Stadiums And Professional Sports Facilities example essay topic

INTRODUCTION The sentiment can be heard in any office break room, local tavern, or play field. The utter discontent of the increasing cost of attending professional sporting events. Disdain ranges from players salaries to cost of parking and concessions. One local newscaster, channel 5 in Chicago, Illinois - April, 2003, reports that for a family of four to attend a major league baseball game on opening day costs between $160 and $200 dollars. The precursor to this cost was a decade of skyrocketing salaries and the trend to build huge public ally financed to house these professional athletes. The current response to this ostentatious decade is to put forth bills to prevent and / or set limits on public financed projects (Shofroth, 1996).

The history of stadiums shows that it was always the norm of publicly building stadiums, however, with the cost of these projects astronomical the public is more skeptical (Rosentraub, 1991). The reason why state and local governments continue to want to finance these stadiums has been much debated. The main debate is one of economic impact. The following two excerpts illustrate this debate: Stadium subsidies do not increase economic activity in total and are not necessary to keep sports leagues in existence.

Cities, though, face competition for sports teams; small market cities particularly might need to offer subsidies in response to remain competitive with larger markets. Riverfront Stadium in Cincinnati had not reached the end of its usefulness. But with other cities offering stadium deals, the Reds and Bengals secured new stadiums at a total cost of $500 million. If residents wish to support a team in this case, they should recognize that the subsidy reallocates resources and investing resources means more sports but less of something else: police and fire protection, road repair, parks or private consumption.

~ Daniel Sutter, "Public Subsidies for Sports Stadiums Don't Spur Economic Growth" Some urban (stadium) facilities... Built in blighted areas, have had positive spin-off effects that no other type of development could have matched due to the regional support for professional sports. Not only did the facilities stimulate development in the immediate area, but it happened with help from entire metropolitan areas. It is unlikely that suburban counties would ever subsidize core- city development in any other circumstance. ~National Conference of State Legislatures, "Playing the Stadium Game: Financing Professional Sports Facilities in the 90"s.

This illustrates the polar ends of the debate as to whether or not public ally financing stadiums and professional sports facilities is truly beneficial to those whom are paying the bills, the taxpayer of that community. This investigatory paper will look at the decade of the 1990's and explain the role of public versus private financing of professional sports stadiums. A particular attention will be given to Major League Baseball facilities as they seem to be the most polarizing venue. This paper will not consider psychological and social benefits, prestige and other society factors, in its attempts to catalogue the trends in financing. REVIEW OF RELEVANT LITERATURE By the time the new millennium was being celebrated some 45 new sports stadiums and complexes were built spanning the previous ten years. Four out of five dollars spent on these projects were derived from public monies (Sanderson, 2000).

The new stadium, Pacific - Bell, that houses the San Francisco Giants is the 1st Major League Baseball stadium to be constructed entirely with private sector monies since the construction of the 1962 Los Angeles Dodgers stadium (Sanderson, 2000). From the period of 1988 thru 1999 the following stadiums are the only ones financed by majority of private sector money City Facility Cost Boston The Fleet Center 160 M Carolina Carolinas Center n / a Chicago United Center 180 Detroit The Palace of Auburn Hills (1988) 70 Milwaukee Bradley Center 80 Minnesota Target Center 113 Montreal Molson Center 230 Philadelphia Core States Center 235 Phoenix America West Arena 100 Portland Rose Garden Arena 260 Sacramento Arco Arena 65 St. Louis Kiel Center 130 Utah Delta Center 78 Vancouver GM Place 180 Cost is in $ millions. Canadian money converted to U.S. Dollar. ; source Federal Bureau of Congressional Finance - web This accounts for 10 percent of new stadiums. It is interesting to note that all the stadiums are indoor facilities with no National Football and Major League Baseball franchises present.

As we see in the next table only Boston's Fleet Center and Philadelphia's Corestates Spectrum are 100% funded privately. TABLE 2 New Stadiums Since 1990 Location Stadium % Publicly Financed Arizona Bank One Ballpark 75 Philadelphia Corestates Spectrum 0 Buffalo Marine Midland 45 Carolina Ericsson Stadium 20 Tampa Ice Palace 62 Jacksonville Jacksonville Stadium 90 Seattle Key Arena 82 Boston Fleet Center 0 Colorado Coors Field 75 Portland Rose Garden 14 St. Louis Trans World Dome 96 St. Louis Kiel Center 46 Cleveland Gund Arena 97 Texas Ballpark At Arlington 71 Cleveland Jacobs Field 88 Chicago United Center 9 San Jose San Jose Arena 82 San Antonio Alamo dome 100 Anaheim Arrowhead Pond 100 Phoenix America West 39 Arena's in descending order of when built. From National Conference of State Legislatures (27 march 1998). STADIUM REVENUES Income that is generated from sports facilities include gate, rent plus parking revenue, concessions, team paraphernalia, naming rights, stadium advertising, luxury suites, personal seat licensing, and corporate partnerships (Howard, ).

