MEMORANDUM DATE: April 27, 2012 TO: Ken Pipher Parks & Recreation Program and Support Manager CITY OF HILLSBORO FROM: Bill Reid, Principal JOHNSON REID, LLC SUBJECT: Economic and Cost‐Benefit Analysis of a Potential Minor League Baseball Stadium The City of Hillsboro retained Johnson Reid to provide an economic and fiscal impact analysis and a standard cost‐benefit analysis of a proposed minor league baseball stadium that would be constructed at the Gordon Faber Recreation Complex. This report is a continuation and expansion of a preliminary analysis completed in March of 2012. The City is interested in a more detailed understanding of the following issues: ▪ Assessment of the extent to which baseball stadium construction activities on Softball Field #4 at the GFRC would negatively affect the existing, busy seasonal schedule of events at the softball complex. ▪ Assessment of the extent to which summer baseball games, particularly on weekends, would result in risk of losing existing, committed, and high value events historically committed to the Gordon Faber Recreation Complex. ▪ Identification of any baseball stadium‐related municipal revenue streams at other such parks elsewhere that the City of Hillsboro might consider. ▪ Identification of the potential interest by Hillsboro‐area businesses to sponsor various aspects of baseball promotion. ▪ A standard cost‐benefit analysis of the public investment and return on the baseball stadium and recruitment of a Class A minor league baseball team based on all other findings. This memorandum is a summary of our findings for this expanded assignment, but where appropriate includes findings from the previous report. Accordingly, the document is separated into the following analytical sections. 1. Project Description & Analytical Approach 2. Professional Sports: Net, New Impacts? 3. Assessment of Project Impacts 4. Baseball Stadium Revenue Streams Identified 5. New or Additional Event Potential 6. Baseball Promotions Market Factors 7. Cost‐Benefit Analysis of the Proposed Baseball Stadium CITY OF HILLSBORO – ECONOMIC, FISCAL, & COST‐BENEFIT ANALYSIS OF A MINOR LEAGUE BASEBALL STADIUM PAGE 1 EXECUTIVE SUMMARY The following is a summary of the main findings of this assignment. ▪ The proposed project is a 4,000 to 5,000‐seat baseball stadium capable of hosting professional, Class A minor league baseball games during the summer month “short season” at the Gordon Faber Recreation Complex in Hillsboro, Oregon. The stadium would replace the existing softball field #4 immediately west of the Hillsboro Stadium facility. ▪ The project would cost an assumed $14 million, including expansion of 400 additional parking spaces to the west of the existing Gordon Faber Recreation Complex. ▪ While under construction, the project would not likely have significant impacts to other events or event scheduling during the construction period. Project construction can largely occur during the late fall, winter, and early spring off‐season for the key uses of the Gordon Faber Recreation Complex: field sports such as softball and baseball. Comparable facilities facing construction closures elsewhere in the U.S. could not be identified for informative comparison. ▪ The Gordon Faber Recreation Complex is currently a very successful sporting and entertainment event complex for the City of Hillsboro and the region. The introduction of a professional baseball home game schedule to the GFRC could potentially conflict with 20 to 25 weekend summer events that typically utilize the softball complex, Hillsboro Stadium, and combined parking. ▪ It is estimated that the economic value of existing weekend, summer events at the GFRC are worth a total of $8.7 million annually to the Hillsboro economy. Several events, particularly multi‐state fastpitch softball tournaments, baseball tournaments, and other events pull significant lodging, dining, and other retail spending into Hillsboro from the Western U.S. and the Pacific Northwest that would not occur otherwise. ▪ The total economic impact of baseball operations and spectator spending, both at the stadium and off‐site while visiting Hillsboro, is estimated at $7.1 million annually. This includes economic ripple effects such as additional business revenues for local vendors to baseball/event operations, as well as local spending by people employed through baseball operations and visitor spending. ▪ Economic analysis indicates that scheduling flexibility for summer weekends is crucial for the City as it considers baseball team attraction to the Gordon Faber Recreation Complex. Although it cannot be determined what existing, weekend events would for certain be lost to baseball scheduling, should the City lose all weekend events, the impact of baseball would be a $1.6 