Sport team practice facilities and public subsidy (a practice facility for the Washington Wizards)
DC announced that they will be building and paying for the bulk of a practice facility for the Washington Wizards basketball team. See "Bowser details plans for $55 million Wizards practice facility at St. Elizabeths East" from the Washington Business Journal. From the article:
The District, pending the D.C. Council’s approval, will invest $23 million in the 118,000-square-foot venue. Events D.C. will put in $27 million, and Monumental Sports & Entertainment, the Wizards and Mystics owner, $5 million toward construction. Monumental will provide an additional $10 million for “St. E’s redevelopment and community philanthropic investments.”In a double twist, (1) the facility will be located in Congress Heights in Ward 7, on the St. Elizabeths east campus, a city-owned site that has been very difficult with which to jump start development and (2) it will also serve as the event site for the Washington Mystics women's professional basketball team.
Given that this news comes on the heels of reports that the Washington Redskins practice facility hasn't been super-successful for Richmond ("City of Richmond, Virginia not making much economic return from holding Redskins football practices"), the move to develop an $80 million facility for the Los Angeles Lakers basketball team as part of the AEG-owned Toyota Sports Center in the El Segundo district ("Los Angeles Lakers granted approval for $80 million training facility in El Segundo," Orange Daily Breeze), and how the Philadelphia 76ers are moving their headquarters and practice facility across the Delaware River to Camden, New Jersey, in return for $82 million in tax incentives ("Sixers' exec: Practice facility will be the best ever," Philadelphia Inquirer) it demonstrates that we need some good academic research on the economic value of such facilities and that clearly there is major competition within the leagues on practice facilities, further upping the ante on the use of public financing to subsidize sports teams.
I think it's interesting that the facility is being located in an economically deprived area of the city.
Whether or not it will have much in the way of ancillary development impact is an open question, but which we can make some inferences that aren't likely to be favorable. Part of that is because of DC's inability to tax nonresident income, which in other jurisdictions would help defray some of the costs of subsidy.
But mostly because of the location, which is ancillary and has limited transportation infrastructure, albeit a location on the Green Line metro station--by comparison Verizon Center is on three subway lines and a few block walk from three other lines.
Note that I have been impressed by the ancillary development plans put forward in association with new facilities for the Sacramento Kings and Detroit Pistons/Detroit Red Wings. And years ago, the development plans for the minor league baseball stadium in Memphis won an award from the Congress for New Urbanism ("Old-Style ballparks, fronting on urban streets, spur in-city living").
This discussion makes me realize that my developing framework ("Stadiums and arenas as the enabling infrastructure for "money-making" platforms" and "An arena subsidy project I'd probably favor: Sacramento") on how to evaluate whether or not it is "reasonable" to provide public financial support for sports facilities needs further refinement, based on the type of facility, the specific sport, and on a ranking of cities.isolation or connection.
This came about out of a realization that while at the metropolitan scale, there is no economic value to a sports team, as it is a substitute good for other entertainment goods, depending on the facility, especially for the center city, it can be valuable to have such facilities, to compete with the suburbs for attention, branding, visitors and their spending, and ancillary physical development around the facility. Success is partially dependent on whether or not attendees drive or use transit.
====Framework for evaluating economic benefits of professional sports stadiums and arenas=======
- how well is the facility integrated into the urban fabric beyond the stadium site and does it leverage, build upon, and extend the location and the community around it;
- opportunity to integrate valuable mixed use ancillary development in and around the facility
- size of the facility and the ability to sensitively integrate it into the urban fabric, bigger stadiums--football stadiums specifically--are harder to integrate in the urban fabric than arenas and baseball stadiums;
- frequency of events held by the primary tenant--baseball has 82 home games/year, football about 10 including pre-season, basketball and hockey have 41, soccer about 17--so football stadiums are very rarely used (according to the Chicago Sun-Times article "Emanuel mulling 5,000-seat expansion to Soldier Field," the facility holds about 22 events including annually, 12 non-football events);
- how many teams use the facility, maximizing use and utility of the building--for example, Verizon Center in DC is used by professional men's and women's basketball, hockey, and one college basketball team for more than 100 sports events each year;
- are events scheduled in a manner that facilitates attendee patronage of off-premise businesses--a business isn't an anchor if it aims to not share its customers; the earlier events are scheduled, the harder it is to patronize retailers and restaurants located off-site, at night during the week, there is limited post-game spending as well, on the weekends it's a different story with more opportunity to patronize off-site establishments--teams manipulate scheduling to reduce spending outside of their on-site and 100% controlled facilities;
- use of the facility for non-game events drawing additional patrons--such as concerts and other types of programming;
- how people travel to events: automobiles vs. transit--if automobiles are the primary way people get to events, then large amounts of parking usually in surface lots needs to be provided, making it difficult to foster ancillary development because of lack of land and poor quality of the visual environment, whereas if transit is the primary mode, then more land around a facility can be developed in ways that leverage the proximity of the arena.
Defining primary sports. Greater interest and patronage means greater economic return. For example, we could term football, basketball and baseball primary sports based on attendance, interest, revenue, television ratings, etc.
