Wednesday, August 22, 2007

Arenas lose money, so why a new one for Tucson?

by Marlena Hanlon, Tucson Business Edge

TUCSON -- Public process can be onerous, especially if there's a fixed goal. But if everyone is asleep at the wheel, it becomes more obvious why it's necessary.

The downtown arena is neither a progressive vision nor sound economic coattail riding.

Arenas are universal economic losers and, contrary to all hype, are more likely to salt the earth than harvest fruit.

Conceptual design by LA-based consultants of Mayor & Council approved $130-200M Rio Nuevo arena.
In a national study of 14 public/private stadiums/arenas, which really means the public paid for a private team or company to reap the profits, only one showed a positive cash flow.

This one is privately operated and was built with private money.

Only 14 were studied because those were the only ones that made available complete capital and operating cost data. These albatrosses become so embarrassing that no one wants to tout the figures.

The average loss of these facilities is $832,640 per year per facility.

In 63 percent of 36 cases analyzed, stadiums negatively affected residential and business growth in the area.

The remaining 37 percent showed no evidence of contributing to growth.

Anyone who has lived in an urban area with stadiums has seen that the "neighborhoods" become blight-infested ghost pockets.

Crime rates in these areas are nine times higher than the national average.

Arenas/stadiums take prime real estate off the development market. While the facility is predicted to generate huge revenues via property taxes, tax concessions used to make the project viable or attractive to investors mitigate those revenues, sometimes entirely.

In contrast, private development more often does contribute to the tax base, if required to pay its own way.

Arenas also are touted for drawing out-of-town lodgers, resulting in revenue to the hospitality sector and via lodging taxes.

However, studies have shown that lodging taxes are not significant, again in part because of tax offsets.

In essence, stadiums and arenas have to import revenue to succeed. The question then becomes how much of a draw the facility will create.

In most situations, the arena serves residents or visitors who are already here. So no new net revenue is injected into the economy; existing money is just moved from one pot to another.

Therefore, the facility actually begins to compete with other, existing leisure business.

Take our nearest example. Phoenix has credited its ballpark and arena for the downtown boom.

The opposite was the case: Those two facilities became attractive to developers after downtown began to register a pulse again.

This was because of the residential renewal and community cohesion resulting from the I-10 fight a decade earlier.

Many thriving local businesses were forced out of downtown when the facilities were built, to make way for the corporate whitewash of TGI Fridays et al, which are event-oriented and do not cater to residents in the lull between pitches.

Phoenix has long cooked the books about the "revenue" generated by these facilities. They are both huge money losers.

Revenue captured by excise taxes - the "indirect spending" factor that sells so many arenas - is reinvested into the facilities to keep them afloat.

US Airways Center, for example, borrows money from the city of Phoenix to pay its rent to the city.

Phoenix captures the rent and the excise taxes as net gains. In reality, it's the same dollar, moved from one pocket to another.

It's just a big shell game.

In some cases, building a stadium is worthwhile, but for cultural reasons, not economic ones.

Cities such as Boston, New York or Cleveland, where sports are deeply ingrained in the community's identity and cohesion, value retention of teams to a degree that warrants spending millions of dollars of public money.

But if any city is making the choice as a way to bolster revenue or create a community where it doesn't exist, the idea is lose-lose.

These points don't even begin to take into account the environmental ravages of such a facility, especially considering that it is used so infrequently.

No infrastructure is in place to support spikes in downtown attendance, and in the absence of viable public transportation, a big parking lot would have to be included, wiping out acres of desert vegetation and contributing to the toxic and thermal load that blacktops provide.

It's simply amazing that with the infinite range of possibilities available to the blank slate that is, and remains, Rio Nuevo, this was the vision so exciting it was pushed through in a competitive spasm.

Marlena Hanlon is a process analyst and applied anthropologist, focusing on urban renewal and community development


Anonymous said...

Transit systems lose money too. Should we deny those with out cars mass transit?

x4mr said...

Get a grip, anon.

People don't need stadiums to get to work, genius.

Excellent article to which I have nothing to add, except that economic development in this community is a joke run by idiots.

Consider the fortune that cash cow Tucson Electric Park has raked in. That investment sure paid off.

laughswithcrows said...

As the author of this article, I'd just like to defend the choppy writing by saying that it was heavily edited by the paper: the original is not so cut-up and is available for the asking.