OPM - Sports Edition
Unless you live in a particular metropolitan area in the Northeast, you probably don't know the name Terry Pegula. Born in a small town in northeastern Pennsylvania, son of a trucker/coal miner, Pegula got a degree in petroleum engineering from Penn State, worked in the oil business for a while, then borrowed $7500 from family and friends to start a natural gas drilling company in 1983.
Thanks to the development of hydraulic fracturing techniques (aka 'fracking'), Pegula was able to grow his business, become fabulously wealthy, and eventually cash out to the tune of $4.7 billion in 2010. He shifted his business focus and invested his billions in sports and entertainment.
Pegula, today, is worth about $6 billion, ranks #188 in the Forbes 400, and owns the Buffalo Bills football team and Buffalo Sabres hockey team.
Not bad for a working class kid from a working class town.
Pegula is in the news today because New York State's accidental governor, Kathy Hochul, and the one-party legislature in Albany are giving him a billion dollars worth of taxpayer money.
Why such largesse?
The Bills' stadium was built in 1973, and the team's lease there expires next year. In the grand and selfless fashion of billionaire sports franchise owners, Pegula threatened to relocate the team if the city and state didn't cough up a giant wad of Other People's Money to underwrite a new sports complex.
Predictably, the state earmarked $600M, the county $250M, $6M per year for the next 30 years for upgrades, and $6.6M per year for the next 15 years for repairs. In exchange, Pegula promises to keep the Bills in New York for 30 years.
This is the biggest taxpayer giveaway for a stadium in American history. By a state that has among the heaviest tax burdens in the nation, the second highest state budget in the nation, ranks 11th in per-capita spending… and one that is losing population to low-tax states. The Buffalo metropolitan area constitutes a mere 6% of the state's population, and while it's certain that much of upstate New York is more apt to root for the Bills than the other New York NFL teams (both of whom play in New Jersey), 70% of the state's residents live in the counties that are proximate to New York City and the Jets and Giants.
Why would the government give so much taxpayer money to a multibillionaire?
Herein we witness the problem of concentrated vs diffuse interests.
Bills fans, businesses proximate to the stadium, local contractors and construction workers, and local politicians have a concentrated interest in such largesse. Most others have a diffuse opposition to it. The Bills are of no interest to me, so I don't support this outlay. But, my 'stake' here is a couple hundred bucks, and it's not worth much of my time or effort when there are a finite number of hours in the day and a whole lot of other things to protest.
So, there will be some short-term grousing, perhaps a few instances of righteous indignation, but not a single politician's job will be put at risk by this gross giveaway to someone who can certainly afford to build a new stadium on his own.
This is why government spending keeps increasing, and also why regulations keep piling up, more and more laws get written, cronyism runs rampant, and no one ever seems to be able to undo bad policies and bad decisions. Those with a concentrated interest in favor of certain spending, certain carve-outs, certain cronyism, and certain regulatory intrusion are almost never counterweighted by those in opposition, since the latter have many other things on their minds.
About the only limiting factor is competition among the concentrated interests. Once the size of the pie is established, people want their slice to be bigger. Arguing down the overall size of the pie is what many “opposers” are apt to focus on. Opposing Boondoggle_01 doesn't get you anywhere if all that happens is that the money flows to Boondoggle_02 (unless, of course, you like Boondoggle_02). The concentrated interests may compete for their slices of a slightly smaller pie, but all that does is intensify their efforts.
I wonder how many Bills fans are the sorts who grouse about ‘tax cuts for the rich’ while still applauding their shiny new stadium. I figure the answer would sadden me.
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Peter.