Sunday, December 30, 2007

Private investment, public costs: Fenway Park, Atlantic Yards, and more

So how much would the public contribute to the Atlantic Yards arena? At a panel held at the Museum of the City of New York on 9/27/07, titled Take Me Out to the Brand-New Ballpark (here's a report from e-Oculus), well-respected sports economist Andrew Zimbalist, who nonetheless produced a rather skewed Atlantic Yards study for Forest City Ratner, lowballed the figure.

Looking at Fenway

Janet Marie Smith, senior VP of planning and development for the Boston Red Sox and architect behind the redesign of Fenway Park, was the most notable speaker on the panel, sketching out the history of ballparks in the country. Fenway Park, dating from 1912, has managed to not just survive but thrive, even as most other facilities from that generation were demolished and supplanted by suburban or semi-suburuban stadiums. And parks like Fenway (and long-gone Ebbets Field, home of the Brooklyn Dodgers) since inspired a new wave of retro urban facilities.

The earlier generation, Smith noted, "fit into neighborhood quite literally, were very civic buildings." New York City power broker Robert Moses, she noted, rejected the plans proposed by Dodgers owner Walter O'Malley for eminent domain and other government support, declaring that this was "in no way a public purpose."

By the 1950s, however, she said, America as a whole began to think of sports facilities as public purpose--the idea of a "civic project" is contested in the Atlantic Yards environmental lawsuit--and multipurpose stadiums, serving baseball and football, obliterated urban areas or were established in suburbia.

The Camden Yards lesson

In the 1990s, however, Smith worked on the spectacularly successful Oriole Park at Camden Yards, in a corner of Downtown Baltimore, which opened in 1992. That begat the urban ballpark as an urban development tool: Coors Field in the LoDo neighborhood of Denver, which opened in 1995; PacBell Park (now AT&T Park), opened in 2000 on the waterfront in San Francisco; PETCO Park in San Diego, adjacent to Gaslight District, opened in 2004; PNC Park, opened in 2001 in Pittsburgh.

The eventual purchasers of the Red Sox in 2002, she said, were only would-be buyers who wanted to keep the ballpark, citing both sentimental and economic reasons. Just as Eutaw Street bordering Oriole Park is opened on game days, so the Red Sox have put up turnstiles on Yawkey Way, so the ticket gets attendees into the street. (That's different for arenas, of course, and impossible in such a congested areas as the Atlantic Yards footprint.) The owners also added "Green Monster seats" behind the famous left-field wall.

(Photo from Ballparks.com)

Zimbalist comments

Zimbalist noted that the current Red Sox owners put in about $150 million of their own money and "haven't gone to the city or state for a penny... that can stand to be a lesson around the country."

(The New York Sun, in a 10/31/07 editorial headlined Fenway's Example, cited the Red Sox's success in paying for their own improvements:
The owner of the Knicks, Madison Square Garden, enjoy a property tax exemption for its arena, while Atlantic Yards and its developer, who will bring the Nets to play basketball in Brooklyn, will receive at least $300 million in city and state subsidies.
)

Turning to the New York example, Zimbalist suggested to the crowd that they consider three images, in absence of photos. One, he said, was Nets owner Bruce Ratner "negotiating" with Brooklyn Borough President Marty Markowitz. (Of course Markowitz had nothing to offer except his bully pulpit and the repeated promises that the project would work and be great. Did he negotiate any concessions or crunch any numbers?)

"Gentrification" of ballparks

Zimbalist explained that, in the 1960s-70s, cookie-cutter stadiums were built in the suburbs and surrounded by parking lots. With Camden Yards and successor stadiums, "baseball teams began to access corporate dollars in a new way"--seats, signage, sponsorship. In a term, "ballparks were gentrified... it became a model everyone wanted to follow."

Hence the desire for new arenas, too, with lucrative naming rights, as with the Barclays Capital deal for the Atlantic Yards arena.

No benefit?

Zimbalist repeated some old but important news: academic economists have universally found that sports facilities bring "no discernible positive economic influence." While "certainly, baseball and other sports have a massive cultural presence," he said, most spending is "substitution spending," replacing monies that would go to other forms of entertainment.

Moreover, 60 percent of the revenue goes to the players. "With very few exceptions, players don't make permanent homes in cities they play in," he noted.

New York an anomaly?

In the last 15 years, about two-thirds of the spending on ballpark and arena construction nationally has been public dollars, Zimbalist said, suggesting that New Yorkers were getting a relative bargain.

The Yankees, he said, were putting up 80% of the cost of the new Yankee Stadium, with the city putting up only 20%.

Well, not quite. Neil deMause, a journalistic expert on sports facilities and a periodic sparring partner of Zimbalist, in August calculated on his Field of Schemes blog that the $799 million public contribution is nearly double what the team itself would put up.

And AY?

Zimbalist said that the percentage of contribution is "lower still for Atlantic Yards project in Brooklyn."

Well, that's if you count, as Zimbalist did in his 2005 report (p. 37) for Forest City Ratner, that "The anticipated public investment of $200 million represents under six percent of the total investment in the project."

