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August 17, 2011
San Diego mayor launches tour of crappy stadium deals
San Diego Mayor Jerry Sanders has announced that he's going to step up his Chargers stadium efforts by taking three advisers on a tour of other cities that have recently built new sports facilities. And which cities did Sanders pick? That'd be:
- Indianapolis, which spent nearly $1 billion on a Colts stadium that overwhelmingly benefits the team, and whose sweetheart lease with the Indiana Pacers has been declared "the worst of all taxpayer-funded bailouts."
- Kansas City, which built a money-losing arena to lure an NBA or NHL team, then agreed to a sweetheart lease with AEG that all but guarantees it will never get one.
- Denver, which is just your run of the mill city that built a whole bunch of sports facilities near its already-gentrifying downtown entertainment district and then tried to retcon the stadiums into being responsible for the economic revival.
The common link, it looks like, is that all three cities pursued sports facilities as downtown revitalization efforts, though they haven't all been very successful.
San Diego Union Tribune columnist Tim Sullivan writes today that Sanders "should complete his three-city due diligence, perform his polling, assemble his staff, tweak the numbers, and then tell us where in the name of Waldo is enough money to build a stadium for the Chargers." That'd sure be nice, but don't hold your breath — typically in stadium deals, it's breathless tales of urban renaissance first, financial details later.
How's it working in St. Louis?
What, there weren't flights to Cincinnati available?
Let's be fair. Indy's football stadium gives them a Final Four every 5 years or so and a Super Bowl next year. And they are a great comp to San Diego because they are a convention town (no comments from the coastal elitist peanut gallery, please).
There is a public cost to Indy's new dome and there will be a cost if SD does the same, but in a lot of ways it's worth it to keep convention/hotel business strong and attract big sporting events.
If you believe it's "worth it" to spend $600M-1Bn to keep the convention/hotel business strong, can you justify that with actual numbers?
It's easy to say that building a "new thing" will bring tremendous spin offs. It is certainly possible that spin offs will come, but no-one ever tries to realistically quantify what they are and how much is directly attributable to the new building itself. All we ever get is "it'll be great, you wait and see".
Then, whether we are talking about a stadium or a public arena/swimming pool, the message changes (as it has in town I live in) to "well, it's built, now we have to pay for it". I don't mind 'I told you so's', except when they are coming from the very people I told in the first place.
And for every deal that does work for a city, there seem to be multiple Indy/Cincinnatti/St.Louis outcomes.
Hizzoner could have gotten in the car and driven to Glendale AZ to tour the (soon-to-be-empty) Jobing.com arena. But it probably wouldn't make the slightest bit of difference to learn that sometimes risk-taking brings no reward. And that, most importantly, if there are rewards they won't go to the city's taxpayers.
I'm curious - does the San Diego Padres stadium qualify as a success? The team backed a promise that city revenues in the area would grow and if they didn't grow enough to cover the payments on the stadium they would cover them (please, feel free to jump in if I'm wrong, I looked in the archive and found nothing on San Diego Padres so I'm going off memory).
Shouldn't just ask for similar guarantees so that people like Ben can have these arenas built and people like John who think they're a white elephant can be justified or mollified once the actual revenue totals start trickling in and we can see whether the city is up or down?
The problem is that city revenues around the Padres stadium were already growing even before the stadium was built. So it's awfully hard to figure out what the "but-for" is here.
Neil, out of curiosity do you have the numbers for growth in the Gaslamp area before PETCO, at opening and after? It would be interesting to see how the changed. Specifically to see if there was a positive impact on them by the ballpark's presence. Because we know they were growing, but did they grow more/less post PETCO?
I don't, Dan, but I agree those would be useful to see. (I've seen similar figures for LoDo in Denver, and the big rise in construction comes *before* Coors Field opened.) Let me see what I can find out.
I cannot say whether or not anything is "worth it" as long as that is an amorphous undefined concept but if you use such basic concepts as return on investment, jobs created, etc. I would go as far as saying seldom are stadiums/arenas "worth it" and even less seldom are the impacts properly evaluated.
There are many falacies used to support public investment in sports facilities (Neil and others at this site are excellent guides and knowledgeable) but to me the most important, usually never addressed, are opportunity costs. This is largely the fault of our political ideologies but simple things like education, public safety, parks, and basic infrastucture fail to get much evaluation let alone credit for their economic benefit (let alone there even greater social benefit).
What is tragic in the selfish world of "boosterism" vague "feelings" of "worth it" carry more weight than sound analytics and reasoning.
Sorry if I've given you the impression that I think all sports facilities are white elephants. I don't think that is the case - sports facilities can and do bring public benefits.
The issue for me is what benefit at what cost?
If any host city is paying all (or most) of the cost to build something, shouldn't they own it, control it and receive the lion's share of the revenues from it (including rent from tenants - all tenants)?
I suspect that if this were the model for most publicly funded arenas, we'd quickly find that their primary tenants were no longer interested in having a new arena, and that the old one would do "just fine".
So, they are saying they have an economic need for a new facility, built to their specs, and that they can't survive without one. Yet the only way the business model works is if someone else pays for all/most of it? And if they can't get it for free or maybe $0.10 on the dollar, they don't want it? Doesn't sound to me like there is an economic need for these buildings. It sounds like a simple subsidy grab.
Some cities (New Orleans) just offered their clubs an annual cash payment based on what the team said they were "losing" (or more accurately, not earning. The Saints are still very profitable, even in a depopulated and depressed area like New Orleans) by not having a new facility.
