ISSN: 1543-9518|Vol. 24

Upon Further Review: An Examination of Sporting Event Economic Impact Studies

Submitted by: Victor A. Matheson

As pointed out by Soonhwan Lee (2001) in a recent issue of The Sport Journal, there exists a great deal of debate about the validity of economic impact studies of sporting events. Economists widely believe that studies sponsored by leagues and events exaggerate the economic impact that professional franchises and large sporting events make on local communities. Such overstatement results from several factors.

First, the studies often ignore the substitution effect. To the extent that attendees at a sporting event spend their money on that event instead of on other activities in the local economy, the sporting event simply results in reallocation of expenditures in the economy, rather than in real net increases in economic activity. Next, the studies usually ignore the crowd out effect. Many large sporting events are staged in communities that are already popular destinations for tourists. If hotels and restaurants in a host city normally tend to be at or near capacity during the period in which a competition takes place, that contest may simply supplant, not supplement, the regular tourist economy. Third, the studies may fail to address whether money spent at a sporting event stays within the local economy. Much of the money spent by out-of-town visitors pays for hotel rooms, rental cars, and restaurants. To the extent that hotels, car rental agencies, and restaurants are national chains, their profits associated with a sporting event do not further the welfare of the local citizens, but rather accrue to stockholders around the country. Similarly, revenue from ticket sales is often paid to a league or to a sport’s ruling body instead of local organizers. Fourth, sporting events’ non-economic costs—traffic congestion, vandalism, environmental degradation, disruption of residents’ lifestyle, and so on—are rarely reported (Lee, 2001). Finally, since economic impact studies are often used by sports boosters to justify public expenditures on sports infrastructure, the ultimate question for anyone reading such studies is whether analysis conducted by agents with a vested interest in the research outcome can ever be considered an objective examination of events’ true economic impacts.

Empirical Analyses of Economic Impact Statements

It is one thing to point out bias that could potentially be introduced in impact studies. It is another thing altogether to examine whether actual economic impact studies are, in practice, truly flawed. One tool that can be used to determine the accuracy of economic impact studies is ex post comparisons of predicted economic gains to actual economic performance of cities hosting sporting events. Empirical studies have been conducted on the observed economic impacts of large sporting events as well as on the construction of new sport facilities.

On the sport facility side, numerous researchers have examined the relationship between new facilities and economic growth in metropolitan areas (Baade & Dye, 1990; Rosentraub, 1994; Baade, 1996; Noll & Zimbalist, 1997; Coates & Humphreys, 1999). In every case, independent analysis of economic impacts made by newly built stadiums and arenas has uniformly found no statistically significant positive correlation between sport facility construction and economic development (Siegfried & Zimbalist, 2000). This stands in stark contrast to the claims of teams and leagues, who assert that the large economic benefits of professional franchises merit considerable public expenditures on stadiums and arenas.

On the events side, nearly every national or international sporting event elicits claims of huge benefits accruing to the host city. For example, the National Football League typically claims an economic impact from the Super Bowl of around $400 million (National Football League, 1999), Major League Baseball attaches a $75 million benefit to the All-Star Game (Selig et al., 1999), and the NCAA Final Four in Men’s Basketball is estimated to generate from $30 million to $110 million (Mensheha, 1998; Anderson, 2001). Multi-day events such as the Olympics or soccer World Cup produce even larger figures. The pre-Olympics estimates for Atlanta’s Games in 1996 suggested the event would generate $5.1 billion in direct and indirect economic activity and 77,000 new jobs in Georgia (Humphreys & Plummer, 1995).

In many cases, variation in the estimates of benefits alone raises questions about the validity of studies. A series of economic impact studies of the NBA All-Star game produced numbers ranging from a $3 million windfall for the 1992 game in Orlando to a $35 million bonanza for the game three years earlier in Houston (Houck, 2000). The ten-fold disparity in the estimated impact of the event in different years serves to illustrate the ad hoc nature of these studies. Similarly, ahead of the 1997 NCAA Women’s Basketball Final Four, an economic impact of $7 million was estimated for the local economy in Cincinnati, while the same event two years later was predicted to produce a $32 million impact on the San Jose economy (Knight Ridder News Service, 1999). Such increases cannot be explained by changes in general price levels or growth in the popularity of the tournament. Instead, they are explained by the fact that economic impact studies are highly subjective and vulnerable to significant error as well as manipulation.

In further cases, the size of an estimate can strain credulity. The Sports Management Research Institute estimated the direct economic benefit of the U. S. Open tennis tournament in Flushing Meadows, NY, to be $420 million for the tri-state area, more than any other sporting or entertainment event in any city in the United States; this sum represents 3% of the total annual direct economic impact of tourism for New York (United States Tennis Association, 2001). It is simply impossible to believe that 1 in 30 tourists to New York City in any given year are visiting the city solely to attend the U. S. Open. Similarly, the projected $6 billion impact of a proposed World Cup in South Africa in 2006 would suggest that soccer games and their ancillary activities would represent over 4% of the entire gross domestic product of the country in that year (South Africa Football Association, 2000).

As in the case of sports facilities, independent work on the economic impact of mega–sporting events has routinely found the effect of these events on host communities to be either insignificant or an order of magnitude less than the figures espoused by the sports promoters. In a study of six Super Bowls dating back to 1979, Porter (1999) found no increase in taxable sales in the host community compared to previous years without the game. Similarly, Baade and Matheson (2000) found that hosting the Super Bowl was associated with an increase in employment in host cities of 537 jobs, for a total impact of approximately $32 million, less than one-tenth the figure trumpeted by the NFL. In a study of 25 Major League Baseball all-star games held between 1973 and 1997, Baade and Matheson (2001) found that, in the case of three all-star games in California (1987, 1989, 1992), the events were correlated with worse-than-expected employment growth in host cities and were furthermore associated with an average reduction in taxable sales of nearly $30 million. Finally, Baade and Matheson’s examination (1999) of the Olympic Games held in Los Angeles in 1984 and Atlanta in 1996 found total observed increases in economic activity of $100 million and of $440 million to $1.7 billion, respectively. While the range of the economic impact for Atlanta exhibits a great deal of uncertainty, even the most favorable figure is only one-third of the amount claimed by the host committee.

Discussion and Recommendation

There are theoretical reasons to believe that economic impact studies of large sporting events may overstate those events’ true impact. In addition, evidence suggests that in practice the ex ante estimates of economic benefits far exceed the ex post observed economic development of communities that host mega–sporting events or stadium construction. The best recommendation is simply for cities to view with extreme caution any economic impact estimates provided by sports franchises, sponsoring leagues, or event-organizing committees.

References

Anderson, T. (2001, January 19). St. Louis ready to raise NCAA flag if Atlanta can’t. St. Louis Business Journal.

Baade, R. A. (1996). Professional sports as a catalyst for metropolitan economic development. Journal of Urban Affairs, 18(1), 1–17.

Baade, R. A., & Dye, R. (1990). The impact of stadiums and professional sports on metropolitan area development. Growth and Change, 21(2), 1–14.

Baade, R. A., & Matheson, V. A. (2000). An assessment of the economic impact of American football, Reflets et Perspectives, 34(2–3), 35–46.

Baade, R. A., & Matheson, V. A. (2001). Home run or wild pitch? Assessing the economic impact of Major League Baseball’s All-Star Game. Journal of Sports Economics, 2(4), 307–327.

Baade, R. A., & Matheson, V. A. (in press). Assessing the economic impact of the summer Olympic Games: The experience of Los Angeles and Atlanta. Proceedings of the 1999 International Conference on the Economic Impact of Sports, Athens, Greece.

Coates, D., & Humphreys, B. (1999). The growth effects of sports franchises, stadia, and arenas. Journal of Policy Analysis and Management, 14(4), 601–624.

Enquirer Sports Coverage. (1999, March 25). Final Four’s financial impact hard to gauge. Retrieved August 30, 2001, from http://www.enquirer.com/editions/1999/02/25/spt_final_fours.html.

Houck, J. (2000, January 21). High-stake courtship. FoxSportsBiz.com. Retrieved September 14, 2000, from http://www.foxsports.com/business/trends/z000120allstar1.sml.

Humphreys, J. M., & Plummer, M. K. (1995). The economic impact on the state of Georgia of hosting the 1996 summer Olympic Games (mimeograph). Athens, GA: University of Georgia, Selig Center for Economic Growth.

Lee, S. (2001). A review of economic impact study on sport events. The Sport Journal, 4(2).

Mensheha, M. (1998, March 27). Home-court edge: Final Four promises to be economic slam dunk. San Antonio Business Journal.

National Football League. (1999). Super Bowl XXXIII generates $396 million for South Florida [Report 58(7)].

Noll, R., & Zimbalist, A. (1997). Economic impact of sports teams and facilities. In Sports, Jobs and Taxes. Washington, D.C.: Brookings Institution.

Porter, P. (1999). Mega–sports events as municipal investments: A critique of impact analysis. In Fizel, J., Gustafson, E., & Hadley, L. (Eds.), Sports economics: Current research. Westport, CT: Praeger.

Rosentraub, M. (1994). Sport and downtown development strategy. Journal of Urban Affairs, 16(3), 228–239.

Seigfried, J., and Zimbalist, A. (2000). Economics of sports facilities and their communities. Journal of Economic Perspectives, 14(3), 95–114.

Selig, B., Harrington, J., & Healey, J. (1999, July 12). New ballpark press briefing. Retrieved August 29, 2000, from http://www.asapsports.com/baseball/1999allstar/071299BS.html.

South Africa Football Association. (2000). World Cup bid details. Retrieved January 9, 2002, from http://www.safa.ord.za/html/bid_det.htm.

United States Tennis Association. (2001). 2000 U.S. Open nets record $420 million in economic benefits for New York. Retrieved January 9, 2002, from http://www.usta.com/pagesup/news12494.html.

2016-10-12T11:40:57-05:00February 14th, 2008|Contemporary Sports Issues, Sports Facilities, Sports Management, Sports Studies and Sports Psychology|Comments Off on Upon Further Review: An Examination of Sporting Event Economic Impact Studies
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Artists & Athletes: A Perspective on the 2002 Olympic Arts Festival

Submitted by: Raymond T. Grant

It is right and proper that cultural programs are a required part of the Olympic Games. To a certain extent, history has driven the integration of cultural programs into the Olympic Games. And, just as both Olympic and Paralympic winter games highlight the accomplishments of our athletes, it is noble and right to similarly celebrate, through Cultural Olympiads, the achievements of our artists.

