Professor Mark Rosentraub's lively and engaging lecture presented a how-to guide for cities to ensure the most bang for the buck when investing in sports facilities.
By Mark Richardson
Published November 02, 2010
Hamilton, how do you want the benefits of your stadium dollars stated? If you are looking for immediate results with in-depth numbers, you will be disappointed. That's according to Mark Rosentraub, Professor of Sports Management, University of Michigan and author of two books: Major League Winners and Major League Losers.
Rosentraub recently delivered a lecture at McMaster University, titled "Amenities, Design and Development: When Having a Team and a New Stadium Matters...and Why".
He started his lecture stating that his is the 30,000-foot view point of a city, not the nitty-gritty of local details. With that in mind, he laid out the foundation of his theory on what makes a sports venue a good investment for a city: "Where economic activity occurs matters more than how much economic activity occurs."
To understand this viewpoint, you first need to become familiar with the idea of Human Capital and how it drives the growth and sustainability of a city.
Rosentraub adheres to the teachings of Alfred Marshall, who theorized that ideas and more specifically Patents, are what drive the growth and sustainability of a city. The only way a city can foster the incubation of ideas and patents through Human Capital is to create a concentration of minds, called a "Marshall Space".
In support of this, Rosentraub points out that between 60 and 80 percent of the new jobs created in America across the last 10 years are from new, start-up businesses.
Competing with the creation of Marshall Space in a city is the unprecedented and de-concentrating growth of cheap communication.
Think of it this way: at one time musicians had to gather in a concentrated area and collaborate together to record music, a micro Marshall Space. Now, much of the work of musicians can be done from home studios and their musical contribution is sent to a recording engineer through file sharing, having no contact with others.
In response to this decentralization of idea creation and communication, many cities have leveraged sports to create Marshall Space and retain the 21- to 35-year-old demographic that is the seed of a city's Human Capital.
The key to retaining Human Capital is to retain the college and university graduates the city produces. What keeps the target demographic in a city are housing, entertainment and employment.
If entertainment and housing stock attractive to the demographic are available, these people tend to stay. Without the proper housing (condos and townhouses) and entertainment (sports, music and restaurants), the 21- to 35-year-olds leave and the city is stripped of its Human Capital.
The focus on 21- to 35-year-olds is for good reason. If this group stays in a city past the target age range, they tend to lay permanent roots and remain in the city for good.
It's not that people over 35 do not provide their share of Human Capital; you just don't have to work hard to keep them in the area any more.
Much of this is to do with the great shift that occurred in the last 40 years: the mass entry of women into careers. Anyone who invests four to eight years in post-secondary education will naturally want to pursue the opportunities it provides.
Because of the time needed to educate themselves and then establish careers, women are having children later in life. As a result of that, women and men under 35 don't need the suburban house yet.
They want to enjoy the benefits a successful city provides: fun, personal engagement, ease of movement and a nice but affordable place to live.
So what does a Stadium have to do with any of this high-level economic theory?
If a stadium is done right, it can satisfy a requirement Rosentraub lays out for the creation of a vibrant Marshall Space - bring a guaranteed number of people together at a known geographic coordinate over a period of 12 months.
Rosentraub clearly states that a stadium alone is not enough to do this, and even answered that simply building a stadium as a place for a sports team to play offers nothing in gain for a city.
A unique and concentrated entertainment zone with many options is required to create a net benefit for a city. "Concentrate, concentrate, concentrate," as Rosentraub put it.
It is in applying Rosentraub's theories that two stadium locations in Hamilton emerge as clear winners (albeit for contradicting reasons) and two are revealed as clear losers.
"If the owner of the team has a stake in the land around a stadium, he will care about the area."
Rosentraub been involved in and studied highly engineered sport complexes. These zones are owner-controlled and developed with help from public money. These complexes include the facility, shopping, amusements and housing and are usually built in a downtown area with all of the components new and coming together around the same time.
Petco Park in San Diego is often cited as a very successful example of this type of engineered development, where the owner has his own stake in attractions and development around the venue.
