Our Sponsors:

Read more »

Our Members

Many thanks to Philip Angell and Marilyn Burlingame some of our many supporters.

ALL MEMBERS »

Bank study debunks claim of public benefits from new sports arenas

A report by UBS, sent to its wealthy clients, finds only owners and fans benefit by these public investments, not the public.

Chris Hansen, left, with Mayor Mike McGinn during a press event.

Chris Hansen, left, with Mayor Mike McGinn during a press event. Office of the Mayor/Flickr

CenturyLink and Safeco Field could be joined by a sports arena.

CenturyLink and Safeco Field could be joined by a sports arena. Dcoetzee/Wikimedia Commons

Should the city and county be offering public subsidies to private investor Chris Hansen and his yet-to-be-revealed partners, who propose building and operating a pro basketball and hockey arena in Seattle's SoDo area? Proponents say those subsidies, in the form of municipal bonds totaling hundreds of millions in public debt backed by local governments, are required to make the deal feasible.

What's more, boosters say we better grab this deal quick or we risk losing it. That notion is hard to square with Hansen's own statements that he is "willing to be very patient." 

How to sort out these claims? Some help comes from a recent research report from a prominent investment bank, UBS, to its own wealthy clients. The report makes a surprising case against claims that a public subsidy is necessary or that these facilities pay off for the broad public.

The report in question comes from UBS Wealth Management Research, whose April assessment offers a frank analysis of stadium financing subsidies and related municipal bonds across the U.S. The 35-page report, called "Batter Up: Public Sector Support for Professional Sports Facilities," concludes that there is no broad economic benefit from most stadium deals. It also finds that public financing mostly props up the ever-inflating value of privately-owned sports teams. Further, that the deals skew the benefits toward a "relatively narrow group of individuals" (the franchise ownership and the sport’s spectators). The report goes on to assess the quality of various stadium finance bonds across the country.

Here are some notable quotes from the report, made all the more telling because they come from advisers to the ultra-wealthy:

"Unfortunately, independent academic research studies consistently conclude that new stadiums and arenas have no measurable effect on the level of real income or employment in the metropolitan areas in which they are located. Feasibility studies for professional sports facilities often fail to account for the substitution effect. Individuals generally maintain a consistent level of entertainment spending so money spent on sporting events typically comes at the expense of cash spent in restaurants, on travel, and at movie theaters."

"Capital expenditures associated with a new arena and sports stadium are directed towards a relatively narrow group of individuals (the franchise ownership and the sport's spectators).... The resulting infrastructure is not easily convertible for other uses and plainly does not provide the same broad societal benefits associated with an airport, highway, or public utility improvement."

"The use of public subsidies to underwrite the cost of construction for a new stadium or arena was a contributing factor in the rapid increase in the valuation of sports franchises."

The report goes on to cite "consistent evidence that subsidies are counterproductive in the long run" yet the advisers expect the subsidy model will continue, for the most part, while highlighting some exceptions that show that public subsidies through bond financing are not always necessary, and noting that "In at least one instance, public opposition has dictated a private sector solution."

The city that chose not to subsidize wealthy team owners with hundreds of millions in government debt? Chris Hansen's own San Francisco, where private interests built AT&T Park, a baseball facility, without using public bonding debt, after voters repeatedly rejected subsidies for the stadium.

Now San Francisco appears to have done its next stadium deal — this time for basketball — also without public bonding debt. Last February, Mayor Ed Lee offered terse words of advice for owners of the NBA's Golden State Warriors, as they sought to fund and build a new arena: private financing. Just a few days ago, a package was announced to build a privately financed new arena on Piers 30-32, without issuing any government bonds, "rather than stress the taxpayer. That's not fair," said team owner Joe Lacob.

In at least these two recent cases on the West Coast, financing for pro sports arenas without the use of local government bonding has penciled out just fine. Of course, every stadium package has its own investors of varying strength, its own deal point complexities. But on the whole, Hansen and his group cannot reasonably claim that issuing hundreds of millions in government debt financing and subsidies is essential to getting stadia built, at least in today's economic context.

Contributor Matt Fikse (Twitter: @mattfikse) has covered urban affairs, politics, tech, and business at Crosscut since 2009. His work has also been featured on KUOW 94.9 FM, GeekWire.com, Q13 television, The Stranger/SLOG, and elsewhere. He has worked as an entrepreneur, CEO, consultant, and past Special Projects Director for the Mayor of Seattle.


