Sports Stadium Economics
February 21, 1997 STADIUMS REQUIRE CONSTANT UPGRADING!
by Staff Journalists, The Daily Republican Newspaper
WASHINGTON DESK - The Miami Sports Arena, just completed in 1988, is no longer adequate to the needs of its two main tenants, the National Basketball Association's Miami Heat and the National Hockey League's Florida Panthers. So, these sports teams are leaving. They are going to cities with brand new arenas.
What happens to the taxpaayers who build and are still paying for the older sports arenas? Team owner couldn't care less. Major league sports teams, including those from Washington D.C. all the way to Phoenix Arizona, San Diego, San Francisco, and Sattle are making unprecedented demands for more profit at taxpayers' expense. According to a story in the National Sports Law Institute on Friday, more than two dozen new sports stadiums have been built in the United States and Canada since 1990, and about 18 more are in some stage of planning.
In Philadelphia, the old stadium continues to play host only to lower-prestige events such as college basketball and soccer team play-offs. In other older city spoprts venues, the stadiums no longer make money. The Richfield Coliseum in Cleveland, is completely vacant and abandoned. Others, like the Boston Garden, have been redeveloped by City Planners to make way for parking lots for new stadiums. This is the pattern.
In the Washington D.C. there are three new sports stadiums under construction at a time when the public schools' roof are collapsing and many building have been condemned.
Professional sports teams want these new stadiums, not because the current stadiums are falling down around their ears. The reason is that the old stadiums are no longer economically feasible. That means, the old stadiumd don't have the luxury sky-boxes and state-of-the-art concession stands that bring in millions in profits.
In some circumstances, though, it's possible to keep an old arena running at a profit. In Philadelphia, the new CoreStates Center sits about 100 yards away from the older CoreStates Spectrum. This month alone, the two buildings will house 58 events.
Having a taxpayers obligated for paying-off a stadium mortgage makes a big difference in the profit picture of sports teams. If the sports team has a $160 million in a new stadium, they are looking at $14 million or more in debt service annually. When there is public finance of the construction costs of the stadim city taxpayers pick-up the tab if the team starts losing games. Of course, when the team leaves town for greener pastures, taxpayers eat the loss instead of the team owners.
From a business point of view, running an arena is different from running a sports team. Team owners have to pay multimillion-dollar player salaries. "That's a lot of revenue to make up," he said.
But sometimes rent isn't quite enough, said J. Isaac, who oversees operations at Memorial Coliseum in Portland, Ore., the arena that used to be home to the Portland Trailblazers until they moved to another stadium. Memorial Coliseum is owned by the city. When the city raised the rent, the Trailblazers decided to build their own stadium and wlaked-out on the city.
Plenty of plans have been floated for how to use Richfield Coliseum in the Cleveland suburbs, but none makes economic sense, according to John Graham, an executive with the company that owns Richfield and the new Gund Arena downtown. So the building has sat unused since 1994.
Among the unsuccessful ideas: soccer play-offs, rock concerts, firewars on the 4th of July, tractor-pulls, rodeos, and outdoor church on Sunday mornings.
Sports arenas are built for a very specific purpose, and it appears they are very difficult to attract paying customers for any other purpose.
In Baltimore, for example, the city kept Memorial Stadium operating much longer than anyone had expected after the Orioles left for Camden Yards in 1992, according to Edward Cline, deputy director of the Maryland Stadium Authority. The minor league Bowie Baysox used it, then the Stallions of the Canadian Football League, then the NFL Ravens this past season.
Since about 1989, commissions and consultants have studied the future of the site, a highly sensitive subject in the neighborhood, Cline said. Right now, demolishing the stadium to provide space for a training center for the Ravens appears the likeliest outcome, he said.
For promoters of the non-sports events that use sports facilities, the new buildings mean a welcome array of choices. "We are always excited when there's a new venue to play," said Lisa Morgan, vice president of arena relations and tour planning at Feld Entertainment Inc. in Vienna, one of the nation's biggest bookers. The company puts on the Ringling Bros. and Barnum & Bailey Circus as well as Disney on Ice and other popular shows.