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Hoop Schemes

Why are cities across the country sinking taxpayer money into sports stadiums and arenas? Stay Free! talks to Andrew Zimbalist and Neil deMause

Interviews by Charles Star | Issue 24

Unused rail yards have never been so popular. Owners of sports teams across the United States see these large, unused spaces as ideal locations for new stadiums. Proponents of stadium building tout their projects as a combination jobs program, civic-pride-generator, and tax revenue bonanza, but the reality rarely lives up to the hype.

Baltimore and Denver built stadiums for their baseball teams on abandoned yards and now the owners of the New Jersey Nets and New York Jets want New York to do the same. Nets owner Bruce Ratner plans to move his team to Brooklyn, where he hopes to build on the Atlantic Yards. The project would be getting more attention if the Jets hadn't been simultaneously plotting to build a new stadium above the Hudson Yards on Manhattan's West Side. Not surprisingly, both stadium plans require New York taxpayers to subsidize construction.

Smith College Professor Andrew Zimbalist, best known for his critical analysis of stadium funding, consulted for Bruce Ratner on the Nets proposal. HIs new book, National Pastime: How Americans Play Baseball and the Rest of the World Plays Soccer (Brookings Institution), was published in April. He spoke with Stay Free! by phone about public financing for stadiums and his evaluation of Ratner's Atlantic Yards project.

STAY FREE!: You wrote that stadiums are seldom attractive as private financial investments. Why?

ANDREW ZIMBALIST: Stadiums cost $300 to $500 million. With football, you've got ten games a year and maybe a few auxiliary activities. If you are talking about baseball, it is 81 to 90 games a year plus a few auxiliary activities. Generally speaking, those are not enough dates to generate enough income in the stadium to justify the investment. There do seem to be some exceptions. Robert Kraft has managed to privately fund his new stadium in Foxboro [MA], Gillette Stadium.

STAY FREE!: How? Lots of concerts?

ZIMBALIST: No, he has the New England Revolution soccer team, and he brings in some international soccer games and there are a few other contests during the year.

STAY FREE!: I'm surprised that soccer makes it profitable.

ZIMBALIST: Well, soccer might not be profitable, but they pay a rental charge at the stadium and he runs all of his own concessions. So they come out with maybe forty events a year and the NFL team is profitable. He had a very clever financial arrangement as well. He got $70 million in infrastructure from the state of Massachusetts, but he is paying it back.

STAY FREE!: Infrastructure meaning roads and that sort of thing?

ZIMBALIST: Yeah. Let me give you another example. [Peter] Magowan, in San Francisco, built what's now called SBC Park--used to be PacBell Park--almost entirely with private money. There is maybe $10 or $15 million of infrastructure in it. He has had a very competitive team, including Barry Bonds. They've practically sold out the stadium every game. And they also have really pioneered corporate use of the stadium on non-playing days, which might generate $6 to $8 million a year. Still, with all that, they have at best a break-even proposition.

Arenas are a different matter because you can get up to 350 events per year. Arenas tend to be less expensive, also. Stadiums are hard to justify as entirely private investments.

STAY FREE!: Another thing you said was that, when it comes to public financing, the term "self-financing" for stadiums is often misleading.

ZIMBALIST: The evidence on public investments and their fiscal impact on municipal budgets is that they break even at best, but if you throw in all of the resources behind a stadium--the value of the land, tax abatements, rent subsidies, infrastructural maintenance, additional security by the city, additional sanitation--then in the large majority of cases the city or state is putting up tens of millions if not hundreds of millions of dollars to either partially or entirely finance the construction of the stadium. Neither the rental payments nor the revenue-sharing payments that the city gets back cover all of the direct and indirect expenses.

STAY FREE!: Stadiums are sold to the public as a way to revitalize downtowns or bring in revenue by way of making the place a "big league town."

ZIMBALIST: Generally, I think it is fair to say that it's not true. The academic studies on this issue are basically what we call "pooled regressions," which means cross-sectional and longitudinal; they are over time and cover all teams and all cities at each moment in time. And these statistical analyses have shown that, on average, you cannot expect a positive economic effect from having a stadium or a team. Of course, there will be some cities that experience a very, very modest positive effect and other cities that experience a modest negative effect. But on balance it is a neutral effect.

STAY FREE!: But it is probably fair to say that the benefits are oversold.

ZIMBALIST: They are always oversold. Except in the case of my study for the Atlantic Yards arena, of course! What is true is that if this stuff is done properly it can relocate economic activity within a metropolitan area. So if it is your desire as a city planner to develop one part of the city at the expense of another, a stadium or an arena can contribute to that.

STAY FREE!: Very briefly, since you mentioned your Atlantic Yards study, what was the conclusion?

ZIMBALIST: Well first of all, I did the study last May. I think the total public contribution to this overall project--which will cost $2.5 billion--was estimated at $470 million. Using that figure, I found that the arena itself was a break-even proposition fiscally, but there was a substantial fiscal benefit for the city for the entire project. After further discussions and negotiations, the public contribution has been reduced from $470 to $200 million.

