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InTransition Magazine : Transportation Planning, Practice & Progress

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Academics Say Stadiums Don't Pay

By Karl Vilacoba

The theory of the sports arena as a catalyst for economic revitalization is far from a slam dunk, according to Villanova University Professor of Sociology Rick Eckstein. The co-author of “Public Dollars, Private Stadiums: The Battle over Building Sports Stadiums” said that of the dozens of publicly financed projects he has studied, not one has lived up to its financial promises.

Eckstein began studying the issue in depth after seeing a stadium referendum shot down by Pittsburgh voters in the late 1990s, only for city leaders to fund it through other means later. He has been quoted widely by media outlets throughout the recent stadium boom, making few friends among sports fans along the way.

When you add up the tangible economic indicators—such as jobs created, tax ratables and sales revenues—it never justifies the investment of public dollars in construction, infrastructure upgrades, policing and other needs, he said. Only the team owners make out big in the end.

He said part of the reason for this is what social scientists call the “substitution effect.” When a stadium is torn down so a new one can be built elsewhere, you’re merely moving money from one place to another. The cash being spent at the arenas and new stores, hotels and restaurants that crop up around them is just cash not being spent on other forms of entertainment, he said.

“We usually find stadiums shift spending from one part of a state to another. There’s no new income being generated,” Eckstein said.

Although they’re large structures that garner lots of attention, stadiums don’t actually produce much money for their cities, he said. The public may own the majority of the buildings, but the team owners command the majority of event revenues. Also, the venues sit empty for most of the year since sports are seasonal.

Eckstein said two opposing camps have formed on the stadium finance issue: the academics, who have overwhelmingly formed conclusions in line with his; and the industry, which backs itself up with “advocacy studies” produced by parties with financial stakes in the projects. They often promise robust dollar amounts in economic stimulus, but base these figures on questionable data and surveys on fan spending behavior that are “very poorly designed and very poorly analyzed,” he said.

As a best case scenario, Eckstein pointed to Denver, which built a stadium using a dedicated sales tax, paid the costs off ahead of time thanks to rapid population growth, and retired the tax. The worst deal he’s seen? Washington, D.C., where the Nationals baseball team just moved into a $610 million stadium without having to contribute a dime toward its construction.

The key to making a stadium investment pay off is the ability to draw people from outside the pool that financed it, he said. If a county pays for an arena, then it must attract fans from beyond county lines, or there can be no net gain. Since the Devils moved from an arena outside of Newark, Eckstein acknowledged that it will be possible, although difficult, for the city to earn back its investment.

“I hope they can, but history’s not on their side,” he said.

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