Foundation Briefs Advanced Level September/October Brief Resolved
Mega Events Are Not Economically Justifiable
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- Cases Pro Case
- Contention One: Consumer Surplus
- Contention Two: Subsidies help centralize business
- Contention three: Public ownership creates mutual interest
- Introduction
- Contention One: Sports Industry fails to generate economic revenue because it displaces other forms of economic activity
- Contention Two: No Long Term Economic Impact
- Contention Three: Opportunity Costs of Spending on Stadiums
Mega Events Are Not Economically JustifiableSubsidies for mega events drive up costs and lower standards DAT Baumann, Robert, and Victor Matheson. “Infrastructure Investments and Mega-Sports Events: Comparing the Experience of Developing and Industrialized Countries.” College of the Holy Cross. AUgust 2013. Web. The potential for the surge in general infrastructure investment as a result of preparations for a mega-event leading to overall economic growth following the event is a real possibility; however, several caveats are in order. First, spending millions or billions of dollars in unproductive sports infrastructure simply in order to have the excuse or the political will to make needed non-sports infrastructure investments is a distinctly second-best economic strategy. Public capital would be more efficiently allocated if governments would simply make reasonable public investment choices without a mega-event hanging over their heads. In addition, mega-events can place surprising tight deadlines on major public works projects. These deadlines can serve to raise costs due to rushed schedules, relaxed bidding rules, and potential corruption. Indeed, as the event nears it may become all too common for a host nation trying to stay within a fixed budget to reallocate resources towards sports infrastructure, which absolutely must be completed ahead of the event, and away from the general infrastructure improvements that were both promised and also comprised the best hope for long-run economic growth. Finally, it should be noted that preparations for a mega-event can result in too high a level of investment in non-athletic infrastructure. An airport, transportation network, or number of hotel rooms that is the right size for three weeks of tourist insanity may be extensively overbuilt for the post-event period. For example, two major luxury hotels built for the 1994 Winter Olympics in Lillehammer, Norway, filed for bankruptcy shortly after the close of the Games. The infrastructure development that accompanies stadium construction only benefits a community if it’s necessary. If it doesn’t serve a long-term purpose, infrastructure cannot recoup the investment made on it. This is especially true if it turns into a maintenance issue due to poor initial construction, which is more likely due to the lowered standards of prepping for massive athletic showcases like the World Cup or Olympics. Cases
Pro CaseIntroduction:Stadium subsidies help the general public by saving the consumers money, creating a better business environment, and creating a mutually beneficial process. Contention One: Consumer SurplusMoney saved is money earned. Usually this saying only applies to personal financial decisions. However, sometimes businesses also save people money. This is called a consumer surplus. A consumer surplus is when consumers are charged at price below what they are willing to pay. This means that they saved money. While this money will not show up directly, it is still an economic benefit. It can be spent to purchase other goods and services and boost the overall economy. Sports teams create a consumer surplus by keeping ticket prices low.
Even though professional sports teams don’t need subsidies, they still prefer them. When local referendums on cancelling subsidies occur, ticket prices will decrease. What this shows is that subsidies offer the public a certain degree of control over a sports team’s revenue stream. In order to win the public’s favor, tickets are sold for a cheaper price than people are willing to pay. By giving consumers a democratic way to influence their sports teams, subsidies give teams an incentive to help their consumers. In a profit-chasing environment such as business, organizations that save people money are extremely rare. Subsidies help this exception to occur. Since subsidies offer the public control over a sports team’s revenue stream, it also induces them to sell tickets for a cheaper price. The money saved by the fans can be spent towards other business, thus reinvigorating the economy. Contention Two: Subsidies help centralize businessThis resolution is centered around the idea of stadium subsidies helping out their local communities. Oftentimes, stadiums are built with the idea of revitalizing a downtown area. The entire concept of city planning is to create an urban area where people are more likely to spend money. Stadiums are guaranteed bring consumers to the area; thus surrounding businesses are bound to gain from a potentially larger clientele. This obviously lucrative business environment only serves to attract more businesses to the region. This optimization of city planning serves to maximize economic growth by making it more convenient to spend money. By making stadiums central to revitalizing a city, many areas have experienced tremendous growth.
