The definition of insanity is doing the same thing over and over again and expecting different results
By Evan Weiner
February 17, 2011
(New York, N. Y.) -- According to Albert Einstein, "." Einstein might have been thinking of politicians who apparently still think that approving public spending for stadium and or arena project is a prudent because sports facilities spur economic growth.
In the Los Angeles area, two football stadium proposals are on the table. In downtown Los Angeles, the Anschutz Entertainment Group (AEG) is promising to build a facility that won't cost the public a dime and will be built by private money. Of course there is the fine print in small letters that comes with the stadium. Someone will have to pay to replace the city-owned convention center that currently occupies the parcel of land that AEG wants for the proposed facility.
The cost to replace the convention center may be as much as $350 million. As usual, stadium proponents are claiming that building a stadium will create construction jobs (building a supermarket also creates jobs or repairing broken infrastructure creates construction jobs but the supermarket and infrastructure work as not as glamorous as working on a stadium) and lots of jobs once the stadium opens.
But a football stadium does not lend itself to creating good paying jobs. Because a football season features two pre-season and eight regular season games, there is a real possibility that an LA stadium might only be used 10 times a year. AEG wants California environmental regulations waived in the run up process to the start of construction just like the state did under Governor Arnold Schwarzenegger for Ed Roski's proposed football stadium east of LA in the City of Industry. Roski too is proposing building a facility where no public monies are used.
That sounds all well and good until the fine print is read. Instead of paying for the construction, the public ends up paying for the project on the back end in various ways whether it is a reduction of property taxes or other tax incentives.
Up the 101 from LA, Santa Clara officials have allocated money for a new football stadium for the San Francisco 49ers franchise. But the 49ers ownership has not raised any capital yet for the facility because the National Football League wants to get a committee from the National football league Players Association that the workers group will help pay for the York family’s dream facility. San Jose officials seem to want to entice Lew Wolff to find a way to San Jose and bring his A’s baseball team with him. But there is a pesky question of territorial rights that needs to seemingly be resolved. Apparently the San Francisco Giants own the territory and Wolff just cannot take his A’s from Oakland (which is significantly closely to San Francisco than San Jose is to the city by the bay) and deposit the team in San Jose. The city of Oakland is looking to somehow satisfy Wolff and also Oakland Raiders ownership by building new stadiums (plural) in the city.
Elected officials are trying to cut spending wherever they can including the public sector. (A note to newly elected officials who are trying to gut the public employment sector and to sports owners looking to push tickets---reduce the public workforce and it has a domino impact on the community. A fired worker has less money to spend in the community, the community loses out on taxes that are collected from items purchased and the economic recovery that people entrusted with your judgment fails. That seems to be missing from the thought process of elected officials who promise to lower taxes and to cut spending when they can't because of fixed costs because of obligations.) But stadium and arena building is still the thing to do.
In St. Paul, Minnesota Vikings officials are pushing to get a new stadium built and looking at the Minnesota state coffers to aid them in the cost of building a stadium loaded with gadgets such as in-stadium restaurants, luxury boxes, club seats and other toys that will put more revenue into owner Zygi Wilf's pockets.
Across the Mississippi River in Minneapolis, the city's mayor R. T. Rybak is seeking about $155 million in state funding from St. Paul lawmakers to upgrade the city's 21-year-old arena. The city of Minneapolis owns the building and it is managed by AEG. The Twin-Cities of Minneapolis and St. Paul have been spending public money for sports facilities for more than a half century. Since then, a baseball-football stadium was built and demolished in Bloomington along with an arena; the Minnesota Twins baseball franchise is operating in a third publicly financed facility. The National Hockey League's Minnesota Wild franchise set up stop in St. Paul in 2000 (St. Paul needs money to upgrade an 11-year-old building) and state money has gone to a new on campus football facility at the University of Minnesota in Minneapolis.
Minnesota has allocated more than a billion dollars on sports facility spending.
Florida Governor Rick Scott may have jettisoned a federally funded high speed rail but he may be involved at some point in the near future in the stadium game in the Tampa-St. Petersburg area. The Tampa Bay Rays ownership wants to leave the taxpayers funded domed St. Petersburg baseball park for a new facility, preferably in Tampa. Rays ownership has a lease on the St. Petersburg facility until 2027. By the way, Tampa Bay's baseball ownership might have lost some potential customers with Rick Scott saying no to the $2.4 billion for the high speed rail between Orlando and Tampa as someone would have had to build the rail and hire people to do just that who might have relocated in the area.
(Wisconsin Governor Scott Walker may have cost the owners of the Milwaukee Brewers and Milwaukee Bucks franchises customers by turning down high speed rail funding and costing Milwaukee a business headquarters for the company that was in line to build the railroad through Wisconsin.)