Thanks to the tireless efforts of archeologists and anthropologists, we have come to appreciate the significance of the Ancient Games and their role in merging sport and culture. Surely this had influenced, in the late 19th century, Baron Pierre de Coubertin and his interest in the integration of art, principally through competitions, as an element in the re-establishment of the modern Olympic Games. Today, Conrado Durantez, president of the International Pierre de Coubertin Committee, keeps interest in de Coubertin and his Olympic legacy thriving.

David Gilman Romano, Ph.D., the gifted classical archaeologist from the University of Pennsylvania, in an essay it was my privilege to commission, said “[C]ultural programs as required elements of the modern Olympic Games are totally in keeping with the origins and history of the ancient festival, where sculpture, poetry, music, and political idealism were bound together with athletic competition and religious celebration.” Romano reminds us that the Delphi festival originated as a musical tribute to Apollo Pythios. Contests in singing to the flute appeared in the sixth century BC, and it was only later that athletic contests were added. I find it both compelling and fitting that the very earliest text in the entire Greek world is scratched into the shoulder of a terra-cotta vase found buried in an Athenian grave. It is a hexameter poem that describes the winner of a dancing contest from about 740 BC. It reads, “[H]e who dances most nimbly of all, take this [the vase] as your prize.” For me, this suggests not only a substantive chronicling of the Olympics, but the influential role artists have played, over the centuries, in the Olympic Movement. The Olympic motto, Citius—Altius—Fortius, invites artists to excel.

In his work The Forgotten Olympic Art Competitions, Richard Stanton explores the program of a conference in Paris in April 1906 called by de Coubertin, at which choreography, letters, music, painting, sculpture, and other disciplines were detailed and discussed. The inclusion of arts and letters in the modern Olympics was under way.

Today, the Olympic Charter binds organizing committees to “promote harmonious relations, mutual understanding and friendship among the participants and others attending the Olympic Games,” in part through the establishment of a cultural program. With proper latitude for local customs and traditions—combined with oversight from the International Olympic Committee’s Commission on Culture and Olympic Education—today’s organizing committees can, through a well-curated Olympic Arts Festival, impact the games and leave a cultural legacy for them.

These few examples of ancient and contemporary history have helped define the role of the 2002 Cultural Olympiad, or Olympic Arts Festival, surrounding the Olympic and Paralympic winter games of 2002. Essays on the Ancient Games, on the role of artists who live with disabilities, and on the connection of human rights within the context of Olympic ideals have all helped provide a perspective and point of view to my selection of programming for the XIX Olympic Winter Games in Salt Lake City. So, too, has a commissioned work by the 39th poet laureate of the United States, Robert Pinsky, who in his poem calls upon the ancient Greek poet Pindar.

The ancient Olympic practice of chariot racing and the forgotten Olympic art competitions of the 20th century have suggested to me the legitimate placement of ice sculpting and the cultural experience of rodeo as a part of the 2002 festival, with accompanying cultural participation medals.

With all of this, however, the raison d’être of the 2002 Cultural Olympiad is the commissioning of new works by contemporary artists. This alone will define a cultural legacy for these Olympic Games. My programming includes a new modern dance work choreographed by Judith Jaimison for the Alvin Ailey American Dance Theater, the world cultural ambassador of black heritage. With music by America’s jazz great Wynton Marsalis, the inspiration behind this new work is the life of the gifted Olympian Florence Griffith Joyner. It seems to me a fine way to merge sport and art. Another example is the commissioned work of the Pilobolus dance company that will combine humor with athleticism.

In his work One Hundred Years of Olympic Congresses 1894–1994, Norbert Muller reports that the aforementioned 1906 Paris conference recommended (in point of fact demanded) that dance be returned to a “more athletic way of expression.” I suggest that the Ailey and Pilobolus works will fulfill the 1906 mandate.

The monumental glass sculptures of Dale Chihuly resist categorization, yet if sculpture were an Olympic sport today, Chihuly would be an Olympian. Similar examples in theater, poetry, music, and the visual arts abound in this 2002 Cultural Olympiad.

It is fitting as well that the Olympic Arts Festival was called upon to produce the opening ceremony of the 113th session of the International Olympic Committee. This program of protocol, pageantry, and culture will reflect the vision of the 2002 Olympic Arts Festival: to highlight the achievements of athletes alongside the accomplishments of artists. This is what we aspire to. To get there, the Olympic Arts Festival established a mission to highlight Americans’ contributions to the arts and humanities, to celebrate Utah and its heritage, and to embrace the West and its cultures.

Artists live and work in community and have the singular ability to find the uncommon in the commonplace. The 2002 Olympic Arts Festival is artist driven. For, like athletes, artists live on the verge of peril.

The indigenous peoples of North America (the American Indians) play a significant and contemporary role in the arts festival. All the tribes of the Great Basin and Colorado Plateau will gather together to curate an exhibition whose message is durability. The monumental sculptures of Allan Houser, a descendent of Chiricahua Apache Indians and one of America’s most influential and respected artists, will be on view throughout these Olympic Games.

While athletes inspire the world through peaceful competition at the 2002 Olympic Winter Games and Paralympic Winter Games, I have invited the 13th Reebok Human Rights Awards to the Olympic Arts Festival to recognize activists who have made significant contributions to human rights through nonviolent means. Norwegian photographer Karin Beate Nosterun will celebrate the work of Olympic Aid in an exhibition of vivid photographs documenting the organization’s efforts for refugee children in Africa.

In music, iconic American ensembles and soloists with international careers—such as the Mormon Tabernacle Choir, Itzhak Perlman, Frederica von Stade, and many others—will be featured.

For perhaps the first time, we will celebrate as well the culinary arts. Following select cultural experiences, I’ve called upon the James Beard Foundation to arrange for celebrity chefs to complement the artistic offerings. Some 50 chefs will celebrate “the art of the table.”

In addition, historical subjects will be addressed, in the light of current research. The 1936 Berlin Games are explored in an exhibition curated by the National Holocaust Museum. Another exhibition, “Homeland in the West,” traces the history of Jews in Utah. Additionally, in “Athletes in Antiquity: Works from the J. Paul Getty Museum,” art and artifacts illustrating Greece’s cultural legacy are showcased.

In all, some 15 exhibitions, 60 signature performances and special events, and 15 community celebrations will welcome both world visitors and 3,500 athletes from 80 countries. These audiences are assured, in an important way, of a place in the Olympic Movement. Their participation in the 2002 Olympic Arts Festival will help define the atmosphere of the games. If history is any judge, it will be an atmosphere fondly remembered.

Author Note

Raymond T. Grant is artistic director of the 2002 Olympic Arts Festival.

Prior to joining the Salt Lake Olympic Committee, he headed the performing arts and film area of the Disney Institute, a division of the Walt Disney Company. He previously served as general manager of the American Symphony Orchestra in Carnegie Hall in New York City.

He is a graduate of the University of Kansas and holds a master of arts degree in arts administration from New York University.

2017-08-07T15:10:44-05:00February 14th, 2008|Sports Facilities, Sports History|Comments Off on Artists & Athletes: A Perspective on the 2002 Olympic Arts Festival
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Minority Hiring Practices in Professional Sports

Submitted by: Brad Muster

Introduction

Professional sports provide a source of entertainment for millions of people. Players and games are seen as diversions to everyday life. Yet to athletes, and to those who work behind the scenes in the front-offices, professional sport is a job. Running and managing sports teams and leagues is big business. As such, hiring practices of these institutions should be of societal concern. Franchises impact the lives of not only those whom they employ, but entire cities as well. From the construction and operation of stadiums to the local merchants who take care of the fans, sports teams greatly affect a city’s economy. A glance at the rosters can quickly show what the players’ demographics are, but a closer look is needed to see the racial and gender make-up of these various teams and leagues.

Statement of the Problem

The purpose of this paper is to review the demographic hiring history of various professional sports teams and leagues. The demographic make-up of players, front-office and league personnel will be compared to the overall labor market to determine how professional sports fare in creating jobs for minority groups.

Independent Variable

The percentage of minority hiring across gender and racial lines will serve as the independent variable in this study.

Dependent Variables

The various professional sports organizations (NFL, NBA, MLB) and the population rates for each selected minority group will serve as the dependent variables in this study.

Hypothesis

Sports organizations will likely fare well in terms of minority hiring where players are concerned. African-Americans comprise a majority on most teams’ rosters, and Hispanics fare well in Major League Baseball. More opportunities are emerging for women. Front-office positions will most likely be under-represented in minority hiring, particularly among females.

Assumptions

This study assumes no one is excluded from pursuing jobs in the professional sports field due to gender or race.

Limitations

This study is delimited to professional sports teams, their players and league personnel.

Significance of the Study

The overall labor force is becoming more diverse. Professional athletes have traditionally been male and, for the most part, Caucasian or African-American. The emergence of new professional sports organizations for women have increased opportunities for female athletes. But who is working off-field for these organizations? How have sports teams and leagues staffed their organizations? Are they in line with the national labor hiring practices? Or, are they in stark contrast with the real world? A minority unfriendly hiring practice could have a negative impact on the popularity and support for each league.

Review of Literature

A review of the literature reveals that the data can be interpreted in a multitude of ways. At first glance professional sports seem to epitomize a system of racial harmony and equality. One needs only to look at the rosters of various teams in the National Basketball Association (NBA), the National Football League (NFL), or Major League Baseball (MLB) to find a healthy mix of minority participation. A closer inspection reveals some disturbing observations. True, while minority participation is high, it seems relegated to one particular minority group, the African-American male. The opportunities for female athletes to participate have increased due to the formation of various sports leagues, most notably the Women’s National Basketball Association (WNBA), but their numbers still far trail those of their male counterparts. Hispanic and Asian-American participation seems limited to MLB, where their numbers are not reflective of their presence in the overall population. A look at the team and league offices reveals that the true position of power in these sports is predominately dominated by the white male.

