Cities Building Stadiums to Keep Home Teams at Home : Sports: A boom is under way, pushed by franchise threats to move. Some say the municipal money is ill spent.

With help from the American taxpayer, professional sports teams are enjoying the benefits of an unprecedented boom in the construction of stadiums and arenas.

Two dozen facilities for baseball, football, hockey and basketball teams are either under construction, in final planning or stand recently completed. Another 25 or so are on the front burner.

Boosters say that new sports palaces, which cost $150 million to $350 million to build, are worthwhile investments because they generate jobs and stimulate business throughout the community and bring national prestige as well.

The models of success often cited are the Baltimore Orioles’ Camden Yards baseball stadium, the Cleveland Indians’ Jacobs Field, and the Phoenix Suns’ America West Arena, all recently built and all credited with giving an economic lift to surrounding downtown areas.

“We in the city of Phoenix view sports franchises as a legitimate economic development mechanism,” said Jerry Geiger, deputy economic development director. Phoenix, happy with its new arena, is champing at the bit to build a $200-million baseball stadium if it can land a major league expansion franchise.

Most projects involve some kind of public subsidy: free or low-cost city-owned land, roads, sewers and power improvements, or low-interest bonds guaranteed by the municipal treasury. The city or region providing the subsidies usually pays for them by assessing special taxes and fees on residents and tourists.

But many independent experts who study the business of sports contend that huge municipal investments in sports facilities often are not worth the returns they generate, that the real winners are the team owners.

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Robert A. Baade, a professor of economics at Lake Forest College in Illinois, tracked the economies of all major league cities that added or lost a team or erected a stadium over a 28-year-period.

“Sports investments appear to be an economically unsound use of a community’s scarce financial resources,” Baade wrote in his study published in April.

That is because the majority of jobs that a stadium creates are seasonal and low-paying, such as security guards, vendors, parking lot attendants, ushers and so on. And the dollars spent at the stadiums are, in most cases, merely a diversion of money from other recreational options such as movies, shopping or restaurants.

By contrast, communities that invest in an industrial park, retail center or office complex can reap “between 10 and 100 times” the benefit in taxes and jobs because the jobs they attract are higher paying and more stable, said Stanford University economist Roger Noll. Such aspersions make the new stadiums much harder to sell in cities where money is tight and where schools, parks, police and other public services are getting short shrift. But for the most part, pro sports boosters seem to get their stadiums built, often by threatening to move the team elsewhere unless they get their way.

Pepperdine University economics professor Dean Baim believes that sports can stimulate an economy, but only when a team draws fans--and dollars--from a wide region, as is the case with football’s Indianapolis Colts and the Cincinnati Reds and St. Louis Cardinals baseball teams. Those fans give the local economies a shot in the arm by staying overnight at hotels and patronizing restaurants.

And Baim acknowledges that there may be a “big bang” of recognition that landing a new major league team can provide a city, a “subliminal advertisement” that may translate into new business and tourism.

But professional sports add very little to the economies of major metropolitan cities that rely solely on local followings, Baim said. In those situations, a new sports team or stadium would simply cause a transfer of dollars from one sector of the economy to another.

“These are discretionary entertainment dollars spent at the ballpark that would not then be spent bowling or at the movies or on some other form of entertainment,” Baim said. “So while you may see an increase in employment at the ballpark, you’d probably see a decrease at the bowling alleys and movie theaters.”

Many communities see a major league franchise as a form of instant urban renewal, an easy way to revive a dormant downtown.

If only things were that simple.

Consider Baltimore and its widely acclaimed Camden Yards baseball stadium. Located in the city’s once-blighted waterfront district, the facility has become a major attraction for residents and tourists. And a moneymaker as well.

To those who tout Camden Yards as a monument to redevelopment, Stanford’s Noll and other experts point out that the Baltimore ballpark is really the crown jewel in a painstaking 20-year program to redevelop the city’s harbor front area. Hotels, restaurants, theaters and shops were up and running when the Orioles’ Rick Sutcliffe threw out the first pitch at Camden Yards on April 6, 1992.

