Consultant reports that soccer stadium would lose around $40m, let’s go build one!

With the race officially on to see which cities can land all the expansion franchises MLS is selling for $200 million a pop, Louisville welcomes to the world a study it commissioned on building a new stadium for Louisville City F.C., which currently plays in the USL but could join MLS as easily as anyone else, I guess. Anyway, the study was conducted by our old friends Convention, Sports & Leisure, the rent-a-consultants owned by the Dallas Cowboys and New York Yankees, and as usual, their recommendation is build build build:

In January, Louisville Metro Government paid Minnesota-based firm Conventions, Sport and Leisure International $75,000 to complete the study. The result calls for a 10,000-seat soccer-specific stadium to be built, primary for use Louisville City FC, by 2020…

CSL estimates a new stadium with its recommended specifications would cost between $30 million and $50 million, and the study assumed in its scenarios the city would fund the stadium through 20-year bonds to be repaid by private and public sources.

The funny bit is that unlike its usual handwavy economic studies, CSL at least gave a shot at doing a deeper dive into the numbers in this one, acknowledging that economic impact would be blunted by both leakage (money spent on soccer doesn’t recirculate locally if it goes to out-of-town owners and players) and what it calls “displacement,” better known as the substitution effect (entertainment dollars spent on soccer instead of on something else local isn’t a net gain) — though CSL doesn’t provide any details at all of how these were taken into account in its calculations. In any case, its cost-benefit analysis for the project is actually pretty dismal:

Screen Shot 2016-08-05 at 8.34.27 AMThat’s $2.7 million in new tax revenues over 20 years, which is an absolutely horrible return on a $30-50 million expense. Yet CSL still recommends that the public fund this money pit, on the grounds that — wait for it — it’s such a money pit that you can’t possibly expect any private businessperson to fund it:

The net income from operations will not be able to fund a material amount of stadium project costs, which is typical of most soccer-specific stadiums that have been built for teams in USL, NASL and other similar leagues. Historically, the development of soccer-specific stadiums has generally involved varying degrees of public-private partnerships.

The study then goes on to list a whole bunch of different ways to pay for a stadium on the public’s dime, including tax increment financing and EB-5 green-cards-for-investment deals and the Louisville general fund, because there’s no real way to build one of these things without dipping into that. Unless you might think about asking a team owner who’d be potentially plunking down $200 million for an MLS franchise to chip in another $50 million for a stadium — or for MLS to take only $150 million for the franchise so that the rest of the cash could go to build the stadium. You know, crazy talk.

Ultimately, when you hire someone like CSL to do a stadium study, you’re not getting an evaluation of whether building one is a good idea, so much as a long list of rationalizations for why it could be defensible, if you squint right. CSL got $75,000 for putting this together, which leads me to believe that I’m in the wrong line of work: I should charging cities a few grand to provide a link to this.

 


9 comments on “Consultant reports that soccer stadium would lose around $40m, let’s go build one!

  1. $30MM to $50MM for a 10K soccer stadium? In Kentucky? What the hell are they building that thing out of? Sheesh. It’s not like it’s a high school football stadium in Texas or anything.

  2. Great stuff. To me this just reinforces what I already believed about CSL: that they are one of the few reputable bulwarks against the pontificating academics who call themselves “economists”. I support the vast majority of public subsidies for major league sports, but soccer doesn’t qualify. Aside from rare examples like Portland these soccer teams just don’t have enough of a ripple effect on the economy.

    • More great stuff, Ben Miller! In your opinion, what has had the biggest economic impact on Wisconsin: “Happy Days,” “Tommy Boy,” or the Milwaukee Bucks?

    • @Ben…Would you mind providing a definition of a “real” economist? Is there a licensing board that I am not aware of?

    • Actually, the real worst part is the fact that U of L won’t let anyone else use their facilities. A friend of mine who was born and raised in Louisville believes it’s because for so long, Louisville’s athletics department had to share Freedom Hall or old Cardinal Stadium with the city and they were always second-fiddle, so now that they have their own facilities they don’t want to share with anybody. It’s a shame. I’d much rather watch Louisville City play at Lynn, even if capacity needs to be increased another 5,000 for USL games.

      • U of L is a public school, one with a basketball arena that was paid for by the creation of a TIF and city funds. It seems ridiculous that there is a AAA stadium and the U of L baseball field. From the highway, you see the new U of L football stadium, and then the old one a few minutes later right by the old basketball arena which also still stands (wouldn’t putting new seats and sod in the old football stadium would be cheaper). They city also appears to have two convention centers. For a city that isn’t that big and isn’t that rich, it seems utterly ridiculous that there is so little cooperation in utilizing its resources. The men’s and women’s teams played 23 games total there last year.

  3. I’ve bookmarked this site on my iPhone so that I can read Neil’s great work daily. I’m always amused and shake my head at the various state and local governments far from here in Kentucky, that do stupid stuff with public money, like building stadiums and facilities. This one hits a little too close to home and I hope to God this does not become the latest screw job to the taxpayers of Louisville and Kentucky following the Yum! Center

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