The Flight of the Owl: A Financial Look at an Amateur Baseball Team and Its Community

Ernest Meyers, Masters Degree Candidate, USSA.

Introduction

On August 14, 2009, the Forest City Owls hoisted the franchise’s first Petitt Cup Trophy after a Coastal Plain League Championship Series sweep over the Peninsula Pilots. The Owls finished the season with an astonishing 51-9 record and, according to PerfectGame CrossChecker, the team finished the season ranked as the best collegiate summer baseball team in America. While the team was shattering Coastal Plain League (CPL) records on the field in 2009, the fans were breaking records in the stands the year prior. The Owls shattered the CPL record for season attendance in 2008 as they drew almost 64,000 to the ballpark. Without a doubt, the Owls and their diehard fan base in Forest City, North Carolina had plenty to celebrate as the team had accomplished some remarkable feats over the past two seasons.

Two years beforehand, on August 4, 2007, the Owls, then known as the Spartanburg Stingers, played their final game in the City of Spartanburg, South Carolina. Although attendance for this final game was the highest draw of the season, not many folks in Spartanburg seemed to know the difference. Over the previous two seasons, the Stingers had played their home games in two different venues. The original home of the franchise, Duncan Park, a historic field that was once graced by Babe Ruth, was unsuitable because of a condemned grandstand. The city was less than willing to spend any money in efforts to refurbish the old ballpark. Therefore, the team played their home games at Wofford College the following year. Even though the team was competitive, they only managed a season attendance of 6,800. Before the season concluded, The City of Spartanburg and Wofford College refused to grant the Stingers a long-term lease while the city further made it clear that a permanent home for the franchise was unlikely. The team had little to celebrate as they headed into an offseason full of uncertainties. The team packed up and, as a matter of survival, made the move to Forest City.

Although the Spartanburg franchise had serious discussions with at least 3 different municipalities in North Carolina, the Town of Forest City’s offer was too good to pass up. The town promised to build a brand new venue using public funds and that it would be ready by the start of the 2008 season. Forest City native, Robert McNair, owner of the National Football League’s Houston Texans, helped jump start the initiative by making a considerable donation of over $1 million to assist in the construction effort. In kind, the stadium was named in his honor. What transpired was a beautiful, natural grass, minor league quality baseball facility with a 26-foot high wall that runs from left center field to the left field foul line. The stadium is equipped with a state-of-the-art sound system and a donated electronic scoreboard equipped with video capabilities. The covered grandstand has 556 reserved seats and over 1,000 general admission seats. Counting the spacious concourses, where patrons can bring their own seating or choose from about 30 picnic tables, the stadium can hold close to 4,000 fans. After bouncing around different venues the previous two years, the team signed a 10-year lease and was finally able to secure a long-term home.

To the untrained eye, one could confidently assume that the financial disparities for the Spartanburg/Forest City franchise over the past four years are as different as night and day. Would this indeed be a correct assumption? Is the franchise a more profitable business now compared to the final years in Spartanburg? What about the Town of Forest City? Is using public money to build a sports venue a sound investment for a town with a population of only 7,600 people? How does this situation affect the taxpayers? This paper will seek to determine answers to these questions.

Purpose

The purpose of this paper is to determine what benefits, if any, are realized by the Town of Forest City, its citizenry, and the Forest City Owls baseball team in regards to the construction of McNair Field. This paper will provide a general financial overview of the costs incurred and revenues generated by both the Town of Forest City and the Owls franchise. Then, by using existing research, this paper will answer a simple question. Was the investment in McNair Field a worthy use of public funds? To obtain this answer, this paper will investigate the following:

What are some recent research findings in regards to using public money to construct athletic venues?
Do athletic venues have an impact on the local economy?
Based on research, who are the main beneficiaries of athletic venues?
What, if any, are the non-financial benefits connected to a sports facility?

Audience or Significance

The issues discussed in this paper can be of benefit to sport managers that may be searching for or actively negotiating with a municipality in efforts to use public funds to construct a sports venue. Equally, the research that will be alluded to in this paper may help city or town officials better understand the risk/rewards associated with using public monies to construct a sports facilities. Even though the principal community in this paper is a small, rural town, the research findings that will be presented may be similarly useful to bigger communities and metropolitan areas. Most importantly, the information that will be presented can help taxpayers better understand the intimate details of stadium financing, what type of an impact a sports facility can have on the local economy, and the other types of benefits that can be derived from having a sports venue in the community. Informed citizens may be more inclined to let their voices be heard at the ballot box if and when important decisions, such as using tax dollars to subsidize a sports venue, are brought before the public.

