Public funding for stadiums?

[WSU151]

The argument for publically financed stadiums has been based almost entirely on correlation. Downtown Denver was doing nothing until Coors Field came in and look at how much better its gotten. And that's true. But downtown Denver wasn't doing until Mary moved in after graduating college in '95 and then the area just exploded. Neither sentence proves anything. You have to show causation as well and that's where the argument starts breaking down.

It's fairly easy to prove that new renovations around Coors Field happend in '95 and later because of the inflow of fans into that section of the city to watch games. New bars within a block or two of the stadium didn't spring up because Mary graduated college. It was clearly the stadium that drove the new investment. You know what else increased thanks to the new investment? Property values and property taxes.

I'm not saying all public fundings for stadiums are great deals. Miami got fleeced with Marlins Ballpark. But downtown stadiums and arenas aren't as economically detrimental as people want to believe, either. (Another decent example is Nats Park is slowly revitalizing part of the city that no one used to visit) .

[STL FANATIC]

Busch Stadium III was mostly funded by the Cardinals, to the point that it qualifies as privately funded. However, a small portion did come from public funds. Additionally, the Cardinals had taxes relaxed/waived on the Ballpark Village land, and continued to have that despite not living up to their obligations as specified in the agreements. (They've finally built something there, and it's decent, but it's not what was planned, and it took a very long time. This isn't all their fault—there were a lot of factors, but they did get away with some things that they maybe shouldn't have.)

Switching away from Busch specifically, stadium developments can have a real impact (be it financial or otherwise), but only if they're part of a well-planned and well-executed strategy. You can't just build one and say it will be good for the area and leave it at that. I'd venture a guess that more developments have failed to revitalize an area than those that have been successful at it. And the ones that succeeded, did so because a number of other factors were smartly executed as well.

[ElwoodCuse]

http://www.fieldofschemes.com/

Public stadium money is just another example of government waste to benefit the megarich but it's easier for people to swallow since everyone likes sports

[Cosmic]

At the very least, states with income tax could funnel the anticipated tax from players' salaries into some kind of stadium fund without costing anybody money. In NY, the top rate is something like 8%.... that's nothing to sneeze at with a $100M NFL payroll or a $60M NHL payroll.

[dfwabel]

At the very least, states with income tax could funnel the anticipated tax from players' salaries into some kind of stadium fund without costing anybody money. In NY, the top rate is something like 8%.... that's nothing to sneeze at with a $100M NFL payroll or a $60M NHL payroll.

Neither funneling a portion of that, nor a "performance tax" for athletes/entertainers which cities like Philly have don't put a dent in debt service. Hell, 20+ states/provinces have a "jock tax".

The 'nati has one at 2.1% per performer, and Paul Brown Stadium debt service is still a d@mn mess

[Cosmic]

I've always thought those visiting player taxes were kind of sleazy IMO, but you double your revenue then... roughly $10M per year for an NHL team or $16M for an NFL team. That is real money. It's not enough to pay debt on a stadium by itself, but it's a significant amount of money.

[dfwabel]

http://www.fieldofschemes.com/

Public stadium money is just another example of government waste to benefit the megarich but it's easier for people to swallow since everyone likes sports

Neil keeps up the cause from books written by Euchner (1994) and Rosentraub (1999) regarding public money.

[Gothamite]

Field of Schemes, like virtually all blogs, is an opinion site. Not a source of actual fact, though Neil often cites facts in his editorials (the actual meaning of those facts being subject to interpretation).

Though I often agree with his conclusions, it's important to remember that. He's a columnist, not a reporter.

[WSU151]

At the very least, states with income tax could funnel the anticipated tax from players' salaries into some kind of stadium fund without costing anybody money. In NY, the top rate is something like 8%.... that's nothing to sneeze at with a $100M NFL payroll or a $60M NHL payroll.

This is more of an add-on than a direct response - Don't players file tax returns in all states (that collect income tax) in which they play games?

EDIT: crlachepincochet beat me to it.

[WSU151]

Field of Schemes, like virtually all blogs, is an opinion site. Not a source of actual fact, though Neil often cites facts in his editorials (the actual meaning of those facts being subject to interpretation).

Though I often agree with his conclusions, it's important to remember that. He's a columnist, not a reporter.

Neil often misses the mark in terms of circulation of money. He tends to have a Wallet A-to-Wallet B approach and that's it.

