THE IMPACT OF STADIUMS AND ARENAS
Originally published in CRE Real Estate Issues,Volume 21, Number Three, December 1996
The reality of the degree of positive and negative impacts of stadiums has been the subject lately of a great deal of controversy. Experts have lined up on both sides of the issue. Stadium opponents declare that the facilities, and the teams that play in them, have no immediate nor permanent economic impact. Further, they claim that all of the jobs created are minimum wage positions, and therefore the process is worthless and bogus.
All the while, the Chamber of Commerce, professional teams, the leagues, and the politicians claim that there is a positive impact on the economy and upon the image of a city. If the voters did not want a new stadium, the politicians would be hard to find. Much of the rhetoric has been based upon opinion; not hard data. However, some studies do indicate that the final impacts of new stadiums were far less than those promised. This is especially true of football stadiums that are being utilized by only one sports team.
In my opinion, the issue can only be properly addressed by considering the stadium, the major team(s) that will play there, and overall utilization. The stadiums and arenas by themselves reflect the fact that there is a marked difference between baseball, football, and basketball attendance and their respective economic impacts. It goes without saying that the team(s) must be at least marginally successful both in playing their respective sports and winning the hearts and minds of the local public.
I am not a great believer that public dollars should support new stadiums. However, I think that the issue is far more complicated. It is not simply dollars and cents, as many would like us to believe. There really is an issue of city image and personal pride. We are a sports crazy country, and it’s our money.
In Denver, the community voted for a new stadium financing, while they voted down a bond issue for new schools. It does not make sense; however, the people had the opportunity to speak, and that is what they selected. It was their choice, regardless of what the critics think.
In other communities, while the critics complain, the public votes with its wallet. According to a USA Today study done and published on Friday, September 9, 1996 in a special section, “45 new stadiums will be built in this decade at a cost of over $9 billion.” Thus, numerous cities have had and will continue having their say on this issue. Fortunately or unfortunately, the people will have their say, while the critics will continue to grumble.
On a personal note, while city image is difficult to define, I live in Chicago and no matter whether I am in Kuwait, France, Chile or Japan, everyone wants to know about Michael Jordan. Al Capone may have put Chicago on the map; Michael Jordan has remade the City’s image.
Over the years, members of my firm and I have had numerous occasions to address this issue. We have evaluated the impacts of stadiums on downtown areas throughout the United States and Canada; determined the value and impacts of Wrigley Field and the Chicago Cubs on the Wrigleyville neighborhood, the City, Cook County and State of Illinois; forecast attendance for numerous public facilities; have been evaluating the impact of the proposed new Milwaukee stadium on the surrounding and adjacent properties; and studied the opportunities for restaurants and stores in numerous arenas, amusement parks, airports, schools, universities and numerous others. We have evaluated the impacts of night versus day baseball and the benefits of single-user versus multi-user stadiums. We have seen both sides of the issues, the debates, the emotion and the hype. Neither side is ever truly correct; however, both the pros and the cons make salient points regarding the benefits and the drawbacks.
Lets look at the issue and some of the impact issues:
The location of the stadium is truly significant when it comes to economic impact. Location, location, location is as true for stadiums and arenas as it is for retailers. We have found that the difference of a few blocks can make the difference between some impact and no impact. How the stadium or arena fits into its environment is also very important. Safety and security at night is a significant factor in the impact of almost any type of facility. A National Football League (NFL) facility in a remote location surrounded by a sea of parking with only ten games a year will have very little impact upon the community other than image and pride. Conversely, a well-placed baseball or basketball stadium in or immediately adjacent to a downtown area or a large residential area can have a major impact upon it surroundings. The most dramatic example is Wrigley Field in Chicago which sits in the middle of a residential neighborhood.
We have found, for example, that most stadiums are located in economically deprived, former urban renewal areas, enterprise zones, or industrial areas away from residential neighborhoods. Building a stadium in these types of locations was and is often cheaper (land cost) and more expedient. They are placed in what were Urban Renewal areas because the land was available and it would not hurt the surrounding neighborhood. Stadiums, it has been said repeatedly, can create the initial elements of positive change. This is true. However, it usually takes over 20 years from the time positive steps are taken to gentrify a neighborhood. To some extent, critics are often short sighted by expecting immediate economic results.
Football stadiums have the least overall impact. The teams play only eight to ten games annually. At a maximum rent of $10 million, they cannot support financing of more than $90 to $100 million. Most stadiums today cost a minimum of $200 to $300 million to build, not considering the infrastructure cost born by the city, county, and state in which the stadium is located.
