[Summit] FW: Sports economists: $101M WooSox stadium deal unlikely to beat the odds | WBJournal.com
mmcglynn at gmail.com
Fri Aug 24 07:58:09 CDT 2018
It's a corporate money-grab regardless of where it is.
Here's hoping that Pawtucket gets a single or double A team so the stadium
can continue to operate.
On Thu, Aug 23, 2018 at 9:46 PM Greg Gerritt <gerritt at mindspring.com> wrote:
> If you are feeling bad about losing the pawSox, maybe you should also
> feel bad for Worceester. greg
> Sports economists: $101M WooSox stadium deal unlikely to beat the odds
> Sports economists across the country sharply criticized Worcester's plan
> to borrow $101 million to build a ballpark and surrounding hotel
> development to entice the Pawtucket Red Sox to move to the Canal District,
> saying Monday public benefits of such stadium deals are often minimal and
> the spillover effects overstated.
> "It virtually never works," said Nola Agha, a professor at the University
> of San Francisco who has written about economic effects of minor league
> After the announcement by the city and the team Friday of their signing a
> letter of intent to build a stadium in the Canal District, WBJ sent copies
> of the financing details to 10 economists and stadium experts around the
> nation to gauge whether Worcester's claims over the stadium development
> paying for itself – without the need for current tax dollars – would come
> Of those experts, the only one who spoke positively about the deal was the
> Smith College professor who was hired by the city to judge the economic
> viability of the offer to the PawSox. The rest doubted the
> stadium-pays-for-itself claims would come to fruition.
> "There's just mountains now of economic evidence that the payoff that's
> promised and what actually happens is far different," said Joel Maxcy, an
> economist at Drexel University in Philadelphia.
> Those who specialize in studying public financing for sports facilities
> generally landed on a few conclusions:
> - Money spent at a ballpark is money a resident or a family would
> likely have spent otherwise at a bowling alley or a concert. A stadium
> mostly just moves money around from one entity in a city or a region to
> - The same goes for a restaurant near a stadium that might benefit
> from added traffic on a game night, only to take customers away from
> restaurants farther away, they said.
> - Related development – like Worcester is planning on with hotels,
> apartments and restaurants – rarely lives up to expectations in economists'
> "The idea that this is going to serve as a catalyst for economic
> development, which is the hope – and I emphasize the word hope – is
> misguided," Robert Baade, an economist at Lake Forest College in Illinois,
> said of Worcester' stadium proposal.
> *The $101M proposal*
> City and PawSox officials pitched their proposal last Friday as one that
> could be transformative for the city by spurring new spending and
> development. They envision a park to draw thousands of fans on game days
> and for other public events there, for an expected total of 125 events per
> A roughly $101-million mixed use development would rise in the Canal
> District as a result, with two hotels, 225 residential units and 65,000
> square feet of retail space planned. The first phase of what is ultimately
> planned for 650,000 square feet of space is set to open in 2021, the same
> year the ballpark hosts it first game.
> The ballpark proposal comes with proposed city and state investments to
> total at least $136 million.
> The city is requesting to borrow $101 million, and to offer tax breaks for
> two new hotels and the housing development. The state has committed to $35
> million for a parking garage and infrastructure work, and unspecified costs
> to redo Kelley Square.
> [image: Photo/Grant Welker Graphics/Mitchell Hayes]
> Photo/Grant Welker Graphics/Mitchell Hayes
> An aerial view of the Canal District site, at center, where Worcester and
> Pawtucket Red Sox officials say an investment of more than $200 million on
> a ballpark and mixed-use development will reshape a part of the city. In
> this view looking south, I-290 runs along the upper left corner, while
> Madison Street begins in the lower right corner, running to the left.
> City Council approval is needed for the city's bond and for the tax
> breaks. The state said its $35 million share does not require legislative
> approval. Nearly all of that funding will be through the state's MassWorks
> infrastructure program, which typically gives in far smaller amounts. The
> largest recipient last year was a roughly $4.8 million project.
> The state Department of Transportation did not give cost estimates for an
> overhaul of Kelley Square but said the department is proceeding with
> transportation infrastructure designs and anticipates advertising the
> construction contract by May 2019. The work is scheduled to be completed in
> Worcester's stadium financing plan calls on the city to create a special
> financing district surrounding the ballpark where the revenues collected
> from the developments inside the district – the hotels, apartments, any new
> restaurants, etc. – would cover the roughly $3 million in annual debt
> payments on the $101 million borrowed. In the city's Friday press
> conference with the PawSox officials, city officials projected the special
> district would generate $3.7 million in 2021, exceeding the amount needed
> to cover the debt payments.
> "In essence, the project pays for itself," City Manager Edward Augustus
> said at Friday's press conference announcing the deal.
> Worcester's proposal struck sports economists as particularly generous to
> the team, with an especially high cost for a 10,000-seat ballpark.
> Victor Matheson, a professor at the College of the Holy Cross in
> Worcester, is among the plan's strongest critics. His views of the deal
> aren't as optimistic as when he first heard just the basic details of the
> "This is an extraordinarily expensive stadium," he said, calling a
> $85-million to $95-million project cost misleading for not including site
> acquisition and other costs.
> Matheson said he was surprised that Worcester officials committed to so
> much money for the stadium with what he said is so little in return. The
> city, which would own the ballpark, would allow the team to keep
> advertising and concession revenue at the stadium and revenue from a
> planned naming rights deal with Polar Beverages.
> "They seemed to be smarter than that," Matheson said of city officials.
> "I'm extremely surprised that (the city's cost) is as large as it is."