Review of Literature

Forest City Financial Overview

One of the major factors in the decision by the Town of Forest City to construct McNair Field for the Owls was the potential for positive economic impact on the community (Dale, 2009). Although the town did not conduct an economic impact analysis (P. Walden, personal communication, November 10, 2009), planners were convinced that with the construction of McNair Field and by drawing a baseball team from a well-respected league, new spending would be generated in the community (Dale, 2009). For the Town of Forest City, a manufacturing community that had a 13 to 14% unemployment rate and was one of the hardest hit communities in the nation by the current recession at the time of this writing (J.T. Wolfe, personal communication, November 4, 2009), one of the most attractive economic benefits for building a home for the Owls was the prospect of job creation (Dale, 2009). Nearly all contractors hired to construct McNair Field were local companies employing local citizens (Dale, 2009). In addition to employment from construction firms, the Owls franchise employees 45 part-time staffers along with 4 full-time positions, most from within Rutherford County (Dale, 2009; J.T. Wolfe, personal communication, November 4, 2009). Forest City’s Commissioner explains the importance of bringing the Owls to Forest City by simply stating, “This was jobs that we didn’t have” (Dale, 2009, p. 5).

In addition to creating jobs, Forest City planners expected direct, indirect, and induced impacts to the local economy (Dale, 2009). As with most sports teams, direct effects of spending were expected to be realized by the local restaurants and hotels (Dale, 2009). For its part, the Owls booked over 400 hotel rooms, purchased all items from local businesses, had all signs purchased from local companies, and used local catering and restaurants to feed visiting teams for 31 home events (Dale, 2009; J.T. Wolfe, personal communication, November 4, 2009). Through these direct expenditures, along with the creation of jobs, it was hoped that it would lead to indirect or second round spending and induced impacts through additional jobs and local government revenues (Dale, 2009).

To assist in bringing additional spending to the community, the Owls franchise has and continues to actively seek non-Owls events at McNair Field to help draw visitors (J.T. Wolfe, personal communication, November 4, 2009). Last season, McNair Field, which also plays host to the town’s American Legion team, hosted Appalachian State University and Gardner-Webb University home baseball games (Dale, 2009). This year, McNair Field has already hosted a LeAnn Rimes concert, will play host to the North-South Challenge featuring Appalachian State, Gardner-Webb, Marist, and Niagara Universities, will also host the 2010 Food Lion South Atlantic Conference Tournament, and a number of other NCAA Division I and local high school baseball games (Dale, 2009; J.T. Wolfe, personal communication, November 4, 2009). Combined with the visiting teams for Owls contests and coupled with tremendous publicity from regional, state, and national organizations, the town expects to draw a significant amount of visitors to the community with the hopes of generating new spending comparable to the estimated $478,083 that La Crosse, Wisconsin generated when it brought a minor league baseball team to the community (Dale, 2009).

With the potential of positive economic activity in the community, Forest City planners felt the investment into constructing and maintaining McNair Field was a worthy use of taxpayer dollars (Dale, 2009; P. Walden, personal communication, November 10, 2009). Initially budgeted to cost about $1.5 million, the total cost of McNair Field to taxpayers, counting interest to be paid on a $2.5 million loan, swelled to $4.7 million (Dale, 2009) when the final item was put into place on opening day in 2008 (J.T. Wolfe, personal communication, November 4, 2009). After accounting for the $1.2 million in total donations by Robert McNair, $150,000 from Rutherford County, and a donated $300,000 electronic scoreboard, the final price tag for McNair Field totaled $5.4 million (Dale, 2009). All expenditures on McNair Field, which also includes $89,679 per year in maintenance and utilities expenses, come from the town’s general fund (P. Walden, personal communication, November 10, 2009). At this point, there are no plans to increase personal income or sales taxes to help fund the stadium (P. Walden, personal communication, November 10, 2009).

The town expects to take a loss on the stadium over each year of the 15-year loan (P. Walden, personal communication, November 10, 2009). Forest City generates only about $21,000 a year in revenues from McNair Field, the bulk of which is $18,000 paid by the Owls in the annual lease payment (Dale, 2009; J.T. Wolfe, personal communication, November 4, 2009). The remainder of revenues generated is through the sale of reserved parking and 5% of gate and concession receipts generated from non-Owls contests (Dale, 2009; J.T. Wolfe, personal communication, November 4, 2009). The Town of Forest City has operated McNair Field at a net loss of close to $300,000 in each of its first two seasons (Dale, 2009; P. Walden, personal communication, November 10, 2009). However, Forest City’s Finance Director (P. Walden, personal communication, November 10, 2009) noted that it is not uncommon for Parks and Recreation projects to operate with losses the first few years. The Finance Director stated that these sorts of projects are provided as a service to the public, much like a playground or a park (P. Walden, personal communication, November 10, 2009).

