MEDIA: Speech

WHO SAID IT: Phoenix Mayor Thelda Williams

THE COMMENT: "I’m a firm believer that the Suns and the arena is the core of downtown. I think that’s how we gain all the business enthusiasm and shops and restaurants — I think even the colleges. Because the kids like the activities, whether it’s a Suns game or a concert… It’s a generator of income that goes into our general fund that pays for police and fire and parks and all other services that benefit the city."

FORUM: Public meeting on Jan. 9 at South Mountain Community Center

WHAT WE'RE LOOKING AT: Whether a sports arena has a significant impact on a city's economy.

OUR FINDING: One Star, Mostly False.

ANALYSIS: The proposal for a $230 million renovation of Talking Stick Resort Arena has sparked an intense public discussion. While public response has been mixed at multiplecity-hosted town halls, city leaders and Suns executives have stressed the significant impact of the arena on the growth and revitalization of downtown.

The Phoenix City Council planned to vote on the proposal in December, but pushed the vote back to Jan. 23.

Phoenix Mayor Thelda Williams supports the proposal. She spoke at the end of the Jan. 9 public meeting and made the claim about the arena being an economic and social draw to downtown.

The deal and the funding

The total renovation cost for the arena is projected at $230 million. The proposal requires $150 million from the city of Phoenix through the Sports Facilities Fund and bonds. The Suns would pay $80 million. The Sports Facilities Fund is generated from taxes on hotel rooms and rental cars.

A report by the Phoenix Department of Community and Economic Development shows the arena has an estimated $182 million in direct economic impact to the city and businesses. The report measures arena attendees' spending on hotel stays and related tourism purchases, such as meals and event memorabilia, and counts tax revenue to the city of Phoenix.

The data also include tax revenue the city would receive from the construction of a Suns practice facility.

Sports arenas and city economies

Phoenix Community and Economic Development Director Christine Mackayviews the renovation as necessary to maintain a robust downtown.

"It's all about being a well-rounded city, being able to supply amenities and assets to all of our citizens who want them," Mackay said. "The entertainment district is key."

Nevertheless, research on sports arenas shows they have a small to negligible effect on the economy and development of a city.

A West Virginia University study published in 2015 analyzed 13 new sports facilities and studied business activity nearby. The research found "no evidence of any effect, positive or negative, of new sports facilities on new businesses around these facilities."

Another study in The Journal of Urban Affairs in 2012 by researcher Geoffrey Propheter found that basketball arenas specifically did not spur economic development in a city.

Using data from 1979 to 2009, Propheter found basketball arenas are dependent on the growing economic state of the city where they reside, not the other way around. "It is not facility-dependent but rather city dependent," Propheter wrote.

"Basketball arenas are economic complements. The present research is generally consistent with the notion that professional sports are not the cause of development so much as they are the effect."

A 1997 study by the Brookings Institution, a nonpartisan research organization, also concluded that sports facilities had a negligible effect on economic activity and employment in cities.

"Regardless of whether the unit of analysis is a local neighborhood, a city, or an entire metropolitan area, the economic benefits of sports facilities are de minimus," the study's authors, Roger Noll and Andrew Zimbalist, wrote.

Other economists have reached similar conclusions.



Michael Leeds, a sports economist at Temple University, said in an interview with the radio program Marketplace that the negligible economic effect of sports facilities is actually the one thing economists agree on.

Leeds studied Chicago, a city with five major sports teams — the Cubs, the White Sox, the Bears, the Bulls, and the Blackhawks. His research found the teams did not matter financially to the city.

"If every sports team in Chicago were to suddenly disappear, the impact on the Chicago economy would be a fraction of 1 percent," Leeds said. "A baseball team has about the same impact on a community as a midsize department store."

Victor Matheson, an economist at College of Holy Cross, said in an interview with The Atlantic that city officials and sports publicists tend to inflate numbers about economic impact.

"Take whatever number the sports promoter says, take it and move the decimal one place to the left. Divide it by 10, and that's a pretty good estimate of the actual economic impact," he said.

He also said publicly financed facilities don't create a return on investment if they are not heavily used. One exception is the Staples Center in Los Angeles — home to two NBA teams, the Clippers and the Lakers, the WNBA Sparks and the NHL Kings.

"But they use it 250 dates a year," Matheson said.

Talking Stick Resort Arena also is home to the WNBA Phoenix Mercury, in addition to the Suns.

Mackay said she recognized the small to negligible economic impact of sports arenas that economists had found.

"I don't disagree, if the (Talking Stick Resort) arena were to close down, $182 million in the economy of Phoenix is not significant," Mackay said.

But she said she had a different view on the social and cultural impact of the arena.

"The problem with those economic reports is that they tend to neglect to see how the trickle effect moves through to create an attractive place for other companies to invest in the market. In every study they neglected it. Economists looked at cold hard math and numbers. They didn't check on that from an economic development level."

Phoenix considers the arena as part of a "branding toolkit," said Julie Watters, the city's public information director.

Mackay said from an economic development view, the arena is part of making a competitive city.

"I am boots on the ground, in the trenches and see how important it is," she said.

She said companies look for such things as education infrastructure, safety, affordable entertainment and nightlife when moving to and investing in new cities.

"From an economic standpoint, (the arena) is negligible. From a social impact on what we can attract in the future, it has a significant impact."

The economic growth of downtown Phoenix would not be derailed, however, if the arena was vacated.

"The arena is not solely responsible for the revival of downtown," Mackay said.

BOTTOM LINE:

Economic research shows that sports arena construction and development has a minimal impact on a city economy and new businesses.

Although downtown entertainment venues and sports facilities can shape a city's social and cultural appeal to residents, tourists and future investors, from an overall economic standpoint, the effects aren't significant.

SOURCES:

Jan. 9 Public Meeting on Suns Arena, South Mountain Community Center; Jan. 10 meeting with Christine Mackay and Julie Watters; Visit Phoenix, "Phoenix Tourism Stats & Facts"; "If You Build It, They Might Not Come," Sep. 2012, The Atlantic; "Do Basketball Arenas Spur Economic Development?" City Lab, Aug. 2012; "Sports, Jobs & Taxes: Are New Stadiums Worth the Cost?" Brookings Institution, June 1997; Phoenix City Council Report: Sports Facilities Special Revenue Fund, May 2016; "Are Pro Sports Teams Economic Winners for Cities?" Marketplace.org, March 2015; "Do New Sports Facilities Attract New Businesses?" West Virginia University Department of Economics, Work Paper Series, July 2015; "Suns arena renovation brings mixed feelings from residents during first public hearing", Arizona Republic, Jan. 5.; Propheter, Geoffrey"Are Basketball Arenas Catalysts of Economic Development?", 2012.

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