Academic journal article Contemporary Economic Policy

Is the Wigwam Worth It? A Contingent Valuation Method Estimate for a Small-City Sports Arena

Academic journal article Contemporary Economic Policy

Is the Wigwam Worth It? A Contingent Valuation Method Estimate for a Small-City Sports Arena

Article excerpt

I. INTRODUCTION AND BACKGROUND

In 2009, the school district of Anderson, Indiana, was facing a budget deficit of roughly $5 million (Newkirk 2009). In order to save costs, one of the proposals was to close a gymnasium, known as the Wigwam. The Wigwam cost roughly $348,000 per year in utilities and maintenance (Newkirk 2009) and was used by one of the local high schools for boys' basketball games. That high school, however, is located over 2 miles away and has a gymnasium in its own building. The Wigwam also housed the district administrative offices, a minor league basketball team, and a few infrequent events. The administrative offices in the Wigwam could be moved and the building shuttered, saving net expenses.

News of the potential closure of a high school gymnasium made news around the country, with the New York Times (Fehrman 2012), Chicago Tribune (Jones 2009a), and the Los Angeles Times (Jones 2009b) carrying stories. The Wigwam was the second-largest high school gymnasium in the country with 8,996 seats, and was listed in USA Today (2004) as one of the top places to watch high school basketball. In Indiana, high school basketball has long had a hold on the residents, and Anderson has been known as one of the epicenters of the sport. The city has been featured prominently in Sports Illustrated stories (Newman 1985; Wolff 2002) and several books (e.g., Gildea 1997).

Opened in 1961 when Anderson had several General Motors plants in town, the building became a symbol to the residents of better times in the past. The city has lost much of its manufacturing, shrinking from 70,000 in population in 1970 to 56,129 in 2010 (U.S. Census Anderson City QuickLinks, 2012) as the General Motors factories closed or moved away. High school basketball has also seen a decrease in importance as substitutes for weekend entertainment increased and as Indiana moved away from one-class basketball. The Wigwam was one of the city's few remaining, recognized institutions from the earlier boom period. It was (and is) an important building to the citizens. Was it worth the cost of maintenance, however?

This paper will estimate the intangible benefits to the city from maintaining the Wigwam. An argument might be made that high school basketball is a kind of public good. Even aside from the benefits to the people who actually attend the game, others in the city might benefit from the team and its gymnasium. There are intangibles such as city pride, a common reference point for the citizens, and a certain fame arising from the gym. Anderson High School has one of Indiana's storied basketball programs. There is a reason a newspaper in California would run a story about the budget problems of a small, unimportant school district in the Rust Belt. If the benefit to the city's citizens can be measured, the results might help show whether an expenditure of public funds is justified.

This measure is often accomplished through a procedure known as the contingent valuation method (CVM). CVM is an attempt to quantify value when no market exists to allow for prices as a measuring stick. Instead, a survey is constructed which asks respondents for their willingness-to-pay (WTP) for a good or service, in this case, the continued use of the Wigwam. From the responses, a general range for the overall WTP of the population is calculated.

CVM has been used to measure the benefits from preservation of other types of cultural sites (Kling, Revier, and Sable 2004), but not the benefits of preservation of the sports infrastructure. The procedure has been used in the sports economics literature (e.g., Owen 2006), but generally measures new public stadiums and arenas. Also, CVM is usually performed for larger projects in larger cities (Groothuis, Johnson, and Whitehead 2004). However, these are usually to benefit professional sports teams. Johnson and Whitehead (2000) did perform CVM to measure the benefits from spending on amateur sports, but the project dealt with a potential subsidy to a new arena for a major college team. …

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