The North American Free Treaty Agreement between the United States and Canada may have produced one unwanted consequence that will be painful to Canadians. It seems local elected officials north of the 49th parallel have learned well from their American counterparts when it comes to stadium and arena building. Quebec City has decided that the people of that village and surrounding areas need a National Hockey League team and the best way to go about that is building a new arena and then finding an owner who wants to move his franchise there or sell the team to local owners.
The building will cost in 2011 Canadian dollars (which is about equal to the US dollar) about 400 million loonies and apparently the bill will be split between Quebec City and Quebec's provincial government. As always, the devil is in the details. What kind of lease can Quebec City present to an owner? In the United States, because of the 1986 Tax Act, as little as eight percent of revenues generated by a facility can go off to pay down the building's debt. The Quebec City arena revenues from naming rights, marketing revenues and operations are supposed to be kept by the government and that will not win over an owner’s heart.
From an owners standpoint, the Quebec City deal if all of those revenue streams are maintained by the city and province is a nonstarter.
The Quebec scheme for a building does not ask for federal money. The owners of the Edmonton Oilers franchise want a new arena in the city and perhaps they could follow Quebec City's lead and fund a building with public dollars but if they put the same sort of restrictions on revenues it is unlikely Oilers ownership would bite at the building.
How to pay for a building is becoming a problem in a northern New York City suburb. Ramapo Town Supervisor Chris St. Lawrence is failing in his bid to get necessary funding to complete a 3,500-seat baseball park after voters told him they were not interested in putting up more than $15 million for the facility last August. St. Lawrence decided that Ramapo voters didn't know what they were doing in the voting booth and is going ahead with building the park for a team in a league that has been fiscally-challenged. St. Lawrence was so eager to land a team in the CanAm League, an association that has problems finding teams to fill the schedule in a year-to-year basis, that he gave away the store to a group called Bottom 9 Baseball.
Bottom 9 Baseball will be throwing a million dollars or four percent of the estimated costs into the venue. The team will pay $175,000 a year in rent. It would take more than a century for Ramapo to get back the construction costs at that rate. The team threw a couple of bones to Ramapo. The municipality will get a dollar for each ticket sold (not including those seats in the stadium's 20 luxury boxes — the town will get some money from those seats and some money from the sale of the stadium's naming rights.
What are the odds that a Ramapo Stadium can get any money for naming rights when the New York Giants/Jets Meadowlands Stadium and the Dallas Cowboys Stadium are still unnamed? What may be disturbing to St. Lawrence is that the city of Jacksonville waived the 25 percent of an estimated $16 million naming rights deal at the city's stadium to help the Jacksonville Jaguars bottom line. The city is forfeiting $800,000 in revenues annually between 2010 and 2014).
The team (presently called the Rockland Boulders if it works out with a local hot dog vendor who owns the trademark to the name) will give Ramapo two dollars from each car parked in the stadium's lot for a game. The town will also get 10 percent of the concessions whether it is food, beverage or merchandise sold at the stadium. The team will keep signage rights in the building.
Based on Can-Am League attendance figures, the Town of Ramapo will get somewhere between $3,000 and $4,000 a game if the town and team is lucky.
The Ramapo paid financial consultant on the project thinks the stadium will bring in $1.4 million a year which would cover the $1.3 million annual debt service that St. Lawrence projects for the stadium. But someone who witnessed firsthand how much money a minor league baseball team can generate debunked St. Lawrence and his consultant's estimate of revenues.
"My brother used to have a piece of a minor league baseball team and there is no way the stadium will generate $900,000 for the town (probably less than half)," said the person who knew about his brother's operation. "00And if bondholders who will have to finance the construction are being told that, then there's another lawsuit coming down the pike."
Ramapo taxpayers better understand that this stadium will be a loss leader no matter what both sides say. Ramapo officials think the team will bring in $900,000 in stadium related revenues. The bad news, the revenues figure is grossly overstated, the good news for Ramapo is that at this point they are not being asked to pay the team's expenses like New Orleans and Indianapolis and Glendale, Arizona residents are doing for pro sports teams.
New Jersey, Indianapolis, Seattle, Pittsburgh and other cities and municipalities are paying off the debt on sports facilities that are no longer standing.
Stadiums and arenas were once thought to be economic engines that would revitalize or build up an area. That is not the case but municipalities are still spending. The only rational reason for that is to signal to investors that an area is open for business.
Einstein was right about elected officials who spend and spend and spend on money losing ventures like sports facilities for professional teams. "The definition of insanity is doing the same thing over and over again and expecting different results," said the noted genius. It is a lesson that has not been learned by elected officials who think spending for a luxurious stadium or arena gives their burgs unachievable relevance.
Evan Weiner, the winner of the United States Sports Academy's 2010 Ronald Reagan Media Award, is an author, radio-TV commentator and speaker on "The Politics of Sports Business." His book, "The Business and Politics of Sports, Second Edition is available at www.bickley.com, Barnes and Noble 's xplana.com, kobo's literati or amazonkindle. He can be reached at firstname.lastname@example.org