The Northeastern University Center for the Study of Sport in Society has been issuing racial report cards for professional team sports. The report has evolved from grading minority participation and employment in a few select leagues (NFL, NBA, MLB), to grading minority and gender participation in collegiate and other professional sports. The report also emphasizes the various levels of authority from coaching to ownership. An early report in 1992 found that the top management hiring practices of the NBA earned a B-, the NFL a C, and MLB an F (Clay, 1994). In a more comprehensive 1997 report, the overall grades for the three sports leagues were NBA an A, NFL a B, and MLB a C. In terms of playing opportunities for minorities the NFL and NBA each earned A+ grades, while MLB received an A. Coaching opportunities found the NBA leading the way again with an A, the NFL received a C+, and MLB a B. No league fared exceptionally well in terms of top management positions held by minorities. These positions include owners and executive officers. The NBA received a C, the NFL a C, and MLB an F (Hubbard, 1998). The 1998 report card included gender grades as well as looking at the National Hockey League (NHL), Major League Soccer (MLS), and the WNBA. Grades for colleges were included as well. The NBA once again scored the highest receiving an A- for minority hiring, and a B for gender hiring. The NFL graded a B+ for minority and a D+ for gender. MLB earned a B for minority hiring practices, but did not receive a gender grade due to a lack of available information. In any event, in terms of race, each league either maintained (MLB) or improved their scores. Other key findings were that soccer had the best record for minority group diversity; the NHL held the best opportunities for women; and that the WNBA had a good record for both minority group and gender diversity (“NBA Scores Highest”, 1999). Sport in Society Director Richard Lapchick stated after his tenth study that “While the hiring practices in sport have gotten better for people of color and women, there is clearly significant room for progress in all sports. Nonetheless, pro sports is measurably ahead of society in these matters.” (“NBA Scores Highest”, 1999).

Compiling statistics on such matters is not unique to Northeastern University. The Women’s Sports Foundation Gender Equity Report Card of 1997 found female involvement to be rare at higher levels of sports management, and opportunities were generally confined to director level positions in two jobs in particular. The Director of Promotions is 58.8% female, and the Director of Marketing is 29.9% female (Delpy, 1998). The Foundation also studied female spectatorship in the various leagues. Statistics showed that despite high levels of interest, the opportunities to work for these sports clubs were not there.

League Females Team/League Executives Female TV Audience
MLB 11/ 190 (5.8%)44%
NBA 19 /203 (9.4%)40%
NFL 10/171 (5.8%)40%
NHL 13/187 (6.9%)41%
–refers to women in CEO, CFO, COO, President or Vice President positions (Delpy, 1998).

The numbers look a little better for women when considering all senior front office positions, especially when compared to their African-American counterparts. Women held 16% of such jobs as compared to 10% for African-Americans in the NFL, and 31% to 11% in the NBA (Holder,1999).

The perceptions of racial discrimination arise when one considers the vast discrepancy between the number of minorities who participate as players to those who help organize and run organizations at team or league levels. “The number of minorities hired . . . doesn’t come anywhere close to the number of Black athletes who play the games . . . On the field sports have as much equal opportunity as anything America has to offer. Off the field, sports are very segregated.” (Greenlee, 1998). As of 1996, African-Americans comprised 12.2% of the United States population, but were represented on 75% of the NBA rosters, 63% of the NFL’s, and 33% of MLB’s (Evans, 1997). Presently there are 4 African-American head coaches in the NFL (13% of such positions), 7 in the NBA (24%), and 3 African-American (11%) and 1 Hispanic (3%) in MLB. African-American assistant coaches account for 25% of NFL staffs, 34% of the NBA’s, and 14% of MLB’s (Holder, 1999). Furthermore, of the 221 officiating positions in professional sports, 25 were filled by African-Americans (Lyons, 1992). Until 1997, there were no female officials. In that year, Violet Palmer and Dee Kantner made history by becoming the first women to officiate an NBA game.

There are numerous theories and opinions as to the importance of these statistics. One such theory is the Key Functionaries Theory where “key functionaries are positions within a social system that are capable of influencing and performing crucial activities” (Evans, 1997). The key functionary roles in sport include positions such as sportscaster, executive, coach or a paid endorser. The scarcity of African-Americans in these roles in sport is seen as proof that discriminatory barriers have not been abolished, but replaced by barriers in institutional practices that involve key functionary positions. Discrimination has shifted from criteria based on ascription (race) to achievement (or holding proper necessities for the job) (Evans, 1997). This institutional bias has led to African-Americans being under-represented in other prominent sport categories such as fans, referees, writers, program producers, directors, senior executives, printers of programs and/or tickets, agents, attorneys and vendors. Others who echo these discriminatory practices are in place are sports luminaries such as John Thompson and Joe Morgan. Thompson, long time coach at Georgetown University, questions the lack of minorities in front office positions and sarcastically quips African-Americans are “competent as a player, but so incompetent that his knowledge leaves him once he graduates from a university” (“Is there a double standard”, 1998). Joe Morgan, Hall of Fame baseball player of the Cincinnati Reds, points out that not one minority was even interviewed for the last thirty three managerial positions in MLB (“Is there a double standard”, 1997). The situation on the playing fields may not be as rosy as some would believe either. Tony Banks and Rodney Peete comment on the low number of African-American quarterbacks in the NFL, and Peete says, “We don’t often get the opportunity to go and make mistakes or get three or four years to develop” (“Is there a double standard”, 1997). Sherman Lewis, long time NFL assistant coach and Offensive Coordinator of the Green Bay Packers, ponders his situation. Lewis has seen two of his understudies, Steve Mariucci and Jon Gruden, given head coaching jobs ahead of him. Of Gruden, Lewis comments, “If you think Jon Gruden is more qualified for a head coaching position than me, it’s like saying I am more qualified to be president than Bill Clinton” (Hubbard, 1998). “Black athletes have taken pro sports to a higher level. But when it comes to who coaches, who manages, and who gets administration positions, athletics is strictly a white mans’ game” (Greenlee, 1998). Others view the numbers differently, and see no real discriminatory practices at work. A study to examine the relationship between the racial composition of NBA, NFL, and MLB teams and the racial composition of the franchise cities found that there were no systematic correlations (Leonard II, 1997). Previous theories held that cities with lower African-American populations fielded teams with lower percentages of African-American players, i.e., “The whiter the city, the whiter the team” (Leonard II, 1997). Leonard II’s study showed no such correlation and thus no directed bias or intentional segregation against African-American players on the part of NBA owners. Another study found no systematical bias of fan voting for MLB All-Stars in relation to race or ethnicity. The historical study found that by 1996 African-American players appeared to have an edge in fan selections which is “striking in light of the fact that black attendance at ball games is not only quite small but seems to have declined over the period” (“Color-Blind”, 1999). Still others feel that if there is a bias it is against white players. “If imbalances betoken bias, and if underrepresentation of various ethnic groups is a big, big problem, what shall we do about the scandalous underrepresentation of whites in most big-league sports?” (Seligman, 1987). Seligman’s true contention is that African-American athletes are simply better at their jobs, and that charges of bias and discrimination, and movements to enact affirmative action policies are brought up too readily.

Conclusion

Professional sports is not only entertainment but big business as well. As a business, the teams and leagues must concern themselves with dominant public issues. One such issue discussed in this paper are minority hiring practices. Comments by sports executives such as those made by Cincinnati Reds owner Marge Schott and former Los Angeles Dodger executive Al Campanis have led many to believe that racist and sexist beliefs run rampant among those who manage and run professional sports. A look at the numbers shows that this may or may not be the case.

At first glance, the rosters of pro sports teams seem to symbolize an ethnic diversity that should be admired and emulated. African-Americans could certainly think so, as this group comprises 75% of NBA rosters, 63% of the NFL’s, and 33% of MLB. But what of Hispanics and Asian-Americans whose only impact is in MLB, and even there at low levels of participation. These minority groups are under-represented at the collegiate level as well. In fact, only 1,400 Hispanics competed in major college sports in 1993-94 (Lapchick, 1995). Women, as a minority group, are faring much better, although their numbers still fall well behind those of their male counterparts. Thanks to Title IX, interest and participation has increased in women’s athletics. These opportunities have led to the formation of the WNBA, with other leagues to follow. Female athletes will continue to strive for equal compensation and endorsement opportunities in relation to their male peers, but their opportunity of expansion into new sports leagues far excels those of males.

The question of discrimination arises when one looks at the number of minorities who hold coaching and front office positions. Many observers feel the numbers should be more reflective of the people who actually play in the games. Presently, African-Americans constitute 13% of all head coaches in the NFL, 24% in the NBA, and 11% in MLB. These numbers are more in line with the overall African-American population in the U.S. of 12.2%, and are much more reflective of a truly diverse organization. The lack of other minority groups, where only one Hispanic holds a managerial position in MLB, should be more of a concern to the Reverend Jesse Jackson and the Rainbow Commission for Fairness in Sport. Senior front office positions are another story. One could assume that the knowledge of sports issues among minority groups is increasing due to participation and would be reflected in an increase in front office hiring. African-Americans hold 10% of the front office positions in the NFL and 11% in the NBA. Women hold 16% and 31% respectively. However, these positions are usually pigeonholed in particular jobs such as Director of Promotions, or Director of Marketing. Diversity demands an increase in these numbers and job titles.

Minority of hiring practices of professional sports teams and leagues should reflect society as a whole and not be based on the athletes who play the game. Yet, participation is important because it reduces the barriers in hiring relating to on-the-field experience and knowledge of competition. Before focusing on the private sector of professional sports, much progress can and should be made in the public sector, namely college athletics. At these mostly publically funded institutions of learning, experience can be gained by minorities in all areas from playing to management. Increased minority opportunities at the collegiate level will enable professional sports teams to identify successful candidates to fill similar positions in their organizations. According to the Northeastern University Report Card, professional sports have outperformed colleges in terms of minority and gender hiring. Professional sports teams and leagues should be credited with the work they have done, and continue to do through their internship programs for minorities. Minority hiring practices will be easier to monitor as professional sports leagues continue to expand. Expansion allows for teams to build their managerial staffs from the ground up rather than trying to fill one position at a time. More important, expansion presents the opportunity for minority ownership of teams.
A hiring practice that mirrors a society’s population cannot be labeled biased or discriminatory. Furthermore, if said hiring practice does not meet societal levels it does not necessarily mean that the organization is biased or discriminatory. Candidates for jobs not only have to be willing to participate but must meet all the qualifications for that position. Applicants must have the interest, ability, knowledge, experience and aptitude to carry out the job duties. In terms of professional rosters, one can easily argue that teams are simply employing the best available talent. The fact that so few Hispanics and Asian-Americans are competing in football, basketball and some respects baseball at the collegiate level makes the argument of having these groups more fairly represented at the professional level a moot point. As far as head coaching positions are concerned, one must remember that these are very exclusive and competitive jobs. Only thirty-one positions are available in the NFL. The four African-Americans who currently hold head coaching positions (13%) clearly mirror the overall U.S. population of this minority group. Are there more qualified African-American candidates to assume these roles? Most certainly. Should the number of African-American head coaches be raised simply to reflect the over-representation of African-American athletes participating in the games? Absolutely not!

