So maybe consumers are not buying a whole lot of cars. And, yes, businesses have cut back on first-class airline tickets and four-star lunches. But there is one area of conspicuous spending in these recessionary times:
sports stadiums.
Domes, parks, yards and coliseums (few seem to be called stadiums or arenas anymore) are being built or remodeled across North America at a pace not seen in two decades.
Among the cities with new stadiums just opened or in the works are Atlanta, Baltimore, Cleveland, San Antonio and San Jose. In New York, Madison Square Garden recently underwent a facelift.
These stadiums are put together a lot differently than their elder counterparts. Many are being financed through partnerships of local governments, sports teams and private corporations. Sometimes money comes from lotteries, instead of the usual bond issues and tax increases.
They also have lots more luxurious corporate boxes and other amenities nestled inside. And several are being built in downtown business areas, not in the suburbs miles away.
The recent success of two downtown stadiums in particular-Camden Yards in Baltimore, which opened in April at a cost of $104.5 million, and the $500 million Skydome in Toronto, which opened in September, 1989-have excited other cities.
”Toronto built Skydome,” said Bill Dorsey, publisher of Skybox magazine, a sports business publication based in Cincinnati. ”The Blue Jays became winners and 3 million fans paid to see them. Suddenly, Toronto was on the major league map.”
Especially in properous times, cities were happy to bear the all costs of construction and upkeep of stadiums. Small and medium-sized cities built ballparks to attract teams, seeking the big-city aura conferred by a major-league franchise.
Those expectations still often prevail, of course, though sometimes a field of dreams can turn into a house of nightmare. That seems to be the case with the Suncoast Dome in St. Petersburg, Fla.
Opened in January, 1991 at a cost of $140 million, the Suncoast is usually dark, save for an occasional concert or hockey game. Debt has risen to $262 million from $116 million because the city has failed to get a major league franchise it thought the stadium would be sure to attract.
So far, Suncoast has been used mainly as a threat by teams such as the White Sox and San Francisco Giants seeking new stadiums or more favorable treatment where they are.
Not so in Baltimore, where the Orioles had played in Memorial Stadium, in a residential suburb, since 1954.
”The move to Camden Yards has increased attendance and allowed the fans to enjoy the city,” said Jon Miller, an announcer for Orioles and for the ESPN cable sports channel. ”They`ll arrive at the park, either by car or train, have dinner and then go to the game.”
Cleveland is hoping to go Baltimore one better with its ambitious Gateway Project. The $362 million complex will have a 21,000-seat arena for basketball and musical shows and a 42,500-seat football stadium. Both are scheduled to open in 1994.
City officials say Gateway, a 50-50 public-private venture, will be the linchpin for the revitalization of downtown Cleveland. The city managed to persuade the Gund brothers, owners of the basketball Cavaliers, to abandon suburban Richfield Coliseum, which they own, for the new downtown arena.
Even financially strapped cities no longer must concede losing a franchise.
”As with Baltimore, Cleveland and the new Georgia Dome,” said Mitchell Ziets of Public Financial Management, a financial consulting firm based in Philadelphia, ”new stadiums can be built largely with money from a dedicated revenue stream.” That might take the form of a special lottery, equity from corporations or leases on luxury suites, in the place of bonds and taxes.
While the average fan may complain about the fat cats sitting in their air-conditioned boxes with television sets and private bars, they might as well get used to it, said Dorsey, whose Skybox magazine is distributed in luxury suites.
”It is those luxury seats that help pay the salaries of the players, keep seat prices lower and indeed help to build the facility,” he said.
With its recent makeover, Madison Square Garden, which is owned by Paramount Communications, yanked out many lower-priced seats and replaced them with luxury boxes. At $140,000 to $190,000 a year, those boxes will open the revenue spigot of leases to $15 million a year, from just $2 million before.
The Georgia Dome in Atlanta is paying off its construction debt partly with revenues from more than 200 luxury suites located on three levels around the football stadium. The suites, ranging in price from $20,000 to $120,000 a year, have been snapped up by Coca-Cola, Delta Air Lines and other corporations.
A suite`s appointments make leasing one to watch a basketball game seem akin to chartering a yacht just to go fishing. Seating up to 20 people, the boxes are crammed with a bar, carpeting, mirrored walls, TV`s, refrigerator, bathroom, closet, telephone and a lot more. When hot dogs just won`t do, full- course meals can be catered.
Companies that lease suites also have access to additional services, such as a concierge and business center with office equipment and meeting rooms. Most of the lease payments and other costs are tax deductible as business expenses.
Those kinds of features obviously appealed to Tom O`Donnell, chief executive of McDonald Company Securities in Cleveland. His company has signed 10-year leases for boxes in both the Gateway arena and football stadium.
”Ours is a relationship business,” O`Donnell said, ”and a loge is a great way to entertain our clients. Our company now is just minutes away from the downtown complex. I believe these luxury suites will eventually be the hottest ticket in town.”
Emerging as a leader in providing financing for the new stadiums is the San Francisco branch of Fuji Bank Ltd. Its sports finance group, started in 1988, has been involved in Arco Arena in Sacramento, Calif., America West Arena in Phoenix, Gateway Stadium in Cleveland, Kiel Center in St. Louis and Tampa Colisieum in Florida.
Working with the bank, Prudential Insurance Co. has underwritten some of hte arenas as well.
Fuji executives say they have eagerly backed private investments in sports arenas because they saw an opportunity to make money as public tax support diminished. They also say they like the idea of the new sources of profit available to team owners from luxury boxes and even restaurants and hotels built as part of a sports complex.
One of the nation`s largest design firms, Ellerbe Becket Inc., of Kansas City, worked on many of the new projects, as did the Turner Construction Co. of New York.
Ernst & Young, through its sports and entertainment group, is also very active in conducting feasibility studies for cities and investors considering new stadiums.
But not everyone thinks the new wave of fancy arenas is all for the better.
Nostalgia aside, a theory is rising about a correlation between improved team performance and a new stadium. Toronto, after all, won its first World Series this year. But that`s another story.
