I'd feel more pride in our city if we had a clean harbour, clean air, less unemployment and fewer vacant polluted lots than a decade of back-to-back Grey Cup victories.
By Christopher Kiely
Published July 15, 2010
What is it worth? This is an important question that is being asked more and more in this city. I'm reading it in posts, I'm hearing it in discussions, even the Spectator has joined in the chorus of questioners (albeit somewhat rhetorically). To answer the question properly, we need to consider a couple things:
The first part is the easy one. We can look at facts, data, debts, profits and some existing studies to get a better idea of the benefits (if any).
The second part is the tough one where emotion, civic pride and a whole slew of human emotions come into play. People's answers will vary dramatically based on many factors: from economic and political beliefs to whether or not they're a sports fan.
In 2003, Dennis Coates and Brad R. Humphreys from the University of Maryland, Department of Economics wrote a paper titled "Professional Sports Facilities, Franchises and Urban Economic Development". In their paper, Mr. Coates and Mr. Humphreys examine the reality of the economic benefits promised by the type of investment we here in Hamilton are currently debating:
...new sports facilities are frequently cited as important components of urban redevelopment initiatives and sources of considerable economic growth in terms of job creation and income generation. Cities provide the owners of professional sports franchises with hundreds of millions of dollars of subsidies for the construction of new stadiums and arenas and expect these facilities to generate economic benefits exceeding these subsidies by large margins.
Not only does their study throw cold water on the notion of any economic benefit, it raises the specter of a negative economic impact:
However, a growing body of evidence indicates that professional sports facilities, and the franchises they are home to, may not be engines of economic growth in urban neighborhoods. Econometric studies of the determination of income and employment in US cities find no evidence of positive economic benefits associated with past sports facility construction and some studies find that professional sports facilities and teams have a net negative economic impact on income and employment.
This conclusion is repeated multiple times in their study. There is minimal to no economic benefit in supporting sports facilities or franchises and in fact a negative economic impact is often the outcome. To understand why, they provide several factors. One of those factors is due to the lack of new money brought in by sports franchises. To understand that we need to understand what the term "new money" means.
New money is the money that comes from out-of-town. Money that if not for the sports franchise being in the city, the city would not see. We cannot look at all the money in the same way. The money spent on Hamilton Tiger-Cat games by local residents is not the same as that "new money". Unless the Ticats are bringing in out-of-town fans who would otherwise be spending their money in Toronto, Kitchener-Waterloo, Brantford, and so on - and they spend some of that money outside the stadium, there is no money coming into the city that would not be here even if the Ticats weren't.
Spending on entertainment, whether it be sports, movies, or a night out on the town, is discretionary spending. People do not increase their discretionary spending just because a sports franchise is in town. As Mr. Coates and Mr. Humphreys explain:
...household spending on sports - direct spending on tickets, licensed merchandise, etc. and indirect spending on food and drinks at or near a sports facility - is highly substitutable for other forms of entertainment... Professional sport does not induce residents to increase total spending by drawing on savings or borrowing against future earnings. Residents maintain their level of entertainment spending but alter the allocation of this spending toward sport-related spending and away from other close substitutes.
This is what leads to the possibility of negative economic impact. If money that would have gone to local entertainment establishments and subsequently to the local employees and owners of those establishments gets spent instead on a sports franchise that, even with that money coming its way, cannot make ends meet (as is the current admitted state of the Ticats) or in the case of successful franchises is simply funneled out of the city through salaries for rich owners and players who do not live in the city, a negative economic impact is possible.
When we look around this city and see the challenges we face - low income, low tax revenue, floundering economy - the conclusions reached by Mr. Coates and Mr. Humphreys are quite troubling.
No evidence exists that professional sports have a detectable impact on local government spending or tax revenues.
... when comparing a city with a sports franchise to one without such a franchise, all other things equal, one will find income lower in the former.
