The Sad Truth About Sports Stadiums

By May 5, 2013Sports News

Just like in most small towns, the closed club at the top of the little tiny socio-political structure in Abbotsford doesn’t tale well to being criticized. Especially when they are criticized by those who own computers.

Their dislike of criticism is perfectly understandable when they have, within their ranks such luminaries of the investment community as Bruce Beck and a former banker like John Smith who know all about borrowing and using other people’s money to make money.

No wonder they shut down all voices opposed to their vanity boondoggle – Plan A – by those within the community who failed to understand that the way to make big money and cause the inevitable resulting economic growth to happen was to have the courage to make big decisions with other people’s money.

Business plans, as every banker or investment broker knows, are for sissy’s. Always go with your gut. And when the naysayers tell you that your numbers don’t add up … insult the; make fun of them; demean them.

Before Mayor Banman tries to negotiate a way out of George Peary’s Deal to have his friends and neighbours guarantee the Abbotsford Heat owners won’t loose money, he should do some reading – the kind of reading we wish John and Bruce, Simon and Dave, and of course Patty, had done before they decided to invest about half a billion dollars worth of their friends’ and neighbours’ money in a hockey rink.

We know not all of those around the council table can be expected to stay awake long enough to read the whole article so, for their sake, we’ve published some excerpts below. The full article can be downloaded here.

As it turns out, Bruce and John got us into more trouble than we thought. It turns out that, as the owners of the Abbotsford Entertainment and Sports Centre (AESC) and the financial backers, the taxpayers of Abbotsford have made the worst of both deals.

We can’t make money on the stadium because we are paying a hockey team to play in it and a paying a US company to manage it. Both are making money but we’re losing money.

If only bankers and investment dealers could read … (or negotiate)

The Sad Truth About Sports Stadiums

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By Dennis Coates and Brad R. Humphreys

The recent spate of sweetheart stadium and arena deals
is only the latest manifestation of owners of professional
sports franchises getting richer at the public’s expense.
While not entirely new, this phenomenon has become
front-page news across the country in recent years. Combined
with the “build it and they will come” attitude of
many city governments, the stadium gambit has led to a
marked increase in new stadium and arena construction,
franchise relocations, and negotiations between teams and
local governments.

Despite the beliefs of local officials and their hired consultants
about the economic benefits of publicly subsidized
stadium construction, the consensus of academic economists
has been that such policies do not raise incomes. The
results that we describe in this article are even more pessimistic.
Subsidies of sports facilities may actually reduce
the incomes of the alleged beneficiaries.

what justification exists for the government subsidy
of professional sports? The proponents of new stadiums
and franchises are always quick to point out the economic
benefits of the proposed facilities and teams. Cities
throughout the country have struggled to attract or keep
professional sports teams in recent years, and the idea that
a team brings with it large economic gains invariably arises.
Part of this process is the commissioning
of economic impact
studies that purport to show just
how much benefit the city or region
will reap.

More than 20 years ago, proponents
of the half-billion- dollar Skydome
in Toronto claimed that this
facility would generate $450 million
in Canadian dollars in the first year of
operation and create 17,000 jobs in
the Toronto area. Half a decade ago,
prospective nfl team owners in
Jacksonville, Florida, claimed that a new nfl franchise
would generate $340 million in new income in the city and
create 3,000 jobs. In a recent case, the Baltimore Sun reported
in April of 1999 that a new study supported tearing
down the existing 36-year-old Baltimore Arena and replacing
it with a new $200 million dollar facility. This investment,
the study claims, will raise city taxes by $3.8 million and state
taxes by $6.3 million. In addition, the facility could generate
up to $100 million in new earnings for the citizens of the
city of Baltimore.

Unlike most studies commissioned by stadium advocates,
the consensus in the academic literature has
been that the sports environment has no measurable
effect on the level of real income in metropolitan areas.

The evidencesuggests that attracting a professional sports franchise
to a city and building that franchise a new stadium
or arena will have no effect on the growth rate of real per
capita income and may reduce the level of real per capita
income in that city. Yet government decisionmakers and
politicians continue to try to attract professional sports
franchises to cities, or use public funds to construct elaborate
new facilities in order to keep existing franchises from

The evidence suggests that attracting a professional
sports franchise to a city and building that franchise a
new stadium or arena will have no effect on the
growth rate of real per capita income and may reduce
the level of real per capita income in that city.

One thing is clear from the evidence on professional
sports franchises: owners are reaping substantial benefits
in the value of their teams because they are so skilled
at the stadium gambit.

For a downloadable PDF of the entire article simply click here

click here

Dennis Coates is associate professor and Brad R. Humphreys is assistant
professor of economics at the University of Maryland Baltimore County

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