Like what you just read? Support high quality local journalism. Become a member of Crosscut today!

Comments:

Posted Mon, Jun 4, 7:34 a.m. Inappropriate

In addition to flipping a $23 million dollar parcel to the city, it looks lucrative to also be able to flip an NBA team back to another buyer at an increased value, if it is secured in a new facility. Therein lies the motivation on why the current deal before us must happen right now, an right here. It is disingenuous by those who stand to profit from this to frame it in any other way. If there is supposedly nothing morally wrong about making a profit, and in fact supposedly virtuous, why is this motivation so obfuscated?

Godwin

Posted Mon, Jun 4, 7:46 a.m. Inappropriate

Thanks for such good coverage of this timely and apparently unbiased report. I hope this gets the widest play possible.

Posted Mon, Jun 4, 8:08 a.m. Inappropriate

San Francisco's approach seems reasonable.

Seattle's approach appears to include two prominent politicians who have been bowled over by desire.

McGinn's lust to recover from his dismal tenure as Mayor might explain his desire to achieve something, anything.

Constantine's belly flopping is inexplicable, or perhaps would benefit from a very clear articulation by the Executive beyond a stated desire to somehow relive Sonics glory days long gone.

Jan

Posted Mon, Jun 4, 8:16 a.m. Inappropriate

Pioneer Square is an example of an area that degenerated due to sports arenas. Once the premier destination for dining and entertainment, once the Kingdome was built, the good restaurants left, most heading towards the then newly renovated but limited draw public market. Realtors based rents on pedestrian traffic skewered by game day stats, loosely monitored "music" clubs took over the recently renovated restaurants and taverns, the decline began. SODO will not prosper as a people place but rather will become a drive around place thus reducing the small business venues. This location is wrong and public financing is unnecessary. Do Over please.

chapala21

Posted Mon, Jun 4, 8:22 a.m. Inappropriate

Great reporting! Thank you!

Trevor

Posted Mon, Jun 4, 8:36 a.m. Inappropriate

Yet another set of reasons, clearly stated, why the Sodo location is the wrong place for another sports arena, and especially one funded with public funds. Thank you Matt.

The question is, are the elected officials paying attention? If they continue to pursue this headlong rush into a deal that is beyond questionable -- that literally does not make fiscal or public policy sense -- then at the very least voters should have the opportunity to turn it down in a public vote.

Yeah, I get it that people are tired of being Eymanized. But a public vote is our backstop against public policy decisions that are not supported by the public, but pushed down our throats by elites who think they "know better."

Posted Mon, Jun 4, 8:50 a.m. Inappropriate

I think seldom-mentioned beneficiaries of the professional sports industry are media companies. Newspapers, television and radio stations, even websites like Crosscut carry sports news. People presumably read, watch and listen to commentary, game reports, etc. (note how much of a daily newspaper is devoted to professional sports) Advertisers respond to this attention. Consequently, it is a rare newspaper or television station that will acknowledge the corruption involved in this great international stadium swindle. Crosscut being a fine exception. Thank you Crosscut.

kieth

Posted Mon, Jun 4, 8:50 a.m. Inappropriate

I think seldom-mentioned beneficiaries of the professional sports industry are media companies. Newspapers, television and radio stations, even websites like Crosscut carry sports news. People presumably read, watch and listen to commentary, game reports, etc. (note how much of a daily newspaper is devoted to professional sports) Advertisers respond to this attention. Consequently, it is a rare newspaper or television station that will acknowledge the corruption involved in this great international stadium swindle. Crosscut being a fine exception. Thank you Crosscut.

kieth

Posted Mon, Jun 4, 9:22 a.m. Inappropriate

Professional sports teams are private endeavors and should receive no "corporate welfare." If you can't make money with an MLB, NFL or NBA team, you're in the wrong line of work.

dbreneman

Posted Mon, Jun 4, 9:29 a.m. Inappropriate

Yet another report -- this one by UBS -- showing exactly the same thing: there is no benefit to a publicly-funded pro sports venue except to the billionaire owners, multi-millionaire players and fans who can afford the increasingly steep ticket prices.

