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Arena subsidies: Not just for big cities anymore

While the huge subsidies handed out for new facilities in the big leagues get the most press here at the Sports Economist, yesterday the New York Times published a piece on the rash of failing arenas in small and medium sized towns.

The lead of the story concerns the plight of Rio Rancho, NM, a small city of 90,000 located 20 miles north of Albequerque. 

The arena, which Global Entertainment said would be profitable in a year, has lost so much money that Rio Rancho has had to spend millions of dollars each year to keep it afloat... eating into the city’s already tight budget and pushing lawmakers to eliminate jobs and cut costs, including asking police officers to buy their own practice ammunition.

“If you look at the numbers that Global Entertainment presented to us, it was really, really questionable then, let alone during a recession,” said James C. Jimenez, the city manager in Rio Rancho, who was hired after the arena foundered. “If we didn’t have to allocate the money for debt service, our employees would have had raises and our budget would be in a better position.”

Rio Rancho is not alone in trying to salvage an arena opened by a growth-hungry town smitten with sports. Global Entertainment, based in Tempe, Ariz., persuaded nine other cities, including Youngstown, Ohio; Hidalgo, Tex.; and Wenatchee, Wash., that it could build them an arena, sell everything from tickets to hot dogs, and book enough events to turn a profit. Yet in most cases, Global failed to meet its financial projections and was replaced, leaving the cities to pay for expensive arenas that they often have had no experience running.

I don't have much to add to the sad tales of woe documented by the NYT, but it sure would be nice if some economists looked into the issue of whether stadium and arena subsidies make any economic sense.

(Thanks to Miles Cahill for pointing out the NYT article.)