When I first started blogging, I would routinely criticize public funding of sports stadiums and arenas, because generally they are a bad deal for communities, although on the margins it depends on the deal, the type of sport, etc. ("Sports Stadiums Can Be Bad for Cities" and "If You Build It, They Might Not Come: The Risky Economics of Sports Stadiums," The Atlantic).
But it didn't matter, elected officials fall over themselves to give money to teams, as communities get squeezed between Growth Machine advocacy, economics and the way teams are able to mobilize fans to support such agreements, except in rare cases like San Diego, where agreements have to be ratified in public referendums ("San Diego Chargers stadium vote fails," Sports Illustrated).
So I started writing about this more in terms of how to make the best possible agreement in terms of elements of the project and contract that favor urban-community-city-county interests, rather than the interests of the team.
While "Framework of characteristics that support successful community development in association with the development of professional sports facilities," published last year, is the most recent iteration, the comment stream is full of additional points, as I've come across additional material, to the point where it's deserving of an updated writeup (which I am putting off).
Tampa Bay and baseball. But I couldn't help but be struck by this AP report, "Rays say split-season plan with Montreal rejected by MLB."
The Tampa Bay Rays baseball team is quite successful on the field, having made last year's playoffs. But they have one of the worst attendance in all of professional baseball, fewer than 10,000 fans per game, ranking 30th--only Miami and Oakland are worse.The team petitioned to be able to play half its games in Montreal, once home to the Expos (which moved to DC). Hoping to get more fans through the gates in Montreal. But MLB said no.
According to the article, the City of St. Petersburg Florida is working on a stadium improvement proposal.
Why?
If your community is barely supporting your professional baseball team, isn't that a sign that "investing" hundreds of millions of public dollars in a new stadium is wasting money? From the article:
St. Petersburg mayor Ken Welch feels a new stadium in his city remains a possibility. Governmental officials have been working on a redevelopment plan for the Tropicana Field site. “We are working with our county partners and city council to put together the best plan possible, which will work in conjunction with my planned evolution of the Tropicana Field master development proposals,” Welch said in a statement. “With this collaborative approach, I am confident we can partner with the Tampa Bay Rays to create a new and iconic full-time home for Major League Baseball in St. Petersburg while also achieving historic equitable economic growth.”Sternberg said the team will definitely explore options in the Tampa Bay area.
Why should either the city or the team ownership want to stay in a community that seems to be uninterested, judging by the abysmal attendance, even when the team is very successful on the field?
It's important for teams there to understand why is it that professional baseball, in terms of attendance, is so unsuccessful in both Miami and St. Petersburg? ("Rays, Marlins stars uncertain of reason for low Florida fan attendance," AP).
Lessons for Oakland concerning the Oakland A's baseball team. And given Oakland's low attendance, maybe it makes sense for the city to not be so willing to pay for a new stadium ("Examining stadium situations for Athletics and Rays; where both clubs stand in pursuit of new ballparks," CBS Sports). The poorly resourced city isn't opening its coffers.
To be fair, the proposal mostly calls on the private sector to fund the stadium. But they are asking for almost $1 billion in local government provided infrastructure, and it will cost even more because of financing.
Glendale Arizona and hockey. Glendale is "legendary" in that the city has spent a lot on sports subsidization, with not a lot to show for it ("If You Build It, They Might Not Come: The Risky Economics of Sports Stadiums," The Atlantic. "Economic impact of major sports events," 2015).
The Phoenix Coyotes hockey team has been unsuccessful for a couple of decades-- basically its entire 26 year tenure in Greater Phoenix--and a major drain on the city budget, because of financial guarantees in the original contract.
For a time the team was owned by the NHL after a bankruptcy. The post-bankruptcy owners have underfunded the team and broken various contract provisions.
The city, tired of all the losses, and despite "the sunk cost fallacy," finally told the team that they weren't going to renew their lease at the Gila River Arena ("The Arizona Coyotes and Their Long Journey to Nowhere," New York Times). The lease ends at the end of June, 2022.
Maybe this is a little different than the Tampa Bay story. Phoenix is a stretch for hockey, whereas baseball shouldn't be a stretch for Florida, even though the Las Vegas Golden Knights, in a city with similar weather conditions, have been wildly successful. What is it that separates Las Vegas and hockey from Arizona ("Ice Hockey In The Desert? The Vegas Golden Knights' Superb Marketing Strategy," Forbes). From the article:
How would anyone go about selling ice hockey to desert-bound Las Vegas? No snow, no skating tradition, and it is far away from the Midwest-Canadian roots of the sport.
The Vegas Golden Knights, an NHL expansion franchise, have pulled off a miracle on and off the ice. This team has captivated Las Vegas, and it began with a brilliant marketing plan, put in place by the Golden Knights' GM, George McPhee, and vice president of marketing Kim Frank. The team knew it was in a unique market and did plenty of research before proceeding.
