Stadium spending is bad for humans and other living things, Thursday edition

Happy National Notice That Stadium Subsidies Are A Bad Deal Day, everybody!

  • The Wall Street Journal notices that the soon-to-be-again Los Angeles Rams are set to join the San Francisco 49ers and Golden State Warriors in building new sports venues without much in the way of public money, and declares this a trend, in California, at least. Though the authors then note that the Sacramento Kings got plenty of public cash, and the San Diego Chargers could yet get a bunch from that city, “despite a wealth of academic studies showing that stadiums and arenas are poor investments when it comes to economic development.” I’m not exactly sure what this all is supposed to add up to, but it does provide a nice roundup of the stadium landscape for anyone who’s been living under a rock.
  • The San Gabriel Valley Tribune asks if the new Rams stadium in Inglewood will provide a big economic boost to the region, and cites a couple of economists and the finance director of Foxborough, Massachusetts in answering, “Nah.” In particular, Vanderbilt’s John Vrooman replies: “The net local impact of a professional sports team is zero, if not negative sum, particularly for an NFL team playing in a monolithic space-eating stadium. … The local sports bars will probably rock, but most direct spending at the stadium stays at the stadium. The injection of new cash flow into the local economy is negligible because it’s coming at the expense of local spending someplace else. The indirect spin-offs are also small because most of the spending leaks out of the economy like a sieve and so the urban/regional multipliers are usually zero, zip … nada.” Stan Kroenke’s poor poor people are going to be awfully disappointed.
  • Milwaukee’s Fox6 looks at the “arena district” the Bucks are promising to create around their new taxpayer-subsidized arena, and notes that in Columbus, while restaurants around that city’s new arena indeed did great, restaurants in other parts of town saw business decline: “Other restaurants went out of business and a lot of people started moving out of the neighborhood and into newer apartments,” said Tony Scartz, a restaurateur in the Brewery District across town from the new arena. “And most importantly, for me personally, was the office space vacancy that was created because people moved out of the Brewery District and into the newer office space down around the Arena District.” This is exactly what you’d expect from the substitution effect, as explained in the Fox6 piece by, um, me.

Tune back in tomorrow, when some city official somewhere will tout the massive economic benefits available from building a new sports venue! They will fight eternally…


24 comments on “Stadium spending is bad for humans and other living things, Thursday edition

  1. I think you’re being a little harsh on the economic benefit.

    As the Inglewood stadium will cost about $3B and it’s all being privately funded by a guy from out of town, that does mean a fair number of construction jobs and purchase of various construction materials and the like.

    That said LA is also, for example, currently building the Wilshire Grand Tower, the tallest building west of Chicago for $1B. No one asks “will one skyscraper be a boost to the local economy.”

    Anytime a city has a major construction project it isn’t a bad thing as long as the taxpayers aren’t paying for it.

  2. Well, Kroenke would be building something on the Hollywood Park site with or without a stadium. And something else might be active 365 days a year, so adding in the Rams could easily be a net negative.

    But sure, construction workers can rejoice. I don’t know how many of them live in or near Inglewood, but somebody’s going to get paid for this thing.

  3. I think any time you bring non-local money and spend it, it is a plus for the economy. How much? Probably very little, but it’s hard to say it is < or = 0 – this to me would be along the lines of a conservative argument against government spending/stimulus in general.

    That being said, economic benefit is the difference between economic "positives" and economic "costs" – whether that will be 0? Yes. But to be some sort of economic boom in a Metro Area of 18,000,000? No.

  4. Wow – a whole paragraph I wrote got cut off.
    The point is that Mr Kroenke is trying to make himself richer, not LA in general. Whether the economic positives will outweigh the negatives is debatable. But to Mr Kroenke they just have to be positive for him (which is also debatable)

  5. I don’t think many people see the construction as a negative for LA. Unless you live right next to the stadium, that is.

    However, the big question comes with publicly financed “tax incentives” and construction projects. If the maximum tax value (earned income and sales taxes) of the site developed as a commercial location is higher than that as a stadium–then there is a large opportunity cost to the public if it offers tax relief for lower tax revenue. Of course, if Kroenke paid full price, no one would complain.