From the Owls financial perspective, they have benefited from the move to Forest City (J.T. Wolfe, personal communication, November 4, 2009). While in Spartanburg, the franchise had a net gain of $200 to $500 per game, which wasn’t enough to cover the lease agreement of $12,000 or many of the operating expenses (J.T. Wolfe, personal communication, November 4, 2009). The team averaged a net loss of close to $100,000 in both of the last two seasons (J.T. Wolfe, personal communication, November 4, 2009). The first two seasons in Forest City has seen the franchise operate with a loss of $20,000 per year; however, the team expects to turn a profit of $60,000 to $80,000 after the 2010 season when all start-up loans have been paid (J.T. Wolfe, personal communication, November 4, 2009). The Owls retain all profits from each Owls contest and 95% of receipts from non-Owls events (J.T. Wolfe, personal communication, November 4, 2009). In addition, the team does not pay property tax and receives 30% of profits from a local restaurant that operates a separate concession stand at McNair Field (J.T. Wolfe, personal communication, November 4, 2009).

The Use of Public Monies in Constructing Sports Venues

The Town of Forest City is hardly the first, and surely not the last, community to use public funds to construct a stadium for a sports franchise (Baade & Matheson, 2006; Dudine & Normile, 2006; Hudson, 2002; Sawyer, 2006; Sneider, 1997; Swindell & Rosentraub, 1998). Researchers have estimated that public subsides financed a majority of the $4 billion to construct 30 professional stadiums and arenas between 1990-1997 (Sneider, 1997), that different levels of government spent $3.3 billion on sport facilities between 1998-2001 (Grange, 1998 as cited by Hudson, 2002), and, since 1961, tax dollars have subsidized nearly $15 billion, or well over 60%, of stadium construction costs (Crompton, 2004 as cited by Sawyer, 2006). Reasons for using public subsidies for sports facility construction vary considerably in each case, but the most common rationalization for the use of public money is that these projects “are most often promoted as an economic catalysts” (Santo, 2007, p. 455). Newer reasoning for stadium subsidies is the prospect of becoming a major league community that will be attractive to tourists (Noll & Zimbalist, 1997) and/or the hard to measure physic income that a team brings to a community (Owen, 2006; Santo, 2007; Sneider 1997). Economic impact and intangible benefits will be discussed in more detail later.

Regardless of the reasoning behind public subsidization of sports facilities, there are a growing number of opponents and hotly contested referendums against the use of public money to fund these projects (Depkin 2006; Sneider, 1997). Sneider (1997) exemplifies this position, “Public financing of sports stadiums, though not new, has become an increasingly costly, and controversial, proposition” (p. 1). Economist Raymond Keating (1997; as cited by Sneider, 1997) takes it a bit further by describing public subsidies for sports franchises as “corporate welfare” (pg. 1) and further states that “the only people benefiting from this is in the end are owners and players” (pg. 1). Bernstein (1998) echoes this sentiment by referencing to the fact that the taxpayers, the ones being saddled with the bill, rarely get a chance to enjoy a day at the stadium due to unaffordable Personal Seat Licenses (PSLs) or luxury suites, and those that do have the opportunity to go will pay handsomely for tickets, concessions, and parking. Perhaps the most compelling argument against public subsidization is the equity issue, or, more specifically, the transfer of public funds needed for more pressing public issues to well-to-do sports franchise owners (Keating, 1997; Siegfried & Zimbalist, 2000). Further arguments can be made that franchise owners use their product’s demand to pit communities against one another to get a better deal or can use relocation as a tool to manipulate governments in meeting the owner’s demands (Baade & Matheson, 2006; Dunn, 1996; Keating, 1997; Siegfried & Zimbalist, 2000; Sneider, 1997).