The lesson of Baltimore’s success is that a stadium alone will not turn a blighted area around.

If Baltimore’s experience is a dream that came true, St. Petersburg’s is nothing less that a nightmare. The Florida city built an indoor baseball stadium in 1989 expecting to land a major league team to pay the rent. It didn’t--and now taxpayers are on the hook to pay $6 million of the interest and principal due annually on bonds that the city floated to pay for the domed stadium. Hotel taxes raise $4 million per year.

Anaheim ran a similar risk when it built its $121-million Arrowhead Pond without a tenant, a move that generated a public outcry and cost at least one city councilman his reelection. The backers were vindicated to a large extent when Walt Disney Co. agreed to base its Mighty Ducks hockey team at the facility, which opened in 1993.

Ever since, the Pond and St. Petersburg’s Florida Suncoast Dome have served as object lessons on the risks and rewards of building an arena “on spec”--as a speculative venture in anticipation of landing a professional sports franchise.

There are other risks as well.

Many of the taxpayer-guaranteed bond deals used to build sports arenas depend on brisk sales of higher priced seats, which are controlled by the sports franchise. Selling those seats depends, in turn, on the host team playing well and drawing huge numbers of fans. If the host team founders or the stadium novelty wears off, cities have to dig deep into their treasuries to pay off the bonds if the cities have not negotiated a big enough piece of the revenues, critics warn.

That has turned out to be the case in Minneapolis where the Target Center ran into serious financial problems, partly because luxury suites did not sell as well as expected for Minneapolis Timberwolves basketball games, said Tim Mueller, a principal with the sports industry consulting practice at KPMG Peat Marwick in New York.

As a result, the city of Minneapolis is picking up more responsibility for paying off more than $40 million in stadium debt. “The city is basically buying the building,” Mueller said.

Given the risks, why are cities willing to give team owners what they want?

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There are the supposed economic benefits, but cities also find themselves over a political barrel. Owners openly threaten to move their teams to another city if they do not get what they want, taking advantage of the monopolistic hold on their markets. And given the popularity of sports, the risk of losing the home team is one that most politicians are loath to take.

It’s no coincidence that Cleveland, Baltimore, Chicago and Phoenix recently built stadiums and arenas for their baseball, football and basketball teams after receiving open or thinly veiled threats by owners to move elsewhere if they did not get new facilities.

“Every team does it. They threaten to pack up the franchise and go,” said Arthur Alexander, chief of staff for Portland City Commissioner Mike Lindberg. Portland contributed $35 million in land and improvements for a new $262-million arena for its Portland Trailblazers basketball franchise.

Although few teams end up leaving, some cities cannot afford to take the demands as idle threats. They know that the Los Angeles Raiders left Oakland, the Phoenix Cardinals left St. Louis and the Indianapolis Colts left Baltimore, all in search of more profitable facilities. So most cities pony up.

“The psychology of fear, of the threat of losing the team, the financial condition of the team and the sport, the financial condition of the host city. . . . All those are the variables at work in determining what the public will fund” in a new stadium deal, said Sam Katz, managing director of Public Financial Management, a Philadelphia firm that advises teams and cities in stadium negotiations.

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Since the early 1980s, teams have been using naked threats to move elsewhere in order to wring concessions from host cities, said Charles Euchner, author of “Playing the Field,” a book about stadiums.

“Probably the most important single event in pro sports occurred when Al Davis moved the football Raiders from Oakland to Los Angeles in 1982. It broke through all the barriers real and imagined against teams demanding all kinds of benefits and made threats much more credible than they were before,” said Euchner, a political science professor at Holy Cross College in Worcester, Mass.