“Don’t put it in my neighborhood; I don’t want the traffic or the drunks.”
The locational decision for stadiums is often made by politicians who are very sensitive to their constituency and re-election and not what is best for the city. Therefore, when selecting locations, they tend to target areas where there will be the least opposition or at the least opposition that is “acceptable.” Also, many new stadiums are placed next to the old stadium that will be torn down because there is less opposition. Stadiums could have more of an economic impact if they could be placed where such a positive impact could occur; however, it usually takes longer and costs more. Unfortunately, that will probably not happen because the average citizen, who elects the politicians, does not want the facility in their neighborhood. Nevertheless, stadiums in urban residential neighborhoods can have the greatest economic impact.
Take Wrigley Field in Chicago:
The stadium is located in what has become known as the Wrigleyville neighborhood. Of all of the stadiums that we have studied, it has had the most positive impact upon its surroundings. True, it did not happen overnight, and a number of other factors came into play. Nevertheless, it has a position that is quite unique among stadiums. It is located right in the middle of an urban neighborhood and has become a vital part of the neighborhood. Moreover, when the area was down, Wrigley Field was the institution in the neighborhood that brought people in and supported the retail and service facilities.
There is housing across the street along with numerous restaurant and bars. The stadium does not have seas of parking; and in fact, parking has always been an issue in the neighborhood. Interestingly, many of the neighbors supplement their income by renting out their garages to fans on either a daily or seasonal basis.
In analyzing stadium and arena impacts, we only found positive economic impacts in stadiums which were located in downtown areas, such as Busch Stadium in St. Louis, Riverfront Stadium in Cincinnati, Jacob’s Field in Cleveland, Market Square Arena in Indianapolis, Bradley Center in Milwaukee, and Madison Square Garden in New York.
Baseball stadiums have the greatest economic impact of all sports venues because there are at least 81 home games per season, compared with basketball's 41 and football's 8. However, since most events are night games, the restaurant impact occurs in the early dinner hours. Interestingly, this impact has been declining because stadiums have begun to improve their food facilities in order to attract the dinner crowd. NFL events actually have a better impact on game days than their counterparts, because the games are usually in the afternoon and after the game, it is common to stop for dinner and/or drinks.
In order to have any measurable economic impact, fan attendance for stadium and for arenas should be:
1. Baseball stadiums: draw over 1.5 million or closer to 2.0 million fans annually.
2. NFL stadiums: over 750,000 fans annually. It is very difficult for an NFL stadium to have an economic impact upon the community because they generally play only eight to ten games at home a year. Thus, the stadium must be utilized for other uses. Unfortunately, the other uses generally do not pay very much rent.
3. Basketball arenas should attract at least 1.2 million fans annually.
4. What does a major baseball franchise contribute to a community? We have selected baseball because games are played both during the day and at night and they plan a substantial number of games, thus utilizing the stadiums in which they play. Let’s examine some of the numbers and the economic impact that they have on the community. The data is from numerous baseball organizations.
5. Payroll of the players, management, staff and ground crews is a significant cost. The costs appear to generally range between $40 and $60 million. Admittedly, not all of the players live in the community. Even if the players do not domicile in the city, they have a place to live in the city where they pay rent, utilities, and taxes.
One criticism has been that stadiums only generate jobs for millionaires and minimum wage workers. That is generally true. However, numerous other jobs are created by vendors, restaurants, bars, stores, and others. While most of the jobs are low paying, or overtime hours, they nonetheless are jobs that feed, cloth and house people. Most are seasonal or part time and because of that the teams have been criticized. That is the nature of sports. It is seasonal! However, I wonder if the critics have ever talked to the seasonal or part time employees to find out how they feel about their jobs. We did! Interestingly we found that many wanted the job because they loved baseball, could watch the game free and had another job for the rest of the year. We also found that the turnover of help was much lower than in the restaurant industry. Some traveled south in the winter because they did not like the northern cold. Others went skiing in the winter with the funds that they had made during the season. Only a few said that this was the only job that they could get.
We found teachers who loved baseball and wanted this job for the summer. Many had taken the job to watch free baseball. Daily payroll for baseball runs between $100,000 and $250,000 per day, depending upon who plays and the appeal of the teams. Team and stadium payroll has the largest economic impact because of the multiplier effect on spending and the impact it has on the local economy. Critics challenge the multiplier effect saying that it doesn’t exist. Well, it does. Admittedly, it may not be creating jobs for rocket scientists, but it is providing jobs that feed and cloth people. As long as we have unemployment, these jobs are beneficial to our society.
