The Fuzzy Math of Arenas | Jackson Free Press | Jackson, MS

The Fuzzy Math of Arenas

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San Antonio's AT&T Center has not delivered on promises of adjacent private development, according to urban policy professor Heywood Sanders.

Talk of a proposed entertainment arena in downtown Jackson has been largely devoid of hard figures, by necessity. Arena supporters are still cobbling together the private money to pay for a feasibility study. As of Dec. 3, the downtown arena "steering committee" had raised $65,915 of the $80,000 it hopes to raise for the study before the end of the year. The study would inject some rough cost estimates into discussions of the proposal.

In the meantime, those curious about the economics of an arena could look to Lincoln, Neb., which is building a new arena in a previously neglected portion of the city's downtown.

Voters in Lincoln approved issuing bonds for the 16,000-seat project May 11. The arguments in favor of the building are reminiscent of arena and stadium pushes across the country: The University of Nebraska's existing arena is too old and too small, and Lincoln needs a new facility to attract big-name events and spur economic development.

The city plans to finance half the $344 million bond debt with taxes on bars, restaurants, hotel rooms and rental cars. The remainder will come from arena revenue, private contributions from business groups and parking garages; $17 million will come from a tax-increment financing deal and the sale of some land to private developers.

Proponents of the Lincoln arena have touted an economic-impact projection of $260 million per year, $216 million of which comes from estimated private development around the arena. But such figures are notoriously flexible. Estimates of a facility's economic impact often include economic activity that simply moved to the arena--or neighboring businesses--from other parts of town. Similarly, economic-impact studies sometimes fail to distinguish between spending that recirculates in the local economy, such as spending at locally owned businesses, and dollars that remain in the pockets of out-of-town owners, like many of the chain vendors inside arenas.

Journalists Neil deMause and Joanna Cagan chronicled the vagaries of sports-stadium economics in their 2000 book, "Field of Schemes" (University of Nebraska Press, 2008, $20).

"'Economic impact' is a favored statistic of consultants, because it dramatically inflates a project's effect by including all money spent at or around a facility, whether or not it benefits the public," they wrote.

"If a team doubles its ticket prices, for example, that counts as double the economic activity, even if the resulting revenue goes directly into the owner's pocket."

A more appropriate rubric would be a new facility's "fiscal impact," its direct contribution to the tax revenues of local government, deMause and Cagan argue.

Lincoln city officials have touted some $3 million in estimated annual sales and property tax revenue from the arena, but $1.9 million of that would go toward tax-increment financing (known as a TIF) to fund infrastructure improvements supporting the private development.

Supporters of a Jackson arena have also focused on the promise of encouraging private development with the construction of a publicly funded arena. But even in the case of acclaimed arena developments, private investment has not always followed the public dollars.

The New York Times and local leaders in Columbus, Ohio, have hailed the 18,500-seat Nationwide Arena as the linchpin of the city's downtown waterfront renaissance. However, that success has not reached other parts of the city's downtown, according to a case study by the University of California-Davis MBA Consulting Center.

"Although the area that became Columbus' Arena District was successfully redeveloped, the positive effects did not spread to the remainder of downtown," the study's authors wrote. "Much of downtown was still empty at night, and various neighborhoods of Columbus competed with each other and the suburbs for attention."

Ultimately, publicly funded arenas and stadiums carry with them not only the direct cost of property-tax breaks, bonds or sales-tax increases, they also bear the cost of diverting public money from other causes, deMause and Cagan argued. "If stadium-construction funds end up coming from the same civic coffers as other municipal projects' funds do, and if massive stadium deals are being given the go-ahead nationwide, what isn't getting funded instead?" they wrote.

The arguments for arena building remind University of Texas-San Antonio public-policy professor Heywood Sanders of the case for convention centers.

"It's always the same story: If we do just one more thing, then that, somehow, is going to secure a grand, promising economic future for downtown," Sanders said.

