New Stadiums Revitalize Urban Communities

Stadium Funding is a Proper Infrastructure Investment

In a Forbes article last week, Adrian Melville explains that “Sports is Helping to Spur Growth in Boston.” During the 163 Boston sports home games last year (Red Sox, Celtics and Bruins) fans injected $300 million in to the local economy. (For the sake of full disclosure—I’m a die-hard New England sports fan, and often contribute to this spending.) It’s hard to miss the craze that happens each time the hometown team plays.

But Boston’s stadiums aren’t new – so let’s take a look at Foxborough, MA, home of the New England Patriots. Owner Bob Kraft wanted to complement the new Gillette Stadium, and as such, built Patriot Place. This mega-mall comprises the 500 acres surrounding the stadium and includes a four-star hotel, 16 restaurants, a 14-screen movie theatre, a full-service hospital, and myriad shops and retail outlets. It is estimated that Patriot Place brings in $2 million in tax revenue to Foxborough each year.

With sports and retail covered, now the Kraft family is working to support the local arts and culture community as well. Last month, the Krafts made a 1,300 sq. ft. vacant storefront available to The Artist’s Studio & Gallery as a means of highlighting the work of local artists.  This is a classic example of a corporation creating “shared value” for its local community.

If a temporary surge in visitors or the creation of new or improved sports infrastructure cannot be seen as saviors for mega-events, then one is left to appeal to the creation a long-term legacy, perhaps through the construction of non-sports infrastructure, as an economic justification for hosting mega-events. As can be seen in Table 4, non-sports related infrastructure expenditures often exceed the spending on sports venues by a wide margin, and unlike sports venues, expenditures on transportation networks and other types of general infrastructure have the potential to encourage future growth. Mega-events can serve as an impetus to engage in needed infrastructure investments that don’t get done due to a lack of political will.

In the near term, we believe a stronger U.S. economy should provide an accommodative environment for continued solid attendance for sports leagues. However, we expect a wave of stadium updates that will focus primarily on increasing the user’s experience in stadium through technological advancements to compete with at-home viewer advancements. We believe luxury suite lessors, club seat owners and Personal Seat License (PSL) holders are more likely to demand state-of-the-art technology given the premiums they are paying over the face value of the ticket. Those facilities that fail to keep up with the latest technology risk higher vacancy rates on suites and club seat, and holders of PSLs risk a softer secondary market for PSLs, and ultimately, the leagues risk downward pressure on ticket prices.

On a positive note, technological innovation is likely to be supportive of a continuation of the significant increase in television rights deals signed by the major sports leagues. This in turn, we believe, will be supportive of middle- and smaller-market teams given the push to secure greater revenue sharing under the most recently signed CBAs, providing upward pressure on team valuations. Higher team valuations make it more likely for team owners to invest in stadium facilities to keep them both physically and technologically relevant.

As with infrastructure, the best stadium investment is one that enhances reliability and decreases future costs. By funding modern stadiums now and significantly driving up franchise valuation, especially in small markets, cities give themselves better future ability to retain sports teams which can fund their own stadiums—this is made even more likely because the cost of advanced stadium tech will go down with increased implementation. By investing in stadium as with infrastructure—focusing on reliability and the potential for lower costs down the road—cities can set themselves up for the win-win of retaining teams without paying as much for facilities.