There are two things going on here are: one, by moving the Nets from New Jersey into Brooklyn, you are taking a team from this greater metropolitan New York area and relocating it across tax jurisdictions. You have the same activity happening, but you have it happening on one side of the tax line instead of the other side. And that ends up making a net transfer into New York city or state coffers. That is atypical. And that is one of the things that made the arena itself turn out to be a neutral deal fiscally in my estimate. And, two, you have basically four-fifths of the $2.5 billion investiment--$2 billion--that has nothing to do with the arena. It's commercial and residential. That was the point. The lion's share of the benefit--or maybe all of it--in my initial study, had to do not with the arena but with the other features of the investment.

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Neil DeMause is coauthor, with Joanna Cagan, of Field of Schemes: How the Great Stadium Swindle Turns Public Money Into Private Profit (Common Courage Press, 1999). A native New Yorker and longtime Brooklynite, he monitors plans for new stadiums across the country at his website, FieldofSchemes.com. Stay Free! met Mr. DeMause at Vox Pop in Flatbush to talk about the local stadium proposals.

STAY FREE!: When did you start writing about stadiums?

DeMAUSE: Joanna Cagan and I stumbled into this when we were working on a zine called Brooklyn Metro Times. It was late 1995 and Giuliani was talking about building a stadium for the Yankees at the same time as he was slashing budgets: shortening library hours, cutting city workers, and things like that. Joanna is from Cleveland, and Cleveland was cutting back on school funding at the same time that it was talking about building a stadium. We thought it was sort of a funny coincidence. So we started researching and quickly found out that it wasn't just Cleveland and New York, it was Milwaukee and Minneapolis and cities all over the country.

STAY FREE!: Have you followed the Atlantic Yards proposal?

DeMAUSE: Yeah, since July 2003.

STAY FREE!: Did you read Zimbalist's analysis of it?

DeMAUSE: Yeah. His report says the arena is at best a break-even proposition for the city. I think he is a little optimistic, but even giving him that, the city is not going to get anything back from the arena. According to the report, the real boon to the city is all the housing Ratner wants to build. The city really needs housing. A lot of people would presumably move to the city if they could find a place to live, and if they pay income taxes and shop locally it would boost the economy even beyond what it costs to send their kids to school and to provide services to them. That part is great. The arena is just an unnecessary add-on to the deal. And the question then becomes: if the only benefit is the housing, why is the city planning on spending between $200 and $500 million on the arena, which is the part that will require knocking down houses? Why not just do an RFP [Request For Proposals] and say to developers, "Who wants to build on the Atlantic Yards?"

STAY FREE!: It seems like the tail is wagging the dog here.

DeMAUSE: Right. Ratner doesn't care about basketball. Bruce Ratner is fundamentally about building big buildings on public land. He went to law school with Pataki and knows how to play the political game. He desperately wants to expand Atlantic Center because his crappy mall and the ugly building with the Target in it aren't doing it by themselves. How can he get the city's attention to build something there? Well, Marty Markowitz would crawl through raw sewage to get a sports team. So suddenly the Nets become the hook to get the politicians and the headlines.

STAY FREE!: Does anything have to come down if you take away the stadium part of the proposal?

DeMAUSE: No, there are all sorts of different options. What we need is some sort of open planning process. There is a UNITY plan that some community activists have come up with, but you know, we can kind of see what is going to happen. It looks like they are going to do a single-source thing with Ratner, where he just comes in and says, "We are going to negotiate a price and I am going to buy it."

STAY FREE!: Zimbalist said that the Nets arena would be roughly break-even. You said possibly optimistic . . .

DeMAUSE: Yes, in terms of what the city would get back. If the city spent several hundred million dollars on it, it could get back that amount in tax revenue. But that is assuming a lot. It's assuming that a lot of people who are currently going to Nets games in New Jersey are going to switch over and come to Brooklyn; otherwise, people are spending the same amount in the city. The money is just going to the Nets instead of, say, a movie theater. It is a best-case scenario that we make our money back. At that point the question is: are there other things the city could be doing with this money?

STAY FREE!: What is the UNITY plan?

DeMAUSE: I haven't looked at it closely, but I think it is housing. It is lower scale . . . These are ridiculously tall buildings that they are talking about building. It helps make their economic plan sound great to say, "We are going to build a sixty-story building," but it doesn't consider the impact on the surrounding neighborhood. Does it make Prospect Heights less attractive to live in when you've got buildings looming over you and more crowded subway stations?

STAY FREE!: There has been a big advertising offensive around the Jets stadium, the Olympic bid, and the funded opposition to it, but I have seen nothing on the Atlantic Yards.

DeMAUSE: It is all to come. Once we see what happens with the Jets, the Nets plan is going to start moving ahead. People are always acting like these things are urgent, yet it can take five, ten years. I remember in 1998 the Yankees announced that they wanted a new stadium, then the Mets came out with their plan for a new stadium; it was supposed to open around 2001, and the plan is still sitting there. These things do not move fast.

STAY FREE!: How many of these proposals would be part of the Olympic construction, should that preposterous notion go forward?

DeMAUSE: Everything the city wants to build at this point is for the Olympics. If somebody is building a public bathroom in Staten Island, they'll somehow work it into an Olympic plan. But it's very unlikely that New York is going to get the Olympics in 2012. If we do somehow, experience has shown that it will take over the city. A stupendous amount of stuff will need to be built: housing, various public facilities, beach volleyball courts in Williamsburg; a velodrome, a swim meet facility. . . Plus, I understand that there is a big construction project going on in lower Manhattan. There is no way that the city can be doing all of this at once. Something has to fall by the wayside.