Subsidizing Entertainment Projects As A Strategy For Urban Economic Development: A Cost-Benefit Analysis Of Miami’s American Airlines Arena

Abstract

This thesis evaluates the practice of subsidizing entertainment projects as economic development strategy through a case study of the American Airlines Arena (AAA). Subsidy proponents argued that it would generate new tax revenue and jobs, and enhance the city's image and pride. This rationale neglects factors that mitigate the economic impact of arenas and fails to consider the social costs. The AAA subsidy is evaluated using a cost-benefit method that has been underutilized in academic research.The economic impact is analyzed by estimating the fiscal return on the public's investment and the number and quality of new jobs created. The social costs are considered in light of Miami's economic development history and the policy implications are discussed. The AAA subsidy results in hundreds of millions of dollars in losses over the term of the public-private partnership and created a negligible number of low quality jobs. Furthermore, the AAA subsidy may have exacerbated relations between residents iv and leaders by prioritizing the leisure spending of visitors over the needs of inner city residents.v