Sanders made his reputation attacking--most notably in a 2005 Brookings Institution report--the rush for publicly funded convention centers, which underperform in an oversaturated market, he says.

Arenas are similarly risky, he argues, noting that the private development promised to follow San Antonio's AT&T Center, built in 2002 for $146.5 million in public money, "simply hasn't happened."

"There's nothing wrong with having a flashy place for a Beyonce concert," Sanders said. "But if your goal is to revitalize your downtown, part of the problem is that a big public investment--measured in the hundreds of millions of dollars, once done--is sunk. ... It's not the kind of thing where if it fails, you just shrug your shoulders and walk away from it. Far better to take a series of smaller, less expensive initiatives that enable you to test how the market and the local population behaves and see what works."

Previous arena coverage: "Downtown Arena, Anyone?"

Previous Comments

ID
161222
Comment

It's actually pretty clear cut once you decide on a way of raising the funds. The negative sentiment expressed against this project is just like every other idea that comes up in Jackson. The water system needs to be fixed first, we all know this. I'd love to read a follow up story with all the great developments that have transformed areas around this country (Cleveland,Washington DC, Foxboro, etcetera ) Granted we won't have Wrigley Field downtown but WHY can't we support an arena ? Every other major Capitol can, are we too backwards to figure this out.

Author
Sanity
Date
2010-12-08T13:31:01-06:00
ID
161224
Comment

The negative sentiment expressed against this project is just like every other idea that comes up in Jackson. I don't agree with you, Sanity. It is responsible citizenship to vet and discuss any project that is going to require public resources. And your statement about "every other Idea" that comes up isn't true: Many projects are coming online and had very enthusiastic response (King Edward, etc.). And any project will benefit from learning from challenges in other places so we can get it right if we proceed; just looking for the positives would be empty cheerleading and would be very irresponsible from a journalistic or civic standpoint.

Author
DonnaLadd
Date
2010-12-08T13:52:19-06:00
ID
161226
Comment

BTW, all, here is the website for the Downtown Jackson Arena Steering Committee so you can learn more.

Author
DonnaLadd
Date
2010-12-08T13:59:10-06:00
ID
161227
Comment

I would prefer one or two medium-sized venues to a huge stadium...something along the lines of the The Lyric in Oxford, MS or Tippatina's in New Orleans. Those will be much easier to fill and will bring much needed opportunities for great musicians. Personally I have never enjoyed a stadium concert. Too many people and usually crappy sound.

Author
Izzy
Date
2010-12-08T13:59:40-06:00
ID
161230
Comment

Another study of such publically funded projects, and their associated unrealistic and unrealised economic development promises, is presented in: Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and stick you with the bill)…(2007), by David Cay Johnston www.freelunchthebook.com/ It seems that arenas, stadiums and prisons, when supported by the wealthy, are easy sells to the bread and circus' public. Woe is us.

Author
FrankMickens
Date
2010-12-08T14:59:50-06:00
ID
161231
Comment

Glad to see an article questioning the economic benefits. I found it a bit odd that the original article noted that no follow-up studies had been done for the cities listed as successful examples. Does an arena really enliven an area? Or does it just bring people in for one-off events? To sustain economic growth, an area needs more than a big crowd a couple of times a year, or even a medium sized crowd a bunch of times - especially when those people are just driving in and spending the bulk of their money inside of the arena. Like @Sanity, i too would like to see more follow-up information on other arenas.

Author
jrt
Date
2010-12-08T15:06:02-06:00
ID
161233
Comment

Donna- I'm sure Ward would be a terrific risk assessor but as a young progressive who would like to have fun and stay in the Capitol city long term, I wonder why he would be so critical early on during a campaign to raise money for a ....study. "Fuzzy Math on Arenas" "Field of Schemes" "steering committee" and examples of failed arenas aren't helping any, it's almost like the stand the GOP took vs health care ! Let the critical analysis happen after the professionals take a look and report via the study. You'd think the Mayor and other civic groups would be vocal in support of this STUDY.