million net loss annually for the Hillsboro economy. Losses for the local lodging and dining sectors would be disproportionately significant, as they see greater benefit from multi‐state and regional sports tournaments at the GFRC due to the multi‐night lodging and dining spending of those participants. ▪ Although 400 additional parking spaces are planned as part of baseball park construction, we find that the addition is significantly insufficient based both on past parking need planning by the City (2.5 passengers per vehicle for GFRC complex visitors) or by national CITY OF HILLSBORO – ECONOMIC, FISCAL, & COST‐BENEFIT ANALYSIS OF A MINOR LEAGUE BASEBALL STADIUM PAGE 2 parking standards recently utilized by other minor league baseball park planning efforts (3.4 passengers per vehicle). ▪ We find the continued under‐provision of parking to be on the order of 941 to 2,000 spaces for instances where the GFRC operates at full capacity between a baseball stadium and the Hillsboro Stadium, specifically 10,000‐visitor joint event attendance. ▪ Assuming temporary, overflow parking need cannot be satisfied off‐site, the cost of surface parking for identified additional need ranges from $2.8 million to $6.0 million excluding land cost. ▪ We find that temporary closure of softball field #4 due to project construction will not have a sizeable impact upon softball complex or Hillsboro Stadium operations. Planned construction phases during sports off‐season months (late fall through early spring) and the loss of only one field of a total of seven, plus all other City fields elsewhere and fields owned and operated by community partners, indicated little likely measurable impact to events. ▪ In general, new baseball team attraction to a community and its annual operations generally do not create new economic activity and, therefore, grow a regional economy. Baseball games, concessions, and merchandise among other things generally represent a shift of existing spending by households from other entertainment and retail offerings that they would have purchased otherwise. A new baseball team as a business and its management is generally the only guaranteed, net new economic impact generated. ▪ However, at the local level, new economic impacts are created by a baseball team and its operations if spectators from outside of the community spend money at the game and elsewhere in that city that they would not otherwise if not, but for the baseball team and trips to visit for games. In the case of Hillsboro, with no professional sports teams drawing such spending from elsewhere in the region, new economic activity for the City itself is generated by a professional baseball team. ▪ Review of ten to fifteen recent, minor league baseball park developments as well as the two other minor league parks in Oregon indicate that City‐owned facilities generate three general categories of revenues for the municipality: fixed lease payments, annual corporate naming rights payments, and minority shares of team operations revenues such as ticket sales, concessions, parking, and merchandise. In general, parks either receive lease payments or minority shares of operations revenues. Naming rights for minor league parks are not extremely common, usually in instances where a Fortune 500 corporation is headquartered locally, and payments typically average between $150,000 to $200,000 annually. ▪ In all instances but Eugene (Emeralds) and Keizer (Volcanoes), cities that own ball parks enjoy sizeable, citywide sales tax revenue and hotel/motel tax revenue that are significantly greater than ballpark‐generated revenue and are significantly leveraged for both project financing and on‐going maintenance funding. ▪ Minor league baseball teams, as with all sports, significantly depend upon corporate sponsorships and promotion. Short seasons and need for concentrated, dedicated revenues during the season with the opportunity to market brands to a captive audience at a 2‐3 hour game make for substantial business market opportunity. However, we also find that 2012 CITY OF HILLSBORO – ECONOMIC, FISCAL, & COST‐BENEFIT ANALYSIS OF A MINOR LEAGUE BASEBALL STADIUM PAGE 3 will likely be a difficult year for business promotions/marketing spending consistent with national trends. Though sports are the safest and largest category of business promotion spending, election year uncertainties, continued economic uncertainties, and locally continued stagnant economic growth have fixed the size of the market spending “pie” and business support for a new baseball team is at best uncertain over the short term. ▪ As a 20‐year investment by the City, we calculate that the net present value of that investment in 2012 is estimated at roughly $55.342 million under reasonably conservative