Some Perspectives on Sports Facilities as Tools for Economic Activity

By Owen, William H; Beitsch, Owen M | Real Estate Issues, April 1997 | Go to article overview

Some Perspectives on Sports Facilities as Tools for Economic Activity


Owen, William H, Beitsch, Owen M, Real Estate Issues


While much has been written regarding the economic impact of sports and sport-related activity, the subject remains hotly debated. This article is not intended to satisfy either the critics or the supporters of such investments, but it does serve as a general guide to the issues involved when public dollars are directed or allocated to develop a sports facility. This article is a policy checklist, not a critique.

In this commentary, some observations are made regarding one-time sports events such as World Cup Soccer which was hosted at several venues in the United States during the summer of 1994. However, the principal focus of the article is the ostensible costs and benefits to be derived from the development of the sports venue itself. To provide added perspective, these costs and benefits are compared with the potential impacts said to be derived from both a major aquarium and convention center in settings where these kinds of facilities might be plausibly supported. Finally the proposed Sports District in Orlando is described and offered not to illustrate sports facility financing but as a possible model for physical and economic development. These comparisons serve as examples to measure the benefits, if any, which can be derived from a major sports venture. They suggest the creative ways in which public resources might be leveraged to enhance even a marginal return. Sports Stadia

Of approximately 100 facilities used by professional football, baseball, hockey and basketball teams, some two-thirds are publicly owned and financed using a variety of grants, taxes and other sources of government funds, as shown in Table 1.12,3 The current costs are staggering; a contemporary openair baseball park is expected to cost $130 million to $170 million to develop.

Equally staggering are the demands of the typical team which ultimately yield negotiators seemingly attractive rewards over a relatively moderate lease period. The most vulnerable cities, e.g., Miami, receive almost nothing for their considerable capital investment. In the case of Miami, the city will lose its second sports franchise to a suburban neighbor before the decade is over. A few years ago, Miami lost the Dolphins and now the Panthers are planning to vacate an arena built less than 10 years ago. The residual of these moves are certainly not disastrous economically but the city has been left with materially obsolete facilities. Because these facilities are highly specialized in design and have utility only under limited circumstances, the loss of a team instantly strips them of value. With some exceptions, troubling issues such as these have gone largely unreported until expansion possibilities are given endless coverage. Expansions are the darling of sports writers everywhere, whereas, it seems, a move is strictly the concern of the local Chamber of Commerce. Given these costs and the potential for long term financial exposure, what are the principal motivations for the public's investment in sports? Generally, the reasons have focused on four areas.4,5,6,7

* Stadiums have become a preferred tool of development and redevelopment. The scale and opportunities associated with adjacent development is perceived as far greater than what might be obtained through entirely private means. They are promoted as catalysts for nearby projects which can produce their own economic benefits. * The stadium is a surrogate measure of a community's maturity and economic well being. The presence of a professional sports facility is viewed with old time community pride. Conversely, an abandoned or vacated stadium is seen as something of a blemish on the city's record of achievement. Communities such as Baltimore and St. Louis may suffer a perception of disinvestment by losing their teams even though viable indicators of economic or fiscal wealth may amply demonstrate otherwise. Certainly, both of these communities have worked to leverage their financial resources to attract teams that had civic partnerships with other communities. …

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