Much of this research doesn't seem to correspond to what we're being told. The city has hired consultants, the Ticats have hired consultants and they've all done studies. This stadium, in one location or the other, depending on who you believe, is supposed to benefit us... right? In their paper Mr. Coates and Mr. Humphreys quote a similar 1995 study by John L. Crompton to warn that we may not want to believe any of them:
Too often, the motives of those commissioning an economic impact analysis appear to lead to adoption of procedures and underlying assumptions that bias the resultant analysis so the numbers support their advocacy position
Although Mr. Coates and Mr. Humphreys never do assign numbers to the economic benefit of sports, if indeed there is any at all. An article by Tom Griffin that appeared in the University of Washington alumni quarterly Columns quotes UW professor Bill Byers, "an expert on economic impact studies", who states the economic impact of sports on the local economy to be:
...1/10th of one percent, and even that is probably overstating it
Based on these studies, the best case scenario is the city sees an insignificant economic benefit and the worst case scenario is a negative impact on our city's economy simply from the presence of professional sports. There would be an even greater negative economic impact by subsidizing them.
The results of these studies do not support either proposed stadium location. East Mountain may be a regressive approach but counting on a West Harbour location to do much of anything besides filling a brownfield may be wishful thinking on the part of the West Harbour supporters.
In their defense, I will say that the stadium is viewed by many West Harbour supporters as only one part of a larger urban renewal plan for the West Harbour, so all hope does not rest on the stadium. If there are those that still view a West Harbour stadium as the critical ingredient to rejuvenation, they may be seriously disappointed.
So if there is minimal to no economic benefit to the city having pro sports, the entire benefit hinges on the second part of the equation, the social benefit. In their paper Mr. Coates and Mr. Humphreys cite a 2002 study by Bruce K Johnson., Peter A. Groothuis, and John C. Whitehead that uses a "contingent valuation approach to measuring the benefits of sports stadiums and sports franchises":
...people are told the local professional hockey team may leave town because their current arena is not adequate to generate sufficient revenues to put a quality team on the ice. They are then told that the city is considering buying the team to keep it in town and that doing so would require a tax increase of $X, where X is randomly assigned to the respondent and was either 1, 5, 10 or 25 dollars. Finally, the respondent is asked if he or she would be willing to pay $X each year in higher city taxes to keep the team in town. Respondents were then asked the most they would be willing to pay and presented with a card with dollar amounts listed for them to choose from. The study "suggests that the value of public goods generated by major league sports teams may not be large enough to justify the large public subsidies".
If what people personally value the presence of a pro sports team in their city to be still doesn't add up to the subsidies than we really do need to ask ourselves why we pay for these things at all.
Is it right for 600,000 people to foot the bill for ~15,000 diehard fans to attend a game ten times a year?
If the simple concept of supply and demand cannot support a corporation (i.e., fans of the team are not willing to pay enough in ticket cost to cover operations) is it the responsibility of citizens to support that business through incentives, subsidies and taxes?
What if businesses that do have a measurable positive economic impact on the city came asking for money and subsidies, would the demands be as positively supported as some have supported the Ticats demands? Would they be viewed as being "committed to the city"?
What are ten days of rah-rah, feel-goodness worth?
What is the value of civic pride created by the Ticats?
After the research and reading I've done on the topic, I believe the best economic choice would be a cleaned-up West Harbour site with a temporary Pan Am stadium and a conversion of the site to a lower cost rejuvenation project (i.e., sculpture park, skate park, even just an urban meadow) while letting Bob Young build his own stadium.
On the feel-good side of things, I'd feel more pride in our city if we had a clean harbour, clean air, less unemployment and fewer vacant polluted lots than a decade of back-to-back Grey Cup victories. Pro sports is a luxury this city can no longer afford to subsidize at the level it is being asked to.
But the above are all questions we need to answer individually and with the understanding that all we are actually buying is enjoyment. Economic benefit for the city is not guaranteed, (quite the opposite actually) nor is the success of the Ticats at a new costly location. So ask yourself what it is worth and let your answer be known to your representatives; otherwise they'll answer for you... and you may not be happy with their answer.
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