There are many ways to skin a cat, as the saying goes. If a new arena/stadium/art gallery/etc is needed, then the funding model needs to reflect a more reasonable return on investment to those who paid to build it.
It's my view that the reason the Oilers/Chargers/Vikings etc don't want an independent economic study to determine what the communities would actually lose (economically) if they left town is that the results would show "not much". Their sponsored studies tend to glorify the entity by proudly stating it's "total economic footprint", and not always honestly.
If that is the basis on which to provide subsidies to business, I'd like my (recapitalized) share of the business and personal taxes I pay. I'll take it as a lump sum, and put it towards building a house on which I'll pay no rent (the city can own it, and pay upkeep), providing the city agrees to a 35 year exclusive lease with terms acceptable to me.
Doesn't really work, does it? Yet if my business left the community I live in, that community would lose revenue... on a pro rated basis, perhaps even more than if our local sports team skipped town...
Neil, can you implement a thumbs-up feature for comments on this site? John Bladen just earned about 30 of 'em.
No need to apologize there John B. I was really wondering if teams could back what they say they're teams will provide for downtown areas whether that mitigates some of the risk for cities.
Bottom line is always going to be cost. For a city like Edmonton to hypothetically host the Summer Olympics for $50G sounds like a solid investment. The only question there should be "why not"? Even for $1M, it still seems reasonable and recoverable. $1B might still be doable. Once that price tag starts climbing into the multiple billions with no threshold that's when we as citizens should be concerned. Same things can be said about downtown arenas/stadia.
You suggest that if teams paid the true cost then they'd probably happily sit in their aged buildings. You may be right. The other reality is they might build their own arenas and pay for only what they need leaving themselves flexibility to improve and remodel at a reasonable price going forward. We'd get more GM Places and ACCs.
The most promising consequence of government stepping away from arena financing is that many teams would probably not survive in their current markets, find the grass not much greener and move again and again until these leagues were in markets that truly supported them and not just ones that subsidized pro sports teams on a whim.
"The most promising consequence of government stepping away from arena financing is that many teams would probably not survive in their current markets, find the grass not much greener and move again and again until these leagues were in markets that truly supported them and not just ones that subsidized pro sports teams on a whim."
Mmm, not so sure about that. Aside from the NFL, which is a special case because of its TV contract, how many teams can you name that are in their current markets solely because of a sweet stadium deal? Maybe some of the Sunbelt NHL teams, arguably, but that was as much about Gary Bettman's crazy vision and the weak Canadian dollar as anything. Few owners are crazy enough to go into a substandard market, no matter how shiny the cupholders are.
Yes, team owners will threaten to leave bigger markets for smaller ones if they get a new building with a good lease. But most of the time, they're - what's the word? - lying.
But in fairness, I don't think I really said anything different than what Neil (and others) have been saying for some time.
All the same, here you go:
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The teams and lackeys on the city council talk about "total economic activity" and other intangibles. Meanwhile most independent studies show total direct return to city coffers in the form of increased tax revenue is pitifully low.
I wouldn't be so opposed to the 49ers proposal if the city had a nice direct equity state in the 49ers--isn't that the way the venture capitalists do their business?
I live in Denver, and know for a fact that Coors field helped make LoDo (lower downtown) a great destination.
For the record both the Pacer's contract and the Colt's contract are outrageous. The Colt's pay a paltry 25k per game to play in a 750 million stadium built at taxpayer's expense where the Colts get parking, tickets, suite revenue, signage and 50% of all non game revenue. The Pacers play in a 180 million dollar stadium that the taxpayers built and we pay them 10 miilion a year for the next three years for maintenance. BTW the Pacers get 100% of what goes on in Conseco.
It a great town to live in if you are a billionaire team owner, but it sucks for us taxpayers.
I remember reading that the city tried to get the Colts to pony up more rent one thim (I guess by using moral suasion or admitting how idiotic they are).
The Colts said pretty much, "Hey it's your stadium, we only use it 15 times a year, you're free to do with it what you want the other 350 days."
There was a proposal to raise ticket prices $2-$3 per ticket to help pay for the stadium but the Colts would not allow it. It seems all increases in tickets have to benefit just the Colts.
But wait there's more; check out local blogger Pat Andrews blog, "had enough Indy". It details some of the back door deals done by the nfl and the local super bowl committee prior to next year's super bowl here in Indy. Without local bloggers like Pat no one in Indy would know any of the details between the city and the nfl for next year's super bowl. It appears it's not in our best interest to know what is going on behind the curtain.
Hypothetically, if we could go back in time to when teams were being charged a fair or at least fairer rent to occupy their publicly built arenas/stadia. Pretend those same deals are honored and if there is any upgrades paid for by the landlord the teams pay a fair markup in rent to reflect that upgrade.
No one has another city's promise of a better lease to lord over their current city's head. No one is subsidizing the construction of new stadia or building it outright for little or no fee. No team has opportunity for free rides.
Do you feel today all those pro-teams would have stayed in their current markets and made do with their buildings? Or better yet, built their own buildings out of pocket?
My hunch is some would have folded and others would have exhausted their options moving to other markets and either found their niche somewhere or folded as well.
And I apologize for saying "many" in my previous post. That suggests the wide majority of teams in all sports are struggling and that is something I have a hard time believing.
Have a good trip.