Chapter 4

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Chapter 4

  1. 1. CHAPTER 4 DISCUSSION QUESTIONS 1) In your opinion, should public subsidies be used to finance sport facilities? 2) What franchise became the first major professional sport team to move from the Midwest or northern section of the US to the West Coast? 3) What problem did the Rams' move create for visiting teams, & how did the Rams help with this inconvenience? 4) How was the land in Los Angeles acquired for the Dodgers stadium? 5) What are "cookie-cutter" facilities? 6) How did the palace at Auburn Hills & Camden Yards spur a change in the type of facilities that were being built? 7) How do professional franchises & facilities generate economic activity? 8) What are some questions that sport economists raise about the economic effect of sport franchises' & facilities'? 9) What "psychic benefits" do sport organizations provide? 10) What is BIRGing? 11) What economic & psychic benefits did the Packers recent Super Bowl provide the town of Green Bay? 12) What is the most common method that governments have to raise money for professional sport facilities? 13) Explain how each of the following types of taxes can be used to subsidize professional sports. A) Sales Tax B) Property Tax C) Tourism Taxes D) Sin Taxes E) Entertainment Taxes 14) What stadium did the citizens in and around Denver agree to fund through a sales tax increase? 15) What Seattle stadium was partially funded by a variety of tourism taxes? 16) What Ohio stadiums were funded through cigarette & liquor taxes? 17) Though not utilized often, what is perhaps the best method of taxation to construct a professional sports' facility?
  2. 2. THE PUBLIC SPENT $27 BILLION ON BUILDING, LAND, & INFRASTRUCTURE FOR 167 MAJOR LEAGUE SPORTS FACILTIES FROM 1990-2006.
  3. 3. IT IS ESTIMATED THAT THE TOTAL PUBLIC COSTS FOR YANKEE STADIUM & CITI FIELD IS $1.8 BILLION.
  4. 4. WHAT ARE THE PROS & CONS OF USING PUBLIC FUNDS TO SUBSIDISE PROFESSIONAL SPORTS FACILITIES? THE BIGGEST PRO IS THAT THESE FACILITIES REVITALIZE THE DOWNTOWN AREA WITH JOBS & COMMERCE. THE BIGGEST CON IS THAT THE PUBLIC FUNDS CAN BE BETTER SPENT ELSEWHERE, LIKE ON PUBLIC WORKS PROJETS & EDUCATION.
  5. 5. MISSISSIPPI RIVER BRIDGE COLLAPSE -WAS AN 8-LANE STEEL TRUSS ARCH BRIDGE THAT CARRIED INTERSTATE 35W ACROSS THE MISSISSIPPI RIVER IN MINNEAPOLIS, MN. -DURING THE EVENING RUSH HOUR ON 8/1/07 IT COLLAPSED KILLING 13 PEOPLE & INJURING 145. -THE NATIONAL TRANSPORTATION SAFETY BOARD (NTSB) CITED A DESIGN FLAW AS THE CAUSE OF THE COLLAPSE & THE ADDITIONAL WEIGHT ON THE BRIDGE AT THE TIME OF THE COLLAPSE CONTRIBUTED. -THE BRIDGE WAS NOT ROUTINELY INSPECTED. -THE TWINS GOT PUBLIC FUNDING TO BUILD TARGET FIELD THE YEAR BEFORE THE COLLAPSE.
  6. 7. THE HISTORY OF PROFESSIONAL SPORT FACILITY FINANCING
  7. 8. 2) WHAT FRANCHISE BECAME THE FIRST MAJOR PROFESSIONAL SPORT TEAM TO MOVE FROM THE MIDWEST OR NORTHERN SECTION OF THE US TO THE WEST COAST? CLEVELAND RAMS -MOVED TO LA IN 1946 & BECAME THE LOS ANGELES RAMS. -PLAYED HOME GAMES IN THE LOS ANGELES MEMORIAL COLISEUM (SITE OF THE 1932 SUMMER OLYMPICS).
  8. 9. 3) WHAT PROBLEM DID THE RAMS’ MOVE CREATE FOR VISITING TEAMS? IT WAS MORE EXPENSIVE & TIME CONSUMING FOR EAST COAST TEAMS TO TRAVEL TO THE WEST COAST. HOW DID THE RAMS HELP WITH THIS INCONVENIENCE? THE RAMS PROVIDED AN ADDITIONAL $5000 ABOVE THE NORMAL REVENUE SHARING DURING THEIR 1ST SEASON IN LA FOR VISITING TEAMS.