    Foxborough itself would be a very interesting study, as it is a very small town (16k) that likely doesn’t share its tax revenue with the surrounding towns. These towns also pay the price for all the events and the massive crowding of US1 to and from games, and there really aren’t many places to go around the stadium (other than Patriot Place) to eat and “stimulate” the local ecoomy.

    I wonder if the additional police presence and other gameday costs are paid by the team or the town or pushed to the State. (The stadium was “privately funded” but the shopping mall around it benefits from a large TIF.)

    A lot of this seems to stem from what we want to believe–that sports do make people “feel better” and spend more money, and that economic development isn’t due to factors that take a lot more work than deciding which “laundry” we support.

  6. I liked the vaportecture from the LADN. Do those end zone upper deck seats have any stairs or ramps going to/from them? The drawing doesn’t seem to show any behind the tunnels. Do you have to stay there for the whole season until being rescued?

  7. Construction is a better economic stimulus than I’d remembered, actually:

    http://economix.blogs.nytimes.com/2008/10/29/bang-for-your-stimulus-buck/

    But yes, opportunity cost is the issue. And there’s an opportunity cost to land use as well as to public spending.

    I don’t actually think the Inglewood stadium will be a net negative, mind you. But Vrooman’s right that nobody should expect a big boost for the city or certainly region.

  8. @Neil…To answer your question in yesterday’s blog (and somewhat relavant to today’s blog), I tried to find info on the profit associated from Levi’s. Didn’t quite hit the target, but here are a couple of stories:

    “Santa Clara gives first financial accounting of Levi’s Stadium”
    http://www.mercurynews.com/breaking-news/ci_28802024/santa-clara-gives-first-financial-accounting-levis-stadium

    Article details $47m in operating “profit” for the Stadium Authority and indicates a $3M windfall for the city in the 1st year of operation, but there is some questions within the council as to the reality and clarity of the numbers (classic City of Santa Clara operations). The audit financial statements are here:

    http://sireweb.santaclaraca.gov/sirepub/cache/2/kgcmvcndmlflpsfaeoylochd/72891701142016094047735.PDF

    “Jed York’s season: The 49ers are his team, playing in his stadium, with his hand-picked coach… and all eyes on the CEO/owner”
    http://blogs.mercurynews.com/kawakami/2015/09/14/jed-yorks-season-the-49ers-are-his-team-playing-in-his-stadium-with-his-hand-picked-coach-and-all-eyes-on-the-ceoowner/

    San Francisco 49ers Valuation
    http://www.forbes.com/teams/san-francisco-49ers/

    Tim Kawakami seems to imply that the $124M is all stadium-related profit for the 49ers. But NFL revenue sharing must have an impact there.

    I would need to dig a bit on how event revenues are shared by Niners and the stadium authority. That would make this clearer. I assume all football related revenues are kept by the Niners. Not sure about the rest. This article indicates the Niner’s rent is $30M/yr which seemed high to me. http://www.mercurynews.com/ci_23211519/49ers-stadium-revenue-tops-1-billion-after-santa

    Per the article, after the Levi’s naming right deal “…the Stadium Authority — the public agency created to build the project — now has at least $557 million in committed revenues to pay off the $850 million loan it took out to start construction a year ago. The authority hopes the rest will come mostly from the team’s rent payments of about $30 million a year.

    The authority will keep 70 percent of the money from the Levi Strauss deal, or $154 million, and has at least $403 million committed so far for seat licenses, which cost $2,000 to $80,000 apiece and give fans the right to buy season tickets”

  9. As long as you have The Power Broker in your bookcase, you cant go wrong. Best book on public policy ever written. as a city manager for 30 years before recent retirement, I always had my staff read it (or at least tried to.) I wonder what Robert Moses would have told these billionaire sharks?

  10. I’m not an Angelino, and I know LA much less than I know other cities. However, for all the talk of Inglewood being more attractive than Carson as a location, I didn’t think Inglewood was exactly prime real estate. It’s not like they are building the stadium in Santa Monica.

    Yes, something might get built there anyways, but I’m not sure that would exactly be a huge economic driver either. It’s quite possible it might have ended up as a generic strip mall or even a vacant lot. Unless my limited knowledge of LA is off the mark.

