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6 Facility Finance Measurement, Trends, and Analysis C ONVENTIONAL WISDOM has it that the public share of stadium and arena construction costs has been falling in recent years. Many have attributed this perceived decrease in part to the emergence of the academic literature in the 1990s, finding that one cannot expect that a new team or sport facility by itself would promote economic development in an area.1 Measuring sports-facility costs is rarely as straightforward as the public authorities, team owners, and newspapers would have us believe. In this essay, we use both the available reported-cost data as well as adjusted-cost data and find that trends in public financing are considerably more complex than traditionally thought. We proceed first by discussing issues in the measurement of costs, then by elaborating the methodology we employ for our estimates, next by expositing our results, and lastly by offering an interpretation for our findings. This essay is based on Judith Grant Long and Andrew Zimbalist, “Facility Finance: Measurement, Trends, and Analysis,” International Journal of Sport Finance 1, no. 4 (2006): 201–211. Facility Finance ▪ 101 Issues of Measurement Numerous measurement conundrums and pitfalls complicate the assessment of overall and public costs of sports facilities. First, and most obviously, publicly released figures may apply to initial, intermediate , or final cost estimates. Because bells and whistles are often added after the original design or political approval, because of mistakes in the a priori cost estimation, and because cost overruns can easily run at 30 percent or more of budgeted expenditures, it is important that final costs be measured consistently. Second, released figures often refer to building costs alone; less often, they can also include land and infrastructure. Land cost estimated at market value can produce widely different interpretations, or its value may be erroneously recorded at the “write-down” or discounted amount. Infrastructure is easier to value if publicly provided , yet it presents attribution issues, because it often includes on- and off-site improvements, such as nonadjacent roads, utility upgrades, public transportation improvements, or environmental remediation. Released figures rarely include opportunity costs. Third, identifying what does and what does not constitute a public subsidy can be tricky, to say the least. Consider the following: The project to build a new Yankee stadium in the Bronx is estimated to have cost approximately $1.5 billion; above this, public expenditures for infrastructure come to roughly $300 million. The latter is for park space, public sports facilities (e.g., ball fields, tennis courts), and parking. Some of the public sports facilities will replace existing facilities, but some will be incremental. Should the spending on the incremental facilities be considered a subsidy to the Yankees? A large share of the “public spending” was on new parking garages, but the government put out a request for proposal to private construction companies to build and to operate the garages. Revenue from the garages accrues to the company winning the contract, not to the Yankees . Should the garage construction spending be counted as a public investment? Further, the city made $5 million in rent credits available annually each to the Yankees and the Mets toward the planning 102 ▪ Chapter 6 of their new stadiums that the city could then recover under certain conditions; how should this benefit be reckoned? The new Yankees, Mets, and Nets facilities projects reportedly will benefit from sales-tax exemption on construction materials, and none of the teams will pay property or possessory interest tax. Some commentators consider these provisions to be public subsidies. Perhaps , but in four of the five boroughs of New York City (other than Manhattan), new construction projects receive these benefits. That is, they are generally “as of right” or available to all builders; should they be considered a subsidy? Or consider, for instance, the ballpark in Washington, D.C., opened in March 2008. It cost approximately $670 million. A bond was issued for this amount, which is being financed as follows: $5.5million rent payments by the team; roughly $12.5 million from taxes on tickets, concessions, and merchandise at the ballpark; and roughly $24 million from new business taxes. What is the public share? It depends entirely on how one treats the taxes from stadium revenue. If one assumes conservatively that 50 percent of these taxes are passed on to the consumer, then the annual public cost is $24 million plus $6.25 million, or $30.25 million—72 percent of capital costs. If one assumes that the team...

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