  9. 10. 4) HOW WAS THE LAND IN LA ACQUIRED FOR THE DODGERS STADIUM? EMINENT DOMAIN
  10. 11. 5) WHAT ARE “COOKIE-CUTTER” FACILITIES? STADIUMS THAT HAVE FEATURES SIMILAR TO ONE ANOTHER. -DURING THE 1960’S & 70’S BEGAN TO BUILD OR RENOVATE FACILITIES TO ATTRACT OR RETAIN PROFESSIONAL FRANCHISES. -STADIUMD WERE DESIGNED TO MAXIMIZE SEATING CAPACITY BECAUSE TICKET SALES WERE ONE OF THE MOST IMPORTANT REVENUE SOURCES. -MULTIUSE FACILITIES BECAME THE NORM SO FOOTBALL & BASEBALL TEAMS COULS SHARE THE FACILITY. -FACILITIES WERE CONSTRUCTED IN SUBURBAN AREAS WHERE ENOUGH LAND WAS PRESENT TO HOST THE FACILITY & THOUSANDS OF PARKING SPACES.
  11. 12. 6) HOW DID THE PALACE AT AUBURN HILLS SPUR A CHANGE IN THE TYPE OF FACILITIES THAT WERE BEING BUILT? THE PALACE HAS 180 LUXURY SUITES THAT GENERATES THE PISTONS MILLIONS OF DOLLARS IN REVENUE. -CONSIDERED TO BE THE FIRST MODERN-STYLE NBA ARENA WHEN IT OPENED IN 1988, & ITS LARGE NUMBER OF LUXURY SUITES WAS A MAJOR REASON FOR THE BUILDING BOOM OF NEW NBA ARENA IN THE 1990’S. -THE PALACE HAS THE LARGEST CAPACITY IN THE NBA (22,076) WHICH HAS HELPED THE PISTONS RECORD THE LEAGUE’S HIGHEST HOME ATTENDANCE FROM 2002-08.
  12. 13. 6) HOW DID CAMDEN YARDS SPUR A CHANGE IN THE TYPE OF FACILITIES THAT WERE BEING BUILT? PROVIDED FANS MODERN AMENITIES PACKAGED IN A RETRO STYLE. -ORIOLE PARK AT CAMDEN YARDS WAS THE 1ST MAJOR LEAGUE DOWNTOWN “RETRO” BALLPARK WHEN IT OPENED IN 1992. -ON 8/19/08 THE STADIUM HOSTED ITS 50 MILLIONTH FAN, A MILESTONE REACHED IN JUST 17 SEASONS, THE FASTEST IN MLB HISTORY. -SINCE 1992, THE STADIUM HAS HOSTED THE 3RD-MOST NUMBER OF FANS IN MLB. 1) YANKEE STADIUM 2) DODGER STADIUM
  13. 14. 12) WHAT IS THE MOST COMMON METHOD THAT GOVERNMENT HAVE TO RAISE MONEY FOR PROFESSIONAL SPORT FACILITIES? CHANGE THE TAX CODE
  14. 15. <ul><li>FACILITY REVENUE STREAMS & FINANCING </li></ul><ul><li>THERE ARE 3 CATEGORIES OF FACILITY REVENUE SOURCES: </li></ul><ul><li>PUBLIC </li></ul><ul><li>PRIVATE </li></ul><ul><li>PUBLIC & PRIVATE COMBINATION </li></ul><ul><li>-PUBLIC REVENUE: TAXES </li></ul><ul><li>-PRIVATE REVENUE: OUTSIDE COMPANIES </li></ul><ul><li>-PUBLIC & PRIVATE: COMBINATION OF REVENUE STREAMS </li></ul>
