Opponents of the 76ers’ proposed arena in Center City released an analysis Thursday claiming to show the project could cost the city a billion dollars in tax revenue over the next several decades by destabilizing businesses in nearby neighborhoods.
The analysis, shared by Chinatown organizers, aims to refute brighter economic projections touted by the team in its quest to gain city approval for the project on East Market Street. The 76ers called the new study “fatally flawed” and questioned the methods used by its author, who fears the city’s commissioned impact studies on the arena — which have yet to be released — will fail to capture any potential downsides of the team’s plan.
“The idea behind this project was to try to look beyond the direct impact of the arena and try to model what might happen to the existing businesses and employees in the area,” said Arthur Acolin, the University of Washington researcher who conducted the analysis.
The study looks at potential impacts on businesses in the 19107 ZIP code, which covers the commercial core of Chinatown, Washington Square West and Midtown Village within a mile of the proposed arena site at the Fashion District mall. The businesses in this footprint generate an estimated $296 million in city and state tax revenue each year, according to Acolin’s analysis.
Acolin presents three hypothetical scenarios — low, median and high impact — with calculations of potential business closures and tax revenue losses during the five-year period of the arena’s construction and the first 30 years of operation.
The economic rationale for the study is that disruptions during the construction phase will harm area businesses — some of which operate on slim margins — by discouraging people from shopping in the area, according to Acolin. And when the arena is completed, crowds for Sixers games and other events will most often spend their money on concessions and at new businesses built to complement the arena. Over time, this could threaten the survival of existing businesses to varying degrees, past research on other development projects shows.
Acolin completed his graduate studies in urban planning at the University of Pennsylvania and said he has remained invested in Philadelphia’s economic future. He’s been a community representative in the city’s ongoing review of the 76ers’ arena plan and previously has attended planning meetings for the Save Chinatown Coalition, but said he was not paid for his research.
In his worst-case scenario, Acolin projects there could be a loss of more than 500 businesses and 15,000 jobs in the 19107 ZIP code. That could result in as much as $1.04 billion in lost city and state tax revenue, a figure that would offset much of the $1.472 billion in tax revenue the 76ers have claimed the arena will generate in its first 30 years for the city and state.
“The new businesses entering bring new customers, but also drain some of the customers from the area,” Acolin said. “It’s really a substitution effect that in the Sixers’ numbers is not taken into account at all. They’re just looking at what their investment will be contributing in terms of economic activity, but not what they are taking away from the community.”
The 76ers called Acolin’s conclusions “haphazard,” suggesting it has “half-baked theories,” errors and omissions.
“The underlying research and citations do not actually reach the stated conclusions,” said Mark Nicastre, a spokesperson for the 76ers on the arena. “There is no explanation of how the researcher arrived at his data, assumptions, or conclusions. If it exists, we encourage the author to submit it to the city for independent analysis as we have done.”
In the 76ers’ campaign to build their arena and residential tower, the team has committed to privately financing the $1.55 billion project. State subsidies haven’t been ruled out, but the 76ers’ proposal is otherwise an unusual example of a sports venue that ostensibly would not be dependent on significant public money — apart from a negotiated tax payment, called a PILOT agreement, that the 76ers would get on the land they lease from the city.
The project’s financing is among the reasons the Sixers are so optimistic about their tax revenue projections related to the arena, which they say will create 1,000 permanent jobs and crucially fill the impending void of created by the Fashion District mall’s decline.
Acolin and the Chinatown organizers contend that the 76ers and the city have not examined any of the potential negative impacts of an arena on small and mid-size businesses in the area. They say there has been too little transparency around the methods behind the impact studies done by the 76ers’ consultants and by the firms chosen to lead the city’s arena impact studies, which are paid for by the team and overseen by the Philadelphia Industrial Development Corp.
“It is hard to tell given the lack of details, but from what I have seen, they do not claim to model changes in surrounding activity as part of their tax estimates,” Acolin said. “If they do, they should make it clear and break down how much is coming from (the arena’s) economic activity and how much is coming from what they anticipate to be the impact on existing businesses.”
PIDC did not respond Thursday to a request for information about when the city’s impact studies will be released and whether they will have data that answer questions similar to Acolin’s research. A spokesperson for City Councilmember Mark Squilla, whose 1st District covers the arena site, said Thursday that community members participated in shaping the goals of the impact studies and that Squilla’s office defers PIDC about their specifics.
Chinatown organizers said they expressed concerns to Squilla and others last year, but were never assured that their requests would been taken into account.
“Despite multiple requests to fill that gap (made to PIDC, city planning, and Squilla) the scope of work has not been modified to include an analysis of potential lost revenue, to our knowledge,” Save Chinatown Coalition spokesperson Melissa McCleery said.
As the wait continues for the city to release its studies, the 76ers warn that the precarious future of the Fashion District makes the arena’s approval a pressing issue for local leaders. The team believes it holds the best path forward for the languishing East Market Street corridor and has presented a rare opportunity for the city to leverage private investment in a bold, multifaceted project. In emails Thursday, team officials questioned why building the arena would be considered more harmful than letting the mall die with no plan to replace it, or opting for a different project that theoretically could affect other businesses in ways similar to those described in Acolin’s analysis.
“This should be read for what it is — another attempt by those who oppose the project to obfuscate the truth by pumping out misinformation,” Nicastre said.
Given the lack of direct highway access near the proposed arena site and the lofty expectation that fans will embrace public transportation, Acolin argues that the viability of the arena “seems highly speculative.” He feels the city would be better served if the 76ers built a new arena at the Sports Complex in South Philadelphia, where the project could better support and connect to neighboring projects in the Navy Yard and the development of the Bellwether District. He acknowledged that the challenges on East Market Street are significant, especially in the context of broader economic conditions constraining new development, but he urged careful deliberation about whether an arena is the right answer.
“One of the big issues is the pressure to act now and find a solution for that location now while the development cycle is really not favorable to any large-scale development,” Acolin said. “The arena can seem like an immediate fix, but then there is the potential that it does not support the existing businesses and residents.”
