Publicly financed stadiums: Boon or boondoggle? - Albuquerque Journal

Publicly financed stadiums: Boon or boondoggle?

The area near Broadway and Coal looking toward the mountains, one of the possible areas for the proposed stadium that would host New Mexico United. Albuquerque voters will vote on a $50 million bond to support stadium construction. (Roberto E. Rosales/Albuquerque Journal)

With early voting under way, Albuquerque residents have begun casting their ballots to support or reject the $50 million gross receipts tax revenue bond that would help fund a new soccer-specific stadium.

The proposal goes beyond simply finding a permanent home for New Mexico United, the city’s 3-year-old professional soccer team. City and business leaders – including those from Albuquerque Economic Development and the Greater Albuquerque Chamber of Commerce – see the project as a potential catalyst for Albuquerque, one that can provide much-needed foot traffic that could draw new businesses to the surrounding neighborhood and help support existing ones. If the stadium is located in Downtown Albuquerque, as a study commissioned by the city recommends, leaders are optimistic that the stadium can act as an anchor to bring bars, restaurants and, eventually, housing to an area that’s struggled to attract and retain residents and businesses.

“Our Downtown area really could use that kind of shot in the arm,” said Albuquerque Chief Operations Officer Lawrence Rael.

Pedestrians walking near Central and 3rd in Downtown Albuquerque, near the general area proposed for a new soccer-specific stadium. City and business leaders see the stadium as a potential catalyst for the Downtown area. (Roberto E. Rosales/Albuquerque Journal)

However, a number of studies on public financing for stadiums paint a less-rosy picture of their economic impact. Victor Matheson, professor of sports economics at College of the Holy Cross in Massachusetts, said new stadiums rarely generate significant new spending for cities that support them, and often fail to draw enough visitors to move the needle at all.

“You get (economic impact) numbers that aren’t zero, but you also get numbers that aren’t nearly as large as the sort of subsidies that stadiums often get,” Matheson told the Journal.

Up until now, New Mexico United has played its home games at the facility now known as Rio Grande Credit Union Field at Isotopes Park, though restrictions related to the COVID-19 pandemic kept the team from playing at home in 2020. Last year, the team, which plays in the USL Championship, the second tier of American soccer, announced plans to develop a soccer-specific stadium, in accordance with the league’s mandate that teams must play in facilities intended for soccer. This summer, the Albuquerque City Council voted to send a proposal to fund a portion of a new stadium using bond financing to voters in November.

Peter Trevisani, principal owner of New Mexico United, said in a September meeting with Journal editors and reporters that the city’s proposal differs from many publicly funded stadiums in that it would allow the city to retain ownership of the stadium, with United required to pay $10 million up front along with $22.5 million in rent to help pay off the bond over 25 years after the stadium is built.

“I feel like that is a huge statement that we have skin in the game,” Trevisani said.

The Albuquerque Rail Yards just south of Downtown near 2nd and Iron, is one of the possible areas for the proposed stadium that would host New Mexico United. Albuquerque voters will decide on a $50 million bond to support stadium construction. (Roberto E. Rosales/Albuquerque Journal)

The majority of upfront funding for the project will still be public, however. During the November election, voters will be asked if the city should issue up to $50 million in gross receipts tax revenue bonds to cover most of the cost of the stadium.

It’s not difficult to find academic studies that are skeptical of the economic impact of public financing for stadiums. A 2016 study from The Brookings Institution concluded that “academic studies consistently find no discernible positive relationship between sports facility construction and local economic development, income growth, or job creation.”

A 2001 study from the Council for Urban Economic Development said “recent research suggests that cities have not benefited economically from the boom in professional stadium and arena construction.”

Pedestrians walk near Gold and 3rd in Downtown Albuquerque. Proponents of a proposed stadium to house New Mexico United believe the project will spur economic growth in the Downtown area. (Roberto E. Rosales/Albuquerque Journal)

Matheson estimated that around 95% of economists who aren’t affiliated with a team or a league feel that little to no public money should be spent on sports stadiums.

While spending does occur at new stadiums, Matheson said it largely comes from local residents who would have spent that money on local goods and services anyway. From that perspective, a stadium mostly redistributes spending that would have occurred at other local entertainment options, from movie theaters to restaurants, a phenomenon known as the “substitution effect.”

“There’s no doubt that spending is occurring there,” Matheson said. “But it’s not like those people, in the absence of a soccer stadium, would have done nothing else.”

Carrie Robin Brunder, political director with New Mexico United For All, the group working to pass the bond, noted that the study commissioned by the city worked to account for the substitution effect by excluding spending from within Albuquerque. The study, conducted by CAA ICON, concluded that the stadium would generate $17.5 million annually in new direct and indirect economic output, outside of construction spending.

Other factors that limit economic impact from stadiums include leakage, where much of the spending goes toward player wages that are spent outside the market, and “crowding out,” where travelers drawn by a game will compete with business or leisure travelers for hotel space and other resources.

However, Matheson acknowledged that both factors would be less relevant for a USL Championship soccer team – where most players live in the community and visitors rarely travel en masse across the country for a match – than for a Major League Baseball or National Football League franchise.

