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Sports stadiums and economic development: the current scene

Here are three news items on the economics of stadium subsidies.

In New York, the Regional Plan Association has taken a stand against the Jets' $1.3 billion stadium/convention center project. They argue that "access to the waterfront is too important to the future of the city and the Far West Side to construct such an immense barrier in a prime location." The association also differs with the city administration on the desirability of landing the Olympics for New York in 2012. The Deputy Mayor claims the stadium project is "critical" for development, and that winning the bid for the Olympics is "absolutely essential." Relative to the administration's bombast, the RPA's claim is quite reasonable: "17 days in 2012 should not drive the planning for a crucial part of the city for the next 50 years."

The Sacramento Business Journal has a lengthy description of the plan to build a downtown sports and entertainment complex. The planners are "thinking big." The arena investment is designed to stimulate the local economy by giving downtown Sacramento a facelift. The tab is projected to come in at $590 to $750 million. The method of paying for it is focused on businesses that stand to gain from the investment. Nevertheless, a 1% to 4% surcharge on food and drink purchased outside the proposed "entertainment district," is sure to raise controversy. The arena itself has a price tag in the $350 million range. $200 million or so could be spent on the purchase of existing hotels, stores, and buildings, demolition, and replacement of existing parking. Sounds like major cosmetic surgery to me. A decision to put the project on the November ballot is to be made on Thursday.

Pittsburgh is slated to host the All-Star game in 2006, according to this report in the Post-Gazzette. The article's title: "All-Star Game a boost for city's image, but economic impact limited" suggests that the reporters have done their homework. They cite Victor Matheson's research on the impact of MLB's all-star games from 1973-1997. Matheson found that "actual job growth lagged behind projected growth" and that "quarterly tax collections dropped in each case." That any boost from the game is minimal should not be a tremendous surprise. A large percentage of seats at the All-Star game are occupied by season ticket holders - i.e. local residents. The money they spend on $200 tickets to the All-Star game does not get spent at the movie theater or hardware store.

Image is important to the local pols. Houston officials are basking in the glow of the perceived change in their city's image after this year's Super Bowl and All-Star game. But changing these perceptions took significant public and private investment - $4.5 billion according to this report. Cash-strapped Pittsburgh might find it more difficult to spruce up the city.

[Pittsburgh] Mayor Tom Murphy's office had no estimates yesterday on extra government costs for an All-Star weekend, such as security, traffic enforcement or even a general beautification of the city.

Paying for any extra, large-scale capital improvements such as street repair will be near impossible: With Pittsburgh's credit rating at junk bond status, it probably cannot borrow any money until January 2006, according to its Act 47 recovery plan.

As I've mentioned before, Pittsburgh's poor financial condition is directly related to its generous subsidies for stadium construction on behalf of the Pirates and Steelers. Yet local officials in Pittsburgh are throwing around terms like "tremendous bucks" and "the sky's the limit" when referring to the All-Star game's economic impact. At least they've been given fair warning.