Tuesday, February 18, 2014

Is There Really a New Game Plan for Stadium-Building?

Some good reading out of Orlando recently, as columnist Scott Maxwell points out something that shouldn't come as a surprise to many (but does): "Orlando's sports deals: Numbers don't always add up." 

Long and short of it, the mayor's stuff tucked some big-time subsidies into an agenda where nobody would (presumably) notice them:
[T]he Solar Bears deal lets the team keep $389,000 more in concession revenues and licensing fees — money that currently goes to the city. The city also agreed to give the team a $100,000 "advertising payment" each year for the next two years.
Yet part of the staff-provided summary described the financial impact as "$0."
[T]he impact to the city's budget was big, probably well in excess of $500,000 — all to help the Magic and Solar Bears.  And no one on the council made a peep.
It's yet to be seen how outraged Orlando city councilmembers will (or won't) be about the appearant circumvention, but there's still hope in Central Florida that municipalities may one day turn the corner on return on investment with stadium subsidies.

A few weeks ago, the Pittsburgh Post-Gazette recapped how an Orange Co. commissioner demanded (so far unsuccessfully) to get a cut of pro sports revenues if taxpayers were paying for a large cut of the cost.

The article summed up how pro teams got increasingly better at blackmailing leveraging municipalities:
What was new about this trend that started in the '90s, however, is that the public return on the investments began to shrink. Rent payments dwindled while construction and capital maintenance costs skyrocketed, and teams dumped their old stadiums in favor of new ones with more revenue-producing opportunities, such as suites and high-tech scoreboards.

Yet the investments continued, partly because politicians did not want to be blamed when teams left town and partly because government officials wanted a project that conveyed progress.
And how economic impact numbers typically "forget" that sports spending isn't necessarily new spending:
The Steelers contend that tax payments to city, county and state governments are on track to more than pay back the public investment. Most economists, though, say that tax revenue would be realized regardless because entertainment dollars are fungible -- if people aren't spending their dollars at football stadiums, they are spending their money at restaurants and movie theaters.

"Such promotional studies overstate the economic impact of a facility because they confuse gross and net economic effects," economists Roger Noll and Andrew Zimbalist wrote in a 1997 report. "Most spending inside a stadium is a substitute for other local recreational spending, such as movies and restaurants. Similarly, most tax collections inside a stadium are substitutes: as other entertainment businesses decline, tax collections from them fall."
Neil deMause, of Field of Schemes fame, was quoted in the article, but actually made much more poignant points in a Sports on Earth column on fan-owned teams, "Ditch the Owners."  Read it, you'll especially enjoy the part where the NFL passed a rule prohibiting other not-for-profit entitites from owning teams like the Packers.

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