  15. 16. <ul><li>TAXES </li></ul><ul><li>THE 4 MAIN PURPOSES OF TAXATION (4 R’S): </li></ul><ul><li>REVENUE: RAISE MONEY TO BUILD & FIX </li></ul><ul><li>REDISTRIBUTION: TRANSFER WEALTH FROM RICHER SECTION OF SOCIETY TO POORER SECTIONS </li></ul><ul><li>REPRICING: TAXES ARE LEVIED TO ADDRESS EXTERNALITIES (TOBACCO TAX) </li></ul><ul><li>REPRESENTATION: CITIZENS DEMAND ACCOUNTABILITY </li></ul>
  16. 17. <ul><li>TAXES AS STADIUM REVENUE </li></ul><ul><li>PROVIDE REVENUES TO PAY PUBLIC’S SHARE OF COSTS FOR SPORTS ENTITIES </li></ul><ul><li>2 TYPES: </li></ul><ul><li>HARD TAXES </li></ul><ul><li>SOFT TAXES </li></ul><ul><li>WHAT ARE HARD TAXES? </li></ul><ul><li>WHAT ARE SOFT TAXES? </li></ul><ul><li>BORNE BY ALL TAXPAYERS. OFTEN NEED VOTER APPROVAL </li></ul><ul><li>BORNE BY SELECT/SMALLER PORTION OF TAXPAYERS. EASIER TO LEVY. </li></ul>
  17. 18. HARD TAXES (4) 1) LOCAL INCOME TAX: 2) REAL ESTATE TAX 3) PROPERTY TAX: 4) SALES TAX: -INDIVIDUAL: TAX ON TOTAL INCOME OF INDIVIDUAL -CORPORATE TAX: TAX ON NET INCOME OF COMPANY -SERVES AS A BENEFIT TAX BECAUSE ITS REVENUES ARE USED PRIMARILY TO FINANCE SERVICES THAT BENEFIT PROPERTY OWNERS & INCREASE PROPERTY VALUE -INCLUDES TANGIBLE & INTANGIBLE PROPERTY. GENERALLY TAXED VIA ANNUAL MOTOR VEHICLE LICENSING TAX -LARGEST SINGLE SOURCE OF STATE TAX REVENUES. -USER’S TAX: ALL TAXPAYERS TAXED EQUALLY -REGRESSIVE: LOWER INCOME GROUPS BEAR MORE BURDEN
  18. 19. 14) WHAT STADIUM DID THE CITIZENS IN & AROUND DENVER AGREE TO FUND THROUGH A SALES TAX? INVESCO FIELD AT MILE HIGH -INVESCO PAID $120 MILLION FOR THE NAMING RIGHTS. -ON 8/16/2011 THE ENGLEWOOD, CO BASED COMPANY, SPORTS AUTHORITY, TOOK OVER THE NAMING RIGHTS OF THE STADIUM IN A 25 YEAR AGREEMENT WORTH $6 MILLION/YEAR.
  19. 20. SOFT TAXES (5) 1) TOURISM TAXES: 2) ENTERTAINMENT TAXES: 3) SIN TAXES: 4) PLAYER TAX: -43 STATES IMPOSE TAX ON INCOME EARNED BY VISITING PLAYERS. -STATES HAVE THE RIGHT TO TAX NONRESIDENTS ON INCOME RECEIVED FOR SERVICES PREFORMED WITHIN THEIR BOUNDARIES. -GANERALLY BASED ON THE NUMBER OF DAYS THEY PERFORMED IN THE STATE MULTIPLIED BY AVERAGE GAME SALARY. -A TAX ADDED TO PRODUCTS/SERVICES THAT ARE GENERALLY SEEN AS VICES. -ALCOHOL, TOBACCO, GAMBLING, PROSTITUTION )NEVADA). -PERHAPS BEST METHOD OF TAXATION TO CONSTRUCT A PROFESINAL SPORTS FACILITY. -TAX PLACED ON A TICKET PURCHASED FOR AN EVENT. -TAX ONLY PAID BY END USER. -TAX PLACED ON “TOURIST” SERVICES. -HOTEL & RENTAL-CAR ARE MOST COMMON FORM OF TOURISM TAXES.