The marketing plan began with a three shift festival and open house for season ticket holders, with plenty to do for kids and a nighttime aspect for adults. They created an arena with Vegas-style entertainment. A castle sits above one section, and the cheers are unique. They embrace fan-created traditions like the "Victory Flamingo," with plastic flamingos thrown on the ice after victories, by selling Victory Flamingo-themed socks and plush animals. The team motto is "Vegas Born," which has become a unifying factor for fans. The average attendance in the first year was over 100% of the capacity of the 17,500-seat T-Mobile Arena, which is located on the Strip, and the Knights are already sold out for next year.
Why is the NHL is still committed to Phoenix? Glendale is a rare instance where continued public "investment" in a hockey team was finally deemed a bad investment after decades of failure. But that hasn't carried over to the NHL.
The team isn't successful. How many indicators of success do you need? Why stay? From the NYT article:
Relocation is a notion more than a practical solution. Quebec City and Houston have both been floated before as potential homes for the Coyotes. Both cities have arenas fit for the purpose. In Houston, the Toyota Center is owned by Tilman Fertitta, who also owns the Rockets of the N.B.A.“The Coyotes aren’t going anywhere,” Gary Bettman, the commissioner of the N.H.L., said last week after the league’s annual board of governors’ meeting wrapped up in Palm Beach, Fla. “They’re going somewhere else other than Glendale, but they’re not leaving the greater Phoenix area.”
The "framework" piece is very good.
ReplyDeleteI'd say the only huge change is the introduction of in-person and app based sports gambling. This is radically going to change sports and viewership.
And actually makes subsidizing the in-person product worthwhile.
It's funny we've switched on this issue. You used to be anti-stadium but have come around to making the best deal possible. I was lukewarm pro-stadiums as their are other benefits to having a major league/sports team but am coming to the point where we absolutely need to NOT do it.
Of course in DC the former Redskins are much in play in terms of future stadium use.
Certainly taxing players on game day should be an easy push for congress. I don't see MD and VA objecting that much.
More on this when at keyboard. I did do a piece on gaming a few months back. You're right it should be integrated. It's the "platform" thing Leonsis talked about in 2014. I did add a slew of comments on the framework piece today. One was about Fox and the new USFL and having and controlling content as a platform issue.
ReplyDeleteBut I didn't mention how ESPN owns many bowl games.
Oakland has already lost two teams, losing the A's also might be a bit rough...
ReplyDeleteAlso, generally, citizens love their teams and don't want to lose them. For better or for worse.
Getting housed by teams in subsidies sucks but general municipal budgets are so bloated and ineffective you can see why outrage is limited. And most people can watch a lot of games for free on their over air digital tv antenna ... one of the few bipartisan things left!?
California cities have more limited budgets than cities in other states because of Proposition 13.
ReplyDeleteI agree that losing two out of three teams would be really bad. (It's also an indicator of the reality of the post industrial economy and the supplanting of Oakland as an industrial-centric place because it's no longer important.)
I've never been to Oakland, sadly. One advantage SF has is both BART service and the intra-city MUNI rail network. I don't know if Oakland has opportunities on that end? (It's legacy streetcar system is long gone.)
It does have an opportunity (although theoretically so does Newark and it never happens), comparable to Baltimore and DC, of being an alternative with lower housing costs to the main center city.
But team-wise/amenities wise Oakland is to SF as Tacoma is to Seattle. They have comparable issues, but Oakland benefits from proximity to SV in a way that Tacoma doesn't.
I do think the city should try to do the deal, but really maximize the benefits. (Ironically, the very first iteration of this entry was about Sacramento and the Kings and why I thought, for the first time, that subsidies were justifiable.)
Speaking of charlie's old position and my "new" one, there is a good discussion in the book Next American City about Oklahoma City and how being part of a professional league like the NBA makes you known around the world. E.g. the author recounts a conversation he had about the Thunders in Turkey or some such.
That's a benefit very difficult to quantify but is an element. Especially for second or third tier cities. It has to matter more to them.
But is it enough? Eg why does baseball not matter much in Orlando or Miami, the same way that losing teams matters in Oakland?
But it matters what type of sport it is. NBA is a worldwide phenomenon more than even the NFL. It's also a lot easier to participate from a market population standpoint. But over time, it becomes harder for the second tier cities to be competitive--how much does being a better than a worse team matter in terms of this being a benefit? And players want to be in the major markets, not just for more money, but for the quality of life.
Even baseball and hockey don't seem to have the same kind of appeal internationally compared to the NBA first, and NFL second. Hockey is a North American thing mostly. Baseball is mostly North American + Caribbean + Japan. (Although there was an interesting article in the NYT about a 17 year old girl pitching in Australia, who her coaches--who played in the US--say right now is somewhere between A and AA in skill.)
