Construction of a New Stadium and Its Impact on the Economy - Essay Example

Economic Effects of new Sports Stadium Several governments spend huge sums of tax payers’ money in order to attract host teams or sporting events from the Olympics to X-Games, from high-tech key league stadiums to bush league ballparks. This paper seeks to explore the impact of building new stadiums as well as their benefits to sports teams. Internationally, expenditure of taxpayers’ money on sporting facilities as well as events is a global phenomenon that takes place at every stage of local government. For instance $732 million was spent by Portugal government so as to host Euro 2004.Thus taxpayers’ money was spent in construction of 7 new stadiums in a nation about the size of Indiana State. Portugal’s spending however is paled when comparing it with expenditure related with co-hosting 2002 World Cup by Japan and South Korea. To get ready for the World cup, Japan had to build seven new stadiums as well as renovated three others at a sum of $4.5 billion. On the other hand South Korea’s expenditure was $ 2 billion on ten state of the art facilities (Rosner &Shropshire, 2011). Expenditure on Olympics dwarfs the above figures. For instance, the government of Greece spent $12.8 billion in 2004, hosting the Summer Olympics in Athens. In addition, the Chinese government spent more than $43 billion in hosting 2008 Beijing games. Usually, this kind of spending is oftenly speculative in nature and most cities undertake construction projects even before the host status is awarded to them. A great degree of attention has been generated by the recent expenditure on stadiums for top-notch professional teams. As a matter of fact, within a span of 9 years (from2000 to 2009), thirty one major-league arenas and stadiums were opened across the US at a taxpayers’ cost of about $8 billion. Some were constructed specifically to lure new teams whereas majority restored existing amenities for serving teams. The big question that arises from all these activities is why this big expenditure? This considerable investment by various local governments hints that the economic proceeds of sport ought to be quite huge. In fact economic returns are often cited as the reason for subsidies in sports. Stadiums, events, as well teams are generally endorsed as economic catalysts. In 1997 for instance, a group in San Francisco, campaigned for a publicly financed football stadium using the catchphrase saying that the new stadium built will create jobs. Proponents therefore argue that sports amenities develop local economies in 4 main ways; first, building of a sports facility leads to creation of construction jobs, secondly, individuals attending games or working for the teams generate new income via spending in the concerned community ,thus expanding employment locally(Zimbalist & Noll, 1997). Thirdly, a team lures companies as well as tourists to the city hosting sporting events, thus further boosting local spending in addition to jobs. Eventually, the overall spending leads to a “multiplier effect” since increased local revenue cause further new job creation as well as spending. Proponents claim that new stadiums stimulate a lot of economic growth and therefore are self-financing; on the other hand, subsidies are compensated by income arising from ticket taxes, concessional sales taxes as well as other expenditure outside the new stadium, in addition property taxes rises due to the economic impact from the stadium(Rosner &Shropshire,2011). It is therefore legitimate to claim that building new stadiums for sport teams is big business. Thus sport leagues using the stadiums so built cater to ever-rising global markets. Powerful conglomerates as well as wealthy individuals sell and buy sport teams for millions of dollars. There is an ensuing struggle between unions and owners of the sport teams for their share of income, and thus salaries skyrocket, partly due to escalation of TV contracts. This is big indeed big business.Several professional sport teams command yearly revenue exceeding 100 million dollars. On average, yearly revenues are around 155 million dollars in the NFL, 130 million dollars in MLB, 70 million dollars in NHL and 95 million for NBA. These figures may seem huge, but they are nothing compared to state universities budgets. For instance, Portland University budget nears 200 million dollars, over double that of Portland Trailblazers. Another big impact for creation of new stadiums for sport teams is the fact that stadiums produce more local customer satisfaction compared to alternative investments. Professional sport teams may seem to be very little businesses, compared to huge grocery or department stores. Normally, they capture the attention of the public extremely out of proportion in regard to their economic importance. Print and broadcast media create so much interest to sports since a lot of people are followers, even though they actually do not attend those games or least of all purchase sports-allied products (Zimbalist & Noll, 1997). This therefore implies that a stadium will aid a qualified sport team to create an “externality” or “public good” –an advantage that consumers enjoy especially those who are sports followers in spite of whether they have assist in paying for it or not. Consequently sports enthusiasts are willing to agree to higher taxes as well public services that are reduced so as to keep or lure a particular team, even though they do not go to live matches themselves. Such spectators, mobilized and supplemented by local media, teams, as well as local interests that directly benefit from building of a new stadium, comprise political base support for subsidized sports amenities (Zimbalist & Noll, 1997). Sports stadiums are critical in assisting sport teams in connecting fans with places and through this create loyalty which finally leads to birth of a new sense of civic pride. Through stadiums therefore, power has moved from cities to sport teams, making franchises to embark on more sophisticated, expensive, as well as profitable amenities. Some of the amenities offered include themed entertainment, luxury suits, restaurants, and lounges something which has made sporting events to become more alluring to a wide range of audience. Currently, cities are expected to pay for a rising part of stadium charges. Franchises normally threaten to pull out of cities that are not ready to make these payments (Zimbalist & Noll, 1997). Generally, therefore, building new stadiums increases income for the affected metropolitan area in 3 ways; indirect expenditures, direct expenditures as well as “psychological” benefits. Direct expenditure comprises of money that is spent directly by professional sports team franchise, in addition to its patrons and employees. The businesses in the metropolitan area receive the direct expenditure on hotels, restaurants, souvenirs, transportation and food as income. Consequently, these enterprises as well as their employees later spend a portion of this income on businesses of other people within the metropolitan area and in addition those other businesses together with their staff use a portion of their revenue at other businesses within the metropolitan region. This cycle continues, whereby the second, third plus subsequent rounds of expenditure comprise what is known as indirect expenditure that profits a region (Santo & Mildner, 2011). The last benefit that may arise from construction of a new stadium is the “psychological effect”. There have been suggestions that TV coverage of a region’s sports team lures businesses in relocating to such a city. New stadium are therefore an important aspect of a region’s economic development and their presence also adds to the posterity of the host city. Works cited Rosner Scott, Shropshire Kenneth. The Business of Sports. New York: Amazon.com, 2011. Santo Charles, Mildner Gerard. "Economic Impact of Sport Stadiums,Teams,Events." Human Kinetics (2011): np. Zimbalist Andrew, Noll Roger. "Sports,Jobs,& Taxes:Are New Stadiums Worth the Cost?" Brookings (1997): np. Read More