Although there is a growing opposition to the use of public money to subsidize sports stadiums and arenas, stadium construction projects nevertheless continues to receive political and financial support from municipalities (Keating, 1997; Rebeggiani, 2006). Some politicians do believe that a stadium will boost economic activity and civic pride (Noll & Zimbalist, 1997; Owen, 2006; Santo, 2007; Sneider 1997). Others believe a stadium can be a catalyst to “revitalizing declining central business districts” (Swindell & Rosentraub, 1998, p. 12) and to help “change land-use patterns” (Swindell & Rosentraub, 1998, p. 12). Conversely, sports franchises are not the only businesses that receive public funds or tax breaks, “Providing locational incentives to businesses is a long-standing tradition of state and local governments” (Swindell & Rosentraub, 1998, p. 12). However this may be, politicians are politicians and they are often motivated by self-interest, campaign contributions, and votes (Hudson, 2002). Supporting public funds for stadium construction may be a way to “secure political support for the expenditure from labor unions, contractors, property owners, and other interested parties” (Siegfried & Zimbalist, 2000, p. 100). If political entities feel that (a) the public interest will be served and/or (b) enough political clout can be gained though stadium construction, then a justification can exist, in the mind of the politician, to use public funds and for raising taxes, as often is the case, to support the expenditures (Baade & Matheson, 2006; Bernstein, 1998; Siegfried & Zimbalist, 2000).

Economic Impact on Local Economy

The primary war cry of proponents for public stadium subsidies is the positive economic impact that will be realized by the community by having a stadium within its boundaries (Baade & Matheson, 2006; Keating, 1997; Noll & Zimbalist, 1997; Santo, 2007; Sneider, 1997; Swindell & Rosentraub, 1998). Over the last few decades proponents have claimed that “new sports facilities built with tax dollars spur massive economic benefits” (Keating, 1997, p. 56). The most common economic benefits associated with sport facility construction is the creation of construction jobs, increased spending in the community from patrons of athletic contests, tourism and the attraction of new businesses due to the presence of a sports facility, self-sufficient tax revenues created by all the new spending, and indirect and induced spending effects which lead to even more spending and job creation (Noll & Zimbalist, 1997). Therefore, since these sports facilities serve as a catalyst for job creation, increased government revenues, and a the possibility of positive economic windfall, stadium projects should be considered a public investment and public, instead of private, dollars should be used (Baade & Matheson, 2006; Noll & Zimbalist, 1997; Sneider, 1997).

As simple as this rationale seems, there has been a tremendous amount of research that has found that the economic benefits associated with sports facilities are often greatly exaggerated (Baade & Matheson, 2006; Dunn, 1996; Noll & Zimbalist, 1997; Swindell & Rosentraub, 1998). Santo (2007) states, “The evidence shows that stadiums and arenas have no significant impact on metropolitan area income or employment” (p. 456). Depkin (2006) continues, “Economists have generally concluded that the public benefits do not outweigh the public costs” (p. 438). In the cases in which economic impact analysis are conducted, it generally represents the economic numbers that favor the study’s underwriters’ point of view, which, in many pre-construction studies, is that of the proponents (Depkin, 2006). Studies conducted before stadium construction normally predict economic impact through best-guess measures, making it easier to intentionally or mistakenly manipulate numbers into a favorable light (Depkin, 2006).

Howard and Crompton (2005) list five inviolable principles that are imperative to maintaining integrity when conducting an economic impact analysis:

Exclusion of local residents
Exclusion of time-switchers and casuals
Use of income rather than sales output measures of economic impact
Use of multiplier coefficients rather than multipliers
Careful interpretation of employment measures (p. 110)

Gross inaccuracy in economic impact studies normally “involves abusing one or more of these five principles (Howard & Crompton, 2005, p. 110; Noll & Zimbalist, 1997).

One of the most common mistakes used in factoring economic impact is the failure to exclude spending from local residents, or what many researchers have dubbed the “substitution effect” (Baade & Matheson, 2006; Bernstein, 1998; Keating, 1997). Substitution effect occurs when local resident’s spending, money that would otherwise be spent elsewhere in the community, are counted as new economic activity (Baade & Matheson, 2006; Bernstein, 1998; Keating, 1997). Keating (1997) states

Consumers have a limited amount of dollars to spend on entertainment, which will be spent one way or another. If they do not spend money on a baseball game, they spend it playing golf, going to a museum, watching a movie, attending a concert, et cetera. Hence, baseball games don’t leverage economic activity any more than any other pasttime (p. 56).

Bernstein (1998) concurs, “Most patrons come from within 20 miles of the ballpark, so money spent there or in nearby restaurants is money that would have gone into the local economy anyway, as movie rentals or pizza sales or book purchases” (p. 52). Since ballpark spending by local residents is just a substitute for spending elsewhere in the community, there is little to no net economic impact (Baade and Matheson, 2006). Although some communities may have a fair amount of visitors to a ballpark, failure to exclude local resident spending in an economic impact analysis can result in misleading numbers (Noll & Zimbalist, 1997). Even with the exclusion of substitute spending, visitor spending often has such a limited impact on the local economy that it often does not justify the use of public subsidies (Noll & Zimbalist, 1997).