Owners must be given credit for running their organizations. If owners are putting the best available talent on the field, and are color-blind enough to bolster their rosters with African-Americans, then it is just as conceivable that they are staffing their front offices with the best talent that they know. Ownership in sports league franchises is also an ultra-exclusive fraternity. Franchises are very expensive assets, and teams, for the most part, are run to win championships and generate income. To inflict a quota system on these privately held “corporations” is not only unfair, but does not allow these individuals to exercise all their business acumen that enabled them to become successful enough to buy a team in the first place. As more people compete and take part in athletics, particularly females, the greater the talent pool for jobs in sport will grow. In a perfect world we would all get the jobs we wished for. The fact is, if a professional sports team/league is hiring minority groups in a manner which mirrors their societal population, and they are hiring qualified personnel, then charging them with discriminatory behavior is difficult to justify.

References

Chappell, Kevin. (January, 1996). Scoring on the Expansion Teams: blacks named to key positions with newly formed professional sports clubs. Ebony, 51(3), 52-55.

Clay, Bobby. (February, 1994). How Do We Score in the Front Office? While blacks have landed some high-profile posts, few are getting the jobs that really count. Black Enterprise, 24(7), 144-149.

Color-Blind at the Ballpark. (July 5, 1999). Business Week, p.18.

Deacon, James, & Hawaleshka, Danylo. (April 7, 1997). Leagues of Their Own; women are finally breaking the old boy stranglehold on sports. Maclean’s, 110(14), 62-66.

Delpy, Lisa A. (September, 1998). Career Opportunities in Sport: women on the mark. JOPERD – The Journal of Physical Education, Recreation & Dance, 69(7), 17-22.

Evans Jr., Arthur S. (September, 1997). Blacks As Key Functionaries: a study of racial stratification on professional sport. Journal of Black Studies, 29(1), 43-59.

Greenlee, Craig T. (April 16, 1998). In Sports, Those Making the Off-the Field Decisions Remain Overwhelmingly White. Black Issues in Higher Education, 15(4), 23-24.

Holder, Sherre. (February, 1999). First & Goal! Black Enterprise, 29(7), 121.

Hubbard, Lee. (May 28, 1998). In Sports, Whites Abandon Limelight for Behind the Scenes Power. Los Angeles Sentinel, p. B1.

Is There a Double Standard for Blacks in Sport? (May 4, 1998). Jet, pp. 52-56.

Lapchick, Richard. (July 5, 1995). HO Perspectives: college sports and race. The Hispanic Outlook in Higher Education, 5(22), 16.

Leonard II, Wilbert M. (December, 1997). Racial Composition of NBA, NFL, and MLB Teams and Racial Composition of Franchise Cities. Journal of Sport Behavior, 20(4), 424-434.

Lyons, Douglas C. (February, 1992). Blowing the Whistle. Ebony, 47(4), 96-99.

NBA Scores the Highest in Hiring Minority Groups. (August 16, 1999). Jet, p. 46.

Seligman, Daniel. (April 27, 1987). Bias on Ice, and Quite a Few Other Places. Fortune, p. 286.

2013-11-26T21:46:34-06:00February 14th, 2008|Contemporary Sports Issues, Sports Facilities, Sports Management|Comments Off on Minority Hiring Practices in Professional Sports
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A Review of Economic Impact Studies on Sporting Events

Submitted by: Soonhwan Lee

Introduction

Economic impact in sporting events can be defined as the net change in an economy resulting from a sport event. The change is caused by activity involving the acquisition, operation, development, and use of sport facilities and services (Lieber & Alton, 1983). These in turn generate visitors’ spending, public spending, employment opportunities, and tax revenue. Specifically, the economic impacts of expenditure are composed of direct, indirect, and induced effects. Direct effects are the purchases needed to meet the increased demand of visitors for goods and services. Indirect effects are the ripple effect of additional rounds of re-circulating the initial spectators’ dollars. Induced effects are the increase in employment and household income that result from the economic activity fueled by the direct and indirect effects (Dawson, Blahna, & Keith, 1993; Howard & Crompton, 1995).

Economic impact is an important topic of discussion and debate in sport marketing and/or management fields because estimating the economic impact of a sporting events is very difficult and frequently too subjective. Because of the nature of social science, everyone has their own ideas and methodology for conducting economic impact studies. The main difficulty in doing social science research is based in the fact that everyone believes that they have an innate understanding of the material. Social objects are hidden behind a screen of pre-constructed discourses which present the worst barrier to scientific investigation, and countless sociologists believe they are talking about the object of study when they are merely relaying the discourse which, in sport as elsewhere, the object produces about itself, whether through its officials, supporters or journalists (Bourdieu, 1999). Therefore, construction of truly scientific objects implies a break with common representations, which can notably be effected by taking these prenotions as the object of study.

Statement of Purpose

Although many previous studies have contributed to economic the impact research of sport and/or recreational events, most studies are based upon the researchers’ personal perception and arguable methodology. The purpose of this study was to review previous economic impact studies and to develop strategies for conducting an economic impact study.

Reasons of Conducting Economic Impact Study

Hosting a sport event has revealed a number of benefits in our communities. Of those benefits, some reasons like increasing community visibility, positive psychic income, and enhancing community image are all common and acceptable postulations. However, there is doubt that sport events that utilize public subsidies always bring positive economic benefits into communities. There are following reasons to conduct economic impact studies of sport events. First, because many sport events in our communities were financed by public tax support, economic impact studies continue to be an important public relations tool for city government. Secondly, there is doubt that sporting events may actually help develop a community in relative to its economy. Therefore, accurate estimates should be proposed and the results should be reported to community members. Thirdly, as sport is not just an entertainment, but an industry, the results of economic impact may be a cornerstone to develop many related businesses in communities. Finally, positive or negative economic results of sport events may be an important method to determine communities’ draft budget for the coming year.

Literature Review on Economic Impact Studies

Unfortunately, economic debates often center around the appropriateness of the size and type of multipliers used for Economic Impact Studies (EIS). The multiplier effect accounts for the overall economic impact of a sport event. The multiplier effect demonstrates the process through which initial spending in a region generates further rounds of re-spending within the region. The ripping process of subsequent re-spending is the multiplier effect. The basic principle of the multiplier effect begins with an initial spending as an increased income into an economy. A portion of the increased income is spent and further re-spent within the region (Archer, 1984; Crompton, 1995; Wang, 1997). In summary, there are three elements that contribute to the total impact of visitor spending: Direct impact (the first-round effect of visitor spending), Indirect impact (the ripple effect of additional rounds of re-circulating the initial visitors’ dollars), and Induced impact, which is further ripple effects caused by employees of impacted business spending some of their salaries and wages in other business in the host community (Howard & Crompton, 1995).

A variety of multiplier used modeling techniques are available: TEIM (Travel Economic Impact Model), RIMS (Regional Input-output Modeling System) (Donnelly, Vaske, DeRuiter, & Loomis, 1998; Wang, 1997), TDSM (Tourism Development Simulation Model) (Donnelly, et al., 1998), RIMS II (Regional Input-output Modeling System, version II) (Wang, 1997), ROI (measuring financial Return On Investment) (Turco & Navarro, 1993), and IMPLAN (Impact Analysis for Planning) (Bushnell & Hyle, 1985; Dawson, Blahna, Keith, 1993; Donnelly, et al., 1998; Howard & Crompton, 1995; and Wang, 1997). Of those modeling techniques, IMPLAN is one of popular methods. The IMPLAN model was developed by the U.S. Forest Service and Engineer Economics Associates, Inc. The IMPLAN develops input-output models for all states and counties in the United States. This model was used to estimate the employment, income, and net sales and adopted as the regional impact analysis program-of-choice. Another often-used model is RIMS, which was developed by the U.S. Department of Commerce, Bureau of Economic Analysis (BEA). This model also offers input-output tables down to the country level (Turco & Kelsey, 1992). Also, a lot of simple formulas were developed to conduct economic impact study of sport events by local sport commission companies. Table 1 shows standard formulas, which were derived from the National Association of Sport Commission (NASC).

Table 1 NASC Economic Impact Formulas
Organization Multiplier Formula Spending per person/day
Albuquerque Sports Council 1.7 # of visitors x # of days x $200 x 1.7 = EI $200.00
Bloomington/MD DVB _ _ # of visitors x # of days x $183 = EI $183.00
Greater Augusta Sports Council 3.0 # of visitors x # of days x $167 x 3.0 = EI $167.00
Greater Cincinnati sports & Events Commission _ _ # of visitors x # of days x $125 = EI $125.00
Lee Island Coast CVB _ _ # of visitors x # of days x $100 (over 18) = EI
# of visitors x # of days x $54 (under 18) = EI $77.00 (average)

Lisle CVB/
Lisle Sports Commission _ _ # of visitors x # of days x $158.41 (1st person in room) = EI
# of visitors x # of days x $85.41 (2-4 people in room) = EI
$97.94 (average)
Shreveport Regional Sports Authority 2.0 # of visitors x # of days x average $ spent x 2.0 = EI
(average $ spent varies from event to event) _ _
Siouxland Sports Congress
2.5
# of visitors x # of days x $90 x 2.5 = EI
$90.00

Tallahassee Sports Council 1.73 # of visitors x # of days x $79 x 1.73 = EI $79.00
Waterloo CVB 2.5 # of visitors x # of days x $100 x 2.5 = EI $100.00
EI indicates the Economic Impacts Source by National Association of Sports Commissions
According to the report by National Association of Sports Commissions (NASC), the average multiplier score is 2.37 and average spending per person/day is approximately $146.89 across the United States.

Problems of Economic Impact Study

As stated before, the economic impact study of sporting events is controversial because of its subjective aspects. There are other problems of the study based on the literature review. First, the use of different and conflicting concepts of the multiplier itself (Howard & Crompton, 1995). A danger in the multiplier and the way it is presented in research reports aimed at the policy maker is that its basic concept and application are deceptively sample. This means that economic impact studies are primarily used by consultants hired by sport entrepreneurs and boosters to demonstrate the value of a proposed sport event (Johnson & Sack, 1996). Secondly, inclusion of local spectators, time-switchers, and casuals in the study. Economic impact attributable to a sport events should include only new cash flow injected into an economy by visitors and other external businesses such as media, banks, and investors from outside the community. In addition, because expenditures by time-switchers and casuals would have occurred without the event, impacts of their expenditures should be excluded in conducted economic impact study. Thirdly, economic impact study by hired consultants from political power usually estimates only positive aspects, which means benefits both economically and socially. They never measured substantial economic costs and potential social problems. For the side of economic impact, only gross benefits rather than net benefits are measured and reported. In the case of non-economic impact, negative social impacts including such as traffic congestion, vandalism, environmental degradation, disruption of residents’ lifestyle, and so on are rarely reported. Finally, economic impact studies are too subjective depend on researchers to trust their results. Even if some models and formulas for economic impact studies were developed and utilized, the results and their interpretations could be changed based on the intent of the researchers and the unrealistic expectations of proponents.

