Will the Boise Sports Stadium be a Financial Black Hole?

Sean Garretson, AICP, is a noted urban revitalization planner and community economic analyst and developer with Pegasus Planning and Development of Austin, Texas. He was Vice Chairman of the City of Austin’s Urban Renewal Authority and a developer in Austin. Locally, Mr. Garretson has provided urban planning revitalization advice to Meridian, as well as local workforce analyses. He has traveled to Boise more than 20 times over the last several years and is a great fan of the city.

What brings you to Boise?

I was asked by Concerned Boise Taxpayers to analyze the financial and development information generated by the City of Boise and its consultants to assess whether the new Boise stadium project is a viable project and in the best interests of the City.  I have a long association with Boise as a result of my various consulting jobs in the state and I always look forward to coming back to Boise.

What have you done so far?

I have analyzed the material prepared for the City of Boise by Conventions, Sports & Leisure International (“CSL”) of Frisco, Texas; and the Shoreline Urban Renewal Area Preliminary Eligibility Study prepared by SB Friedman Development Advisors of Chicago, Illinois. I have also reviewed other multiple stadium projects in other cities, personally reviewed the proposed urban renewal area here in Boise, talked with local citizens, business people, developers, appraisers, and transportation professionals in order to assess the viability of this project.

Have sports stadiums in the past played a role in urban revitalization efforts?

At one time it was a popular belief that sports stadiums could revitalize blighted city centers. Over time cities did build taxpayer-subsidized sports stadiums. Now with the experience of hindsight, it is generally accepted that sports stadiums do not generate the economic benefits the city authorities thought they would generate.  The list of cities that have dug financial blackholes for themselves goes on and on.  All one has to do is get on the internet to see the very unfortunate financial consequences to the cities that built these stadiums as well as to see the destroyed political careers of local politicians who became mesmerized by the perceived glamour and benefits of government-owned sports stadiums.

All one has to do is look at cities like Hartford, Connecticut; Stockton, California; Pearl, Mississippi; Reno, Nevada and other cities to see the financial train wrecks these stadiums have created.

Are new stadiums being built now?

There are a few but taxpayer-financed stadiums are definitely not favored and no longer popular in light of the experiences of other cities. One study prepared by Initiative on Global Markets at Chicago Booth has concluded that the benefits of stadiums are very likely to be far outweighed by the cost to the taxpayers who fund these white elephants.

The Nevada Policy Research Institute published an article entitled “Why Taxpayers Should Not Fund Baseball in the Silver State” which concludes that the economic benefits of subsidized stadiums are monumentally overstated.

Why have these projects failed in other cities?

They failed because the expenses of building such large facilities exceeded cost estimates and the income didn’t materialize after completion.  Furthermore, a large stadium is simply a large fortress-like structure with a parking lot around it that does not generate any consumer or public interest.  Additionally, the developers who have promised adjacent real estate developments couldn’t fulfill their grandiose promises.  As a result, taxpayers get stuck with the cost of not only maintaining the facility but as it ages, taxpayers are responsible for repairing and replacing the depreciating physical structure.

Are there any projects closer to home that illustrate the risks?

Yes, there are. Please remember that the professional entertainment and sports business is highly competitive and the people who are professionals at it can themselves have a difficult time making money.

When a municipality decides to enter into that business, the risks are compounded because the city has no experience in that type of business.

The Ford Idaho Center in Nampa is an example of how a city building such a stadium facility can get into trouble.  The city believed that the structure would be self-sufficient and would be able to retire the city debt that was incurred to build it. Unfortunately, Nampa has had to fund literally millions of dollars out of taxpayer funds to keep the stadium afloat.  As it looks now, the City of Nampa will be paying off its debt for the stadium and maintaining it at a financial loss for a very long time.

Have you carefully studied the City’s reports for the Boise sports stadium?