Owner-owned condos were built around the ballpark to specifically look inside at the diamond; one can stay at home and watch the game live. The stadium has some free seating near a play area for kids and the usual shopping and restaurants are close to the venue.
The complex was "blown in", as Rosentraub likes to say, very quickly in a dilapidated part of the downtown.
Interestingly, the stadium and the immediate area around it have no parking. People either walk a distance from surrounding lots or take transit to the venue.
LA Live in Los Angeles is cited as another example of an updated venue where the owner has a personal stake in the surrounding area.
The area around the old Staples Center was considered one of the most dangerous in LA, and many people would not venture into the neighborhood to see a game.
The owner of the Lakers invested in an iconic entertainment complex that included a gathering area where crowds could watch a game outside for free on a screen.
Of course, if you wanted to eat, drink or shop you have to do that in the owner-controlled stores. The unsafe area was turned around using the concepts of crowds to create security, also called eyeballs on eyeballs. The old reputation of the area has now been changed and new development is coming in.
"Build new facilities as close as you can to existing sports, shopping, housing and entertainment areas."
Rosentraub could not state the case for geographical entertainment concentration strongly enough. He said if other venues and entertainment facilities exist, of course it makes sense to locate the new facility as close to these as possible.
Instead of spending huge tax dollars to procure extra land and create an engineered space out of nothing, it makes more sense for a city to invest where these amenities are already located.
Rosentraub also alluded that monies saved on acquiring extra land could instead be used to create an iconic facility with the wow factor, instead of building a box to hold sports.
He says it is critical that a stadium have some sort of dazzle factor - be it location, design or both. If a bare-bones stadium is there just for a team to play in, it doesn't make sense for a city to invest, as it will not be an attraction.
For Hamilton, he also leaned heavily to a covered stadium, due to our climate. By his numbers, an open air stadium was pointless for growth here.
"It does not make sense for a city to build a stadium just to house a team. There has to be a net benefit."
Rosentraub tells his audience that sport facilities most benefit a city when suburban dollars are spent in the downtown. Suburban dollars staying in the suburbs are detrimental to a city creating a vibrant Marshall Space.
He also stated that it is very difficult for a city to maintain two area of entertainment concentration dense enough for the creation of Marshall Space.
He pointed to Yankee Stadium and Cowboy Stadium as great facilities in awful locations, as there are no opportunities for synergies around them.
I was amazed throughout Rosentraub's lecture, especially when he brought up San Diego as the example of a successful city using entertainment and housing to create Marshell Space to attract and retain Human Capital in the 21-35 age range.
My sister in-law is a McMaster graduate and Certified Accountant who worked for several large industries that have left town or are leaving town.
At the age of 29, bored and disappointed with Hamilton and its lack of growth and change, she started looking at working in the United States. Her job search took her to San Diego and she was enthralled with the lifestyle opportunities that city offered.
She moved to the trendy and funky Pacific Beach area, full of entertainment, and lived the single life to its fullest. Along the way, she met a very nice guy and got married this summer.
At 34 she is working as a vice-president of an insurance company and she has now moved to the suburbs in preparation of starting a family.
I get depressed when I think of what Hamilton lost when this bright young woman who worked so hard and volunteered for so many causes left.
I will always remember sitting in the lecture hall listening to Rosentraub's 30,000 foot viewpoint ... and seeing my lovely sister in-law as if she was only one foot away.
Rosentraub clearly stated that it extremely difficult for a sports team to move to a different city and that most will avoid it at any cost.
He clarified that the Ti-Cats are already a regional team; they do not need a new stadium or location to become one. At the same time, he pointed out that half of a team's profit comes from luxury suites.
He argued that it it doesn't make sense to build a facility just for the owner. If it doesn't make economic sense for the city, the city should not sign the contract.
Finally, the investment numbers in San Diego and LA are illustrative.
In San Diego, the public investment was $310 million, while the team and private investmen totalled $660 million.
For the LA Live, the public investment was $187 million, while the team investment was $300+ million and the third-party private investment was $2.5 billion.
Rosentraub concluded: If it could happen in downtown Los Angeles, is there really any place it cannot work?