[smzimbabwe]

At the very least, states with income tax could funnel the anticipated tax from players' salaries into some kind of stadium fund without costing anybody money. In NY, the top rate is something like 8%.... that's nothing to sneeze at with a $100M NFL payroll or a $60M NHL payroll.

That was part of the financing plan Portland came up with when it was trying to land the Expos...

[Brian in Boston]

Its just seems like money is getting moved from one area of the city to another, but not necessarily generating any new revenue of its own.

Regular season events generally result in discretionary income being moved from one location to another, even when sports attendance is up (e.g. a couple chooses to go to a baseball game instead of spending the same amount of money on dinner and a movie on the other side of town).

Bingo.

Discretionary income is finite. Public construction of an arena, ballpark, and/or stadium doesn't cause new, heretofore nonexistent money to magically materialize in the pockets of consumers. Money spent on one non-essential good or service, such as attendance at a sporting event in a publicly-financed venue, cannot subsequently be spent on another non-essential pursuit. Ultimately, public subsidization of one entity - in this case, a pro sports franchise - is, in a best-case scenario, going to leach discretionary income away from other businesses in the community. The bottom line is that construction of publicly-subsidized athletic facilities doesn't create new discretionary income, it simply redirects existing discretionary income.

[pmoehrin]

Its just seems like money is getting moved from one area of the city to another, but not necessarily generating any new revenue of its own.

Regular season events generally result in discretionary income being moved from one location to another, even when sports attendance is up (e.g. a couple chooses to go to a baseball game instead of spending the same amount of money on dinner and a movie on the other side of town).

Bingo.

Discretionary income is finite. Public construction of an arena, ballpark, and/or stadium doesn't cause new, heretofore nonexistent money to magically materialize in the pockets of consumers. Money spent on one non-essential good or service, such as attendance at a sporting event in a publicly-financed venue, cannot subsequently be spent on another non-essential pursuit. Ultimately, public subsidization of one entity - in this case, a pro sports franchise - is, in a best-case scenario, going to leach discretionary income away from other businesses in the community. The bottom line is that construction of publicly-subsidized athletic facilities doesn't create new discretionary income, it simply redirects existing discretionary income.

Otherwise known as the subsitution effect which pretty much every economic study done by a team or league very conveniently ignores.

If there was a real economic impact from a new stadium/arena it would show up on the city's total GDP in addition to the neighborhood's GDP.

I haven't seen a single independent study that can show that.

[bosrs1]

My only experience with Red Bull Arena is passing it by while riding NJ Transit from Penn Station to MetLife. It's a beautiful stadium, but it's basically in the middle of a swamp. They really blew it.

Location wise they really did. Which may be why Red Bull is rumored to be pulling out of the league. They got suckered into building a private stadium in a less than ideal location in Jersey only to have a second MLS team be granted in NYC proper who are going to undermine their position in the market. Particularly considering they have a better brand (lets face it, Red Bull NY isn't exactly the team kids grow up dreaming to root for unless they've got a thing for Taurine) and now they're being severely undermined on location.

Strangely MLS appears poised to repeat the mistake in LA with the new 2017 LA2 franchise being put in downtown while the Galaxy are stuck out in Carson.

The mistake there is Carson. Throwing the new team in there wouldn't help. Incremental steps; first get LAFC out of there, then wait out the least and get the Galaxy out.

Other than that, there are precious few parallels to be drawn between the Galaxy and Red Bulls.

Except the Galaxy own the stadium in Carson (seeing as they also built it). It's a very similar situation to Red Bull. And now we're hearing that LAFC is going to be playing right near downtown at the LA Sports Arena site long term (and temporarily at the LA Coliseum). It's actually a very similar if not quite as extreme situation as NY.

[leopard88]

Its just seems like money is getting moved from one area of the city to another, but not necessarily generating any new revenue of its own.

Regular season events generally result in discretionary income being moved from one location to another, even when sports attendance is up (e.g. a couple chooses to go to a baseball game instead of spending the same amount of money on dinner and a movie on the other side of town).

Bingo.