Yes. But I must say that these reports are basically result-orientated marketing exercises. The feasibility study prepared by Conventions, Sports & Leisure International is just a public relations exercise designed to promote the project as desired by the developer of the project and the City. Every city that has a failed stadium project has an old flowery report in their file about how it is going to succeed.  Based upon the information that has been released by the City to date, which is not complete, causes me great concern.  It is apparent that the cost estimates in the reports are unreasonably low.  Boise is now experiencing a great increase in construction costs. As a result, a project which is estimated to cost $40,000,000.00 will actually cost substantially more and it will be on the taxpayers’ shoulders to pay that extra cost.  Secondly, the income figures currently published are, in my opinion, greatly exaggerated.

There is no way these professional sports teams that have historically always lost money will be able to cover the expenses for the project.

This is all particularly true now that BSU has decided to pull out of the project.

You mention the pull out of BSU from the project.  What effect does it have on the stadium project?

BSU was a critical component to the stadium project for several reasons. First and foremost, financially Boise State was going to pay some of the construction expense for locker rooms but more importantly, was going to be paying a substantial amount of rent, approximately $400,000.00 to $500,000.00 per year, to pay toward the $2,000,000.00 in annual bond payments for the structure.  Boise State’s withdrawal means that revenue from a very reliable source is now gone. When you take away such a large amount of rent from a facility that is questionable or marginal to begin with based upon the City’s own figures, the project cannot now succeed.

Secondly, it is a major psychological blow to the project.  BSU’s decision to have its own stadium and baseball team means that the support for a professional baseball team at the new stadium will be impaired.  Baseball is simply not a growing sport and two baseball teams in downtown Boise will result in the professional team not having the same kind of support it would have had otherwise. Remember, under the City’s plan BSU’s baseball team would be playing in the stadium when the professional team was not playing. That is now gone.

BSU originally supported the stadium but as the finances became clearer and Boise State did a real-life assessment of it, the University decided that it was better off going on its own.  This action speaks volumes about the viability of the stadium.  You will recall that there was an article recently in the Idaho Statesman where a BSU economics professor stated that the project could be an economic failure because it simply does not make sense that money-losing professional sports teams can support a “profitable” or even “break-even” stadium.  It can’t help but hurt the stadium.

The developer of the stadium has noted its success in revitalizing Fort Wayne, Indiana with a downtown stadium.

I have studied Fort Wayne and while municipal governments should always be encouraged to try and revitalize their cities, relying on Fort Wayne as a poster child for sports revitalization projects is really misplaced.

First of all, Fort Wayne had a classic rust belt downtown that was blighted, crime-ridden, and a disaster.  Almost anything the city government did to improve the area would have been an improvement.

Secondly, the Fort Wayne project had major financial problems.  During the design process budget issues arose and the integrity of the design had to be cut by fifteen percent (15%).  Furthermore, the project did not have enough money to fully fund it and thus the city had to go to the state for the creation of a special downtown district in order to get state funds. These funds came from a program that had originally been designed by the state to help abandoned industrial sites.  The city was in deep trouble and the state helped the city with state money.

Most distressing of all with regard to that project was that the retail and residential efforts projects did not get constructed by the developer as promised.  There was a particular project known as the Harrison Square Condominiums which remained unfinished and was a glaring reminder of the economic failure of the surrounding developments. It is only now, years later, that the retail and residential developments are starting to take hold. These developments probably would have occurred on their own anyway. The failure to construct the retail and residential projects as promised of course can have a major impact on the tax increment financing for a project such as this. If there is no new development then the real estate taxes don’t go up and if the taxes don’t increase then the city does not have the money to pay its annual bond payments and therefore, it has to pay those bond payments out of its own (taxpayer) financial resources.

All of this emphasizes that these projects have major economic risks tied to the success of professional sports teams and real estate promotors who may or may not have the funds to support the project when they get into trouble.  It is not the kind of project that the taxpayers of Boise want to guarantee with their tax dollars.

What about the soccer fans?

