Chester stadium: Two views

Is it worth spending millions of public dollars?

Posted: February 12, 2008

One reason people thrill to the prospect of pro soccer coming to Chester is the promise that a new stadium complex will generate a raft of jobs, spending and tax revenue - all told an astounding $1.7 billion in economic activity.

Or not.

"A fantasy figure," scoffed Rick Eckstein, a Villanova University professor and coauthor of Public Dollars, Private Stadiums: The Battle Over Building Sports Stadiums. "The numbers should be treated very, very skeptically."

Despite the dozens of new stadiums built or rising in communities across the United States, and despite the huge public subsidies they command, there's nearly universal agreement among economists that arenas produce practically no benefits to taxpayers - a view hotly disputed by the businessmen who seek funds and the government leaders who back them.

"The debate has intensified because the costs have escalated and these sports developments have become larger real-estate and entertainment plays," said David Carter, executive director of the University of Southern California Sports Business Institute.

Now, that tension has come anew to the Philadelphia region, specifically to one of Pennsylvania's poorest cities, where Gov. Rendell has promised that a proposed $500 million stadium development will "change the face of Chester forever." He has pledged a pivotal $47 million in state funding that has supporters believing the city will land a Major League Soccer expansion team. A decision is expected soon.

The team would play at a $115 million, 18,500-seat stadium set near the Commodore Barry Bridge and surrounded by what sounds like riverfront paradise - $385 million in restaurants, stores, offices and townhouses. The development would have boat slips and new streets, even a supermarket. Artists' renderings show people jogging on a waterside promenade and strolling with shopping bags.

The prospective team owners, leading a St. Louis group in the contest to secure MLS's 16th team, predict a huge financial impact:

More than 2,600 temporary construction jobs and 800 permanent full-time jobs. About $19 million in annual tax revenue. An estimated $670 million in personal earnings and $335 million in taxes over time.

Those are giant numbers to a city where half the households get by on less than $25,000 a year.

And they leave sports economists shaking their heads. Whether it's Kansas City or Charlotte, Chicago or Chester, they say, the argument is always the same, and so is the result.

"Plopping down a stadium," said Temple University assistant dean Michael Leeds, coauthor of The Economics of Sports, "does nothing for a city."

The team investors based their projections on a study by CSL International, a Minnesota consulting and analysis firm. The report itself has not been released, making it hard to judge the methodology. Economists tend to dismiss such studies as one-sided - composed solely of supporting data, presented in the most favorable light.

The problem for taxpayers, they say, is the government subsidies are so big - estimated at $87 million in Chester - that they're difficult to recoup through small-percentage tax receipts at venues that are hardly ever open. Despite the large crowds they draw on game days, stadiums are rarely used. The Eagles host eight regular-season games, the Phillies 81. The Chester stadium would operate about 35 days a year for soccer games and other events.

Perhaps most of all, economists say, stadiums are poor financial engines because of "the substitution effect." That is, spending by fans usually doesn't represent new dollars entering the economy, but a reallocation of dollars that would have gone to other entertainment - movies, dining, tickets to the symphony. In Chester that could be somewhat offset if the team draws paying fans from New Jersey and Delaware.

Soccer executive Nick Sakiewicz, CEO of FC Pennsylvania Stadium, the group seeking a club, responds to economists' somber calculations with one word: hogwash.

"These entertainment districts generate a boatload of jobs and real-estate taxes," said Sakiewicz, credited with securing the deal for Red Bull Park, a soccer stadium now being built in New Jersey near New York. He calls the argument for substitution spending "shallow."

"You don't go to the symphony to get your soccer fix," he said. "The soccer team is new revenue."

He offered details about how the tax and job figures were compiled - based upon wide financial universes and including both the spending and re-spending of dollars in Chester and other parts of Pennsylvania. Not all the predicted economic activity, jobs and taxes would accrue to the city.

For instance, if achieved, the job creation would be impressive. The total number of people with jobs in Chester is 10,500. So 800 permanent jobs would represent a sizable increase of about 8 percent. But that includes the jobs of the players and coaches on the team, as well as jobs created outside of Chester as a result of the project.

The team investors, including Jay Sugarman, CEO of iStar Financial, and James Nevels, chairman of the Swarthmore Group investment firm, insist the complex will be a magnet for growth. Building near the new Harrah's casino and the Wharf at Rivertown offices creates a solid base for future expansion.

"The economists have defined a narrow issue: Is the public investment in sports facilities worth it to the public?" said John Lord, a marketing professor at St. Joseph's University. "Where government leaders, investors ask: Is the public investment in sports facilities worth it if it draws other development? Those could be very different answers."

Supporters also argue that stadium projects bring benefits that don't show up on a balance sheet - entertainment, of course, but also a sense of enhanced community pride and reputation. A city that has a sports team is presumed to have other positives, the argument goes, and that message is transmitted to the public every time a game appears in a box score.

Fred Nance, an attorney who led the court fight to retain the NFL Browns in Cleveland, said it's wrong to view a stadium as a strict profit-or-loss venture.

"The public subsidy doesn't have to work like a precise mathematical equation. There's all sorts of intangibles that come back," said Nance, who has followed the plans in Chester. "If you've got a credible developer, it could prove to be a very good development for the state."

Nance, also chairman of the Greater Cleveland Partnership, the city's chamber of commerce, said it was worth every penny of about $1 billion spent on stadiums for the Browns, baseball's Indians and basketball's Cavaliers. He believes it's crucial to look beyond the initial investment to what a stadium complex can mean for a city's long-term ability to attract money, business and people.

"If an area is perceived as hot and worth taking the risk, it can almost become a self-fulfilling prophecy."

For the Chester project, the state has promised $47 million and Delaware County $30 million, while the Delaware River Port Authority is being asked for $10 million. Delaware County taxpayers would actually pay more, because the $30 million would be raised by selling bonds. The added cost of interest payments is not yet known, officials said.

A 1997 study by the Brookings Institute, a Washington think tank, laid out the case against stadiums in explicit detail, concluding that the impact on local economies and employment was extremely small - and perhaps negative. That's because chain restaurants and stores that may settle near an arena don't recirculate much money - they ship it to headquarters.

"It can actually create a 'dead zone' rather than an 'active-use zone,' " said Suzanne Clain, who teaches sports economics at Villanova.

This is not a pro football operation moving to tiny Chester, bringing the colossal fan base and marketing power of the NFL, she noted. This would be a team in a league that last year drew 3 million fans - about as many as the Phillies. And anyone who thinks it's easy to thrive in the crowded Philadelphia market should consult the Soul, Kixx, Phantoms, Wings, Barrage, Rage and Charge.

"What does it say," asked Leeds, the Temple dean, "that they're pinning much of their hopes for economic development on sports bars? Will parents taking their junior-high schoolers to a game stop-off for a cold one on the way home?"


Contact staff writer Jeff Gammage at 610-313-8110 or jgammage@phillynews.com.

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