Discretionary income is finite. Public construction of an arena, ballpark, and/or stadium doesn't cause new, heretofore nonexistent money to magically materialize in the pockets of consumers. Money spent on one non-essential good or service, such as attendance at a sporting event in a publicly-financed venue, cannot subsequently be spent on another non-essential pursuit. Ultimately, public subsidization of one entity - in this case, a pro sports franchise - is, in a best-case scenario, going to leach discretionary income away from other businesses in the community. The bottom line is that construction of publicly-subsidized athletic facilities doesn't create new discretionary income, it simply redirects existing discretionary income.

Otherwise known as the subsitution effect which pretty much every economic study done by a team or league very conveniently ignores.

If there was a real economic impact from a new stadium/arena it would show up on the city's total GDP in addition to the neighborhood's GDP.

I haven't seen a single independent study that can show that.

I don't think the effect on the total GDP is zero. Sporting events do draw tourists who might not otherwise come to a city, which provides a boost in discretionary spending (e.g., hotels, ground transportation, restaurants, ticket sales). However, even that effect is probably negligible, absent a city hosting a significant number of large, unique events.

[Gothamite]

Not to mention that cities use sports teams to lure other business to town as a "quality of life" issue for future employees. I don't know how successful it is, but I've seen it done.

Discretionary income is only part of the story. That's where bloggers like Field of Schemes sometimes fall down.

Location wise they really did. Which may be why Red Bull is rumored to be pulling out of the league. They got suckered into building a private stadium in a less than ideal location in Jersey only to have a second MLS team be granted in NYC proper who are going to undermine their position in the market. Particularly considering they have a better brand (lets face it, Red Bull NY isn't exactly the team kids grow up dreaming to root for unless they've got a thing for Taurine) and now they're being severely undermined on location.

Strangely MLS appears poised to repeat the mistake in LA with the new 2017 LA2 franchise being put in downtown while the Galaxy are stuck out in Carson.

The mistake there is Carson. Throwing the new team in there wouldn't help. Incremental steps; first get LAFC out of there, then wait out the least and get the Galaxy out.

Other than that, there are precious few parallels to be drawn between the Galaxy and Red Bulls.

Except the Galaxy own the stadium in Carson (seeing as they also built it). It's a very similar situation to Red Bull. And now we're hearing that LAFC is going to be playing right near downtown at the LA Sports Arena site long term (and temporarily at the LA Coliseum). It's actually a very similar if not quite as extreme situation as NY.

That's what I said; other than the stadium locations there's no real parallel to be drawn between the Galaxy and Red Bulls. I believe the Galaxy have more relevance in LA than the Red Bulls ever did in NYC.

[WSU151]

Its just seems like money is getting moved from one area of the city to another, but not necessarily generating any new revenue of its own.

Regular season events generally result in discretionary income being moved from one location to another, even when sports attendance is up (e.g. a couple chooses to go to a baseball game instead of spending the same amount of money on dinner and a movie on the other side of town).

Bingo.

Discretionary income is finite. Public construction of an arena, ballpark, and/or stadium doesn't cause new, heretofore nonexistent money to magically materialize in the pockets of consumers. Money spent on one non-essential good or service, such as attendance at a sporting event in a publicly-financed venue, cannot subsequently be spent on another non-essential pursuit. Ultimately, public subsidization of one entity - in this case, a pro sports franchise - is, in a best-case scenario, going to leach discretionary income away from other businesses in the community. The bottom line is that construction of publicly-subsidized athletic facilities doesn't create new discretionary income, it simply redirects existing discretionary income.

Otherwise known as the subsitution effect which pretty much every economic study done by a team or league very conveniently ignores.

If there was a real economic impact from a new stadium/arena it would show up on the city's total GDP in addition to the neighborhood's GDP.

I haven't seen a single independent study that can show that.

I don't think the effect on the total GDP is zero. Sporting events do draw tourists who might not otherwise come to a city, which provides a boost in discretionary spending (e.g., hotels, ground transportation, restaurants, ticket sales). However, even that effect is probably negligible, absent a city hosting a significant number of large, unique events.

Similarly to what leopard88 said...this premise under the assumption that only locals go to sporting events. You take a team like the Patriots or the Red Sox- it's not just Boston fans that are moving money around the area. It's people from the region, from other states that bring in money too. It works the same out west...people from Montana, Wyoming, Utah, New Mexico, Kansas travel to Denver to watch Broncos and Rockies games. Hypothetically, if you estimate the number of home-team "regional tourist" fans at 1,000 per game, and say, 2,000 fans are out-of-town fans of the visiting team (both numbers probably aren't unreasonable for football and/or baseball), and an average total cost of $200-500, it's clear that there is some economic benefit. Neglible is lowballing, I think. I think it's more than negligible. Like you stated, for huge events, it's pretty substantial.

