SADDLEDOMED WITH DEBT?
The fight over funding a Calgary arena shows the dubious economics of sport subsidies,
In the beginning, when our forebears found time for testing their mettle against the clan from over the hill, the arena was probably a meadow, maybe a clearing in the woods.
They might have tossed something roundish — a previous opponent’s skull, say — into the middle and whacked it with sticks past yonder tree that served as a goal-line.
Onlookers likely counted themselves lucky if they spotted a rock or fallen tree to sit on. Inevitably, time passed. Next thing you know, the Greeks had given us the word “stadion,” the Romans had adapted it to “stadium.”
And before you could say “Beer here! Get your ice-cold beer!” we’re talking publicly subsidized stadiums and arenas with luxury boxes, jumbotrons and extortionate concessions as the bare essentials for cities hoping to host a pro sports franchise.
Calgary is just the latest city locked in an oft-performed staring, daring contest between civic politicians and pro sports proprietors.
As the bounce of the puck would have it, the campaign now under way for the Oct. 16 municipal election there might serve as the nearest thing to a debate and referendum on how lavishly local taxpayers think the NHL’s Flames should be supported.
Mayor Naheed Nenshi has said he “gets how important the Flames are” to his city.
“This is, of course, an emotional issue for many people. I had a poster of Theo Fleury on my wall when I was a kid. I’ve been a Flames fan for a long time. And I know that we have a great hockey market.
“We have to put the emotions aside. And we have to determine what is the right thing for Calgary, what is the right thing for the citizens, what is the right thing for the tax base.
“And Calgarians have told us, ‘You know what, we’re willing to make an investment. We’re not willing to give away the farm.’ ”
As always, such standoffs are long-running sagas — with threats by team ownership (aided and abetted by dire warnings from NHL commissioner Gary Bettman) to leave town if local politicians don’t pony up public cash.
In Calgary, the Saddledome, built for the Flames and the 1988 Winter Olympics, has for some time been considered inadequate. “Old, antiquated, inefficient” were among Bettman’s words after a tour this year.
Calgary Sports and Entertainment Corp., which owns the Flames, the CFL Stampeders and other local sporting interests, had proposed a $1.3-billion arena and field house development heavily underwritten by taxpayers. That was rejected by the city.
Nenshi recently countered with a proposal in which taxpayers would pick up one-third of the cost of a $550-million arena, anchoring a rejuvenated downtown culture and entertainment district, with the remainder split between the team and a surcharge on Flames tickets.
Ken King, president of Calgary Sports and Entertainment, rejected that proposal by the city. And this week, the team released details of an earlier proposal in which the Flames had said they were willing to pay $275 million toward a $500-million arena. King said, however, that’s no longer on the table. The Flames will withdraw from negotiating a new rink, he said, and make do with the Saddledome. Some analysts saw this as another bargaining manoeuvre, suggesting the team hopes the municipal election next month will give it the new leverage of popular opinion.
To sports economists, it’s a movie seen many times before. And to some, the pros and cons — mostly cons — of such arrangements are well proven.
“It’s the overwhelming opinion of economists . . . that spending public money on spectator sports is a poor use of taxpayer money.” VICTOR MATHESON ECONOMICS PROFESSOR AT THE COLLEGE OF THE HOLY CROSS
“It’s the overwhelming opinion of economists — and remember, it’s hard to get economists to agree on anything — that spending public money on spectator sports is a poor use of taxpayer money,” Victor Matheson, an economics professor at the College of the Holy Cross in Worcester, Mass., told the Star.
Economists have studied stadium projects, and mega-events such as the Olympics and associated infrastructure construction, and “we can rarely find the sort of economic impact that the boosters all promise ahead of time.”
The phenomenon of stadiums and arenas as modern-day cathedrals to civic greatness and the catalysts for urban renewal of blighted downtowns can be tracked to the early 1990s, Matheson said.
After Baltimore built its Camden Yards throwback baseball park in hopes of cleaning up a decrepit neighbourhood, other franchise owners got “a case of stadium envy,” he said.
That syndrome — and the expansion across North America in many pro sports leagues — created a boom in stadium and arena construction, usually significantly supported by taxpayers.
“A lot of this came to a screeching halt in 2008, at least in the United States, when we got the great recession,” Matheson said. “All of a sudden, taxpayers found it very distasteful to give huge subsidies to millionaire players and billionaire owners while simultaneously laying off teachers and firefighters.”
The number of stadium projects dropped from about two or three a year to less than one, he said, and the amount of public subsidy went from roughly two-thirds public, one-third private, to the reverse.
“There’s still a big public component, but much lower that we’d seen in the decades prior to that.”
In Canada, Glen Hodgson isn’t so sure there can’t be an upside to taxpayers for this sort of investment.
“More and more, my thinking is the details really matter,” the senior fellow at the Conference Board of Canada told the Star from Ottawa.
Hodgson said negotiations for the new arena in Edmonton were a long affair with many false starts. Since opening last fall, it is already renewing a hollowed-out downtown and promises the city development fees and higher property taxes, he said.
“If you get the conditions right, there may be circumstances where it actually can be a long-term payback for the city. It’s a matter of doing your sums and thinking through the potential to use a new building with an anchored tenant to rebuild an urban area.”
The city of Edmonton, for instance, was “really getting skewed to the mall in the west end,” he said.
But the arena has helped reinvigorate the downtown core.
“It may well have been a shrewd investment by the city council to change the shape of the city.”
The counterpoint is found in Quebec City, Hodgson said, where an arena was built entirely on tax money, with no NHL franchise, and the city obliged to “repay the debt and keep the building running for a long time without any prospect of a team.”
Still, the mayor there got elected on financing the arena, so “it’s not that people didn’t know what they were doing.”
Matheson acknowledges that there have been instances in which new stadiums or arenas have helped neighbourhoods.
“But that tends to be fairly localized,” he said. Beyond about 1,000 metres, most of the economic benefits dissipate and “we don’t see any effects at all citywide.”
What economists believe happens, he said, is that new stadiums merely redirect where economic activity occurs in a city rather than generating new eco- nomic activity.
That’s called the “substitution effect.” “Crowding out” is another phenomenon, he said, occurring when mega-installations displace other activity that would have been there anyway. And “leakages” measures whether money spent at the stadium actually “sticks” in the community.
“Money spent at a local mom-and-pop will be re-spent in the local economy,” he said. But it’s not certain that fortunes bestowed on rich owners and athletes from elsewhere will.
One thing on which Matheson and Hodgson firmly agree is that it is foolish and false of the Flames to threaten to pack their bags.
“That’s a dumb card to play,” Hodgson said. “You’re not going to move a team like the Oilers or the Flames to an American city.”
Matheson agrees, saying “there are very, very few places in North America that don’t have an NHL team that would be a better location than Calgary.
“It’s not like they’re going back to Atlanta, right?” he said, referring to the original home of the NHL franchise. “They just don’t have the taste for hockey that you guys have up north . . . Everyone has their own sickness.”
Matheson said no economist would discount, however, the intangible factors: community pride and emotional investment in a team, for instance.
“Those are real effects,” he said. “Sports make us happy, and we do have some evidence for that. But don’t have a lot of evidence that they make us rich. Except the guys on the field.”
Not that this kind of debate is entirely decided by arithmetic, rational planning and consistency.
“There’s no real reason to subsidize hockey fans going to games, or rich hockey players and hockey owners,” Matheson said.
“We don’t subsidize movie theatres, and a lot more people go to movies in Canada than NHL games. And we don’t subsidize restaurants, and a lot more people go out to eat than watch hockey games.
“We kind of lose our heads a little bit when it comes to sports.”