Hockey would be a secondary sport generally, but in the cities where it is popular (Montreal,Toronto, Chicago, New York City, Detroit, Chicago, Philadelphia, etc.) it is a legitimate primary sport, especially in terms of the winter season, while in cities like Phoenix, it is at best a secondary, even tertiary sport--witness the massive financial failures of the Phoenix Coyotes.
Soccer too would vary as secondary/tertiary depending on the market, while women's basketball and minor league basketball would be ranked tertiary.
Minor league baseball ("Minor league baseball's most valuable teams," Forbes Magazine) and hockey should be judged on a relative basis, as many of the teams can be quite successful--in terms of patronage, community building, and maintaining economic interest in the center city--given that they are located in cities that would never be candidates for top-tier major league teams.
Some examples include the Hershey Bears or London Knights in hockey, and the Dayton Dragons in baseball, and minor league teams in secondary cities in major markets (Staten Island Yankees and Brooklyn Cyclones in NYC, teams in suburban and exurban locations in Greater Washington, DC, etc.).
Motorsports. Not living in a place where car racing is big--Indianapolis race cars, NASCAR, or the Grand Prix races on city streets--car racing isn't usually on my radar. But it's an issue for many cities as pointed out by the Topeka Capital-Journal ("Heartland Park investors racing to catch financial bailout"), which then reminds me of issues in that sports market segment and the relative failure of the NASCAR museum in Charlotte, NC ("Nascar Hall of Fame Leaves Charlotte Home With Bank Debt," Bloomberg), which is a slightly different issue from sports events facilities.
Adding practice facilities to the sports and economic development framework. Given the increasing public subsidy of practice facilities, this type of facility needs to be added as a distinct category.
Some types have more possibilities for additional use than others, especially hockey ("Emanuel basks in glow of Blackhawks practice facility, Rush expansion on Malcolm X site," Chicago Sun-Times), because they can provide access to rink resources that aren't otherwise available, while most communities have plenty of football fields and basketball courts suitable for most needs.
WRT hockey, the DC area has an example with the Kettler Iceplex for the Washington Capitals, in Arlington County. Built on top of a parking structure, there isn't a lot of opportunity cost lost in the facility, but it's not likely it generates much economic impact for the county.
Professional football practice facilities may be great for hyper-small communities like Carlisle, Pennsylvania, but probably make little sense for larger communities, especially because of the extremely short duration of the use, less than one month.
Spring baseball practice facilities. Spring baseball practice facilities are another subset. These sites cost communities a lot of money, but are only used for a couple months each year. Plus, Florida is being replaced as a primary location by Arizona, at least by teams from the west.
Many baseball practice facilities seem to get public funds ("The City that said no to baseball," Bond Buyer). The Washington Nationals and Houston Astros are getting a new complex in Palm Beach County that will cost the County than $3 million in payments per year for 20 years ("Palm Beach County approves funding for Nationals-Astros spring training complex," Washington Post).
The Bond Buyer article is interesting in how it discusses the decision by Chandler, Arizona to not subsidize spring baseball practice facilities and how over time the city has benefited in stronger municipal finances and better use of the space otherwise dedicated to stadiums for more profitable activities.
The comparison to Glendale, which saddled itself with tens of millions of dollars of annual payments to the group/s running the Coyotes hockey team, is telling. See "NHL hockey in Arizona an albatross for Glendale taxpayers" from the Topeka Capital-Journal.) But Glendale is also home to the Arizona Cardinals football stadium and has subsidized baseball spring training facilities as well--they are all in on sports.
Basketball practice facilities. With the basketball facilities, it's not so clear cut. While the new Philadelphia and DC facilities are getting a lot of public money, facilities in Los Angeles for the Clippers and Lakers seem to be self-financed by the teams, although there is the possibility of ancillary revenue from naming rights. For example, the Lakers-Kings facility is named for Toyota.
Adding college sports events facilities to the equation. It is also necessary to figure out how to add college sports to this framework, both because some college facilities end up getting some public financing from local governments or stadium authorities.
The Baylor football stadium, which relocated from the campus to the Downtown Waco waterfront, received $35 million in funds from the City of Waco. A basketball arena for DePaul University's basketball team will get city funds in Chicago ("Cost soaring for proposed DePaul arena," Crain's Chicago Business).
Dayton's arena is quite successful for that city as it is a regular host for NCAA Basketball tournament games, and Verizon Center gets a boost from being the home court for Georgetown University basketball. In a relatively small city like Salt Lake, while it has a professional basketball team, University of Utah sporting events are major attractions, etc.
In yet another indicator of the big business nature of college sports programs, universities are selling naming rights to sports facilities ("Corporations Go Back To School: Colleges Attract Naming Rights Deals," Marquette University Law School).
An analysis of capacity to add professional sports teams to communities done by American City Business Journals (publisher of the Washington and Baltimore Business Journals, among others) included college teams in their analysis. See "American City Business Journals calculates the capacity of North American metropolitan areas to support new/additional professional sports teams."
The local newspaper published a special magazine insert on the opening of the McLane Stadium for the Baylor University football team.
Note that as part of the agreement for public subsidy, Baylor rents their football stadium to the Baylor-Waco Stadium Authority for use as a "community event facility" when the football team isn't using it. The university ends up subsidizing this use to the tune of about $500,000 annually. See "Baylor’s subsidy to stadium non-game events to top $450k," Waco Tribune-Herald.