  11. Charles,

    It’s been over 20 years since I read the Moses biography and I don’t remember how stadium issues were addressed. The Shea Wiki entry does state though that Moses wanted the Dodgers to play in a city owned facility in Flushing Meadows while O’Malley wanted to own a stadium in Brooklyn (and control all revenues–which he was able to do in LA).

    I’m currently listening to Caro’s LBJ bio; interestingly it doesn’t seem that stadium development was high on congressman’s LBJ list of priorities as an economic driver when he was trying to pull the HIll Country in Texas into the 20th century.

    JC,

    I think it’s far too soon to say what the final financial impact for Santa Clara that Levi’s will be. I’ve never been as sanguine as Neil about it. I think the opportunity cost of the stadium is very high. The security for the SB will be an enormous expenditure as SV has probably the country’s highest paid law enforcement. I don’t trust the city gov’t to accurate account for stadium costs. Nothing very detailed has been released by the city re stadium revenues/expenditures to this point that I know of.

  12. I don’t recall there being that much on Shea Stadium in Power Broker. I haven’t read it in a while though — overdue for a re-read. (The end of the Inwood Hill Park chapter never fails to make me cry.)

  13. @Santa Clara Jay..

    yes, we still have a ways to go before getting a good sense for the stadium financials and benefit to the city. The first year and second years were dramatically different from a fan attendance perspective (although I imagine all niner game revenue goes to the niners so it doesn’t benefit the Stadium authority). And if people start backing out of their PSLs b/c the team is bad, that could hurt the financial picture for the SA (assuming people can get of their PSLs–I don’t know the terms).

    The stadium hasn’t been without its problems and complaints–traffic, crime and not to mention the ongoing battle over the soccer parks. The suit by the youth soccer league over potential damage of the soccer field next door during the SuperBowl is just the latest. They will lose (if they haven’t already), but the black marks can pile up).

    Hard to assess the opportunity cost. Certainly the city could have developed the land for something else, although all seemed fine when the land was a theme-park parking lot. With Apple, etc buying up land in north San Jose, maybe they could have used it for commercial space which that area is more suited for than a white steel erector set that is empty most of the year.

    Neil’s question in yesterday’s blog post was how much a second team would contribute to the bottom line of the Stadium Authority. I couldn’t tell from any of the articles/docs I found. I assume it would be similar to 8-10 additional monster truck rallies. It would be interesting to see the SA revenues on an event by event basis, but since it is a “private” entity (wink-wink), we probably never will.

  14. Rays granted permission to look for new stadium in Tampa Bay
    http://www.draysbay.com/2016/1/14/10767492/tampa-bay-rays-stadium-search-vote

    Once a new stadium location is found, the Rays can terminate their lease for a cost of $24 million beginning in 2018 — a sum that decreases each year the team remains at Tropicana Field. The current lease expires after the 2027 season, but the proposal as written is limited to a three-year search window, but the team is unlikely to let that window expire.

  15. Scola: The Forum is right across the street (i.e. still in Inglewood) from where the stadium is going to be and it was great for the Lakers and Kings for 32 years.

  16. Anonymous: That may be. Don’t know. However, if it was so great, why did they move?

    Also, just because you liked the Forum doesn’t answer the question about the value of the alternative. I actually don’t know if housing, retail or business space is in much demand in Inglewood. The arguments against the stadium was basically “Kroenke wants to build a Wal Mart” which doesn’t exactly make it sound like it’s the west side of Manhattan after the Jets plan fell apart. Could be wrong.

  17. Knoxville wants to build a $200 million arena for a minor league hockey team (Ice Bears!) that averages 3,000 attendance per game, but at least they aren’t trying to justify it with wild economic impact projections.

  18. Found it:

    http://www.knoxnews.com/news/local/consultant-replace-knoxville-civic-coliseum-renovate-auditorium-293b4a59-a65f-473c-e053-0100007f6fc7-365368811.html

    Looks like they’re going with “it’s obsolete.” And “they” in this case is CSL, the consulting arm of the Dallas Cowboys and New York Yankees. Conflict of interest much?

  19. Neil,

    At least they pointed out that there are leaks in the roof, which apparently is required anytime a $200+ million dollar project is proposed in lieu of, well, fixing the roof.

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