First, the direct cash investment is now up to $305 million, with much assigned to the $637.2 million arena rather than the project as a whole--a figure that challenges Zimbalist's assertion of a low percentage regarding the sports facility.

Beyond that, as the Independent Budget Office found in its September 2005 Fiscal Brief, there are a plethora of other benefits to the developer beyond direct cash investment, including increase in development rights, the use of eminent domain, and access to scarce tax-exempt bonds, not to mention significantly increased public costs.

In other words, that "six percent" is not a credible figure.

Ineffable value

Zimbalist did suggest another value to professional sports: "Ballparks and teams do a lot to mobilize and energize a local community... a ball team enables us to express community... maybe it's somewhat perfunctory, but it's one of the only expressions of community we have left."

"Ballparks," he said, "can be magnets to draw in other investments," citing the example of PetCo Park. "It will be very exciting to see what happens in the Bronx and in Queens and in Brooklyn."

Brooklyn vs. the boroughs

The situation in Brooklyn is a bit different, given that neither Yankee Stadium or the Mets' CitiField would be located in or adjacent to hot residential neighborhoods. Absent the arena plan, the "great piece of real estate," in the words of Forest City Enterprises' Chuck Ratner, would be a magnet for much investment; rather, the arena helped Forest City Ratner get the inside track on the site.

Baseball vs. football

Moderator Frank Deford, a noted sportswriter, asked if baseball park was a better deal than a football stadium, because more games are held. Zimbalist was skeptical "Look at Yankee Stadium; where do you see development in that neighborhood?"

However, there's a stronger argument for arenas, given that they host several events a week.

A standalone sports facility "is not likely by itself [to be an engine of development]," Zimbalist said. "Other things have to be done. There has to be concerted city planning around it."

Well, there would be "other things" around the Atlantic Yards arena, but whether they represent "concerted city planning" is doubtful.

Luxury suites?

Pointing to the rise of luxury suites, Deford observed that "everything is done to accommodate a high-class audience that pays big tickets."

Zimbalist allowed that "there's always been a risk of over-gentrification... what happens when cheapest seat is no longer five or ten or 15 dollars, the cheapest seat is 25 dollars?" After all, he said, it's different to watch a game in person rather than on television.

"Charge what you want to rich corporate America, but always remember your base in our culture has to do with the mass of Americans," he said.

In that case, the Nets seems to have pursued a smart strategy. While the "blended average ticket price" would rocket up, thanks to suites, but there would be at least 2000 “screecher seats,” costing $15.

Who loses? It seems--though we can't be sure--that there might be fewer and more expensive mid-priced seats.

Meanwhile, the Boston Red Sox manage while keeping their cheapest seat at $25.

"If you can make $15 or $20 or $30 million selling luxury boxes, and another 15, 20, or 30 selling club seats, that's fine," said Zimbalist, who said he was concerned about luxury boxes at university stadiums that are 85% tax-deductible.

Could Ebbets have been saved?

Given what we now know about the persistence of Wrigley Field in Chicago and Fenway Park, could Ebbets Field in Brooklyn have been saved as a viable ballpark?

Panelist John Pastier, architecture critic and author of Historic Ballparks (right), said yes, noting that the Dodgers were the only team that moved that had average attendance above the league average, and had been the league's most profitable team.

Then again, the neighborhood was going downhill, and O'Malley thought he could get a better deal with a new stadium located in either the edge of Downtown Brooklyn or, ultimately, Los Angeles.

As Bruce Ratner once said in another context, "Like so many things in life, it was just a matter of money."

1 comment:

  1. Norman,

    Interesting to hear about this panel!

    Another angle to consider when discussing urban stadiums and arenas (and the supposed community economic benefits "justifying" public aid) is that today's stadiums and arenas appear to be expressly designed to be economically self-contained (e.g., food service, souvenir sales, etc.) -- and, in fact, this capturing of a stadium's / arena's positive economic externalities by its owner seems to be a large part of the reason for building such new stadiums and arenas in the first place (e.g., luxury boxes, etc.).

    So it's not like the old days, when patrons, rich or poor, going to the old (bare bones) Madison Square Garden (occupying a conventional city block) would patronize neighborhood restaurants and shops (e.g., "Jack Dempsey's" restaurant across the street, for the well-heeled; a local pub, for the less affluent; a local gym for would-be athletes and their associates, etc.).

    And the internalizing of such economic externalities not only deprives surrounding businesses from benefiting as much as they might from an arena, but it also seems to contribute to the inflated size and footprint of such stadiums and arenas -- making them more disruptive to the urban fabric (e.g. "requiring" them to seek larger sites, "requiring" more blank walls, and sometimes even "requiring" the demapping of city streets, etc.).

    Although I haven't read Phillip Bess's book, "City Baseball Magic: Plain Talk and Uncommon Sense About Cities and Baseball Parks," judging from other things of his that I've read, he seems to be making this latter point.

    -- Benjamin Hemric

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