Discussion and Recommendation

Conducting an economic impact study is important because it becomes a useful tool to evaluate a community’s development both economically and socially. Therefore, professionals who have the responsibility of conducting an economic impact study should consider the following suggestions. First of all, limit and define the purpose of study. Limiting and defining the purpose of study can save study time and make the outcomes more useful and specific to people whom want apply them. Secondly, prepare alternatives to be considered. The number of alternatives that should be considered depends upon the number of realistic options available and on other constraints, such as time, information, funding, and political realities. It is a very useful activity for the leadership to reduce the number of alternatives to the realistic three or four to include in the analysis (Goldman & Nakazawa, 1997). Thirdly, prepare enough information to conduct a meaningful economic impact study. In order to produce exact and non-arguable results, appropriate and diverse information for the study like a demographic profile on potential visitors and/or study respondents, the degree of economic development for the potential hosting community, tax impact, and other social guidelines. This information will be effective to make research questionnaire and other necessary research tools. Fourth, conduct a study based not on assumption, but on evidence and information. One of the arguable issues in economic impact studies is that the researcher and/or proponents of the event rely on their assumptions. These assumptions lead not correct results and apply to community’s decision on hosting a sport event. Fifth, consider all possible impacts for the community not just on economic impact. Economic impact studies should contain economic as well as social impacts. Frequently, the negative impacts on community life such as vandalism, increasing traffic congesting, environmental degradation are not considered and reported. Sometimes, however, these social impacts can be more important to a community than the economic impact. Sixth, do not exaggerate the results of study. Because the results of an economic impact study can make a decision to use public tax supports, the political sponsor may tend to exaggerate or misinterpret the results of the study. Seventh, on the side of estimating economic benefits, under estimation is better than over estimation. The proponent of a sport event frequently over estimates on their projects to attract public approval and political support. This is related to moral and ethical issues. Even if no one can produce an exact estimation on sport events, the researchers should keep the study based on the result data. Also, based on the results, other alternatives for the sport event can be considered.

References

Archer, B. (1984). Economic impact: Misleading multiplier. Annals of Tourism
Research, 11(4), 517-518.

Bourdieu, P. (1999). The state, economics and sport. In Dauncey, H., & Hare, G. France and the 1998 World Cup: The national impact of a world sporting event, (pp. 15-21). London, England: Frank Class Publishers.

Bushnell, R. C., & Hyle, M. (1985). Computerized models for assessing the economic impact of recreation and tourism. In D. V. Propst (Ed.), Assessing the economic impact of recreation and tourism. Asheville, NC: Southeastern Forest Experiment Station.

Crompton, J. L. (1995). Economic impact analysis of sports facilities and events: Eleven sources of misapplication. Journal of Sport Management, 9, 14-35.

Dawson, S. A., Blahna, D. J., & Keith, J. E. (1993). Expected and actual regional
economic impacts of Great Basin National Park. Journal of Park and Recreation
Administration, 11(4), 45-59.

Donnelly, M. P., Vaske, J. J., DeRuiter, D. S., & Loomis, J. B. (1998).
Economic impacts of state park: Effect of park visitation, park facilities, and county economic diversification. Journal of Park and Recreation Administration, 16(4), 57-72.

Goldman, G., & Nakazawa, A. (1997). Determining economic impacts for a community. Economic Development Review, 15(1), 48-51.

Howard, D. R., & Crompton, J. L. (1995). Financing sport. Morgantown, WV: Fitness Information Technology, Inc.

Johnson, A. T., & Sack, A. (1996). Assessing the value of sports facilities: The
importance of non-economic factors. Economic Development Quarterly, 10(4),
369-381.

Leiber, S. R., & Alton, D. J. (1983). Visitor expenditures and the economic impact of public recreation facilities in Illinois. In Leiber, S. R., & Fesenmeier, D. R.
Recreation planning and management. State College, PA: Venture Publishing.

National Association of Sports Commissions. (April, 1999). National Association of
Sports Commissions Annual Meeting Book. Unpublished manuscript.

Turco, D. M., & Kelsey, C. W. (1992). Conducting economic impact studies of
Recreation and parks special events. Washington, DC: National Recreation and
Park Association.

Turco, D. M., & Navarro, R. (1993). Assessing the economic impact and financial return on investment of a national sporting event. Sport Marketing Quarterly, 2(3), 17-23.

Wang, P. C. (1997). Economic impact assessment of recreation services and the use of multipliers: A comparative examination. Journal of Park and Recreation Administration, 15(2), 32-43.

2013-11-26T22:08:46-06:00February 14th, 2008|Sports Facilities, Sports Management|Comments Off on A Review of Economic Impact Studies on Sporting Events
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Financing Options and Facility Development

With
new state of the art sporting arenas costing anywhere between
$30 million to $300 million to build, huge financial investments
must be made. There are many options in financing sport and
recreation facilities than involve both public and private
arrangements and investments. This paper will address various
financial ventures and the benefits and pitfalls of those
options.

Funding
may be separated into two distinct groups public funding and
private funding. Public funding may included but may not be
limited to taxes, municipal bonds, certificates of participation
and special authority bonds. Public funding may include but
may not be limited to, cash donations, contributions, naming
rights, concessionaire and or restaurant rights, sponsorships,
lease agreements, luxury and preferred seating, parking fees,
advertising, and gifts shops revenues. Other ways of financing
in order to spread the enormous costs of building a state
of the art sporting facility is that projects have been partnered
in joint public and private funding. Often, the public funding
is in the form of land contributions or luxury taxes and the
private contributions are reflected within the facility itself.

Cities,
counties and states such as Tampa and Miami Florida, Nashville
TN. and Irving TX. have picked up the entire cost for new
arenas through public funding. More than half of the construction
costs for other facilities in Dallas, Seattle, Atlanta, Raleigh,
N.C. and St. Paul, MN. are financed by their local governments.

Public
funding in the form of taxes

In
the state of Texas, there was a controversy around the arena
funding bill called House Bill 92. Passed in 1997, House Bill
92 is a tool that communities can use as possible funding
options for the development of new sport facilities by levying
taxes and tapping sales tax funds. The bill authorizes cities
to tap the sales tax to fund other economic development projects
as well (San Antonio Business Journal, 1998). Many have their
eyes on the funding source. One of those interested was State
Senator Frank Madla, who had a proposal using the House Bill
92 to couple the funding of a new arena, community projects
and a campus expansion at the University of Texas, San Antonio.
Considering the little support that voters had toward approving
a sales tax to fund a new sports arena, a referendum involving
a combination of many different projects, might have had more
of an appeal. Community leaders reacted to the idea of a bundled
project referendum with apprehension. Although, it may have
more of a voter support, the plan will limit the amount of
money that could be raised for any one project. A half cent
sales tax would bring in about $50 million a year and spread
out over several projects, it is not a lot of funding. A ½
cent sales tax was also desired solely for the building of
a new arena for the San Antonio Spurs, the Livestock Show
& Rodeo and ice hockey. Arguments opposed to the use of
the ½ cent sales tax came from the Metropolitan Transit
in San Antonio. The sales tax that the House Bill 92 refers
to is what Texas voters had previously designated as the Mass
Transit Authority (MTA) sales tax. The state legislation allowed
for the MTA to receive a full cent for operating a public
transit system. The Metropolitan Transit decided to collect
only a ½ cent with the expectation that the additional
½ cent would be available for future needs. It is that
extra ½ cent that was wanted for the development of
projects. The MTA claims not only address the transportation
needs of the community, it also maintains 550 full time jobs,
and provides returns three times its cost in business revenue
to the communities it serves. Its argument is that the building
of a sports arena only satisfies the private interests of
a few people and its supporters (San Antonio Business Journal,
1997). A similar argument echoed in Dallas, where citizens
questioned by they should pay higher taxes to benefit the
team owners who are two of the wealthiest citizens in Dallas.
Even though the teams were contributing $105 million to build
the arena, the city was getting no revenue directly from the
facility (Dallas Business Journal, 1997). These arguments
have lasted for several years and in 1999, the city of San
Antonio was exploring other funding options for the new arena.
Not only would voters be asked to back 1/8 of a cent a tax
revenue, but the San Antonio Spurs and other private donors
would be expected to contribute funds. Besides the use of
sales taxes, House Bill 92 authorizes the levying of other
public taxes such as motor vehicle rental tax, event parking
tax, hotel occupancy tax and facility use tax, which allows
visiting teams to be charged up to $5,000 per game for the
use of the facility. The burden of the taxes levied fall on
the visitors rather than the general public. This attracted
opposition from trade groups, and convention groups whose
members depends on tourism. The thought is that when hotel
and car rental taxes are increased, fewer people will consume
those services. Those opposed to the idea feel that the city
visitors gets poorer by paying for something he or she may
not use, a new arena, but the owners and players get richer.
The cities of Dallas and Houston have taken advantage of the
hotel and car rental taxes. Dallas has a $230 million downtown
arena project that is publically and privately financed. The
Dallas plan as approved by the City Council ended up as roughly
a 50/50 deal between the city and the two teams to use the
facility. The city contributed a total of $110 million for
the construction of the arena and an additional $15 million
in infrastructure improvements and the teams kicked in $105
million for construction costs. In San Antonio, voters did
approve $110-147 million to be raised through hotel and car
taxes only by slim margins. Of the 125,000 votes casts, the
arena referendum passed by just 1,642 votes. (San Antonio
Business Journal, 1999).

Often
residents are concerned with how much a new arena would cost
them. One question also to be considered is how much would
it cost not to build at all. In a recent study done by the
St. Louis Cardinals, a new stadium would bring a tax revenue
to both St. Louis and Missouri, from $14.5 million last year
to $23.2 million by 2005. By 2035 the projected revenue is
estimated at $77 million (St. Louis Business Journal, 2000).
Without a new stadium, the city stands to loose that much.
Over the years, the Cardinals by investing millions in stadium
upgrades, has already increased tax revenues from$6.3 million
in 1995 to $16.4 million in 2000. The proposed ball park,
would cost approximately $370 million to build and the city
and state would allocate a portion of taxes to fund the costs.
Without a new stadium, the team president fears they will
not be able to compete with division rivals and fund a higher
payroll. The same fate happened to the Minnesota Twins and
the city of Minneapolis in 1992. After winning the 1991 World
Series, the Twins asked for a new stadium to compete with
the Metrodome. They were turned down, the payroll was cut
and attendance fell. As a result, the $3.2 million generated
in taxes from ticket sales, fell to $500,000 as of last year.
The city of St. Louis may face the same situation and needs
to weigh their economic opportunities for their city.

