Sport Finance Test 3

Who paid for stadiums in early history

Fully paid from owners

Where were early stadiums located

urban neighborhoods

Why were early stadiums placed in urban neighborhoods?

To take advantage of the population density

What was the outcome of early stadiums being placed in urban neighborhoods

Stadiums had quirky characteristics that have been romanticized

Jewel Boxes

unmistakable oddities in ballparks. Ballparks provided little comfort or convenience for fans.

Which cities had circular, dual purpose (football and baseball) stadiums in the 1960s

Cincinnati, New York, Philadelphia, Pittsburgh, Atlanta, and St. Louis

Who was the first team to build seperate facilities

Kansas City

Why is it beneficial to not have two teams share a stadium

To maximize revenue

What do venues that have hockey and basketball require

the upper deck needs to be set farther back so fans can see both goals

Who controls the supply of teams

the league

(T/F) Early sports teams had the same bankruptcy rate as start up businesses

True

What two things did establishing an exclusive market do?

1. Formed a fan base
2. Other members would not play a member of a competitor in the market space

Which event caused proliferation for the demand of sport

Baby boom

What happens if a city is without a franchise

They are losing out on human capital

What is the best way to lure a franchise

Building a stadium

Do venues produce positive economic effect on real estate development

Yes

Which city launched the modern era of public support (city pays for venue)

Milwaukee

How have leagues snuffed out rival leagues

Through expansion

Which team had the first successful relocation threat

Indianaplois

What did indianapolis gain from the relocation threatg

THey got to keep income from luxury seats

Which decade saw dozens of facilities built with public money

90’s

Was the public or private sector responsible for matinence costs of venues

Public

What did state of the art clauses define

what is appropriate for tax-payers to foot the bill for

Downside to more teams

prices may decline as supply increases

* Two key factors cities and teams must consider in decision making process

1. The extent to which a professional sport venue aligns with citywide development plans


1. Whether the venue design will contribute to an iconic exterior design that will define the urban space

Yankee Stadium

* New has twice the retail space. 13 restaurants and pubs compared to 4 in the old ballpark
* New has 56 luxury suites and 410 party suites. Older had 19
* The new stadium is 63% larger than the size of the facility it replaced even though playing fields were identical

How many square feet is the mercedes benz stadium in atl

1\.6 million sq feet of space (300,000 more than Dome)

One of the most important issue when choosing location

Availibility of land

What are benefits of having a stadium in a business district

better modes of transportation than suburban options. Less congestion can reduce consumption costs

Consumption Costs

* as relate to sport attendance, cost of tickets and transportation to and from the game, as well as the amount of time the fan invests in attending the event

Which league should remember consumption costs the most

MLB

Which league should remember consumption costs the least

NFL

Which sector offer incentives to keep the economic vitality of aging downtown areas

Public

How many seats maximize sight lines and

provide best range of seating options

45,000

Larger ballparks that offer more seats must place the extra seats where?

Upper outfield decks

(T/F) When fans know that there will not be tickets available, they easily make advanced purchases

False; When fans know that there will always be tickets available, they are reluctant to make advanced purchases

Is it more beneficial to have too few or too many seats

Too few

Facades

create an image for a team and city

Monumental Design

* Dramatic and becomes a destination. Dwarfs the surrounding environment

Neighborhood Design

* Fit into neighborhoods and facilitate development. Often nearby structures that are larger in height

How many events must arenas host per year

100

Why is college attendance declining

not paying attention to Disneyfication of sports

Private Financing

Team ownership contributes to the construction of the venue

Public Financing

Local city/county/state government contributes to the construction of the venue

What do people against public financing want

either want the tax dollars going elsewhere or do not like that owners are billionaires

Two ways public financing is awarded

* 1) Politicians have the ability to simply legislate a public stadium subsidy for a franchise
* 2) The potential for the award of the public subsidy can be placed up for a public vote

What have the majority of public stadium subsides come from

politician legislation with no public vote

How many publically funded projects awarded using legislation since 2000

50

How many stadium subsidy projects brough to a public vote since 2000

15

What is unique about sports venue construction?

Team owners are being subsidized by local governments (indirectly through taxpayers/consumers)

Why are Team owners are being subsidized by local governments (indirectly through taxpayers/consumers)

* Local governments feel pressure to keep the franchise in their local market
* Fans do not want their local team to move
* Politicians do not want to be “the one in office” when the team decides to relocate

Why does the franchise owner have the advantage?