Author
Sanity
Date
2010-12-08T15:39:41-06:00
ID
161237
Comment

Sanity, you are welcome to post on this issue, but please do not make this personal against Ward or attack the messenger because we are reporting a side you prefer not to have discussed (being that you are part of the arena committee). He is a reporter and has also reported on the positives about the arena proposal. It would be irresponsible for a local newspaper not to look at the possible downsides of such a public investment -- as much as anything so that we can learn from other's mistakes and do things better as/if we go forward. This particular follow-up story came largely because a CNN Money/Fortune Small Business editor who visited (and is a friend of ours, as well as a HUGE advocate of Jackson) responded to a question about arenas at a talk at the Architecture School downtown. She mentioned that arenas can be difficult to pull off financially and recommended that people read the book that Ward quotes above. That does not mean that she or we are against this arena, but it does mean that we are going to facilitate a conversation about it in Jackson that takes more than one view into account. I'm sure you are not against having all the information possible out there on this to discuss, right? I can't imagine anyone wanting just one side of such a huge public work presented to the public. As for not discussing it until the "professionals" have decided what we should all support, well, that's not the way we roll. We've had too much experience watching "professionals" steer the public wrong. I'm not saying that is happening in this case. There are some very good people supporting this project; we are not against it; we have not taken a position, yet. But we will add as much information as we can to the discussion; dissing us for doing that will not get you anywhere. This is what readers expect from us.

Author
DonnaLadd
Date
2010-12-08T18:08:50-06:00
ID
161238
Comment

Also, Sanity, you mention the need to keep young progressives in Jackson. There is a ton of research out there (just Google) about how arenas and the like are not important to young creatives and professionals. A small sample: From The Rise of the Creative Class by Richard Florida: "The physical attractions that most cities focus on building — sports stadiums, freeways, urban malls and tourism-and-entertainment districts that resemble theme parks — are irrelevant, insufficient or actually unattractive to many Creative Class people." Mobility is one reason, he writes. "When people move frequently to pursue careers and lifestyle interests, it becomes harder to sustain the home-team allegiances built in youth." Also, many are immigrants. "Those who grow up with cricket or field hockey or soccer may not take to American-style sports." From Cities: Back From the Edge, by Roberta Brandes Gratz with Norman Mintz: "Convention centers, stadiums, aquariums, cultural centers, enclosed malls — these are about politics and development; profitable for a few, not about developing local economies, enlivening downtowns or stimulating revitalization." "For the past few years, car-dependent stadiums have been the fad of choice. They are like urban renewal projects of an earlier time. If you don't know how to rejuvenate an area or how to recognize and nurture rejuvenation when it begins spontaneously, you build a stadium or some mega-equivalent. If you are lucky, you'll do it well (Denver, Toronto, Baltimore) and connect it to the existing city, rather than suspend it in its own isolated space in a sea of parking." That doesn't mean it's a bad idea, but it does mean that y'all shouldn't assume that everyone is going to just jump on board the project, especially with public funding involved. There are many people who will want to be convinced that this would be the best use of our money, especially considering that developers seem to float a lot of projects that rely on public funding (such as a one= or two-lake project).

Author
DonnaLadd
Date
2010-12-08T18:37:21-06:00
ID
161239
Comment

Does anyone remember a few years ago, Jackson had a hockey team. I and I am sure others went to at least one game. The problem with building an arena is can you find a sport to play in the arena for a couple of months out of the year. Like hockey, basketball or football. Most of all if you want to get a team, keep a team and make money; you have to allow beer sales and put an competive product out there for the public. I am not sure how well the city of pearl does with the M-Braves but they have the two things mentioned above. I am not sure arena is a good or bad thing but before everyone lines up studys that are useless. Go find a team to play at the arena then go to the public. What good does it do to built anything without already having a deal in place to put a team there.