> *The cultural benefit*
> There is one sports economist who is bullish on the deal: Andrew
> Zimbalist, a professor at Smith College, who served as a paid consultant
> for Worcester to help land a deal with the PawSox.
> Zimbalist said Worcester's plan is the exception rather than the norm.
> Zimbalist said he looked at a financial model that estimated that more than
> $100 million in related mixed-use development outside the ballpark will pay
> back the city – and then some – through new tax revenue.
> "If you can do something like this that was culturally and socially
> positive and at least break even, it made sense to go forward," he said.
> Zimbalist said he was brought on board by the city to help Worcester
> officials start negotiations on a financing plan and on a letter of intent
> with PawSox brass. He said he's often critical of public financing of
> stadiums because stadiums by themselves don't offer enough of a financial
> return on public investment. He said he was hired by the city to ensure
> that Worcester's proposal would be revenue-positive.
> Worcester's plan fits into a trend toward stadiums part of larger
> developments, said Daniel Etna, the co-chair of the sports law department
> at the New York firm of Herrick Feinstein.
> "In the last few years," Etna said, a trend has moved toward "it's not
> just about the ballpark — that the ballpark is part of something larger.
> Worcester's proposal seems like a well thought-out project, said Etna,
> whose firm has worked on minor league ballparks and other stadium projects.
> "There always seems to be contrary public thought on the merits for these
> projects, but I do think Worcester has in its favor that it's part of a
> larger project," Etna said.
> Worcester's City Council voted a year ago to have Augustus work to attract
> the PawSox, but it wasn't clear for much of that time how likely Worcester
> was to land the team.
> At first, Zimbalist said, he suspected Worcester may have been used by
> PawSox Chairman Larry Lucchino for leverage in negotiating with officials
> in the team's current home state of Rhode Island. But as talks progressed,
> he said, it became more clear the team was taking a serious look at
> "Up until the last week or so," he said in an interview Sunday, "I wasn't
> entirely convinced of it. It evolved over time."
> Zimbalist acknowledged the high cost for the stadium but said new parks
> are far more elaborate than in the old days, with luxury suites, a broader
> array of food offerings and other amenities fans once might have only seen
> in new stadiums in Major League Baseball.
> McCoy Stadium, where the PawSox have played for 45 years, lacks luxury
> suites and other modern touches. It was expanded and renovated in the late
> 1990s but has since been surpassed by other teams' stadiums.
> "Every time a stadium is built, it becomes a little more filled with these
> amenities," Zimbalist said.
> [image: Photo/Grant Welker]
> Photo/Grant Welker
> City and team officials say a new stadium and 650,000 square feet of
> mixed-use development will bring new life to the Canal District and be an
> economic driver for the city. Economists are doubtful.
> *Limited secondary spending*
> Economists are generally still skeptical of how much stadiums, even more
> luxurious ones, offer a spillover effect.
> "There's a great deal of consensus among sports economists of all
> political stripes that this is not a good thing for local governments to be
> doing," said John Solow, a Massachusetts native and an economist at the
> University of Iowa.
> Other economists criticized other aspects of the proposal, such as the
> roughly $1-million-a-year rent for the team, along with $6 million in
> upfront equity toward construction.
> Maxcy, the Drexel professor, saw those numbers as indicating the project's
> risks will fall squarely on the city, while the team is able to reap the
> revenue benefits.
> "If it were a private person, you would never take such a nonsensical
> bargain," Maxcy said of the city's commitment.
> In Worcester, the team would be allowed block off a street beyond right
> field as the Boston Red Sox do with Jersey Street outside Fenway Park,
> controlling concession stands as a way to capture revenue even outside the
> "Your community could think of all other ways to spend the money with
> better economic return than a minor league baseball team," said Baade, from
> Lake Forest College in Illinois. "We're talking, after all, about a minor
> league club … If the local economy is going to be given a boost by this
> project, it would somehow have to stimulate additional spending in the
> local economy."
> Michael Leeds, an economist at Temple University in Philadelphia, was most
> doubtful about the city's plan that new development of hotels, apartments
> and restaurants adjacent to the stadium would create enough revenue to
> cover costs.
> "I really, really don't see it," Leeds said.
> The assumption, Leeds said, is the development "is so successful that
> we'll generate enough revenue to pay for everything."
> Worcester's projection of $3.7 million collected in the first year the
> stadium is opened relies on the construction of the ballpark, hotels and
> apartments to be completed as scheduled, as well as having optimistic
> projections of how much revenue each will generate.
> "You're counting on something that's not very likely to happen, and you
> better have a Plan B in place," Leeds added.
> Economists generally feel sports, especially in the minor leagues, do not
> spur additional spending.
> "Overwhelmingly, the fannies in the stands are local," said Allen
> Sanderson, an economist at the University of Chicago. "They're choosing to
> spend a day or an evening at the ballpark instead of at the ball or other
> entertainment options."
> Neil DeMause, a New York City author of a book on sports economics titled
> "Field of Schemes," said he believes Worcester's proposal could be the
> largest public commitment to a minor league stadium.
> "Worcester's city leaders haven't just outbid Pawtucket, they've ladled on
> goodies like they're trying to buy Larry Lucchino's love," DeMause said.
> "Assuming they can get past all the legislative hurdles, it should be
> enough to get the city a pro sports team, but it's tough to see spending
> more than $100 million in tax kickbacks and state infrastructure subsidies
> on a team that you could buy outright for $20 million as smart bargaining."
> [image: Image/Courtesy]
> The stadium and development plan calls for a new ballpark for the
> Pawtucket Red Sox to open by 2021, and for the first phase of mixed
> development to open by that year. The project would straddle Madison Street
> on what is now largely underutilized or vacant land.
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