* Open markets that are a “real” relocation threat
* Think of the open markets in NFL, MLB, NHL and NBA

Ways public can contribute to stadium funding

* 1) Higher property taxes
* 2) Higher standard sales taxes
* 3) Additional new taxes on specific items

4) Diversion of taxes from the general fund to the stadium construction fund

Sin Taxes

Taxes on rental cars, alchohol, tobacco, and gambling

The brunt of the stadium costs are paid by who if the venue is privately funded

Fans since they pay for tickets and parking

IF the venue is publically financed, who bears the brunt of the costs

Taxpayers

What arguement do politicians use to agrue for public funding of a stadium

Four positive externalities

Positive Externalities

scenarios that improve life or another person’s welfare

4 Positive Externalities

* Creation of Social Capital
* Relocate economic activity
* Define the identity of the city/region
* Economic development

Ticket Tax

tax added to the cost of the ticket. Can be a percentage or fixed fee

What can ticket tax also be considered

Amusement tax

Who does ticket tax only impact

Users

Result of Ticket tax

fans pay higher ticket prices, team receives less ticket revenue and fewer fans attend games (but depends on consumer willingness to pay)

Parking tax

usually occurs at parking lots and structures by the venue and during an event held at the venue

How can parking tax be structured

Percentage or flate fee

Who does parking tax only impact

Users

Can parking tax impact team revenues

Yes

In-Facility Sales Tax

additional tax on all transactions within the facility

Is In-Facility Sales Tax a % or flat fee

Usually a %

Who does In-Facility Sales Tax affect

Only impacts users

What happens if fans avoid in facility purchases

Hurts team revenue

Sales Tax

a small increase in the general sales tax for all retail sales that goes towards venue construction

Who does sales tax impact

Since all purchases in a city have the tax, it impacts users and nonusers of the facility

Why do sales taxes work?

* The small increase usually has little political opposition
* Even a small % increase generates a large amount of $
* Impact on the individual taxpayer is very small

Property Tax

very small increase in the rate at which real estate is taxed

How is property tax calculated

* Tax on the “assessed value” of a property for property owners

Does property tax generate a significant or insignificant amount of revenue

Significant

Who would oppose property tax

those on fixed-incomes and those who believe increased property taxes should support education/other public services

Income Tax

small increase on household income taxes

Does a small increase in income tax generate small or large revnue

Large

Sports District Tax

taxes generated in a specific area around the proposed venue are used to help fund the venue construction

Sin Tax

tax on the purchase of alcohol or tobacco

Who does sin tax affect

Only users of those products

Is sin tax considered voluntary or involuntary

Voluntary

Gaming taxes and lotteries

tax on gambling winnings or  lottery ticket purchases...or…Lottery proceeds for a period of time can go towards venue funding

Tourist Tax

tax on hotel rooms or rental cars

Why do tourist taxes have a lower level of voter opposition

Since the tax largely falls on visitors

What happens if tourist taxes are too high

it could shift tourism patterns and reduce economic activity in an area

Food and Beverage Tax

tax on food and beverages sold at restaurants and pubs within a given geographical area

Is food and beverage tax voluntary or involuntary

Voluntary

What are sports venues complimented by

additional development and other amenities, can contribute to the revitalization of urban neighborhoods and enhance adjacent property values. Many team owners have changed their business models to include real estate development

First stadium to develop aroudn the facility

Orioles

Two Development Approaches

* 1. Real estate outside venues on adjacent land (build new neighborhoods for Padres, District in Detroit
* 2. Build new entertainment complexes on small acreage to include restaurants, pubs, live performance spaces

Increasing Value of Downtown Locations for Sport (4)

* 1. Located at the nexus of many transit systems
* 2. Now include amenities that are available before, during, and after games and
* events
* 3. Horizontal integration of sport with entertainments options is more popular
* 4. Sport has sustained its popularity across several decades

Transportation

When switched to cars as main mode in 60’s, many teams went to suburbs for parking (especially in west and south). But once luxury seating came, businesses were interested in suites and B2B deals. Cavs, Wizards, S.F. Giants, Lions, Pistons all moved to suburbs and came back to downtown.

Decentralization of economic activity

Despite this, banks, law firms, real estate all hold office space in financial districts. This portion of teams fan base needs easy access to facilities. Many downtown revitalization strategies were enhanced by sport venues

Who lives downtown

Young professionals

What types of apartments and condos are in demand

Apartments and Condos in demand that offer easy access to restaurants and entertainment

What are stadiums similar to

ballparks and stadiums are similar to large-scale real estate projects. Very similar to malls which offer large tracts of space that managers need to maximize revenues on

6 Pieces of Real Estate that must be maximized

* **1. Luxury seating**
* **2. Seating deck**
* **Normal seats/bleachers**
* **3. Concourses and entrances**
* **4. Scoreboard and electronic displays**
* **5. Playing surface**
* **6. Naming rights**