The history of this stadium is interesting from the sports standpoint. It was originally billed as a baseball stadium, then it moved into being a soccer stadium with baseball because I believe it would leverage the support of Boise’s soccer families.  The City is now morphing the project into also being a park-like structure open all of the time to the public.  A stadium like this cannot be all things to all people. The blurring of its concept only serves to emphasize its lack of viability.

Interestingly, recent efforts to turn sports stadiums into entertainment/sports/park-like venues have not been successful because, in truth, if you are going to have an entertainment venue, a convention center already wired with the proper electronics and amenities makes much more sense.  There is serious angst in the industry because stadium designers are worried that visitors who are accustomed to a spread of entertainment options at home will get restless at a long, live sport event.  Some of this is generational, of course, and is affecting all sorts of commercial enterprises in the world. This is the bottom line of a recent article that appeared in the New York Times called “More Than Sports: Stadiums Try Video Games and Surfing.”  This reflects the lack of sports income being generated by the stadiums and the financial necessity that they try to search out for other sources of income.

Don’t the Boise Hawks need a new stadium?

Yes, but the current location of Memorial Stadium for the Boise Hawks is an excellent, centrally located venue.  The rent is certainly desirable at $1.00 per year with all kinds of parking.  The Hawks have in the past had plans for a new stadium and it makes much more sense for the Hawks to rebuild their stadium than to try and move in to a new stadium in Downtown Boise.

Why aren’t the citizens of Boise voting to approve bonds for the construction of the stadium?

Idaho law provides that the citizenry must approve the issuance of bonds to construct major public projects at taxpayer expense.  There is an exception in the law.  The exception states that if an area is “deteriorated” and suffering from urban blight, then an urban renewal district can be created without a public vote and bonds issued to finance the restoration project.  I have analyzed the urban renewal area proposed by the City in order to finance the new stadium and the district does not in any way meet the requirements of a “deteriorated” or “blighted area” justifying not taking this matter to the voters.  I have served as the Vice-Chairman of an urban renewal district in Austin and I am well aware of the purposes of urban renewal funds. The City should have a vote of the citizenry for these bonds because this area of Boise is not a candidate for urban renewal funding.

I have no idea why Mayor Bieter and the City Council refuse to allow the voters to vote on this project.

What do you mean the area is not deteriorated?

This area of Boise is progressing financially and organically in an excellent fashion.  Private investment is developing the area in an exceptional way so there is no need for the area to be rehabilitated from any alleged blight.

I note in this regard the recent completion of the Simplot headquarters in Downtown Boise and the construction of the world-class JUMP facility shows that the nearby River Street area has and will continue to develop in an appropriate way without the City incurring millions of dollars in debt. An example of what I am talking about is one real estate investor I know here in Boise has tried to buy property in the River Street area but the prices are so high because of the development potential that he was unable to purchase any.

Any other thoughts?

• Schools, police, fire, and other public agencies lose tax dollars because of the tax increment financing.
• We have never seen any financials on the developer’s company that will be making the critical lease payments.
• There is no guarantee that the developer will build the promised retail and residential buildings around the structure.
• To the best of my knowledge, the developer has not disclosed any tenants for the surrounding development or firm financing.
• Additional taxes will be created for the hotels to help pay for the stadium which only hurts tourism.
• The City is de-annexing 26.64 acres from the existing 1996 River Myrtle-Old Boise urban renewal district, which property one would assume has already been “rehabilitated” by paying so much tax money on the public debt for that district (and which is supposed to only be subject to this TIF until 2025).  The City is then moving that 26.64 acres into the new stadium district so that property can start its life over again for 20 years supporting the new TIF debt that will be incurred to construct the new multi-million-dollar stadium.  It will be interesting to see if that works legally.

So, what is the bottom line?

The bottom line is that this project is not viable and should not be done. The withdrawal of BSU from the project is a game changer. The City should acknowledge that its investigation into the stadium idea shows that it is not worth pursuing.  The City should then devote its efforts and tax dollars to more worthwhile public projects that may not be as glamourous or sexy, but which are financially reasonable and involve much less risk to the taxpayers.