One need only to consider the economic impact of the baseball strike of 1994. Whether you are a baseball fan or not, one cannot ignore that the strike cost over $800,000,000. In Chicago, businesses near Wrigley Field and White Sox Park were badly hurt during the strike. Hundreds of people were laid off, restaurant sales declined drastically, taxi cabs fares were way off, city, county and state taxes were negatively affected, parking revenues disappeared, as well as supplemental income of the residents from parking was lost.
Chicago Cub concessionaires were hurt by over $5,000,000, and they laid off their people as well. Even the gasoline service stations felt the impact. So when critics say there is not an economic impact, they have not done their homework. If one interviews the players, management, ground crews, and more importantly, the nearby businesses, one would have found that the multiplier impact is significant. Waiters and waitresses told us they made substantially more income, permitting them to use daycare services for their children, or save funds for a trip or education. They counted on those additional funds during the season. These are real people - not statistics. Talk to the towing companies in Chicago about the strike and you will see real tears. Illegal parkers during the baseball season are the towing companies' bread and butter.
Stadiums and teams generate considerable taxes. If the team owns the stadium, total taxes paid including payroll, real estate, sales, amusement, parking, parking license, gasoline, vehicle, franchise, liquor, utilities, parking tickets, and others will run over $2,000,000 to $3,000,000 annually. However, most new stadiums today are publicly owned or controlled by a public/private corporation, generally less taxes are paid.
Concession sales have increased dramatically over the past ten years as more stadiums have focused upon foodservice. Many stadiums have tripled food concessions and added full-service restaurants. Concessions sales for a strong team can exceed $20,000,000 annually and generate over 500 to 700 part-time jobs.
Parking revenues can be substantial. Much depends upon who gets them. In most new stadium deals today, a large part of the stadium revenue is going to the teams rather than the community. Regardless of who gets the revenue, the dollars are substantial. Parking revenues for baseball can exceed $200,000 for a single event.
Charter bus companies usually enjoy a strong business from fans traveling to game outings. The business is stronger for baseball than football, and the degree of the success depend upon the team. Revenues range between $1,000,000 and $3,000,000 annually for a good team.
Public transportation gets a shot in the arm on game days. In a major urban setting, the impacts are naturally greater. In Chicago, we found that over 35 percent of the fans travel to Wrigley Field by public transportation. The primary reasons include the lack of parking, the expense of parking, and the convenience of the rapid transit. Revenue to the Chicago Transit Authority exceeds $1,500,000 annually.
The stadiums and arenas have their greatest impact upon restaurants, hotels, taxis, bus companies, hotels, tourism, convention business, and others. The Chicago Cubs, according to our estimates, generate over $15,000,000 annually to restaurant and bar sales in Chicago. The Chicago White Sox generate substantially less because of lower attendance figures and the location of the stadium. The new Jacobs Field baseball stadium in Cleveland is having a strong impact upon restaurant and bar facilities, and it is helping to rejuvenate downtown Cleveland. If you have not visited Cleveland lately, you will be happy to know that it’s downtown is thriving.
There is a positive impact upon property values where the stadium is placed close to residents and businesses. Apartment buildings across from Wrigley Field sell for a premium because fans can sit on the roof and watch the game. The same has been true in other cities where sports fans appreciate the benefits of the game and want to be near it. Are there some adverse impacts? Of course. They include: noise, traffic congestion, parking conflicts, unruly people, trash and other irritating impacts do exist. And yet people choose to live in those neighborhoods.
Entertainment is the issue and going to the stadium is enjoyable. Many public works projects are just that -- public works projects. Whereas a new stadium is a visible public emporium that people enjoy and are generally proud of.
In total today, a major baseball team and its stadium usually have an impact of between $175,000,000 and $225,000,000 on the local economy.
Do Stadiums pay for themselves? Usually they do not. Is the public willing to subsidize them? Usually they are. While professional sports is big business, the fans still see it as entertainment, their team, a point of continuous discussion (and argument) for which they are willing to pay. Is it an escape for the problems of our individual worlds? Yes it is; admittedly an expensive one, partially subsidized by our neighbors. It is a fan’s part of a dream to join the pride of a hopeful winner. At least we hope . . .year after year!!!!