too close to other hospitals, so it probably wouldn't be a good fit for this particular property. But many other land uses would work here at this particular property. What are your thoughts on that?
Heywood Sanders
That's precisely the case; this property is sufficiently well-located and has excellent transportation access. The property will be developed one way or another. And again, let's stress essentially that all of the deal has nothing to do with the arena portion. Whatever happens, we won't be generating taxes that support services to the people who live there or the offices in these mixed-use office towers. This deal has it so they aren't paying taxes; all of the property tax revenue generated by this is pumped into paying for the arena and concert venue. So, if I were a taxpayer in Alexandria, I'd be furious about this.
Michael Pope
You say you would be furious about this. The city of Alexandria would indeed take a huge hit in terms of property taxes; they would not get the property tax revenue from this property. However, there would be a lot of other taxes. This is the selling point that's attractive to the city council members. Which is all this revenue from hotels and the sales taxes we're going to get.
Heywood Sanders
Understand, again, that this is a market phenomenon if there is demand for retail on that site or for housing on that side. Then, those activities will produce taxes that would naturally go to Alexandria.
Neil deMause
A little secret that not everyone may be aware of. But people who live in Alexandria also live in Virginia. Even if you're saying, well, Alexandria is going to be able to steal some business, right from other parts of Virginia, and maybe a little bit from DC as well. But if this ends up being almost a net wash for Virginia because people who live in Virginia are still going to be shopping in the same Virginia, then the state is going to be taking a huge hit as well. I think, yes, sure, there might be a world in which you'd say, Oh, well, Alexandria is getting away with something by getting the state to pay to build something in Alexandria. Sure. But the people getting rich off of this are going to be the Capitals and Wizards owners and the other developers, not the city of Alexandria.
Michael Pope
I think a lot of people listening to this podcast might be saying to themselves after having listened to the conversation that we just had. The 30,000 jobs is a made-up number; is that the takeaway?
Heywood Sanders
It's a number that's based on a whole set of assumptions, effectively, none of which are spelled out here. And all of which are subject to a great many questions. In particular, I think anyone with any sense should recognize the current economic environment. The shift to significant remote work and the change in how we live our lives as opposed to pre-Covid. You need to know what these assumptions are. And if they are plausible. And quite frankly, that plausibility has certainly not been demonstrated in this document or anything that I've seen to date on the project. And it's seriously open to question. It just doesn't add up. So, are they made up? Somebody created them based on some assumptions. But one of the giveaways, and Neil should join in on this, is when folks produce documents like this that are precise, down to the unit's digit. This document doesn't say sort of 30,000, but maybe 25,000 and maybe even 32,000. It says 29,555. It is remarkably precise; is that a red flag? Yes, it is. Because you simply can't be that precise about estimates and forecasts that are going out 20 or 30 years, as this project has multiple phases.
Michael Pope
So, would it be a more credible document if it were a round number?
Heywood Sanders
Well, at the very least, there should be some suggestion for the lack of precision. There should be some suggestion that there is a plausible range of outcomes. But this is very precise because every single number here is very precise. It suggests that we can and do know exactly what will happen. The total of direct, indirect, and induced jobs will be 29,555. And you just can't be that precise in this circumstance.
Michael Pope
Neil deMause, what do you make of the precision here with 29,555?
Neil deMause
Maybe some of your listeners have seen the Manchurian Candidate, where instead of saying I have here a document that shows there are 216 communists! Hahaha, right? People like precise numbers. It sounds more plausible if you say it will create 29,822 jobs rather than between this number of jobs and that number of jobs. Even though when you look at a legitimate economic study, it has those error bars, it has here's the optimistic projection, it has the pessimistic projection. So I think it's very much intentional; it's big, loud, bold, and definitive numbers to make it sound like they're coming from somewhere. That does not mean it's actually coming from anywhere real.
Michael Pope
Heywood Sanders, I'm curious if you have any thoughts on the different phases. This is a one-page document that they finally released after two months of pressing them. The document has a phase one, phase two, and phase three. I don't know what to make of that. What do we make of the three different phases?
