Thursday, January 10, 2013

Local-washing in Kentucky

While I was queuing up some 80's rock music on YouTube this week an advertisement from Goldman Sachs started playing that brags about how they helped create local jobs in Louisville by financing a new NCAA arena. There was a lot of talk about putting local people back to work and revitalizing the downtown area, which were of course red flags that something is very wrong here.

The most obvious criticism is that this is an approach called local-washing where a large national company will try to piggybank onto the silly "Buy Local" fad by presenting itself as a savior of the local economy. Since most companies need workers to perform labor near their home, any company can argue it has a local impact on some community somewhere.

The second one is, what do I care about the local economy in Louisville? The local purchasing preference movement is all about putting your own community above all the others, so as a resident of Massachusetts shouldn't I be hostile to Goldman Sachs for helping one of our many rival communities?

The third is that arenas are a horrible use of taxpayer money. Sports economist Roger Noll said mixed-use arenas like this one will break even at best, as they mow down a lot of property that can no longer be used for other purposes, and that's if the arena sees constant use. This one doesn't.

The Goldman Sachs video never reveals the name of the arena, which is understandable as it has the unfortunate moniker of the KFC Yum! Center. Like clockwork observations started pouring out about how great the arena is for the city, but the financial figures tell a different story.

The official price tag was $238 million, but critics put it at $348 million by focusing on the municipal bonds the city had to take out to pay for it. The annual profits can't even clear $1 million a year, the city may have to kick in $9.8 million annually to help it makes its mortgages and the arena's managing authority just had its credit rating kicked down the stairs.

Sorry Goldman Sachs, but this Yum! center just made me lose my appetite.

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