The San Francisco Giants baseball team plays the Chicago Cubs at Oracle Park in San Francisco. Oracle Park, located in the city’s South of Market neighborhood, was cited as an example of a successful stadium that incorporated public financing. (Carol M. Highsmith’s America Project/Library of Congress).

Neil deMause, a New York-based author who co-wrote the book “Field of Schemes,” which takes a critical look at publicly financed stadiums and arenas around the country, said most stadiums aren’t open for enough time during the year to have the type of economic impact proponents claim. United played 17 home games in 2019, and is on track to play 16 home games this season.

“Stadiums are lousy anchors because they’re not used very much,” deMause said in an interview.

For its part, New Mexico United is optimistic that the facility can be useful even when the team isn’t playing. Trevisani said ownership has committed to bringing in a professional women’s soccer team within three years of a new stadium opening in Albuquerque, something that it lacks the capacity to do at Isotopes Park. Additionally, United ownership has argued that the stadium could attract high school all-star games, college soccer games and friendlies between other professional teams, along with concerts and other community events.

“We don’t want a stadium that sits empty for 345 days,” said Jason Harrington, CEO of HB Construction in Albuquerque and one of five co-owners of New Mexico United. “We want that to be impacting part of our community.”

Peter Trevisani, principal owner of New Mexico United, left, speaks during a news conference on the potential stadium agreement between the city and the soccer team. At right is Albuquerque Chief Operations Officer Lawrence Rael. (Adolphe Pierre-Louis/Albuquerque Journal)

Moreover, Trevisani said he’d like to see the stadium stay open even when there’s no programming at all. He envisions a stadium that could host meetings, offer easy meals from the concession stand and even double as a public park when there’s no one using the field.

“I think it would be the safest park that we have in the city,” he said.

Even with the additional uses, deMause and Matheson doubted that the stadium could attract enough people enough of the year to help it function as an economic anchor for a neighborhood. New Mexico United drew 12,693 fans per match in 2019, but that total has dropped under 8,000 in 2021, according to data from the USL. Matheson said the other events the stadium is looking to attract would likely draw far fewer fans, or would put the stadium in competition with much larger venues.

DeMause said hosting events for 50 to 60 days a year would be “spectacularly successful” for a soccer stadium, but still wouldn’t drive the traffic needed to cover the funding.

“If an Albuquerque soccer stadium could successfully turn itself into a year-round destination, that would be the first soccer stadium to do that,” deMause said.

Despite the challenges, business groups like the Greater Albuquerque Chamber of Commerce and the Albuquerque Hispano Chamber have expressed support for the deal, in part because of potential benefits for Downtown. Terri Cole, president and CEO of the Greater Albuquerque Chamber, said in an email that the stadium could support other revitalization efforts in Downtown, including the city’s planned rail trail, a multi-use urban trail designed to better connect Downtown neighborhoods, and the ongoing revitalization of the Albuquerque Rail Yards.

“Taken together it would paint the picture of an exciting place for families to spend time,” Cole said. “And all of that would be enough to attract new hotels, restaurants and stores.”

Danielle Casey, president and CEO of Albuquerque Economic Development, said investing in a city’s urban core can help attract younger residents looking for a live-work lifestyle.

While the city will not finalize its site selection for the stadium and may choose a location outside of the Downtown core, Rael said having a stadium near the center of the city could help draw visitors during periods of time when Downtown and surrounding neighborhoods don’t draw as many people. That influx of people could draw new bars and restaurants, and eventually new residents looking to use those amenities at different times, Rael said.

“These historic neighborhoods … have not seen any kind of investment of this magnitude in decades,” he said. “This could be a transformational project.”

Reilly White

While there are plenty of studies suggesting that publicly funded stadiums don’t help cities grow, the data are less clear at the neighborhood level. Reilly White, associate professor of finance at the University of New Mexico’s Anderson School of Management, said the substitution effect can still push visitors and dollars into neighborhoods that might otherwise not see those impacts. Done in conjunction with other development, White said a stadium could help create resources in a specific downtown neighborhood that might not otherwise get built. He cited San Diego’s Petco Park and Denver’s Coors Field, where construction coincided with increased development in the Gaslamp Quarter of San Diego and the LoDo neighborhood in Denver, respectively.

Even in those cities, deMause questioned the value of the ballpark in supporting those neighborhoods, arguing that both neighborhoods were on the cusp of growth before the stadium construction.

“It’s a myth that’s been perpetuated by the fact that team owners, like other developers, like to build in areas that are sort of ripe for takeoff,” deMause said.

Still deMause acknowledged research showing that downtown sports facilities can sometimes help smaller cities better compete with their suburbs for spending. He cited Oracle Park, home of the San Francisco Giants, as a stadium incorporating public funding that has been relatively successful.

Matheson and White agreed that money isn’t always everything when it comes to stadium funding. In an academic paper taking the “pro” side of a pro-con argument, he noted that sports teams can provide a more ephemeral public good, in the form of communal joy and civic pride, that the open market may fail to produce. He said publicly funded events like festivals and fireworks shows can help improve quality of life in a community, even if they don’t provide a direct return on the investment.

“There’s no reason not to include sports as part of that,” he said. “But … you have to be very clear about why would you spend tens of millions of dollars on this one item.”

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