The Stadium Debate: Is our love of major sports teams helping or hurting the Minnesota economy?

April 14, 2010 at 6:15 pm

By: Lindsey Reese, Liberty Property Trust

Target FieldIt can be said that Minnesotans love their sports almost as much as they love their three months of summer, but has our love affair blinded us to practicality? A general assumption is that taxpayers in every city across the country tend to pay for their professional sports teams either through special taxes or proceeds from state lotteries, etc. Given the size of Minneapolis, as compared with L.A., Chicago and New York, the fact that we support four major sports teams seems to place a big cost on smaller market. The Metropolitan Council put the Minneapolis population at 2.87 million at the end of 2008, while cities like LA, New York and Chicago all boasted populations of 16, 21 and 9 million respectively in a 2000 demographic census. When you look at these three cities, they also support at least four major sports teams, if not more. So what do our sports teams offer us in exchange? In a word: Identity. 

Not prone to making spectacles or causing a scene, Minnesotans tend to be more reserved than other cities’ sports fans but that doesn’t mean we don’t live and breathe our sports just the same. We identify with our teams because most of us participate and enjoy these same sports on some level in our daily lives. It’s been shown that Minnesota is one of the healthiest states in the country and this quality of life is due to our active lifestyles so it would be fair to say Minnesotans have a passion for sports – literally! And it’s this passion for not only watching but participating in these sports that seems to help the real estate economy as well, according to Brad Butler, senior leasing representative for Liberty Property Trust in Eden Prairie. “Minnesota is a seasonal place, with spring we think of baseball, with fall, football and with winter, hockey,” Butler says. “And because [Minnesotans] not only watch sports but also participate in them, it spurs the economy for whatever city that particular sports complex is in, either through ticket sales, retails shops,  recreational leagues, etc.”

Butler also notes that there seems to be a chain reaction happening now with sports teams and their respective stadiums. “Shops and retail follow the stadiums, the Light Rail follows the people heading to the stadiums and the city follows the Light Rail,” he explains. “In turn, this attracts commercial and residential developers and helps retain high-end employers and employees.”

If professional sports do indeed bring jobs, development, and add revenue to a city, why then do cities continue to debate the building of stadiums for their teams? 

Many economists believe building these stadiums accomplishes just the opposite. Brad Humphreys, a professor of recreation, sport and tourism at the University of Illinois in Champaign, has been researching this issue since 2004 and believes there is no benefit to having a major sports team in a city. “Nearly all academic economists studying this issue [believe] that professional sports generally have little, if any, positive effect on a city’s economy. As sport and stadium-related activities increase, other spending declines because people substitute spending on sports for other spending,” Humphreys says. “If the stadium simply displaces dollar-for-dollar spending that would have occurred otherwise, there are no net benefits generated.”
( for full story visit www.news.illinois.edu/NEWS/04/1117stadiums.html).

He arrived at this conclusion by looking at economic indicators from 37 major metropolitan areas with major-league baseball, football and basketball teams. He felt even cities who claim to have “corporate ballpark fees” to help supposedly offset the costs to residents (as was proposed in Washington D.C. to have the Montreal Expos move to the nation’s capital) is really just a clever way of disguising the truth. “Whether [it’s] a surcharge or an increase in the corporate income tax rate, this so-called fee is a tax increase, pure and simple. Corporations don’t pay taxes, people do.”

This same economic debate took place nearly a decade ago when an outdoor baseball stadium was first proposed in Minnesota. Six years after that debate started, Governor Tim Pawlenty approved the Twins stadium bill into law on May 21, 2006 (a bill that was shut down in 2005). Where once vacant parking lots and deserted buildings sat, now stands a ballpark emblazoned with the Twins and Target Corporation’s logo. It’s worth noting that under the terms of the original legislation the public’s contribution to the stadium totaled $350 million and the Twins totaled $130 million, with Target Corporation adding an extra $4.5 million for plaza enhancements. So now that the stadium is built and fans have had their first taste of outdoor baseball, do they even care what this ballpark cost? Or are they too much in love with the green grass and open air to worry about whether or not this new stadium will generate new revenues or just replace old ones as Humphreys suggests.
 
Jerry Bell, president of Twins Sports, Inc. (the company who owns the Minnesota Twins) was interviewed by the Wall Street Journal in January of this year and gave a few thoughts on the economic implications of the Twins stadium and its effect on the community. When asked if publicly funded ballparks make sense on an economic argument alone, Bell’s response was short but honest. “It depends on your alternative for investment,” he said. “My view is that it does have an economic impact in a targeted sense, it benefits this neighborhood. Does that make a ripple effect in the state economy? Probably not.”

Later Bell was asked if he expected the stadium to return the tax money put into it with other taxes or economic benefits in the community. “I think it has a chance, it depends on the economy.” Bell said. “Does the real estate value around the ballpark go up and if it goes up, does it contribute to construction and further development and what kind of real estate taxes does that produce? If all of those things come together over a long period of time, maybe. It’s hard to say.” Despite the opinion that Bell is the main reason the Twins even have a new ballpark, he never claimed it would be a financial home run. But when asked if Joe Mauer’s new $184 million contract would help the state’s tax base Bell simply replied, “He does pay Minnesota income taxes.”

While we will have to wait and see how this new stadium plays out in terms of economic growth and potential development in an otherwise unused part of downtown Minneapolis, what about across the river? Now that the Xcel Center has been open for almost 10 years, what impact has been derived from building the $170 million sports facility in downtown St. Paul? According to a report published by the Xcel Energy Center, in 2003 the Saint Paul Chamber of Commerce released a study showing the overall economic impact the Xcel Center had on the Minneapolis-St. Paul economy, and it showed an added $247 million, with $103.8 million going directly into St. Paul’s economy alone. Over the last decade it might be said that the Xcel Center has paid for itself, having brought in numerous sporting events such as the yearly Minnesota State High School Hockey League and big name music performers like Billy Joel and Bon Jovi.

But what may have set the Xcel Center apart from other ice arenas around the country that bring in these same types of events was the Republican National Convention it hosted in September 2008. Because of the 3,000 + leather seats and 360-degree video ribbon board and eight-sided 50,000 pound scoreboard, the Xcel Center was able to generate nearly $170 million in new money for both Minneapolis and St. Paul that otherwise may have been lost had the facility not been able to accommodate the 45,000+ visitors who came for the convention. According to the Minneapolis St. Paul 2008 Host Committee (a non-profit, nonpartisan organization charged with raising money for the Convention to reduce the financial burden on the host cities), who put together an impact study one year after the event, the “Republican National Convention generated a total direct economic impact of more than $153 million and an indirect impact of more than $15 million for the Minneapolis St. Paul area.”

With statistics like that, one would think the Vikings could walk right up to Governor Pawlenty’s office and have him sign a new football stadium bill tomorrow. But with the Xcel Center 10 years into its tenure and the Twins Stadium so new you could still feel safe eating your hotdog off the floor, do we have enough income, revenue or commitment to support a new stadium (rumored to cost almost $1 billion) for the Vikings? At the end of the day it may come down to this: How much are Minnesotans willing to pay for their love of the game?

Entry filed under: Featured Articles, General Business | Off Topic.

State view: Legislators: Please listen Member Question: E-Marketing-Is it effective to send multiple emails consecutively for different properties?


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