At
the national Council For Urban Economic Development conference,
Rick Horrow, President of Horrow Sports Adventures spoke of
the revenues lost by not building needed facilities. He reported,
“80%-85% of team revenue that is shared comes mostly
from ticket sales and television contracts. The 15%-20% balance
comes from skyboxes, parking concessions and club seats..”
(Amusement Business, 1997). It is this 15%-20% that is fueling
new sports facility development. The average annual revenue
income of the NFL is $71 million, and the top five teams average
$86 million. Horrow also said, the building of new NFL facilities
generally requires cooperation between cities, counties, and
states, and that the financial risks and burdens borne by
the public sector have been increasingly shifted onto tourists,
who pay through hotel and car rental taxes and other mechanisms
that minimize the cost to local taxpayers. The latest trend
is to package other community needs with facility funding.
Many of the new facilities are multipurpose facilities which
can offer concerts and other events.
Public funding in the form of bonds.

Bonds
are a way for a city government to generate money needed for
the construction of a new or the renovation of a sports facility
or arena. A bond is defined as ” an interest bearing
certificate issued by a government or corporation promising
to pay interest and to repay a sum of money (the principal)
at a specified date in the future”(Samuelson and Nordhaus,
1985, Sawyer, 1999). Bonds sold by a government are referred
to as municipal bonds. The two most common type of municipal
bonds are general obligation bonds and non guaranteed bonds.

Some
state governments permit the state to fund construction and
other capital expenses by selling general obligation bonds
(GO) that are backed by their tax bases. They are considered
to be full faith and credit obligation bonds . Both state
and local governments usually ask voters to approve proposed
GO bond issues, an opportunity not available to voters by
federal governments. Most of the time voters approve the issues
even though it may increase local debt and taxes. Since 1993,
a majority of public referenda (23 of 41 ) have been approved
totaling $4.4 billion in public funding. (Amusement Business,
1999). The funding for development may be desirable if the
development spurs economic growth.

One
example is that of Scottsdale in Arizona who is pursuing to
redevelop an old neighborhood. The redevelopment plan called
“Los Arcos Redevelopment Project” is being funded
with private and public funds. This hefty redevelopment plan
can be seen on the Internet page www.newlosarcos.com. The
project costs are as follows: arena costs- $175-183 million,
land acquisition/parking- $172-182 million, retail development-
$90-98 million, construction- $63-72 million, subtotal: $500-590
million, the over 30 year total: $1066-1125 million. The public
will pay for a portion in taxes as follows: land acquisition-
$120-135 million, public infrastructure (streets, sewer, plazas)-
$30-50 million, sub total: $150-185 million, over 30 years-
$340-390 million, the total public participation is 30-35%
of the total redevelopment plan. The arena itself will be
funded by the developer and the Coyotes. The plan is designed
to satisfy the redevelopment of the neighborhood by joining
the arena with a mall, restaurants, supermarket, retailers,
and a movie complex. (Amusement Business, 1999).

In
New Jersey, the Governor offered this year the sum of $75
million toward the $325 million needed for the development
of a new arena. The arena in Newark is apart of a plan to
bring new retail growth to a suffering city. The state plan
has two options: stay in East Rutherford and build a new arena
at the Meadowlands Sports Complex for $250 million or move
the New Jersey Devils and Nets to downtown Newark. Both projects
need voter approval. Those who want the arena built in downtown
Newark claim that the funds not only build an arena but rebuild
a city. The funds will go to improving access arteries, highways,
exit ramps and a new parking garage. But the minimal state
investment may keep the teams in the Meadowlands since the
Governor is not convinced that new downtown sports arenas
can spur economic revitalization in the cities. One assemblyman
disagrees, Wilfredo Caraballo, D-Essex said that the lawmakers
need to seek more state funds for the Newark project, “In
the Meadowlands, the land is already publicly owned. In Newark,
the land still needs to be purchased. Moreover, the Meadowlands
property might be used for more lucrative ventures for the
residents of this state. In Newark, the arena investment would
be part of an overall, long term strategy to revitalize the
state’s largest urban center.” (The Record, 2000).

Non
guaranteed bonds such as special authority bonds, revenue
bonds and certificates of participation are other sources
of finance that can be used to build, own and operate utilities,
airports, transportation systems and public purpose facilities,
such as arenas, and have no power to tax. They derive their
revenues from user fees and other sources and must finance
general and capital expenditures out of these receipts and
whatever they are permitted to borrow. When issuers undertake
capital projects, they sell long term bonds. One type of bond,
called an industrial development bond, can raise up to $10
million. This type of bond known as an industrial revenue
bond offer low interest rates and in order to be eligible
for the issuance of these bonds, the borrower must show to
the government that the deal will create jobs. Generally,
for each $50,000 in capital raised by industrial development
bonds, there should be one new job. This will qualify the
interest income as tax exempt to the buyers of the bonds.
The city council must approve all projects using these bonds.
(Nation’s Business, 1998).
Since their securities cannot be backed by expected tax collection,
often the issuers pledge the revenues from their operations,
giving the name revenue bonds. These are considered a greater
risk for the investors than full faith bonds and credit bonds
and therefore likely to pay a higher interest. Instead of
GO bonds, which are backed by the city’s tax receipts, revenue
bonds would be sold and backed by specific revenues generated
by the new sports facilities. Such revenues may be concessions,
ticket sales, and advertising rights. By using revenue bonds
rather than GO bonds the city may avoid criticism that may
ensue from using funds needed to improve the schools, create
affordable housing or other city priorities.

One
example of creative financing to lower taxpayer risks is the
city of West Sacramento who teamed with two other governments,
the county of Yolo and neighboring Sacramento County to sell
bonds to build the new baseball stadium, Raley field. The
bonds are to be repaid entirely from team and stadium proceeds
over the next 30 years, where by then the River Cats will
own the stadium outright. The deal is structured so the team
could pay off the bonds with an average game attendance of
just 3,500, the lowest of any AAA team. At the present time
the River Cats are averaging more than 12,000 fans a game.
An innovated part of their plan is to have daily deposits
put into a lock box account to assure that the bonds are repaid
to a Joint Powers Agency. Joint Powers Agencies are common
for government entities to band together to pay for law enforcement,
fire protection, and insurance but are not common to finance
sports facilities (Business First, 2000). If other governments
could get together, it is a promising financial package that
will not raise taxes to back the bonds and lessen the risk
for all involved.

The
down side is that revenue bonds may not be as popular with
the fans since they are the ones coming up with the extra
fees. The city of Boston is considering imposing a surcharge
up to $100,000 on luxury box and club seats. They are also
considering a personal seat license for all ticket holders.
The personal seat license requires season ticket holders to
purchase the right to buy certain seats every year.

Revenue
bonds which are sold by state and local governments account
for about 2/3rds of the $100-200 billion in new state and
local government debt. GO’s account for about 1/3rd. In the
Las Vegas NV. area, Clark County’s total bonded indebtedness
is $2.9 billion, which is up 18% from last fiscal year. The
largest fiscal year percentage increase was posted by the
Las Vegas Convention and Visitors Authority, which had $172
million in debt last fiscal year and is $312 million this
year. The 82% increase was due primarily to the issuance of
bonds for the current conventional hall expansion project.
According to Nevada’s Taxpayers Association President, Carole
Vilardo, “We’re still well below our legislatively imposed
GO(General Obligation) limit.” (Las Vegas Business Press,
2000). Under state law, Clark County GO bond issuance is limited
to 10 % of its assessed valuation. Current assessed valuation
stands at $34.1 billion while the county’s GO bonded indebtedness
stands at $1.2 billion or 35% of its limit. Revenue bonds
are not considered in the debt cap. Clark County’s $1.6 billion
in revenue bonds account for more than 54% of all its indebtedness.
The total indebtedness for the 5 area cities in the Las Vegas
area and special authority entities such as the water district,
water authority, and international airport amount to $8.6
billion for FY00-01, up 12.1% from the previous year.(Las
Vegas Business Press, 2000).

Because
income from state and local GO and revenue bonds is exempt
from federal income tax, they have a strong appeal to many
taxpayers. Unlike the federal government which has maintained
its reputation for prompt payment of debts, state and local
governments have periodically, in recent years, defaulted
on their bonds or have come close to doing so, making it important
to be mindful of the credit quality of the government securities.

Municipal
bonds whether GO or revenue, are rated by the rating agencies
in a manner similar to their ratings of corporate bonds rating.
The most credit worthy corporations are given a AAA rating.
The next three grades are AA, A, and Baa. The bottom ratings
go to the most speculative or junk bonds, which would be rated
as, Ba, B, Caa, Ca, and C (Renberg 1995). The rating can be
improved as the company’s finances are monitored and upgrades
it if the issuer’s situation improves. It also may be downgraded
if the situation deteriorates. Many of the corporate bonds
have maturities of 30 years, which may involve call risk,
which is similar to the prepayment risk of mortgage backed
securities. An investor should expect to be compensated for
the degree of risk that they will accept. Securities with
the highest rating, will offer the lowest yields and likewise,
the lower ratings will be higher yields. Revenue bonds tend
to have lower yields due to their debt is met out of fees
and receipts and therefore, may be affected by recessions,
a fall in supply and demand by falling out of favor, or being
affected by other services such as water, and utilities. (Renberg
1995).

Investment
Grades are as follows:

High
Grade

AAA:
Bonds with this rating are judged to be the best quality.
They carry the smallest degree of investment risk.

AA:
These are high quality by all standards. They are rated lower
because their margins of protection is not as large.

Medium
Grade

A:
These bonds possess many favorable investment attributes.
Even though, factors giving security to principal and interest
are considerable, elements may be present that suggest a susceptibility
to impairment some time in the future.

Baa:
They are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present
by certain elements may be lacking or may be characteristically
unreliable over any great length of time.
Speculative (junk)

Ba:
Their future cannot be considered well assured. Safeguards
and protection for security may be very moderate

B:
These bonds lack characteristics of the desirable investment.
Assurance of interest and principal payments over any long
period of time may be small.