Public construction of an arena, ballpark, and/or stadium doesn't cause new, heretofore nonexistent money to magically materialize in the pockets of consumers.

I'm not sure that's necessarily true, at least if you take a look at third-and-fourth order effects. Free circulation of money is a powerful thing. The money spent on an arena or ballpark doesn't go into a black hole never to be seen again. It's continuously spent, and even when it's saved, banks are creating money to be spent.

[pmoehrin]

Its just seems like money is getting moved from one area of the city to another, but not necessarily generating any new revenue of its own.

Regular season events generally result in discretionary income being moved from one location to another, even when sports attendance is up (e.g. a couple chooses to go to a baseball game instead of spending the same amount of money on dinner and a movie on the other side of town).

Bingo.

Discretionary income is finite. Public construction of an arena, ballpark, and/or stadium doesn't cause new, heretofore nonexistent money to magically materialize in the pockets of consumers. Money spent on one non-essential good or service, such as attendance at a sporting event in a publicly-financed venue, cannot subsequently be spent on another non-essential pursuit. Ultimately, public subsidization of one entity - in this case, a pro sports franchise - is, in a best-case scenario, going to leach discretionary income away from other businesses in the community. The bottom line is that construction of publicly-subsidized athletic facilities doesn't create new discretionary income, it simply redirects existing discretionary income.

Otherwise known as the subsitution effect which pretty much every economic study done by a team or league very conveniently ignores.

If there was a real economic impact from a new stadium/arena it would show up on the city's total GDP in addition to the neighborhood's GDP.

I haven't seen a single independent study that can show that.

I don't think the effect on the total GDP is zero. Sporting events do draw tourists who might not otherwise come to a city, which provides a boost in discretionary spending (e.g., hotels, ground transportation, restaurants, ticket sales). However, even that effect is probably negligible, absent a city hosting a significant number of large, unique events.

Two questions have to be asked. One is how many people are traveling from out of town to the event and how many of them are coming simply because of the new stadium/arena.

If someone from New York has two season tickets to 49er games and was flying in for those two games when they were playing at Candlestick but is still coming when they moved to Santa Clara. That's not someone who's money you can attribute to the new stadium. That person would be coming even if the Niners played in a toilet bowl.

It has to be someone who's coming in only for the new stadium/arena and not because of the team or significance of the game. That's a very hard thing to measure.

The most effective way to do it would be to find out how many people from out of town were showing up to the game before the new stadium/arena was built and compare that to after the stadium/arena went up. But good luck collecting that data, because most of those people would probably just be going to one or two games a year. Any more and they're probably just fans of the team who are coining no matter what.

A simpler but less clear method would be to just look at hotel revenue. But that may not prove very conclusive either as the vast majority of people coming into a city over a full year are not doing so becuase of a sporting event and may choose to or not to come to a particular city for all any number of reasons.

It's also assuming that a new arena/stadium would be immune from the crowding effect. What's to say that more locals wouldn't be inspired to come to the new stadium/arena and as a consequence make it more difficult for out of town era to get tickets ie. greater scarcity and higher ticket costs. If that's the true then the new stadium/arena is actually driving away tourism dollars.

I don't think there would be many coming from out of town just for a stadium. Fa bases tend to do be very localized, and the games that are fly ins such as the Super Bowl and All-Star games are almost purely event driven and will sell out regardless of where you have them and therefore can't be attributed to a new stadium.

[WSU151]

Its just seems like money is getting moved from one area of the city to another, but not necessarily generating any new revenue of its own.

Regular season events generally result in discretionary income being moved from one location to another, even when sports attendance is up (e.g. a couple chooses to go to a baseball game instead of spending the same amount of money on dinner and a movie on the other side of town).

Bingo.

Discretionary income is finite. Public construction of an arena, ballpark, and/or stadium doesn't cause new, heretofore nonexistent money to magically materialize in the pockets of consumers. Money spent on one non-essential good or service, such as attendance at a sporting event in a publicly-financed venue, cannot subsequently be spent on another non-essential pursuit. Ultimately, public subsidization of one entity - in this case, a pro sports franchise - is, in a best-case scenario, going to leach discretionary income away from other businesses in the community. The bottom line is that construction of publicly-subsidized athletic facilities doesn't create new discretionary income, it simply redirects existing discretionary income.