Beneficiaries of a Sports Venue

As research has shown, little, if any, economic impact is felt in the community from the financing of a sports facility; therefore, the primary financial beneficiaries of stadium subsidies are owners and, in the case of professional teams, athletes (Keating, 1997 as cited by Sneider, 1997; Keating, 1997). Without doubt, publically financed sports facilities increases the bottom line of sports organizations (Keating, 1997). Siegfried & Zimbalist (2000) simplifies this reasoning, “although the existing facilities are not physically obsolete, they are economically obsolete” (p. 98). With the advent of highly lucrative sales of luxury suites, club seats, in-stadium advertising, and naming rights, owners that do not have to make payments on a stadium can, and often do, maximize revenues (Baade & Matheson, 2006; Bernstein, 1998; Noll & Zimbalist, 1997). After moving into a new stadium, teams often see a leap in generated revenues (Keating, 1997). With the monopolistic leagues of professional sports, the control over supply allows organizations to use their powerful leverage to ensure the team keeps all revenues from sales of luxury suites and club seats (Badde & Matheson, 2006; Bernstein, 1998; Depkin, 2006). In addition, this leverage also allows owners to “acquire low rent payments, lower sales taxes on tickets, and less responsibility for maintenance and renovations” (Depkin, 2006, p. 144). Teams with new stadiums have also seen an increase in franchise value (Keating, 1997). Therefore, substantially increased revenue is the primary motivating factor for sports organizations to use public subsidization to construct their facilities (Depkin, 2006).

There has been a shift in public perception regarding public subsidies for sports facility construction (Depkin 2006; Sneider, 1997). With this shift, along with federal laws making it harder for public money to be used in stadium construction (Baker & Forrester, 2004; Bernstein, 1998; Dudine & Normile, 2006) and a sluggish global economy (Baker & Forrester, 2004; Rebegiani, 2006), owners are moving toward more public-private or simply private funding options (Sawyer, 2006). Although private investment is not a particularly attractive option (Siegfried & Zimbalist, 2000), the revenue potential from naming rights, luxury suites, PSLs, and club seats sales gives owners more private funding options in sports facility construction (Sawyer, 2006). The St. Louis Cardinals were able to finance a new stadium through private means with most of the public help coming through tax abatements (Baker & Forrester, 2004). Not long ago, the New York Yankees were able to work out a deal with New York City to build a $1 billion stadium without raising local taxes (Dudine & Normile, 2006).

Although owners are the primary beneficiaries in using public subsidies for sports facility construction, communities can also benefit from a facility if they can maximize returns by hosting events other than the primary tenant’s contests (Swindell & Rosentraub, 1998). Booking other events at sports facilities during downtime or in the offseason “creates the potential for substantial revenue and income (Swindell & Rosentraub, 1998, p. 19). Consumers can also benefit from a new sports venue and/or from the presence of a team (Depkin, 2006). Non-financial benefits will be discussed next.

Non-Financial Benefits

Sports in the United States have a tremendous following (Sneider, 1997). With that thought, researchers have suggested that taxpayers of communities may receive intangible benefits from having a sports team (Baade & Matheson, 2006; Bernstein, 1998; Noll & Zimbalist, 1997; Owen, 2006; Santo, 2007; Swindell & Rosentraub, 1998). Non-financial benefit can be classified into two categories: private consumption benefits and public consumption benefits (Santo, 2007).

For sports fanatics, the demand curve for a sporting event is often price inelastic, making considerable consumer satisfaction possible (Siegfried & Zimbalist, 2000). Santo (2007), who classifies consumer surplus as a private consumption benefit, states that consumer surplus occurs when “the amount that a person is willing to pay for a ticket to a sporting event is greater than the actual cost of the ticket” (p. 456). From this perspective, “the difference represents a benefit to the consumer” (Santo, 2007, 456-457). Unique to the sporting world, consumer surplus is most often felt by those that do not attend sporting events, but instead track the sporting event through media coverage, often free of charge (Baade & Matheson, 2006). Utility is derived by both the diehard and casual sports fan through this unique media coverage (Santo, 2007). With the sports franchises, which are small in comparison to other local businesses, ability to capture tremendous public attention through mass media coverage, the consumer can experience surplus without actually making a purchase (Noll & Zimbalist, 1997). However, using large public subsidies for private consumption benefits as a justification is not without criticism (Owen, 2006). Owen (2006) concludes,

Just because consumers are willing to pay a certain amount for a good does not mean that they have to or should have to. If professional sports at the same level of quality can be provided without subsidy to the team, this is obviously better for the city (p. 342).