Caa:
These are of poor standing. They may be in default or elements
of danger of the principal or interest.

C:
These are the lowest rated class of bonds. They are considered
to have extremely poor prospects of attaining any real investment.
(Renberg 1995).

General
obligation vs. revenue bonds. General obligation bonds are
serviced out of appropriations and backed by the credit and
tax base of the issuing unit of government. Interest and principal
on revenue bonds are paid from the revenues of the facilities
that were built with the money received from their sale. Generally
the supply of revenue bonds is greater in longer maturities,
while the supply of general obligation bonds are greater in
intermediate maturity. GO bonds are considered a better credit
risk because of the taxing authority behind them.
Many long term municipal bonds timely payments are insured.
It is intended to protect the funds against loss in the event
of a state or local governments unit’s default. The literature
of the bond should state whether or not it is insured. Three
types of insurance are involved in tax free bond funds. First:
New insurance is what state and local governments or their
underwriters obtain if the issuers qualify. Higher ratings
such as AAA may result from the coverage. Second, secondary
market insurance is purchased by investors, to cover bonds
as long as they are outstanding. Third, portfolio insurance
is bought by funds to cover bonds in a portfolio (Renberg
1995). It is not enough that the bonds that funds buy have
ratings that meet their standards, they must have the claims
paying ability of the insurance company providing the coverage.
Most funds make certain the insurance companies are rated
AAA and remain at that standard. Insurance is an extra layer
of protection. Bond insurance negates the need for costly
letters of credit and grants an instant AAA rating, and interest
rates paid to bond investors are lower. Therefore, refinancing
at a later date would not be necessary. With most sporting
arenas now being built as revenue palaces, underwriters and
investors are more open to insuring private sports deals.

Other
risks to watch for in long term municipal bonds purchase is
bonds being “called” prior to maturity (Barker 2000).
Simply, if a long term bond gets called after five years,
the purchaser want to make sure that its total yield is similar
to that of other 5 year bonds. The longer the term the bond,
the more likely it is to lose value before maturity if interest
rates rise. On the other hand, lower rates boost a bond’s
value. Some bond brokers advise against bonds with maturities
past five years or so unless they are likely to be called
sooner. For example, the average AAA rated five year municipal
bond may trade 4.64%, while a 10 year bond may yield just
4.93%. The interest rate risk with the 10 year bond may not
be worth the risk (Barker 2000). When purchasing or trading
bonds, one usually goes through a bonds broker who will charge
a commission for the transaction. An alternative would be
to call a firms such as Charles Schwab or Fidelity Investments
and they will sell from their inventory of bonds, not as brokers
but as principal. They make their money on the bid spread
and not commissions. (Barker 2000).

Certificates
of participation are a government buying a facility or land
and then leasing it out to pay off the facility’s expenses.
An example is that of the city of Boston. Several plans are
being considered for the new Fenway Park in which the city
could invest $200 million. The city may issue revenue bonds
to buy a proposed site for a new ball park next to the 88
year old Fenway and assist with construction costs. It has
not been determined yet as to whether the city will own the
new ball park and require the Boston red Sox to pay an annual
lease or it the new facility will be jointly owned by the
team and the city (The Boston Globe, 2000).

Residents
frequently do not support bonds or increases in tax bases.
In Columbus Ohio, financing for a new facility is needed.
Polled residents said that they do not support a sales tax
increase to fund a stadium, the present location of their
stadium is fine and if the Clippers did move, they would prefer
a new location outside of town (Business First, 2000). In
Dallas, residents resisted the tax increase for a new arena
to replace the outdated Reunion Center. One resident’s opinion
was that the only reason to develop a new center was to add
luxury suites which doesn’t add back to the community but
pays for the escalating player salaries (Dallas Business Journal,
1997). Likewise, voters struck down proposed tax increases
to help construct a $160 million basketball arena for th4
NBA Rockets in Houston, and a $325 million baseball stadium
for MLB’s Twins in St. Paul MN. Other sources of revenues
for the building of sports facilities are available for team
owners to look at such as private funding.

Private
funding is a way to finance a new or renovated facility without
a tax increase and little risk to taxpayers. New arenas in
San Francisco, Denver, Washington D.C., Boston, and in Vancouver,
Montreal, and Ottawa in Canada all have been built entirely
with private funds. Minimal public funding was used for arena
projects such as in Columbus, Portland and Philadelphia.
Private funding through naming rights.

The
San Francisco Giants’s privately funded ballpark opened this
year. The sale of licenses and naming rights was a key source
of income for the ballpark. The San Antonio Spurs will sell
its naming rights to the Ellerbe Becket venue. Similarly,
possible naming rights may contribute to the new Boston stadium
which could add up to $50 million toward the financing. The
city may plan to allow the Red Sox to retain revenue generated
from the sale of naming rights but still be a city owed facility.
But Bostonians have an affiliation with the name Fenway Park
and fans may be furious with the changing of the name(The
Boston Globe,2000). American Airlines paid $2.1 million a
year for 20 years for the naming rights of the American Airlines
Arena in Miami FL. The Miami Heat who predominately plays
at the arena signed up sponsorships with CitiCorp/Citi Group,
Lucent Technologies, Carnival Cruises and Florida Power &
Light.(South Florida Business Journal, Miami-Dade Edition,
1998). Dallas’s Stars, of the NHL will receive revenues from
naming rights , concessions, parking and other arena income
when their new arena will open. In Seattle the Seahawks will
split arena revenues with the city and the owner. Fans may
be getting tired of the corporate naming of stadiums. On the
web site www.epinion.com. the user can look up stadiums by
option of name, sport or city. A brief description and rating
of the stadium/arena is available with comments from the fans.
One critic wrote, “Personally, I hate corporate names
on buildings. Candlestick Park is now 3Com Park, Joe murphy
Stadium is called Qualcomm, and Joe Robbie is Pro Players
Stadium. What’s next? The Preparation H Arena? Kibbles and
Bits Stadium? Depends Fieldhouse?” (Craigmoosh, 2000).
The comment rings true, but it is the corporate sponsors that
pay for the upgrades, player salaries and other costly expenses.
It is an amusing and interesting site to browse.

In Denver a state of the art facility, the Pepsi Center, was
developed entirely by private funding. The facility which
costs $170 million almost didn’t get built when one of the
original funding partners pulled out of the deal. The one
company left would had to pay $2 million a year for 25 years
and not even own the asset at the end of the period. The two
primary teams who would play at the new center are the Nuggets
and the Avalanche who had a prior lease agreement with the
city at the McNichols arena. In order to break the leases,
the city wanted a commitment from the Nuggets and the Avalanche
to stay in Denver for 25 years at the new center. The teams
resisted. There was a stall of building for 2 years. Finally
a deal was struck with the city. The arena would be deeded
to the city of Denver when it opened but leased back to the
teams for 25 years to ensure they did not move during the
span of the city’s agreement. During the 25 years the city
will take all sales tax proceeds generated by the arena as
compensation for the teams breaking their prior leases. Ascent
Entertainment Group Inc. who owned the Colorado Avalanche,
agreed to pay the arena’s construction costs and an exemption
on a 10% city/county seat tax. At the end of the 25 years,
the teams will own the arena. The city was happy that no tax
money was spent and the received additional sales taxes from
the Pepsi Center. Major sponsors contributed their funds in
exchange for naming rights, such as Pepsi, who contributed
millions. The amphitheater is called Coors Meadow, which provides
a direct path to the Coors Tap Room bar inside the arena.
Private concession stands who pay leases offer items from
all over Colorado’s eateries. Other sponsorships include the
Denver Post to got the Fanway and upscale restaurant on the
club level. The business center is named for US west Inc.
who offers the business community benefits from the new Pepsi
center because it offers state of the art conference rooms
for rent. Another major sponsor Conoco, has a service stations
and mini marts next to the arena, and is one of the few stations
in the down town area. The deals with the sponsors are termed
for 10 to 30 years. Recently, Ascent Entertainment sold the
teams and the Pepsi Center for $461 million (Denver Business
Journal, 1999).

Not
always do naming rights work out so well especially when the
facility is sold. In Buffalo, home of the NHL Sabres, there
was a contract dispute regarding the name of their arena.
The arena which was called Marine Midland after a bank which
no longer exists. The parent company HSBC wanted the named
changed of the arena. The Sabres dispute was over the fact
that their contract with the bank was for the arena to be
called Marine Midland, who was to pay $15 million over 20
years for the right. The facility’s standpoint is that they
spend lot of time and money promoting the name and then they
have to change it. The Buffalo Sabres who was in default on
their loan with HSBC because of a $15 million loss last year
has changed the name of the arena to HSBC arena.

Naming
right experts report that during the early entitlement deals,
sponsors fail to protect themselves in the event that a merger
or buy out forces them to change their name (Business First,
Western New York, 1999). In recent entitlement deals, sponsors
have provisions in the contracts for a name change during
the course of the agreement. In name rights sponsors this
occurrence happens mostly with banks due to buy outs. The
costs of changing a name may average around $2 million. Corporate
sponsorship of naming rights is well established in professional
sports such as the Pepsi Center in Colorado and the Continental
Arena in New Jersey.

A
recent trend in college athletic is naming rights for multipurpose
sports facilities. On Ohio State University’s campus, the
facility the Schottenstein Center and the basketball and hockey
arena the Value City Arena are named after the retail store
chain and owners. The owners of the retail chain paid $12.5
million for 75 years of advertising. The University of Wisconsin
sports facility is named after Kohl’s Department Stores. Syracuse
University in 1979 was the first sports facility to sell naming
rights for $2.75 million for the Carrier Dome. Some companies
buy naming rights for name recognition, tax deductions or
support of the community. Experts have not agreed as yet if
the tax deductible millions spent on naming rights actually
pay for themselves (Business First, Columbus 1995).