Corporations will pay top dollar for the privilege of putting its name on stadiums. Miller brewing Company paid $40 million for the naming rights to Milwaukee's field while Arizona Diamondbacks received $30 million for calling their field Bank One Field (Goodman, 2002). The list goes on and on. In addition to naming rights most corporations will tie in vendor rights in the field.

Personal seat licensing gives the fan the rights to a specialty seat, club seating, or a season ticket. Club seating is a seat with a preferred view and comes with preferential parking spots and a higher quality of food and beverage selection. Luxury suites or sky boxes are at the upper end of amenities. These luxury suites are usually bought by corporations at a premium and are serviced by personal staff for the box. A private entrance and elevator service is usually affixed to the box.

Revenues from the stadium, excluding gate or ticket sales, constitutes about 1/4 of the total income the professional sporting team can generate (Jenson, 2000). This means more amenities and services provided the greater the income the professional team has at its disposal. Multipurpose stadiums are a more and more common trait used in new stadium proposition. A stadium that is shared between a national basketball league franchise and national hockey league team or a national football league team and major league baseball team is a strong option. The cost is slightly higher as seating must be adjusted but the increase in revenue more than makes up for a slight increase in initial cost. The problem arises with the national football league team and major league baseball team arrangement.

The playing surface is quite different with regards to locale of play. The second problem is the overlap of seasons, causing a time constraint on converting the field. ECONOMIC IMPACT The value of and economic impact of erecting a sports stadium is the subject of a great deal of disagreement. Advocates of public financing sports structures view this as impudence to economic recovery or even a financial windfall in the community. Critics, conversely, claim that in fact there is a non or even a negative impact on the community as resources must be reallocated away from where they might be needed, i.e. education, police, fire, etc... The two major issues with economic impact are that of direct versus indirect economic benefits and that of a fair multiplier effect.

Direct benefits are the immediate, tangible revenue that the government and surrounding community receives from the fruits of operation of the sports stadium (Cardall, 1995). Direct benefits can be readily estimated by looking at current financial trends (Cardall, 1995). The first direct benefit is the creation of new jobs. This starts with the construction of the stadium. The creation of jobs does not necessarily mean huge increases in the local labor force unless a new sporting team is moving into the area (Guilbon, 1996). If the stadium is replacing an existing stadium then logic dictates that there is a transfer of the labor force not an actual new labor increase.

Direct spending by the patrons is a tangible increase in revenue and as such the immediate surrounding businesses should see a seasonal increase (Rosentraub, 1991). However, as the text, Financial Aspect of sport, explains that if the businesses are newly created due to the facility then it is only seasonal workers that are employed and the business has minimal effect on the local economy (Howard, 1995). Indirect spending starts with the re spending of the dollars that was initially spent in the local business's (Erickson, 2002). A second form of indirect benefit is from tourist who travels to the area for a sporting event and stay in the area (Erickson, 2002). Indirect benefits are extremely difficult to measure. They are calculated by using a multiplier.

MULTIPLIERS A multiplier is the rippling effect of money initially spent in the community (Howard, p 59). This ripple is likely to occur with spending in these five different ways: (1) The restocking of inventories to settle for future sales, maintaining of buildings and equipment, insurance, and other upkeep by businesses in the local area. (2) Salaries and wages paid to employees whom reside in the local area - personal income. (3) Taxes - sales, property and license fees.

(4) Non local Sales tax on profits. (5) With employees, shareholders, businesses, organizations who reside outside the local jurisdiction. - compiled from the text Financing Sport p. 59. The three major types of multiplies are: (1) Sales Multiplier - a sales multiplier measures the direct, indirect and induced effect of monies a visitor spends on various economic activities in the host community. It correlates the connection between tourism and increase in business turnover that is created which would indicate an increase in sales (Howard, 61). (2) Income Multiplier - an income multiplier measures the direct, indirect and induced effect of monies a visitor spends that changes the level of household income in the community. "It is the ratio of change in income to the initial autonomous change in expenditure that brings it about" (Howard, 61).