“While teams had moved around throughout the history of professional sports, the spirit behind the Raiders’ move was of a different nature. Davis made no apologies whatsoever for abandoning a city which was as loyal as a city could possibly be. He thumbed his nose at all authority in the NFL. Ever since, people are pretty much playing Davis’ game,” Euchner said.

It was against the backdrop of these threats that the current wave of stadium construction took root. It represents this century’s third generation of construction.

In the early 1900s, club owners paid for stadiums themselves in downtown areas, catering to a distinctly urban fan base. Yankee Stadium, Wrigley Field and Fenway Park were all privately built by teams that controlled the premises.

Then in the 1960s a huge new set of concrete “multipurpose” stadiums rose amid seas of asphalt parking lots to accommodate fans from the suburbs. The stadiums were usually paid for by cities with bond issues and leased to the football and baseball teams. The cities usually received the lion’s share of ancillary revenues generated at the stadium, such as parking, concessions and advertising.

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The newest crop of stadiums are big moneymakers because of how seating is configured. A quarter or more of the seats in a new stadium or arena are likely to be “premium” seats located either in luxury suites or in so-called club areas featuring better sight lines, waitered bar and food service and valet parking. That is up from under 10% in older stadiums.

The suites rent for $100,000 or more per year, often for much more, while the club seats cost up to $25 on top of the standard ticket price.

Combined with the additional advertising, concession and parking revenues that team owners now typically get as part of their deals, new stadiums can generate up to $10 million more in annual revenue for owners than older generation stadiums, said David C. Petersen, a specialist in stadium finance at Price Waterhouse in Tampa.

The stadiums are designed to take full advantage of what Petersen describes as the “segmentation” of the sports ticket market. Others decry it as a trend toward smaller, more luxurious stadiums catering to a more elite viewership.

“Teams finally realized that it’s not just you and your son who go to these games but major corporations who use a box suite . . . to entertain and discuss business with clients, customers and colleagues. And teams saw they could get a higher price from those big companies than they could from you and me,” Petersen said.

And so evolved the so-called public-private financing schemes that many of the new stadiums feature. The stadiums are likely to be financed principally with municipal bonds and built on redevelopment land, while the owners raise money to pay for the sky boxes.

And how do cash-strapped cities pay for their contributions?

Maryland instituted a state lottery to help pay for Baltimore’s Camden Yards. Portland will collect a 6% surcharge on all tickets sold at the Trailblazers’ new Rose Arena when it opens next year. Phoenix has taxed rental cars to build a series of baseball spring training facilities, and San Diego recently raised its hotel bed tax 1% to pay for the proposed arena and a convention center expansion.

How do voters feel? Though much less organized and politically prominent than stadium boosters, opponents have been able to vote down stadium projects.

San Francisco voters have thrice rejected proposals to finance a new home for the San Francisco Giants. City of Cleveland voters rejected a new baseball stadium but Jacobs Field was built after a cigarette and alcohol tax was approved by all of Cuyahoga County, Ohio.

Where possible, politicians can often get around organized local opposition by broadening the vote, as in Cleveland. Coors Field in Denver, home of the Colorado Rockies, was built only after voters in a six-county region agreed to a sales tax increase to finance the $141.5-million facility.

Or they can include the stadium in a proposed complex of buildings or appeal to civic pride by stressing the redevelopment value of a stadium.

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The bottom line is that the new stadiums are being built because a large or at least vocal percentage of the public seems to want them, despite their dubious benefit.

Mayor Susan Golding of San Diego, which is planning a $156-million downtown sports and entertainment facility, says an arena would bring construction jobs and revitalize a blighted area that so far has resisted redevelopment efforts.

But Golding admits that there are “intangible” reasons for a new downtown sports facility, which may get to the heart of the nationwide building craze, and why governments since Roman times have seen fit to use public money to promote sports and spectacles.

“There’s community pride in having a major league team. . . . It’s obviously an important amenity if you look at the fact that newspapers devote an entire section to sports, that cable television devotes an entire channel to sports,” Golding said.