I wouldn't say that I am pro funding/pro stadium-arena, what I would say is that I am "resigned." If it's gonna happen, we "antis" need to do everything in our power to make it work to the advantage of the community. For example, my continually harping on the necessity of including transportation demand management requirements within the original contract. Eg., the Nationals should have been forced to support late Metrorail service for games ending after the normal closing time.
So wrt gaming etc., I never did learn how to do a pro forma. I've never tried to find one for a sports team.
ReplyDeleteSo you'd have to come up with a list of all the profit lines:
Day of game
- ticket revenue
- concessions
- parking (if owned)
Other
- merchandise sales
- sponsorships (general and venue)
- broadcast rights (tv, radio, cable, Internet)
- e-sports
- gaming
- other events/rentals (concerts, meetings, etc.)
I don't know how it works for gaming. I guess they get a percentage?
And then owning the venue, they can add teams in other sports to their portfolio, like for arenas: basketball, hockey, arena football, WNBA.
Although depending on the owner of arena teams (basketball and the Clippers, hockey and the NY Islanders) the arenas have been built to be exclusive to those sports. (I think the Climate Pledge Arena in Seattle anticipates being able to get a basketball team.)
In Salt Lake, the Miller family owners of the Jazz bought the minor league baseball team, which they still own after selling the Jazz. The Jazz operation manages the team.
Now the new Jazz owners bought the soccer team(s), with an option to get an expansion NWSL team (there was one here "briefly" taking over the KC team, but in the fallout over the previous ownership, that team went back to KC).
A new(er) revenue line item is ancillary associated development rights.
ReplyDeleteLike what the Rams are doing in Inglewood, what the St. Louis Cardinals baseball team did with their Ballpark Village, what the Detroit Red Wings are doing with "District Detroit" (which the Pistons moved to as well, but I don't know if they have a profit percentage, I doubt it).
I read an article that I can't find the cite for about the Warriors, how they argue that ancillary development revenues are key to being able to generate the total revenue they need to be able to compete as a top team.
There are three issues wrt "cui bono" (who benefits):
- the owner independent of the team
- the team
- the city
In a city like DC, you don't need a team to be able to generate development around the facility.
I argued fervently for years that the MCI Arena didn't rebuild downtown. Alex B. always disagreed. The truth is somewhere in the middle.
It helped to reposition DC as being once again a place to live, invest in, locate your business, attend an event. And that was huge, especially in the late 1990s when revitalization beyond Downtown was pretty much unimaginable.
I think it accelerated the velocity of positive change, in particular real estate development (more buildings) in the East End. By how much I don't know? 10 years, 5 years, 20 years?
That velocity element is important.
The same is true in all likelihood in Navy Yard. Because of the stadium there is faster development along the waterfront generally (both SW and SE) and definitely in the Navy Yard/M Street corridor.
And velocity matters.
But in second tier markets the ability to do ancillary development without the anchor of a team is probably a lot harder.
So again, it matters more in those communities. Like Sacramento, Oakland, Buffalo.
There's no way you'd have a District Detroit without the sports team.
Inglewood too, even though it is in the LA market, which is huge, would otherwise be a secondary or tertiary location, without the football team. (Although I don't have first hand experience of the before, and there was a race track there.)
There's a big deal in the works for the area around the Angels Stadium in Anaheim, and while it isn't gnarly, it is definitely underpowered, and you'd think that with Disney already there, it could have been developed better and earlier, but it didn't happen.
OTOH, depending on the working out a new deal with the federal government, DC could redevelop the RFK campus to be great without a sports team at all. It doesn't need a football team to be the driver of change, it just needs to buy out the recreation easement on the land.
Did NYC need a football team to redevelop Hudson Yards?
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But then is the who benefits question. The owner independent of the team? F* it, why give them more money without a percentage to the city?
The team, to be more competitive? It's tough to say.
The city definitely. Why give money to the team/owner instead of keeping it.
Plus the type of development really matters. The NFL thinks there's gonna be an equivalent of an amusement park with the SoFi development.
ReplyDeleteBut even in a big city like LA, I wonder. There are big competing destinations (Disney, Universal, Greater LA). My experience with what we might call "festival marketplaces" is that after awhile they "consume" the visitation by locals and need constant refreshment to continue to generate repeat business, unless they are awesome.
So there definitely needs to be mixed use, to generate ongoing activity.
With Navy Yard, baseball helps food-related business, but not nonfood retail. You need more apartments, more local shoppers to support much in the way of retail outside of convenience goods like groceries.
If NFL wanted a football festival marketplace, maybe it needs to be in Las Vegas, which gets a constant flow of nonresident visitors.