Local communities are strongly benefited by stadium subsidies. By creating a business community where there previously was none, stadiums manage to anchor social re-development projects. While they cannot create growth by themselves, they still remain an important component of urban design. Clearly, stadium subsidies manage to create benefits to the local population that surrounds them. Contention three: Public ownership creates mutual interestPrivate interests are often pictured at odds with the public good. Rarely does a situation arise when both are benefitted. Creating such a situation channels a buisness’ relentless drive for money in a manner that benefits the public good. Public ownership of a sports franchise is essentially the fans subsidizing their team by buying publicly traded stocks. Such a scenario is detailed below, describing the NFL’s Green Bay Packers. A board of directors that is elected by the shareholders is in charge of managing the business operations of the team. The board must approve all substantive changes, such as upgrading the scoreboards at Lambeau Field, adding luxury boxes to the stadium, and building a new indoor practice facility. Both President Bob Harlan and Executive Vice-President/General Manager John Fabry have the authority to make all football operations decisions. One of the most significant features of the Packers' bylaws is that a majority vote of the shareholders is necessary to relocate the franchise. With over 90% of the shareholders residing in Green Bay, all most likely avid Packers fans, it is extremely unlikely that any shareholder would ever vote to relocate the team. Community based ownership essentially serves as a mechanism for preventing teams from moving out of town. The team can only move through dissolution, and if this occurs the shareholders get back the amount of money that they invested. If a shareholder ever decides to sell his or her stock, the Packers' bylaws state that the shares must be offered back to the corporation first. As a result of their corporate structure, the publicly owned Green Bay Packers have become the most stable team in the NFL and the city of Green Bay has never faced the threat of the team relocating. Apart from the direct logistics of it, funding pro sports teams isn’t about finances; it’s about control. When it comes to huge money transfers, this is what both municipalities and businesses crave. Control is what local communities get when they subsidize their sports teams. Individuals get controls through public ownership of teams: their franchises no longer have the option of relocating and holding their hosts hostage. City planners themselves get economic control through a centralization of economic activity around sports stadiums. With a stake in their construction, communities are able to get these favorable terms in return for an initial investment. Regardless of the broader picture at hand, it’s local communities that stand to benefit from subsidy arrangements. Con CaseIntroduction:The builders of sports stadiums and owners of professional sports teams play up the benefits of sports for as long as anyone will listen—they claim vague impacts based on “civic pride” and promise that each stadium is bringing jobs to its host city. Unfortunately, these claims remain unsupported. When one looks at the actual numbers it is clear that public subsidies for professional athletic organizations consistently cost more than the benefits these investments produce. According to a report from the North American Association of Sports Economists on the subject: “There now exists almost twenty years of research on the economic impact of professional sports franchises and facilities on the local economy. The results in this literature are strikingly consistent. No matter what cities or geographical areas are examined, no matter what estimators are used, no matter what model specifications are used, and no matter what variables are used, articles published in peer reviewed economics journals contain almost no evidence that professional sports franchises and facilities have a measurable economic impact on the economy.” We will now go on to explain why sports teams are failing in almost every case to produce any recognizable positive economic impact.
“One of the main reasons sports teams and the facilities in which they play are not drivers of economic growth is because they don't create new economic activity. Instead, they displace other forms of economic activity. For example, imagine you were going to spend money on a night out. You could spend it on an expensive dinner or you could spend it on tickets to a sporting event. But because you have a limited amount of money to spend, you wouldn't spend it on both. This substitution of one type of spending for another is exactly what you see happening when you analyze the experience of cities with sports teams. Consumers spending more of their discretionary income on sports-related goods is offset by those same consumers spending less on other things. Thus, no net new economic activity results.” Another point economists make is that most of the profit generated by sports teams go to the players, owners, and shareholders of the team. Those individuals tend not to live in the area in which the team plays. Instead, the money is "exported" to be spent or invested elsewhere. This reduces or eliminates the "ripple effect" that sports teams have on the local economy.
