An Alternate Justification for Public Investment in Major Sport Facilities?

Managing Leisure, 2014 http://dx.doi.org/10.1080/13606719.2014.885712 Proximate development: an alternate justification for public investment in major sport facilities? John L. Crompton Department of Recreation, Park and Tourism Sciences, Texas A&M University, College Station, TX, USA As skepticism has grown toward the purported economic impact of major sport facilities on a community, advocates have redirected their justification toward the proximate structural development they stimulate and the social capital emanating from their presence. Analyses in this paper are confined to returns on investment in sport facilities from proximate structural development. Advocates invari- ably claim such benefits will accrue, but frequently they do not. Based on a review of multiple cases, it is suggested that at the city level an acceptable return is dependent on there being a critical mass of complementary attractions, while at the regional level the requirement is a critical mass of businesses that “feed off” the sport facilities. In the context of mega events, the return may be in the form of environmental rehabilitation, a legacy of long-term usable facilities, or “fast-tracked” infrastructure improvements. In all contexts, success is dependent on the extent to which the sport projects are part of a holistic plan. The challenge of stimulating proximate development is exacerbated by the private facility operators’ goal of capturing all discretionary spending by visitors to their facilities and minimizing visitor spending outside their facility. Keywords: sport facilities, proximate development, urban rejuvenation, structural capital INTRODUCTION The investment in facilities for teams in All public investments have opportunity the four major US professional sport costs which are the benefits that would be leagues (NFL, NBA, MLB and NHL) in the forthcoming if the public resources com- past two decades was approximately $37 mitted to a sport project were (i) redirected billion (in 2011 dollars) of which the public to other public services or (ii) retained by sector’s contribution was approximately the taxpayer. Conceptually, for an investment $20 billion (Howard & Crompton, 2014). It of public money to be justified, it must meet has been demonstrated that in most cases, Downloaded by [Texas A&M University Libraries] at 10:35 03 April 2014 the criterion of “highest and best use”. Advo- the direct net economic gains accruing to cates may like to think that government the taxpaying public from these major investment in sport projects will have a posi- sport facilities are small (Baade & Matheson, tive economic and/or social impact, but the 2000, 2001, 2004; Crompton, 1995, 2007; key question is whether more benefits Hudson, 2001; Noll & Zimbalist, 1997; would be generated from any number of Porter, 1999; Rosentraub, 1997). They fall other opportunities such as investment in a far short of the opportunity costs incurred local college, public schools, transportation and, thus, do not justify public investment infrastructure, health programs, or incen- in them. However, direct economic returns tives to attract other kinds of businesses to provide only part of the context because locate in the community. total community benefits also include # 2014 Taylor & Francis 2 Crompton enhanced social capital and proximate struc- investment that determines the quality and tural economic development. Thus, analyses quantity of social capital (Rosentraub & Ijla, of a community’s return on its investment 2008). For example, where urban rejuvena- also should include consideration of these tion or redevelopment is an intended two outcomes. outcome of expenditure on facilities, its When Jacobs (1961) introduced the notion effectiveness is measured by the magnitude of “social capital” over half a century ago in of its contribution to the quality of life of her seminal work on the failure of American the people living there, i.e. social capital. cities, she conceptualized it as bringing Thus, an evaluation of the viability of sport people together so commerce, culture and facilities should consider both structural community would flourish. In more recent development and social capital. In different years, the concept was further developed in contexts, the outcomes will be differentially the context of communities by Putnam prioritized. However, given the scope and (1995, 2000), who argued that social net- magnitude of this topic area, the discussion works are not a natural given. Rather, they in this paper is limited to structural develop- have to be facilitated by cities through stra- ment. The objective is to analyze multiple tegic investments in structural development. cases to identify and describe the conditions Since in most sport projects, the direct which result in proximate structural devel- economic case is not viable, the viability opment occurring from investments in case has shifted to consideration of the sport facilities. public legacy from such investments. Legacy refers to the sustainable gains that THE CONCEPT OF PROXIMATE accrue to the people living in a jurisdiction DEVELOPMENT who paid for the facilities. It suggests that rather than the goal being to meet a short- In the USA, major sport facilities increasingly term end goal of direct economic impact, are justified as anchors for economic devel- new facilities should be viewed as a vehicle opment. Either because they are publicly for intentionally accomplishing specified owned, or because property taxes were social goals. Thus, an increasing number of waived or abated in negotiations with a decision-making bodies are using the poten- private developer, most major sport facilities tial of major sport facilities for facilitating in the USA do not directly generate tax reven- social capital as their justification for large ues for a city. However, they have become investments in such facilities. ubiquitous in the downtowns of US cities. When public sector funds are used to pay The intent is that they will serve as catalysts for capital development and/or operating which stimulate proximate retail, commer- costs of a sport facility, this can be con- cial and residential development. This con- Downloaded by [Texas A&M University Libraries] at 10:35 03 April 2014 sidered an investment if the tax dollars spent trasts with the situation in the UK where are substantially offset by either additional the modernization of stadia is reliant revenues emanating from proximate struc- upon commercial development and planning tural development it has stimulated or gain. social capital emanating from the existence While the building of major sport facilities of the facility. If these gains do not offset the affords cities an opportunity to steer devel- costs, then the public expenditures are opment to a desired location and to “jump merely a subsidy for the private partner. start” economic development there, some Proximate structural development and proportion of the new spending will be sub- social capital are interrelated. It is what stitutable expenditures. That is, if the happens as a result of the structural capital public amenities and private facilities were Proximate development 3 not built in the redevelopment site, either Notwithstanding these reservations, advo- they would have been constructed at cates argue that expenditures on these sport another location in the city, or the consumer facilities represent investments not subsi- expenditures made in them would have dies, because the proximate development occurred elsewhere in the city. Indeed, reju- will produce higher revenues for public juris- venation of a district inevitably redirects at dictions from income, sales and property least some investments to it that were pre- taxes that will be sufficient to repay the viously spent in other city outlets. Thus, it initial public investment in the sport facility. is the marginal economic impact reflecting The public sector intent is: the amount of new money entering the To create lively, convivial downtown spaces local economy that should be the criterion that promote a street-fair atmosphere as used to measure the economic success of a well as meet the needs of a button-down downtown rejuvenation project. business environment for office and commer- Major sport projects sometimes result in cial space. The intention is that both sets of the displacement of poorer people living in activities will generate the tax dollars the cities. Government investments of struc- needed to meet a city’s social responsibil- tural capital to upgrade neighborhoods are ities while simultaneously reducing the intended to strengthen a city’s tax base inventory of dilapidated properties leading through attracting wealthier residents to the to the movement of residences and targeted area, and the higher end retail businesses away from the center city. (Rosentraub, 2008, p. 60) stores that service them. There is a Machiavel- lian rationale related to image enhancement For the most part, this optimistic vision has that supports these kinds of actions. Sport in not been realized. A fairly typical scenario cities traditionally has been associated with was the catalyst case made to justify the the urban working classes. It has been city of Dallas contributing $125 million to suggested that this is “hardly the image that construct the American Airlines Arena for would be deemed to attract the ‘right sort of the NBA’s Dallas Maverick’s team. An econ- people’ to cities which already possess endur- omic impact study projected that the

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