Heywood Sanders
Well, it's describing that this deal is not going to produce 29,550 jobs immediately. Even if you grant them the indirect and induced downstream jobs, the Arena produces 20,322. Then, in phase one, however long that might be, you get a total of 1,234. And I hate to keep doing this and read off these numbers because, again, it sounds like they're really precise when the reality is they can't be. But the biggest numbers come in phase three, where there are 19,364 jobs.
Michael Pope
Yeah, 20,000 jobs.
Heywood Sanders
And in this document, they don't even tell us or suggest, as best I can tell when phase three happens.
Michael Pope
Neil deMause, What do you make of this magical phase three? When 20,000 jobs magically appear.
Neil deMause
I mean, it'll happen in the future. So you're safe from anything you predict happening in the future? Because here in the present, we don't know what that's going to be yet.
Michael Pope
Actually, that's a very good point; I had not really seen that. So you just pointed out that phase three is like the magical number, where you get two-thirds of the job to appear at this undated point in the future that they call phase three.
Neil deMause
Which can change and which may or may not happen. The important part when you're producing one of these PR documents is to put in as many big numbers as you can without actually committing to anything. It would be very different if this developer were saying, Okay, here's how much development is going to happen, and here's the dates we're going to hit it by. And here's how many jobs this will create. And if we don't create that, then we will give you back your tax money. It's called a clawback, and they are not promising to do any of that.
Michael Pope
Clawback is a very interesting word. Heywood Sanders, there has been no discussion, that I know of, in Alexandria of any sort of clawback provision.
Heywood Sanders
Well, if you're committing to creating jobs, any sensible local, elected, and economic development officials would say give us a number and give us a timeline. And if you don't create those jobs and if you can't document that you've created those jobs, then we'll take what we've given you back. But in this case, you can't give back an arena once it's built. Although I suppose you could repay the cost. The problem is these are not commitments. There are no consequences to the developer for failing to generate these jobs.
Michael Pope
So you could write that into this deal.
Heywood Sanders
They could, but they won't because they can't. They would never commit to these numbers because they can't commit to them. Because they they won't happen. They can't be documented.
Neil deMause
My favorite example of this was from years ago when people like Greg Lloyd were starting to push for commitments. You at least have to promise how many jobs you're going to create. And I think it was a Dairy Queen in Minnesota that had gotten some public money to create jobs. And they were required to file a form saying how many jobs they were going to create. And they sent it back in, and they wrote in, we will create one job. I think they made it to that one job; I'm not sure.
Michael Pope
Wow. So this has been a fascinating discussion, especially considering we have been talking about a one-page document that Monumental, the City of Alexandria, and the Alexandria Economic Development Partnership had finally shared with me after two months of pressing. So I'd love to open it up to any closing thoughts that either of you had, Sanders you first. Our listeners are constantly hearing this number: 30,000. The governor is always talking about 30,000 in the press, and you read it in the newspapers: 30,000 jobs. When people hear that number, what should they be thinking about?
Heywood Sanders
They should think that it makes no sense. They should think that it is totally implausible. They should think that what they're doing is giving an enormous amount of public dollars, public tax dollars, to developers to build a new arena to move a sports team from one side of the Potomac to the other. Period.
Michael Pope
Neil deMause, the same thing happens to you; our listeners are constantly hearing the governor and even Democrats who are supporters of this proposal. They will cite this number as a reason to make it happen. What should people have in the back of their mind? What should people be thinking about when they hear this 30,000 number?
Neil deMause
People should be thinking this is nothing new. For decades, elected officials and sports team owners have been making these kinds of claims in order to get all this public money given to the owners of private sports teams. And this is absolutely no different. The promises have not been followed up on in other cities or states in the past. And I guess Alexandria may be different from all of the other hundreds of times this has happened since the 1980s. But I would not put my money or Virginia taxpayer's money on it.
Michael Pope
The definition of insanity is doing the same thing and expecting a different outcome. This has been a fascinating and eye-opening discussion. I really appreciate everyone joining us. Heywood Sanders and Neil deMaus, thank you for joining us.
Neil deMause
It has been a pleasure.
Heywood Sanders
You're very welcome. Pod