There is no way a new NBA arena should be built in our area using public bonding debt. Hansen is reportedly extremely wealthy, and he presumably has an investor group of other extremely wealthy individuals. Let them pay for the entire cost of a new arena. They are the ones who will benefit -- so let them pay for it, completely, with no tax subsidies.

The new Husky Stadium supporters went to the WA state legislature at least a couple of times asking for tax subsidies for the new Husky Stadium, and were rejected every time. So, new Husky Stadium is being built, anyway, with private money. This is how a new NBA arena should be funded -- with all private money.

Lincoln

Posted Mon, Jun 4, 10:23 a.m. Inappropriate

Well done, Matt. Thanks for writing it.

Posted Mon, Jun 4, 10:49 a.m. Inappropriate

Probably a reasonable study.

By analogy, reasonable studies also show that it is more economical to buy a used car,or even better ride public transit or walk.

The bottom line is "does the Puget Sound want the car?" Or, in this case, does Seattle want a new version of the Sonics and if not now, when, and on what terms and conditions.

Having no vested interest in the final decision, and believing that NBA basketball is not worth watching let alone paying for, I can follow once again the "Seattle process" unfold. And I really enjoy it:)

Posted Mon, Jun 4, 1:38 p.m. Inappropriate

The new arena will have many other events in addition to hockey and basketball. The general public will benefit.

animalal

Posted Wed, Jun 6, 5:37 p.m. Inappropriate

You know better than these consultants for the wealthy? Really?

Posted Mon, Jun 4, 2:23 p.m. Inappropriate

Good article, thank you for finding the UBS report. Staples center in Los Angeles, where the NBA Lakers play, was also privately financed. The arena where the Utah Jazz play was privately financed. The NHL/NBA arena in Columbus Ohio was privately financed. This is not a complete list of privately financed arenas; but it is not uncommon for these arenas to be privately financed. Hansen needs to pay his own way.

jhande

Posted Mon, Jun 4, 5:48 p.m. Inappropriate

The NBA/NHL arena in Vancouver, B.C. was privately financed. And the NBA team left after just a few seasons, leaving only the NHL.

Paul Allen's arena in Portland was mostly privately financed, and completely privately-owned, so he could not blackmail Portland for an improved lease, since the City of Portland did not own the arena. In fact, the company that Allen formed to own and operate the Rose Garden did declare bankruptcy, but that just meant the arena went to the private investors who loaned Allen the money for the arena. And, since then Allen has bought it back. This would have been a real mess if the City of Portland had owned the arena, but since the arena was owned by Allen, he could not threaten to leave the city, because he owned the arena!

animalal: a new arena would not host any events that other venues in our area don't already host. For example, KeyArena and Century Link Field host the concerts that would just move to a new arena. The Huskies have their own basketball arena and Seattle U. and the Storm play at KeyArena. A new arena would add only NBA and NHL events to our area, and it looks like the plan now is to build it without even having an NHL team -- so it might bring nothing new other than the NBA back to Seattle. Make no mistake, this proposed new arena is for nothing other than the NBA, and perhaps at some future date, the NHL. We have plenty of venues in our area to host any other events.

Lincoln

Posted Tue, Jun 5, 9:11 a.m. Inappropriate

I'm sorry to see this important story off the Crosscut front page so soon, thanks to the barrage of Fizzes.

Posted Tue, Jun 5, 10 a.m. Inappropriate

The elite who've recovered from the recession now have money to invest in venues they expect will lead to profit knowing the fickle public will pay to temporarily inflate their own egos with a frivolous escape from the reality of a decomposing society which does not need another sports venue.

Wells

Posted Wed, Jun 6, 5:39 p.m. Inappropriate

Did someone send this report to McGinn and Constantine?

Posted Fri, Jun 8, 9:57 a.m. Inappropriate


Right now we are force to pay an annual "Congestion Reduction Fee" to King County.

Yet that same King County government wants to situation a traffic clogging stadium in the worst possible place...hampering traffic, using up parking...and ironically, no where near a useable LINK station!

It would make far more sense to "spread the load" and put this stadium somewhere at a terminus of the transit systems like Kent.

I'm so tired of a whole state being entirely Seattle-centric instead of thinking of the county, region and Inland Washington as options for building.

jabailo

Login or register to add your voice to the conversation.

Join Crosscut now!
Subscribe to our Newsletter

Follow Us »