  20. 21. 15) WHAT SEATTLE STADIUM WAS PARTIALLY FUNDED BY A VARIETY OF TOURISM TAXES? SAFECO FIELD (SEATTLE MARINERS)
  21. 22. 16) WHAT OHIO STADIUMS WERE FUNDED THROUGH CIGARETTE & LIQUOR TAXES? QUICKEN LOANS ARENA (CAVALIERS) & JACOBS FIELD (INDIANS)
  22. 23. 7) HOW DO PROFESSIONAL FRANCHISES & FACILITIES GENERATE ECONOMIC ACTIVITY? THROUGH DIRECT & INDIRECT SPENDING. DIRECT SPENDING: -REVENUE GENERATED SPECIFICALLY BECAUSE OF THE SPORTING EVENT. EXAMPLES: TICKETS, CONCESSIONS, SOUVENIRS. INDIRECT SPENDING: -REVENUE GENERATED THAT MAY OR MAY NOT BE RELATED TO THE SPORTING EVENT. EXAMPLES: RESTAURANTS, BARS, HOTELS. TRICKLE DOWN EFFECT: -NEW REVENUE ENTERING THE MARKETPLACE WILL MOVE ITS WAY THROUGHOUT THE MARKETPLACE.
  23. 25. 8) WHAT ARE SOME QUESTIONS THAT SPORT ECONOMISTS RAISE ABOUT THE ECONOMIC EFFECT OF SPORT FRANCHISES & FACILITIES? 1) IS THE MONEY THAT IS BEING SPENT A RESULT OF THE FACILITY OR MERELY BEING SHIFTED? -THE ONLY MONEY THAT IS TRULY PROVIDING AN ECONOMIC IMPACT IS THE NEW MONEY THAT THAT IS ENTERING THE MARKETPLACE AS A RESULT OF THE FACILITY. -GAME INSTEAD OF MOVIES. 2) WHAT ARE THE OPPORTUNITY COSTS AS A RESULT OF FUNDING THE FACILITY? “ THE COST OF AN ACTIVITY MEASURED IN TERMS OF THE VALUE OF THE NEXT BEST ALTERNATIVE THAT IS NOT CHOSEN.” -FACILITY INSTEAD OF NEW ROADS, BRIDGES, SCHOOLS, ETC.
  24. 26. 9) WHAT “PSYCHIC BENEFITS” DO SPORT ORGANIZATIONS PROVIDE? HOMETOWN PRIDE
  25. 27. <ul><li>10)What is BIRGing? </li></ul><ul><li>TERMS COINED IN THE MID ’70’S WHEN AN ARIZONA STATE UNIVERSITY PSYCHOLOGY PROFESSOR NOTICED THAT STUDENTS WERE MORE LIKELY TO WEAR ASU GEAR ON MONDAYS AFTER THE FOOTBALL TEAM WON THAN WHEN IT LOST. </li></ul><ul><li>BASKING IN REFLECTED GLORY (BIRG): </li></ul><ul><li>-FANS ALIGN THEMSELVES WITH A TEAM THAT HAS SUCCESS, HOPING THAT THE CONNECTION WILL IMPROVE THE WAY THEY’RE VIEWED BY OTHERS. </li></ul><ul><li>CUTTING OFF REFLECTED FAILURE (CORF): </li></ul><ul><li>-FANS CUT THE CORD ON THE CONNECTION WITH THE TEAM WHEN THE TEAM LOSES, TRYING TO AVOID THE NEGATIVE EVALUATION THAT COMES FROM OTHERS WHEN A TEAM LOSES. </li></ul><ul><li>THE GROUPS THAT WE BELONG TO FORM A PART OF OUR SELF CONCEPT </li></ul>
  26. 28. SOCIAL IDENTITY THEORY “ US VERSUS THEM” -STATES THAT GROUP MEMBERSHIP CREATES SELF-CATEGORIZATION & ENHANCEMENT IN WAYS THAT FAVOR THE IN-GROUP (US) AT THE EXPENSE OF THE OUT-GROUP (THEM). -THE GROUPS THAT WE BELONG TO (FRATERNITIES & SORORITIES) & THE TEAMS THAT WE CHEER FOR (YANKEES & RED SOX) INFLUENCE OUR SELF-IDENTITY.
  27. 29. 11) WHAT ECONOMIC & PSYCHIC BENEFITS DID THE PACKERS 1997 SUPER BOWL PROVIDE THE TOWN OF GREEN BAY? -EVERY HOTEL ROOM WAS SOLD OUT IN GREEN BAY FOR 2 WEEKS AFTER THE NFC CHAMPIONSHIP GAME. -TOURISM WAS UP DURING A MONTH (JANUARY) WHEN TOURISTS DO NOT TYPICALLY VISIT GREEN BAY.

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