Although consumer surplus may be more logical than the economic benefits stance for use of public subsidies in sports facility construction, perhaps the most compelling argument for taxpayer funds is a concept that encompasses both tangible and intangible (Santo, 2007). “Public consumption benefits”, as described by Santo (2007), “encompass the intangible rewards associated with hosting a team, and are related to the economic concepts of positive externalities and public goods” (p. 457). Some researchers believe these spillover benefits can help a town become a major-league city in which they benefit from free publicity to help attract tourist and businesses while providing a vehicle to enhance the city’s image (Siegfried & Zimbalist, 2000). A sports team, along with a stadium, can often help form a city’s identity, “People in China may have never heard of Green Bay, but they have heard of the Green Bay Packers” (Bernstein, 1998, p. 52). Therefore, sports teams can contribute to a city’s strategy of development through civic pride, image, and reputation (Swindell & Rosentraub, 1998). Swindell & Rosentraub’s (1998) study found that the residents of Indianapolis attributed their civic pride and reputation to their famous auto race and their two professional sports teams. Since image is often underprovided by other local businesses, the image that a sports team can bring to a community may justify public subsidies for stadium development (Siegfried & Zimbalist, 2000).

Although research has found limited economic impact due to the presence of sports facilities, one can still assume that “there are tangible economic spillover benefits” (Swindell & Rosentraub, 1998, p. 13). However limited these economic spillover benefits may be, there are some indications that tangible and intangible benefits can occur (Baade & Matheson, 2006). In one study, Coulson & Carlino (2004; as cited by Baade & Matheson, 2006) found that housing prices in NFL cities are higher than in comparable towns without. Financial spillover benefits of this type will affect both fans and nonfans alike (Santo, 2007). Therefore, there may be justifications for municipalities to use public monies for stadium constructions if they can show some direct economic benefits in combination with the intangible benefits (Swindell & Rosentraub, 1998). In any case, dialogue between the community, its leaders, and owners should place less emphasis on wide spread economic impacts and concentrate more on the potential for public consumption benefits (Santo, 2007).

Summary and Conclusions

Restatement of the Purpose

What are some recent research findings in regards to using public money to construct athletic venues?
Do athletic venues have an impact on the local economy?
Based on research, who are the main beneficiaries of athletic venues?
Are there any non-financial benefits connected to a sports facility?

The Use of Public Monies in Constructing Sports Venue

The Town of Forest City was not the first community to use public money to construct a sports facility. The trend of using public subsidies for sports stadiums and arenas has been commonplace since 1961. The $4.7 million that Forest City used to subsidize the construction of McNair Field is just a fraction of the $15 billion used by municipalities nationwide in sport facility financing. There are a number of reasons owners and political figures have supported the use of public funds, the most common of which has been the potential for positive economic impact on the community with the sports facility serving as the catalyst. With growing opposition from academia, economists, and voters, newer reasoning for the use of public monies has been shifted to focus on the psychic income or the title as a major league city earned by a community with a major sports facility.

Opponents of public financing for sports facilities view this trend as corporate welfare. Many see the transfer of tax dollars to franchise owners as an equity issue. Opponents argue that these dollars should be used for projects that benefit the entire public. Furthermore, the opposition makes a point in which they claim that taxpayers, the ones shouldering the cost, rarely get an opportunity to enjoy the fruits of their investment. Those that do have the opportunity to attend a game are often hit with high ticket, concession, and parking prices in addition to their normal or inflated tax rates. Owners, especially at the professional level, can pit communities against one another in bidding wars in order to secure the bigger, better deal.

Although there has been a growing opposition to public subsidization of sports facilities, many projects continue receiving political support. Some politicians believe that a sports facility can lead to increased economic activity for a community while others believe that a project of this scale can lead to the revitalization of declining business districts or can be a tool to revamp zoning practices. Additionally, providing public financial support through direct subsidies or tax abatements to attract traditional businesses is a common tool used by local and state governments. Many feel that this should be no different when attracting or attempting to retain a sports franchise. Another school of thought theorizes that politicians are looking to recoup political benefits from labor unions, construction firms, or other interested parties by backing public funds to finance sports projects.

Economic Impact on Local Economy

Many proponents of public stadium subsidies cite positive economic benefits as the chief reason for investing in such projects. The creation of jobs, an increase of spending in the community, attraction of tourist and businesses, an increase of tax revenues, and secondary and induced spending are the primary benefits listed by those who wish to see sports facilities financed with public money. The rationale is that since stadium projects serve as a catalyst to increased economic activity, something that benefits the entire public, public money should then be used and viewed as an investment for the entire community.