Otherwise known as the subsitution effect which pretty much every economic study done by a team or league very conveniently ignores.

If there was a real economic impact from a new stadium/arena it would show up on the city's total GDP in addition to the neighborhood's GDP.

I haven't seen a single independent study that can show that.

I don't think the effect on the total GDP is zero. Sporting events do draw tourists who might not otherwise come to a city, which provides a boost in discretionary spending (e.g., hotels, ground transportation, restaurants, ticket sales). However, even that effect is probably negligible, absent a city hosting a significant number of large, unique events.

Two questions have to be asked. One is how many people are traveling from out of town to the event and how many of them are coming simply because of the new stadium/arena.

If someone from New York has two season tickets to 49er games and was flying in for those two games when they were playing at Candlestick but is still coming when they moved to Santa Clara. That's not someone who's money you can attribute to the new stadium. That person would be coming even if the Niners played in a toilet bowl.

It has to be someone who's coming in only for the new stadium/arena and not because of the team or significance of the game. That's a very hard thing to measure.

The most effective way to do it would be to find out how many people from out of town were showing up to the game before the new stadium/arena was built and compare that to after the stadium/arena went up. But good luck collecting that data, because most of those people would probably just be going to one or two games a year. Any more and they're probably just fans of the team who are coining no matter what.

A simpler but less clear method would be to just look at hotel revenue. But that may not prove very conclusive either as the vast majority of people coming into a city over a full year are not doing so becuase of a sporting event and may choose to or not to come to a particular city for all any number of reasons.

It's also assuming that a new arena/stadium would be immune from the crowding effect. What's to say that more locals wouldn't be inspired to come to the new stadium/arena and as a consequence make it more difficult for out of town era to get tickets ie. greater scarcity and higher ticket costs. If that's the true then the new stadium/arena is actually driving away tourism dollars.

I don't think there would be many coming from out of town just for a stadium. Fa bases tend to do be very localized, and the games that are fly ins such as the Super Bowl and All-Star games are almost purely event driven and will sell out regardless of where you have them and therefore can't be attributed to a new stadium.

People go to Wrigley, Fenway, Yankee, et al. just to see the stadium. Most of these people really don't give a about the Cubs. They just want to drink beer and watch baseball. Granted, these are bad examples because Wrigley and Fenway are old stadiums, but the argument that fans don't travel to new stadiums is as unprovable as fans actually traveling to new stadiums.

Most of the big All-Star game and Super Bowls only occur because of new stadiums. How many Super Bowls were in New York or San Francisco or Indianapolis prior to 2010? Therefore, I can certainly attribute the impact to the new stadium.

And fan bases aren't as nearly localized as they once were. Thanks to the internet, fan bases are now "nations" that spread the continent and the world.

[scottysprings]

Its just seems like money is getting moved from one area of the city to another, but not necessarily generating any new revenue of its own.

Regular season events generally result in discretionary income being moved from one location to another, even when sports attendance is up (e.g. a couple chooses to go to a baseball game instead of spending the same amount of money on dinner and a movie on the other side of town).

Bingo.

Discretionary income is finite. Public construction of an arena, ballpark, and/or stadium doesn't cause new, heretofore nonexistent money to magically materialize in the pockets of consumers. Money spent on one non-essential good or service, such as attendance at a sporting event in a publicly-financed venue, cannot subsequently be spent on another non-essential pursuit. Ultimately, public subsidization of one entity - in this case, a pro sports franchise - is, in a best-case scenario, going to leach discretionary income away from other businesses in the community. The bottom line is that construction of publicly-subsidized athletic facilities doesn't create new discretionary income, it simply redirects existing discretionary income.

Otherwise known as the subsitution effect which pretty much every economic study done by a team or league very conveniently ignores.

If there was a real economic impact from a new stadium/arena it would show up on the city's total GDP in addition to the neighborhood's GDP.

I haven't seen a single independent study that can show that.

Just because gross income is virtually constant doesn't mean people can't or won't reappropriate their budgets to allow for going to see their local sports team every-so-often if a new, more luxurious, and convenient venue is built. Even if gross disposable income is assumed to be constant you can't assume it is going to be spent elsewhere in the community.