“… just three of the NFL's 31 stadiums were originally built without public funds. In two of those cases, public funding was later used to upgrade the stadium or surrounding facilities, even as all 32 of the NFL's teams ranked among Forbes' 50 most valuable sporting franchises in the world in 2012. (Only MetLife Stadium, shared by the New York Jets and New York Giants, received no public funding.)” This public funding is justified by sports teams’ owners, however, stadiums and areans almost never deliver an economic benefit, leaving cities and states with hundreds of thousands of dollars in debts. "The basic idea is that sports stadiums typically aren't a good tool for economic development," said Victor Matheson, an economist at Holy Cross who has studied the economic impact of stadium construction for decades. When cities cite studies (often produced by parties with an interest in building the stadium) touting the impact of such projects, there is a simple rule for determining the actual return on investment, Matheson said: "Take whatever number the sports promoter says, take it and move the decimal one place to the left. Divide it by ten, and that's a pretty good estimate of the actual economic impact." Others agree. While "it is inarguable that within a few blocks you'll have an effect," the results are questionable for metro areas as a whole, Stefan Szymanski, a sports economist at the University of Michigan, said. There are numerous reasons for the muted economic effects. The biggest is that arenas often sit empty for a significant portion of the year. Jobing.com Arena is guaranteed 41 hockey games annually. The other 324 nights, it must find concerts, conventions or other events to fill the schedule, and in Glendale, where the arena competes with facilities in nearby Phoenix, that can be tough to do. "We've looked at tons of these things, and the one that we found that seemed to make sense is the Staples Center in Los Angeles," Matheson said. "But they use it 250 dates a year. They don't make sense when you're using it 41 times a year and competing with another venue down the street." Contention Three: Opportunity Costs of Spending on StadiumsWith no economic impacts to show, spending on stadiums and arenas for professional athletic organizations just cannot be justified, especially with so many areas struggling to pay their regular expenses. An article from June of 2013 by the Pacific Standard found that In a report to be presented to Michigan’s treasurer on Monday, Kevyn D. Orr, the emergency manager appointed in March to take over operations here, described long-term obligations of at least $15 billion, unsustainable cash flow shortages and miserably low credit ratings that make it difficult to borrow. But, they’re somehow on the verge of finding $450 million for a new hockey arena. And in Hamilton County, Ohio, where a combined $805 million in taxpayer money built the new football and baseball stadiums, police and education budgets have been slashed, while one in seven people live below the poverty line. Similarly, According to Bloomberg [Businessweek], the U.S. Treasury loses $146 million a year on municipal bonds with tax-free interest issued for sports structures. The taxpayer subsidies to bondholders on the $17 billion tax-exempt debt on stadiums built in the last 27 years will be $4 billion. You know what would be a better use of $4 billion? Repairing roads, building sea walls, preparing for the next big storm. There are many better ways and many better investments for the thousands of dollars the U.S. pours into its sports arenas and sports stadiums. As countless studies and statistics demonstrate, on balance the public subsidies for professional athletic organizations in the United States are not benefitting their local communities. Directory: school -> jchs -> staff school -> April 7, 2016 Theatre school -> Census in Schools and the 2010 Census – What’s Next? school -> Ap u. S. History presidents list the Young Republic, 1788-1815 school -> Your Name Period Date Chapter 24 Earth Science Word Study Movements of the Ocean school -> Introduction school -> Cutting Greenhouse Gases Global warming school -> Vocabulary sc geography The Land school -> Evaluate key political, social & economic changes that occurred in Georgia between 1877 & 1918 staff -> A history Of us secret Human Experimentation staff -> Things To Have Down Cold For The ap test Download 0.68 Mb. Share with your friends:
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