This concept seems simple enough. However, academic research shows that the projected returns from public investments are grossly overstated either erroneously or intentionally. The manipulation of these numbers are easy to accomplish as most economic impact studies are conducted prior to the financing process and are often underwritten by proponents of the measure.

The most common error when calculating economic impact on a community from the presence of a sports facility is the failure to exclude local spending in the analysis. Researchers have dubbed this error the substitution effect. Local spending at an athletic venue or event is a mere substitution of spending by the same patrons elsewhere in the community. Patrons have limited entertainment spending. Therefore, if they did not spend money at an athletic contest, they would spend the money on other entertainment options. In that regard, when local residents are counted in economic impact studies, the numbers become erroneous because that money would have been spent in the community regardless. Visitors attending a sporting event or venue should be included in economic impact studies. Since most patrons of a sports facility or event live within 20 miles of the site, visitor spending has minimal economic benefits and may not justify public investments.

Beneficiaries of a Sports Venue

With the lack of economic magnitude offered by proponents, the primary beneficiaries of publicly subsidized sports venues are the franchise owners. In professional sports, athletes also benefit from the provision of taxpayer dollars to stadium financing. Owners with tremendous negotiating leverage over a community can gain highly favorable terms so that the franchise is able to maximize revenues through the sale of luxury suites, club seats, and naming rights. This leverage often allows owners a free pass in sharing revenues and/or generous lease agreements that might assist in paying off the facility’s debt.

A shift in public opinion in regards to publically financing sports venues is beginning to emerge. In conjunction with federal laws, it is becoming increasingly difficult to use public money to construct sports stadiums. As with most laws, there are loopholes; however, owners are starting to see the financial windfall, mainly through the sale of PSLs and naming rights agreements, by using private money to construct their own venues. In today’s era, there has been an increase in cooperation between teams and communities to construct these facilities. The stadium projects involving the St. Louis Cardinals and the New York Yankees are excellent examples. It both cases, the taxpayers were exempt from paying any additional taxes to fund the respective stadiums.

Although owners are the primary beneficiaries, the community and the public can also realize benefits. Communities that are able to use the publicly built venue to host non-tenant events can maximize their own revenues. The ability to host multiple events, primarily during the tenant’s offseason, will allow the community to settle all debts on the facility and then allow for increased revenues to be invested in other capital or public projects.

Non-Financial Benefits

There are very few that can argue that sports play a defining role in many lives throughout the United States. In that, academics research is starting to study the intangible benefits that consumers receive from a sports team or event. There are two categories of intangible benefits indentified in research literature: private consumption benefits and public consumption benefits.

Consumer surplus is the difference between a consumer’s willingness to pay and the actual price of the event. With the coverage that professional sports obtain from media outlets, consumer surplus is not only available to those physically attending the event, but to the casual or diehard fan watching or reading about the event from their living room as well. Although this is the case for fans, it does not always translate to the entire public and justification for using public monies to construct a sports venue may not exist solely on the grounds of private consumption benefits.

Public consumption benefits mix both the intangible and tangible benefits that can be derived from a sports team by the community as a whole. Intangible spillover benefits can impact the community as a whole by helping to establish an identity, to enhance its image, or by improving civic pride and reputation. Fans of sports teams often come from different social-economic statues, races, and gender. Sports can transcend our differences, and for a few hours can unite an entire community.

These spillover benefits can also lead to tangible benefits. Sports communities with an established prestige can be successful in attracting tourists, citizens, and businesses. Although not significant enough to justify public financing of sports venues, these tangible spillover benefits can be used to increase economic activity and be of benefit to the entire community.

Conclusion

It is true that the owner and general manager of the Owls were looking for a reasonable deal when relocating the franchise. However, the communities in which the Owls held serious discussions all proposed the use of tax dollars to build a home for the Owls. With the City of Spartanburg all but showing the franchise the door, it does not seem that an amateur baseball team had the leverage to pit these towns against one another in efforts to gain a bigger, better deal. Forest City put the best offer on the table, and, as any other business that attempts to maximize revenues while trying to minimize costs, it would not have made good business sense for the Owls to turn it down. Though the Owls franchise receives direct benefits from public subsidies, it can hardly be considered corporate welfare. The team’s lease payment to the town is roughly 30% of projected net revenues after the 2010 season. In addition, the team must pay all required taxes at their normal rates. The lone exemption is property tax.

From the Town of Forest City’s perspective, it can be concluded that the town built McNair Field with every intention of providing a public service. Small town politics does often operate on a good ole’ boy system; however, there is no indication that town officials used McNair Field as a way to curry political clout.

