U-T San Diego (the stupidly rebranded former San Diego Union-Tribune) may have fired its best sports columnist and be owned by a guy who thinks journalists should be cheerleaders for stadium deals, but I may have to rethink my evaluation that it’s not a real newspaper anymore. Yesterday, business columnist Dan McSwain wrote an excellent analysis of why new stadiums are so often money-losing propositions:
Let’s start with what we do know: The Spanos family, which owns the Chargers, wants a new stadium costing about $1 billion.
On the bright side, interest rates are low. The annual payment would be about $80 million, assuming a 20-year loan at 5 percent interest…
In a 2004 presentation, the Chargers estimated that a new stadium at the Qualcomm site in Mission Valley would boost the team’s “local revenue” by $15 million a year.
A fresh estimate by John Vrooman, a sports economist at Vanderbilt University, put the gross increase at $50 million (some would indirectly go to players via league revenue sharing).
At $15 million or $50 million, either figure is a long way from covering $80 million in new costs, let alone boosting profits. This may explain why the Spanos family hasn’t simply built a stadium itself by now, after 13 years of occasional pleas for public help.
Let that sit in your head for a minute. Chargers owner Dean Spanos says he desperately needs a new stadium in order to be economically competitive — a new stadium that would cost 60% more than it brought in in new profits. (There would likely be some help from the NFL’s G-4 fund, but it wouldn’t be enough to fill a $30 million a year gap.) Spanos’ stadium chief Mark Fabiani told McSwain that this is why the team needs public subsidies (“Your calculations do demonstrate the severe and very practical limitations we face in San Diego with regard to private investment on a new stadium”), but another way of looking at it is that a new stadium in itself would actually hurt the Chargers’ bottom line. Or as McSwain put it:
My take-away: The team’s deal at Qualcomm is too good to abandon without hefty public subsidies.
This is possibly the key point to keep in mind when analyzing stadium proposals: With few exceptions (the San Francisco 49ers stadium in Santa Clara comes to mind), the building itself is a money-loser — the team owner only turns a profit thanks to the public subsidies. (If you want another detailed example of this, see Kansas City’s Sprint Center, though there substitute “arena manager” for “team owner.”) This means it would literally be more cost-effective for cities to just hand over a wad of cash to their teams, and skip all of this laundering of subsidies through a billion-dollar construction project that nine times out of ten will be awash in red ink.
There is nothing wrong with new stadiums and arenas per se — well, unless you think they’re ugly, but plenty of old ones are, too. But the reason the U.S. has so many of them, and is tearing down its not-quite-as-new ones to replace them with shinier models as fast as possible, has nothing to do with the alleged riches that can be made off of them, and everything to do with the fact that in order to get those fat checks from the public treasury, you need to be able to present a giant construction bill as justification. If we could only start subsidizing something useful instead — say, rules changes to prevent concussions, or better mascots — there would still be a massive transfer of money from the public to a bunch of rich dudes, but at least we might get something out of the bargain other than fancier cupholders.
[UPDATE: Neglected to mention that UT-San Diego also has a new poll of local residents on a Chargers stadium, and they oppose using taxpayer funds by a 63-29% margin. (A slightly lesser majority opposes “tax breaks” for a stadium, because some people think tax breaks aren’t taxpayer funds somehow?) NFL commissioner Roger Goodell, meanwhile, chimes in that “they do need a new stadium for the Chargers to be successful long-term.” Same as it ever was…]