Asset
Backed Securities

Securities
for the multi million dollar arenas are being backed not only
by naming rights and sponsorship, but from revenues from luxury
suite sales and food concessions. The Pepsi Center in Colorado
is an example of how asset backed securities were used to
build the arena. The borrowed funds are backed by the sale
of luxury suites, sponsors, and food concession sales. The
original owner of the Pepsi Center and its teams, Ascent Entertainment
Group, reported while securing funds, “One benefit was
that we received an investment rating…we were able to get
an A rating from Fitch, the highest rating for a sports financing.”(Treasury
& Risk Management, 1999). This led t a 6.94% interest
rate, which helped in raising $139.85 million towards the
total cost of the arena. D. L. Auxier, the director of securitization
services in Ernst & Young, a structured finance group
reports some set backs with asset back issues. He fears, “the
interest for sports franchises is short lived.” (Treasury
& Risk Management, 1999). If the securities are backed
by luxury suites and a team projects a certain amount of sales,
falling short means adjusting the financial picture. In Florida,
the Miami Heat’s arena’s $180 million in private revenue bonds
was able to get bond insurance. It was the first time that
private bonds issued for a new arena had received an insurers
guarantee even though there is a shadow of a doubt of meeting
revenues. According to Larry Levitz, of MBIA Insurance Corp.,
“The Heat’s expected revenues could fall 40% but over
half of the arena revenues is from contractually obligated
income.” (South Florida Business Journal, Miami-Dade
Edition, 1998) It seems that luxury suites are in demand.
The Reunion Arena in Dallas and the Continental Arena in New
Jersey are both outdated because they don’t offer enough suites.
The American Airlines Arena in Miami was able to raise $180
million toward their arena, home of the Miami Heat. The arena
has 65 luxury boxes and is able to take in approximately $13
million a year from leases. The arena leased four first of
a kind court side luxury boxes for $500,000 each. (South Florida
Business Journal, Miami-Dade Edition, 1998). Other luxury
boxes have gone for $300,00 at the Staples Center in Los Angeles
and at Madison Square Garden in New York City. For the new
arena that will house the San Antonio Spurs and the Live Stock
Show/Rodeo in will have 50 new luxury suites and 340,00 potential
seats that are sold out in advance. The center will receive
100% of parking , concession, ticket and adverting revenues
as well. (Amusement Business 1999).

Extra
revenues may be offered to a new arena by management companies
who want the contract to manage the facility. In 1998, two
big management companies were in competition with each other
for the management rights over the smaller version of the
SuperDome in New Orleans. The Philadelphia based company,
Spectator Management Group (SMG), who already has a contract
with the SuperDome, offered $5.6 million cash toward the construction
of the Baby Dome. Another management company, Houston based
Leisure Management Inc. (LMI), offered $6 million for both
contracts. The extra cash would allow the building of luxury
suites that would be necessary to attract corporate contracts
and big league teams. LMI has 10 arena management contracts
in the South. Two other companies made offers in the form
of cash loans. Globe Facilities Services of Tampa, FL. and
a New York based management company, Ogden Entertainment,
made cash loan offers. Ogden Entertainment has 34 other arenas
that it manages and also had made offers for cash loans. But
a offer of cash without interest is certainly more desirable.
In order to make an arena management bid, the company must
submit information on their assets. Ogden Entertainment reported
$3.6 billion, SMG reported their assets totaling $64.7 million,
leisure Management International reported $2 million in assets
and Globe Facility Services reported $409,000 in assets (
New Orleans city Business, 1998). Those who do not submit
the information would not be in the running for consideration.
Joint management of both Domes would save millions in equipment
and personnel sharing, and in attractive contracts with vendors
and sponsors.

Opinion

It
amazes me still that millions of dollars are available for
those who need to access it. In 1958, the Phoenix Sun Devils
Stadium was built for $1 million dollars. Quite a bit of money
back then. Today the new Foxboro arena is estimated to cost
$325 million when built. My husband and I priced the tickets
for the NHL all stars game in Denver, Co. Just the tickets
and hotel would costs us, $1,500 each. At some point in time
the costs of going to games is going to be more than the average
joe can afford. I do not think the economy is equating with
what the average annual salary is. Yes, there are the dot
com millionaires but not everyone has been so fortunate to
have gotten on that boat. It could be that my personal salary
never quite made it out of the range it was in the 80’s. Nevertheless,
I think with the new presidency, there will be economic changes
where going to a game will just not be affordable anymore.
The new costly arenas will not fill their seats, not be able
to pay their bills and sponsors will not be so willing to
spend up millions on advertising rights.

Chart
for Arenas and Financing

Legend
for chart:
A: City A
B: Facility B
C: Opening C
D: Total Cost D
E: Public Share E
F: Comments F

Miami,
FL.
National Car Rental Center 1998
$185 million 100%
Panthers home financed by Broward County

Nashville,
TN.
Nashville Arena 1998
$144 million 100%
Predators home in the NHL-voters approved a property tax
increase

Tampa,
FL.
Ice Palace 1996
$153 million 100%
Tourist bonds and ticket charges will repay municipal bonds

Seattle,
WA.
Key Arena 1995
$119.5 million 83%
City gutted Seattle Coliseum and rebuilt from the inside

Raleigh,
N.C.
Raleigh Sports Arena 1999
$140 million 75%
N.C. State boosters help facility for NHL and NCAA-home
of Hurricanes and Wolfpack

Atlanta,
GA.
Philips Arena 1999
$284 million 74%
Turner contributes money- home of the NHL Thrashers

St.
Paul, MN.
River Centre 2001
$130 million 73%
The city and state split the public bonds

Dallas,
TX.
To Be Announced 2000-01
$232 million 54%
all public contributions from city, not county or state,
home of the NHL Stars

Buffalo,
NY.
HSBC 1996
$122 million 37%
New York State put in $25 million and Erie county put in
$20 million-name change 1999

Columbus,
OH.
Nationwide Arena 2000
$139 million 14%
voters shot down sales tax raise for arena, home of the
NHL Blue Jackets

Portland,
OR.
Rose Garden 1995
$307 million 11%
A mulit use complex

Philadelphia,
Penn.
CoreStates Center 1995
$213 million 6%
Owner got $13 million in city and state loans- First Union
Corp. bank merger acquired CoreStates, kept name

Denver,
CO.
Pepsi Center 1999
$160 million 0
City finally approved downtown facility agreement, delays
in building for 2 years

Montreal
Canada
Molson Centre 1996
$230 million 0
Canadien’s home financed by beer giant

Washington
D.C.
MCI Center 1997
$200 million 0
Part of a redevelopment plan

Vancouver, Canada
General Motors Palace 1995
$116 million 0
Grizzlies owner built arena and bought franchise

Boston,
MA.
Fleet Center 1995
$160 million 0
Celtics and Bruins home owned by Delaware North Cos.

Ottawa,
Canada
Corel Center 1996
$145 million 0
Corel paid owner Terrance Investments $25 million for naming
rights

Arlington,
TX.
The Ballpark in Arlington 1994
$191 million 71%
Arlington voters passed ½ cent sales tax for Rangers

Irving,
TX.
Texas Stadium 1971
$35 million 100%
Cowboys pay Irving rent

Fort
Worth, TX.
Texas Motor Speedway 1997
$121 million 0
Speedway Motorsports built facility and gave title to Fort
Worth

Grand
Prairie, TX.
Lone Star Park at G.P. 1997
$96 million 68%
Grand Prairie voters approved a ½ cent sales tax
for the Ponies

East
Rutherford, New Jersey
Continental Arena 1981(original) new arena to be built
$250 million if stays in East Rutherford
AKA the Meadowlands, Home of the Devils

Scottsdale
Arizona.
Los Arcos (to be announced) 2001
$175-183 million 30-35%
New home of the Phoenix Coyotes part of a large redevelopment.

Foxboro, MA.
To Be Announced. 2002
$325 million 0
badly need new home for the New England Patriots will be
privately funded

Phoenix
AZ.
Sun Devil Stadium 1958
$1 million 100%
used by college and professional teams built on the campus
on Arizona State.

San
Antonio TX.
To Be Announced 2002
$175 million 70-80%
Taxes will pay off $260 million worth of revenue bonds in
about 20 years. The teams will lease the building from Bexar
County.

Sources
from Dallas Business Journal 1997 and www.epinion.com.

REFERENCES

Arnott,
D. (12/19/1997). Arena proposal would rob the poor to pay
the rich. Dallas Business Journal, v21, i17, p39.

Barker, R. (11/6/2000). Buying munis, not heartbreak. Business
Week, i3706, p218.

Bernstein, A. (8/23/99). Arena name dispute influences future
deals. Business First-Western New York, v15, i47, p5.

Bonded indebtedness in county up 12 percent from fy99-00.
(7/31/00). Las Vegas Business Press, v17, i30, p14.

Boston mayor leans toward financing plan for proposed new
ball park. (5/3/00). The Boston Globe.
Caywood, T. (2/2/98). Scoring the contract. New Orleans City
Business, v18, i31, p1-4.

Crawford, D. (11/27/95). Sports marketers debate impact of
naming rights. Business First, Columbus, v12, i13, p4.

Crawford, D. (8/11/2000). Calif. model: Low risk funding of
ball park. Business First-Columbus, v16, i52, p1-2.

Dwyer III, J. (7/10/2000). The cost of not building a stadium.
St. Louis Business Journal, v20, i44, p1-3.

Hovey, J. (July, 1998). Cheap funding through bonds. Nation’s
Business v86, i7, p50-52.

Kamerick, M. (3/20/98). Senator floats plan to fund AG campus
with arena bill. San Antonio Business Journal, v12, i6, p1-2.

Kaplan, D. (5/8/98). Insurers ok private bonds for funding
new heat arena. South Florida Business Journal, Miami-Dade
Edition, v18, i38,p7a.

Mitchell, E. (9/3/99). How arena became a reality. Denver
Business Journal, v51, i2, p17a-19a.

Muret, D. (11/15/99). Two pass, two fail in new venue referendums.
Amusement Business, v111, i46, p3-5.

Prior, C. (May/Jun 99). Asset backed arenas. Treasury &
Risk Management, v9, i4, p21.

Renberg, W. (1995). All about bond funds. John Wiley &
Sons, Inc.

Sawyer, T., Goldfine, B., Hypes, M., LaRue, R., Seidler, T.
(1999). Financing Facility Development .Sawyer, T. Facilities
planning for physical activity and sport. P43, Iowa.

Stile C. (8/23/00). New Jersey governor approves funding for
new basketball, hockey stadium. The Record.

Suggs, W. (10/17/97). Dallas arena deal takes middle road
on funding. Dallas Business Journal, v21, i8, p8-10.

Tankerson, R. ( 6/20/97). Don’t compromise public transit
system. San Antonio Business Journal, v11, i21, p54-56.

Weiss, S. (2/19/99). City staff will draft funding plan for
arena. San Antonio Business Journal, v13, i2, p1-2.

Zoltak, J. (3/3/97). NFL economics separate haves and have
nots. Amusement Business, v109, i9, p18.

Web sites:
www.newlosarcos.com.

www.epinion.com.

2019-10-28T14:01:22-05:00February 14th, 2008|Sports Facilities, Sports Management|Comments Off on Financing Options and Facility Development
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