Colin Marks
MILWAUKEE BUCKS ARENA DEAL
The Milwaukee Bucks have been in the news a lot lately, but not for the usual reasons (great performance on the court). They have been in the news because of their soon to be new arena. This new arena deal has economists up in arms. John Siegfried and Andrew Zimbalist reported in The Economics of Sports Facilities and Their Communities that “independent work on the economic impact of stadiums and arenas uniformly found that there is no statistically positive correlation between sports facility construction and economic development.”. Meanwhile owners of professional sports teams often claim that professional sports facilities and franchises are important engines of economic development in urban areas. They argue that the team contributes millions of dollars of net new spending annually and create hundreds of new jobs, and provide justification for hundreds of millions of dollars of public subsidies for the construction of many new professional sports facilities in the United States over the past decade. Neither of these conflicting statements are entirely wrong but they are not right.
The reason John Siegfried and Andrew Zimbalist are right when they say there is no statistical data is due to two items, Substitution and Leakage. Substitution occurs because teams primarily draw their attendance from the local area, and if the team weren't there, these people would still spend money on entertainment, just on different options such as a play or local restaurant. Leakage occurs because in when looking at employment, sports teams are small businesses, and many of the athletes live outside the team's home city so their taxes and revenues leak out of the city to other places. But John and Andrew are wrong because there is statistical data proving that sports teams are economically beneficial to cities. The statistical data lies in rent prices and hedonic benefits. The team itself helps the image of Milwaukee and builds pride in a city and community. This makes a sports team a nonexcludable good. Speaking on the rents according to a study published ten years ago studying cities who had lost an NFL team paired with those who gained teams between 1993 and 1999. The study found that the actual cities with an NFL team had rents that were 8% higher than those who didn’t, and the surrounding metropolitan area saw rent prices 4% higher. This is showing how teams increase the value of a city.
Now because Milwaukee already has a professional basketball team they wouldn’t receive an increase from the new arena, but if a new arena were not built the city of Milwaukee would be forced to give their team to Seattle or Las Vegas. This would cause a drop in rent/property values. The report stated that cities had 8% higher rents, but if Milwaukee’s real estate market was affected by even just 1% the city would stand to lose over $250 million over 20 years (the same amount of time allotted to pay for arena) And with predictions of more drastic changes than 1% it would be more expensive to lose the Bucks than it would be to pay for them to stay. And that is why the sports owners are right. It is more beneficial to keep a team in your city but just not for the reasons they argue.
Works Cited
Delong, Katie, and Ben Handelman. "Bucks Arena Funding Plan Passes in Madison, and Now, It's up to the City and County to Approve Their Portions." FOX6Nowcom. WITI, 28 July 2015. Web. 17 Nov. 2015.
Thompson, Bruce. "Data Wonk: The Economic Impact of a New Bucks Arena." Urban Milwaukee Data Wonk The Economic Impact of a New Bucks Arena Comments. Urban Milwaukee, Inc., 10 June 2015. Web. 17 Nov. 2015.
I thought it was interesting how you talked about leakage and how the Bucks players' salaries are leaking out of the Milwaukee area. I wonder what the statistics are about how many Bucks players actually live in Milwaukee and how many live elsewhere. Also, I think a knew arena would boost the demand for bucks tickets which would increase the price and quantity, thus increasing the profit. This would be beneficial to the Milwaukee economy. However, I'm not sure if the cost of building the new area would be less than increased profit.
ReplyDeleteWhat I found really interesting from your post was how much money is being spent on the new Bucks Arena. Many people are up in arms over the new stadium and that too much money from the State is being spent on it, yet the State's contribution of funds is the same as Milwaukee County and only about a TENTH of the total cost. I believe many people making an argument against the stadium are severely uninformed and in the long run, this stadium will definitely help the economy of Milwaukee.
ReplyDeleteI thought that this article was very interesting because a lot of people think that the arena itself is what makes a difference, but its really good that you identified that it's the team that makes the difference. Although the arena will make a difference, not as big as a whole new team.
ReplyDeleteI really liked this article because the new arena is a big deal in Milwaukee, and has been for a while because of all the controversy. Bringing the new arena to Milwaukee will help the economy for sure. Also, it could bring new development in downtown, possibly improving nightlife. The possibilities are endless. This is a great investment for Wisconsin and it's going to be a win-win all around. We keep the basketball team here, Milwaukee development increases, and maybe the arena could draw in more popular events including concerts and conventions.
ReplyDeleteI think it is very interesting that the Milwaukee Bucks may bring a new stadium in Milwaukee. In my opinion, I don't think it's 100% necessary. I understand that the Bradley Center isn't very good (in general), but the Bucks aren't a super star team (the last time I've checked). Responding back to the graph shown in the blog post, it appears that about half of the funds would basically come from tax payers money. The problem that I have with this is I think there are other things in our society that could be changed for the better with the tax payers money instead of a new stadium. Regardless, I am curious to see what will happen in the future for the Milwaukee Bucks.
ReplyDeleteColin Marks
ReplyDeleteWhile I can see why you would think that updating the Bradley Center isn't 100% necessary because it is still functioning quite well, but the NBA stated that the Bradley Center is not at the level that the NBA wants its teams arena's to be at. Therefore despite the arena being fully functional it needs to be replaced. Also as Hannah said the new arena will be multi functional and be able to house other events such as concerts, WWE, and much more.