(3) Employment Multiplier - An employment multiplier measures the direct, indirect, and induced effect of monies a visitor spends on employment in the community. This is the increase in full time jobs proposed by the increase in sales (Howard, p 61). The major problem with multiplies is that they can be manipulated to support whatever point of view you are looking to promote (Hazlitt, 1998). CURRENT AND FUTURE TRENDS IN FINANCING The literature shows that there is a backlash against publicly paid for stadiums (Cross, 1995). The three areas getting the greatest attention are (1) using antitrust laws to break up the professional leagues, causing privatization of stadiums; (2) banning the use of tax subsidies for stadiums; and (3) ending the use of tax - exempt bonds for stadium construction (Cross, 1995). ANTITRUST LAWS Most economists believe that the notion that the government can prevent firms from the act of collusion, and in doing so benefit consumers is no longer valid (Crews, 1997).

Further, if the past is a prelude to the future the government can not be expected to be able to properly enforce antitrust laws in a way that benefits the consumer (Crews, 1997). Economist Fred L. Smith, Jr. States: "Liberty is a neglected aspect of antitrust discussion. Why should a businessman not be free to restrain his own trade if he wishes, alone or in combination with others?

The activities prohibited under antitrust laws are invariable peaceable activities - whatever their merit under an efficiency standard - and thus should be allowed in a free society" (Smith, 1985). An attempt to "break up" the professional sports leagues with the instrument of antitrust laws would undoubtedly result in less competition and thus fewer benefits to the consumer (fans). TAX SUBSIDIES Rather than using antitrust legislation to reduce the power these professional leagues have over the communities it is said to be easier to change the amount and frequency of the subsidies granted to these private entities (Pierce, 1998). Neal Pierce spoke of this type of extortion and reports that "if prospective towns start saying no to sports moguls in search of public subsidies for their luxury - suited sta dia and sky - high player salaries, then the whole extortion bubble will bust and pro sports will descend to more reasonable, free market set (pierce, 1998)". This "just say no" strategy is starting to become more and more popular. Just last year the tax payers of Minnesota resoundingly rejected legislation that would provide for a new stadium for the Minnesota Twins.

TAX EXEPT BONDS Senator Daniel Moynihan (D-NY) bill to restrict the use of tax-exempt bonds to finance sports stadiums was the first shot fired into federal legislating the construction of stadiums (Johnston, 1995). This bill was successfully challenged by the states as to the constitutionality of it. The states claimed under the tenth amendment that the federal government cannot tell the States how to structure their non federal taxes (McGraw, 1996). Representative Barney Frank (D-MA) has a new bill that remains in subcommittee that also attempts to limit the tax bonds by restricting federal dollars to the states that produce tax exempt bonds to produce stadiums. FUTURE FINANCING MODELS The newest model of stadium financing involves the central theorem of fan ownership. The model put forth by the The Heartland Institute of Chicago, Illinois is based on the Green Bay Packer organization.

The Green Bay packers sell shares of their team on the open market and list themselves as a "not for profit" team. Since it is a not for profit team then all proceeds of profit get returned to the general fund for facility improvements and player endowments (Harding, 1997). This has produced the effect of the packers being the least subsidized National Football Franchise and generates a small amount of money in luxury suites (Harding, 1997). Widespread adoption of the Packer Model would eliminate the greatest bargaining chip the professional sports teams owners have in demanding new stadiums that of city abandonment. If an organization is public ally owned it becomes virtually impossible to move. The biggest opposition to the model is of course the dreaded category of "not for Profit".

If a business man cannot profit of a sporting team then would he invest in said team? Summary and Conclusions The economical reality of today's market does not bear the notion that building new stadiums using public funding is prudent. It can be seen as political suicide in a time where financial cut backs are the norm to ask to reallocate monies from necessities such as education, public safety, and basic land repair. The owners of professional franchises continue to try to black mail cities into spending millions and millions of dollars on these stadiums with the threat of moving to greener pastures. The federal government seemingly unable to stop this with banning stadium subsides (Moynihan's legislation) and a flawed antitrust laws causing a market failure. The loopholes abound in these measures.

The best solution to date is that of fan ownership. With this as a backdrop you develop a return to the community both financially and socially. The sales of shares will also generate a greater depth of fan support and appreciation. This would increase an across the board profit. Stadiums will be built but the amount of governmental help seems to be diminishing and that is not necessarily a bad thing.

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