As for the taxpayers, they do have to purchase tickets, in addition to their tax contributions, in order to enjoy McNair Field. However, unlike professional stadiums, admission and concession prices are very reasonable. Attending an Owls game has the potential of being a lower cost alternative to other entertainment options in the area.

In regards to the economic impact hoped by the decision makers of the Town of Forest City, the claim that McNair Field might have a sizeable impact on the local economy cannot be substantiated. First, the jobs that were created by the construction of McNair Field were more than likely temporary. Contractors may have added employees in order to make the stadium available for opening day. However, it is a safe assumption that the contractors terminated employees once the stadium project was completed. As for the jobs created by the Owls franchise, the 45 part-time jobs are seasonal positions that pay minimum wage. Therefore, it is unlikely that McNair Field made or will make a significant contribution to the local economy through job creation. With that being said, however, a community with such a high unemployment rate welcomes any job, however brief. Secondly, in terms of creating additional spending in the community, it also seems unlikely that any major contribution has been made due to the presence of the Owls and McNair Field. Town officials have neglected to exclude the spending of local residents in their estimations. Approximately 90-95% of all patrons to Owls contests are Forest City and/or Rutherford County residents. Therefore, all spending at McNair Field is a mere substitution of spending elsewhere in the community. It is true, however, that there are visitors, family, and friends of Owls or visiting team players that come from outside the community to take in a game at McNair Field. So, there are some levels of fresh spending in Forest City, but the levels of new spending is not adequate enough make a substantial impact on the local economy.

The Owls franchise is a key beneficiary from the construction of McNair Field. The franchise was on the brink of financial collapse in Spartanburg. The move to the Town of Forest City allowed the team to rebound in a much stronger financial position. A large part of that financial success has been due to the fact that they did not have to build a stadium using their own capital, which they did not have. Because the team was able to move into a stronger financial position, along with a long-term, state-of-the-art home, there is little doubt that the value of the franchise has also increased.

I also believe that the Town of Forest City and the community has benefited from the construction of McNair Field. Although the town continues to take a loss on the field, and, with the plight of the economy in Forest City, has no plans to raise local taxes to assist repaying the $2.5 million loan, the town has received a boost in tourism. With the Owls gaining state and national exposure from their on-field feats over the last couple of seasons, the town is also gaining the same recognition. Recently, McNair Field was named best baseball field in the country under in the category of Sports and Parks by the Sports Turf Management Association. McNair Field and Lambeau Field, home of the Green Bay Packers, can be mentioned in the same sentence. In partnership with the Owls, the town is using other events at McNair to draw in more visitors from outside the county. This past September, the town hosted a LeAnn Rimes concert at McNair Field. In addition, McNair Field will host 19 NCAA Division I baseball games mainly featuring Appalachian State and Gardner-Webb Universities as the home teams. Although these events will not benefit the town in terms of covering expenses on McNair, it will serve to boost visitor spending in the community.

As for the community, there was a drop in season attendance in the second year. Much of this drop can be attributed to the drop in disposable income for the folks of Forest City. However, the team has still been able to draw well over 120,000 in attendance over the past two seasons. This number speaks volumes to the sense of pride and admiration the good citizens of the Town of Forest City has for the Owls baseball team. This number also gives a fair estimate of the private consumption benefit, or consumer surplus, derived by each and every fan. As for the public consumption benefits, the team, along with McNair Field, is in line with the best interest of the community. The team and the stadium have been successful in drawing a limited number of visitors to the area. As recognition continues to grow through media outlets, along with other state and national organizations, it is hoped by town leaders that residents and businesses will eventually be attracted to the community. Although the economic impact might not reach levels desired by the town, the Owls have made tangible and intangible impacts on the community.

One may look at the price tag of McNair Field and the economic and employment situation in Forest City and conclude that it was a waste of public money. Not this author. Although the team and the stadium does not and will not make a significant impact on the local economy, both the Owls and McNair Field bring so much more to this town facing the direst of circumstances. The team and the field brought a sense of hope and pride to a community at a time of need. They had something to root for. The townspeople of Forest City went to the ballpark and left their problems for later. They went to the ballpark and rooted hard for the hometown Owls. They went to the ballpark and celebrated each success the Owls accomplished, culminating with the CPL Championship and finishing as the best baseball team in America. They are not Forest City, a town with a dire economic situation. They are Forest City, home of the best amateur summer baseball team in America and home of the best baseball field in America. In my opinion, using public money to build McNair Field was a sound investment.

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