And they'd need to think about moving the football hall of fame, or at the least, creating a branch of it.
charlie, getting back to the income tax thing, the other thing that has changed my position somewhat is recognizing that the research finding limited benefit is flawed. It measures this at the metropolitan scale and at that scale, it all washes out.
ReplyDeleteBut if you look at it at a specific jurisdiction scale, the effect can be significantly more pronounced, depending on whether or not the locality aims to maximize the benefits.
One is income tax on player income. That's probably significant. If DC could do that it would be huge. (I still wouldn't go for football because of how few events there are.)
The other is sales taxes, admissions taxes, etc. from event related commerce. DC gets that from Capital One Arena and PGC no longer does from the Capital Centre.
Plus it's easier to develop around a site in DC than in a interchange proximate site in the suburbs. So DC will benefit from development in a way that PGC didn't with Cap Centre and doesn't with FedEx Stadium.
But again football is different from baseball and basketball/hockey. It's not like the area around the Ravens stadium is all that.
My last year iteration was touched off by Salt Lake, because there is a minor league baseball stadium that is beautiful, but not in the Downtown, and basically after almost 30 years, the area is pretty much unchanged.
... which is why I argue you need to have a plan and implementation organization simultaneously.
That "build it and they will come" is a fallacy. BUT especially when the facility is not in the absolute best location.
I've never been out to the suburbs where the Real Salt Lake soccer stadium is. I doubt the area around it is all that.
OTOH, at the 2003 Congress for the New Urbanism meeting, an award winner was the plan for the area around the Memphis minor league baseball stadium.
In second (Memphis, Nashville) and third tier (Louisville, Greensboro, Greenville, Dayton, etc.) cities, minor league baseball can work quite well. But the obvious point is central location for the stadium, which isn't the case in Salt Lake.
I haven't gone to newspaper archives to read about the creation of the new stadium in Salt Lake, but apparently the Millers were convinced to build in the now Ballpark neighborhood (not sure where they played before) as a gesture for revitalization. So their sentiment was in the right place, just no plans and means for bringing it about.
(Minor league teams have fewer games than the MLB. And now with the changes, even fewer, in that they play at home every other week.)
I've never been to a Richmond minor league baseball game, but the stadium is on the outskirts of the city, poorly positioned, not unlike the White Sox stadium or the baseball and football stadiums in Philadelphia.
There have been attempts to move it to Shockhoe Bottom, which have never come to fruition. I don't know if somehow they could fit it into Downtown.
But it's a good example of how second and third tier cities have limited options because of lack of funds. In Virginia cities and counties are legally separate and can't commingle funds. There is a metropolitan authority that has control of the stadium issue, but getting the counties to agree to more taxes for something they see as mostly benefiting Richmond is a hard sell.
That is one advantage of a state scaled authority. While the Maryland Stadium Authority has focused on Baltimore and the FedEx Stadium in Prince George's County, it has also assisted smaller cities with minor league stadiums too.
Day of game
ReplyDelete- ticket revenue
- in-facility advertising
- concessions
- parking (if owned)
Other
- merchandise sales
- sponsorships (general and venue)
- broadcast rights (tv, radio, cable, Internet)
- e-sports
- gaming
- other events/rentals (concerts, meetings, other teams, e.g., the Georgetown basketball team plays at Capital One Arena, etc.)
City/County payments. May pay for improvements, maintenance, including "janitorial" expenses related to events, guaranteed minimum ticket revenues, etc.
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Ancillary real estate development
Capital Appreciation of the team
Personal Seat Licenses are a form of capital, used to fund construction of stadiums and arenas. I don't know where to account for this.
https://en.wikipedia.org/wiki/Personal_seat_license
Los Angeles Times: A turbulent path: How Stan Kroenke and NFL turned SoFi Stadium into $5-billion reality.
ReplyDeletehttps://www.latimes.com/sports/story/2020-09-04/stan-kroenke-nfl-owners-coronavirus-workers-sofi-stadium-rams-chargers
The Rams might be winners, but two communities know what has been lost
ReplyDeletehttps://www.washingtonpost.com/sports/2022/02/11/buckner-stlouis-inglewood/
https://buffalonews.com/news/local/who-pays-for-what-here-is-how-the-costs-break-down-for-new-buffalo-bills/article_532872e2-ae9c-11ec-bd57-5f0465cd6118.html
ReplyDeleteBig proposal to build a new arena for the Coyotes in Tempe, will cost upwards of $500 million in subsidies.
ReplyDeletehttps://www.businessinsider.com/arizona-coyotes-tempe-new-arena-vote-funding-sports-stadiums-taxpayers-2023-1
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article on multiple examples of stadium subsidy.
https://reason.com/2016/01/14/you-might-as-well-watch-the-nfl-playoffs/
A Home in Florida That Nobody Seems to Want
ReplyDeletehttps://www.nytimes.com/2008/10/09/sports/baseball/09sandomir.html