Author
Bryan Flynn
Date
2010-12-08T18:58:40-06:00
ID
161241
Comment

I think the articles raises some good points, but I don't think the "Field" book is the best reference for arenas. I haven't read the book, but from a couple of reviews I've read, the book focuses on stadiums and not arenas. If I'm wrong, you can totally discount my argument. It would be like saying magazines aren't profitable anymore and basing your information on the problems in the newspaper industry. Arenas are much more flexible and can be used year round. Whereas, stadiums take up much larger real estate, can't be used year round (unless it's a dome) and aren't as flexible having 40,000+ seating capacity. The article points out how the Nationwide Arena has contributed to the renaissance of the waterfront in Columbus which supports the notion that it could contribute to the revitalization of downtown. No one has said the arena is the silver bullet to revitalize the entire downtown or the City, but it could be a part just like the Convention Complex, King Edward, Farish Street, Fondren Place... I think it's smart the supporters of the Jackson arena aren't focusing on finding a sports team to play in the areana. Basketball doesn't work in the south. Hockey has an iffy track record at best in the south. Arena football is the only sport where you do want a team for a city of our size. On another note, this article does have direct implications to JSU's desire for a new stadium. If JSU uses an economic development argument for a new stadium, the article clearly states JSU would have fuzzy math.

Author
maybob95
Date
2010-12-08T21:22:15-06:00
ID
161243
Comment

Maybob, as I understand it, the book is a good source to figure out what questions we should be asking now on the front end, which is the whole point. Jackson really has to get away from the habit of acting like asking real questions about public projects is a personal affront. That is so provincial. Not saying you're doing that, by the way. Agreed on the sports team point. That seems to have changed. As for the JSU point, sure, this article and the book and whatever other sources should be used to ask similar questions about that stadium. I suspect they have some different arguments in addition to eco-devo, but it's up to them to make them. I think the study idea is *great*, by the way, being that it's funded privately and as long as it isn't done just to justify an arena (which would be PR), but to really figure out all the pros and cons so that the public can decide intelligently. If they do not pursue answers to problems elsewhere, it's a sign that it's more PR. But I certainly don't assume that to be true until we we see that happen. Let's just all be sure we're plugged in on the front end. The whole Two Lakes/flood-control saga is an example of how things can go really awry when citizens don't pay enough attention soon enough.

Author
DonnaLadd
Date
2010-12-09T09:20:14-06:00
ID
161260
Comment

Just a reminder...it's been two days since my last posts and they still haven't shown up. There was nothing contreversial in either one of them. Thanks, Dave

Author
Dave Coleman
Date
2010-12-10T13:42:54-06:00
ID
161261
Comment

Must be a tech issue, Dave. I haven't seen any other comments from you. Please re-post.

Author
DonnaLadd
Date
2010-12-10T13:47:00-06:00
ID
161265
Comment

No problem. I had written that I hope that they are able to raise the funds to pay for the study. The study should answer a lot of these questions. I'd like to see a good music venue built in Jackson. Tons of top bands pass through Jackson traveling on I20 and I55 as they go from Atlanta>Dallas or Chicago>Memphis>New Orleans.

Author
Dave Coleman
Date
2010-12-11T12:53:53-06:00
ID
161266
Comment

Just a thought, but has any one asked the question of why does Jackson need an arena when the Coliseum goes unused for most of the year. It does not make sense (to me) to build something new when there is a buildig for simular use already in place. If they are going to build an arena then something must be done with the Coliseum. There is no need to pay for up keep of two building. Espically if a new building makes the old bulding even more obsolete. I could be wrong but why pay twice (if tay payers funds are used) for two buildings. Either build a new arena and blow up the coliseum or renovate or expand the building we already have.

Author
Bryan Flynn
Date
2010-12-11T13:38:27-06:00

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