Thursday, June 14, 2007

Changing The Rules Of The Game For A New Football Stadium

It wasn’t exactly a “Man Bites Dog” news story.

The lead and second graph in The Commercial Appeal said:

“…improvements could cost up to $20 million and mean the loss of 10,000 seats at Liberty Bowl Memorial Stadium…the findings of the study by local consultants SSR Ellers appear to back the assertion by Memphis Mayor…that the cost of ADA upgrades at the 42-year-old Liberty Bowl is too great, in dollars and in stadium capacity.”

Since the engineering study was paid for by the Herenton Administration, the real news would have been if it had reached any other conclusion.

The $130 Million Question

All in all, even if the $20 million is right, it’s still light years from the estimated $150-175 million that it would cost to build the new stadium coveted by Mayor Herenton.

It’s even hard to get too worried about a loss of seats, since having a 62,380-seat stadium is akin to designing the highways in suburban Shelby County for rush hour traffic (which sadly is exactly what’s done). Capacity crowds are about as frequent in the stadium as winning seasons for University of Memphis and Top 10 ranked teams playing in the Liberty Bowl.

Despite a serious lack of enthusiasm for his proposal by his own staff, it seems clear that the mayor is in for the long haul, despite having only a mild interest in football in the first place.


We’re hard-pressed to understand why Mayor Herenton is so hellbent to get this stadium built, and our confusion is heightened by his failure to articulate a compelling justification for the project.

We look for him to mount an 11th hour push for the stadium, and drawing on past themes for projects like this, we expect him to inevitably cite the economic impact of a new stadium and the need to revitalize the Fairgrounds area.

The problem is that once these big project freight trains start rolling down the tracks, no one ever steps back to ask the more pertinent question:

The Overriding Question

If Memphis is prepared to spend about $160 million as an economic stimulus or community development vehicle, are there strategies that would produce more impact and create more lasting results?
After all, the annual bill for a project costing $160 million is about $10.5 million a year for 20-25 years. Is a football stadium the best use for these scare tax dollars?

Before that question can be pondered too much, we’re expecting the ever dependable economic impact study to be rolled out, complete with whopping numbers drawn from multipliers that defy common sense.

Economic Impact

It’s no surprise, since these economic impact studies are only undertaken by the people pushing for the project, not by an independent third party committed to an objective reading of the facts and a thorough analysis of the options for the public funds.

In Washington, D.C., in the midst of the argument about a new stadium, that city’s government issued an impact study that said the new facility would create $100 million in new salaries. When you did the math, it meant that the jobs would pay an average of $261,111. And yet, the economic impact numbers stuck, repeated by the media and the mayor in D.C. until they were hammered into the public consciousness.

Multipliers are a central feature of these studies. They quantify the alleged ripple effect for each dollar as it is turned over in the community’s economy – for example, the money for a ticket to the Liberty Bowl goes to that organization, they spend the money to buy equipment from a local store, that store uses the money to pay local suppliers, etc.

Multiplication Tables

As a result, if there is anything dependable about the studies, it is that they regularly overstate the amount of the positive contributions to the economy and confuse gross and net spending. That’s how you end up with a study like the one issued by the Memphis Regional Chamber years ago that claimed that the economic impact of the NBA would be $1 billion. Even city and county governments and Grizzlies ownership put some distance from those conclusions and told Chamber leadership to bury the study as quickly as they could.

But, worst of all, the economic impact studies act as if there’s no alternate uses for the money.

We’ve never seen one that looked at alternate uses of the same amount of public money. It’s as if there are no potential uses other than the stadium, such as health care, schools and parks, or even a tax reduction.

A Different Standard

But it doesn’t stop there. Because it’s a football stadium, there won’t even be the same level of questions asked of other public projects. You would think that at some point, there would be some discussion about investing the public money in a way that has the biggest payoff for the city.

All of this will be accompanied by the normal rhetoric about the stadium raising civic pride and Memphis’ image across the U.S. Sometimes, it almost feels like only cities with great sports facilities can be a first tier city.

Perhaps, $160 million invested in better schools, a more vibrant riverfront, the nation’s best skatepark or a design competition for national artists could actually attract more national attention. After all, these days, who doesn’t have a stadium?

Invest In Neighborhoods

Lost in all of this is a seminal fact: most independent research concludes that sports facilities are not engines of economic growth. On balance, the research indicates that there is no impact at all.

In the end, a new stadium is a direct subsidy in a state university and two privately operated football games.

With the deterioration of the city’s infrastructure – from streets in neighborhoods to potholes in major thoroughfares to crumbling sidewalks to the decline of parks – it seems to make more sense for Memphis to invest in the improvement of its present assets. There’s a lot more chance of them having a major impact on the city’s quality of life and be the strongest weapon against continued flight of Memphians to the suburbs.


LeftWingCracker said...

Absolutely on point. I could not have said it better, except that I think I said something similar about the FedExForum.

In any event, kudos for a great piece.

Anonymous said...

I may be naive, but I just don't see any way this stadium project gets built. Other than Herenton and maybe some local contracters who think they will get a piece of the pie, nobody wants it. Nobody.

Put $10-15 MM in the existing facility to get it up to code and move on.

Anonymous said...

"With the deterioration of the city’s infrastructure – from streets in neighborhoods to potholes in major thoroughfares to crumbling sidewalks to the decline of parks – it seems to make more sense for Memphis to invest in the improvement of its present assets. There’s a lot more chance of them having a major impact on the city’s quality of life and be the strongest weapon against continued flight of Memphians to the suburbs."

Wasn't this basically Carol Chumney's argument against the Beale Street Landing?

Anonymous said...

If we do build a stadium, it needs to be near the U of M, the main tenant. It would make it more of a part of campus life and, over time, would help make U of M less of a commuter school. Having gone to UT, it's much easier for students to walk to a stadium than to drive.

city watch said...

Dear Smart:

I agree with your blog about the stadium and need for impact measurement of alternatives; and yes, there are many neighborhoods that need attention, but the $160 million would be gone pretty quickly without much improvement. What about putting up $140 million (taking out the $20 million for stadium upgrade)and finding what it could do for the fairgrounds that would have real benefit for Memphis. Get everyone involved not just the committees that hire consultants who operate in secret.

Smart City Consulting said...

Great insights by all.

Just for the record, we did take a different position about FedExForum, because in that case, there was no NBA team without a new areana, and like it or not, The Pyramid was a third-rate building on its best day. And, we also felt this way because about half of the cost of the building is paid from taxes produced by the presence of the team. There are no new tax sources created by a new football stadium.

We've said previously that we think the stadium should be built by University of Memphis on its own property. That's why we've also said that the University ought to figure out how to pay for it, rather than act as if it's a stepchild of city government.

As for Beale Street Landing, at a time when CEOs say that the #1 thing they are looking for in cities for relocation is vibrancy, we continue to believe that the project is absolutely essential to shake off the slow-moving, stuck in time images created by our riverfront. Also, the total cost will not be born solely by local taxpayers.

Those are our positions although we appreciate the well thought out opinions expressed here on this question. Why can't civic debate in this city be this civil?