Facility Management

Describe the evolution of stadium and arena development in the United States, and the issues that municipalities and team owners had to address over time. How is the modern era of stadium and arena construction different than in the past?
• Gain in the popularity of professional baseball and intercollegiate football launched the construction of stadiums
-Constraints of urban space limitations dictated the irregular sizes and shapes of the older ballparks
-Early NFL teams played in baseball stadiums until new stadiums were build
• Hockey owners built arenas to host their teams in 1927
– Needed to fill empty seats in arenas on non-hockey nights (boxing matches, ice capades)
-Basketball enters arena picture and arena owners earn revenue from two tenants
• Modern era:
Baseball-only stadiums were becoming obsolete during the 1960s
-Team owners could make a great deal of money by having their host city build their stadium rather than building it themselves
-Cities built shiny new facilities to keep their teams enthusiastic about their hometowns
-City leaders believed that publicly built stadiums were good investments and added to quality of life
-Trend toward one purpose stadiums again to maximize more revenue by owners
What are the various types of public facilities?
Arenas, Stadiums, Convention Centers, Theaters
-Built to accommodate one (or more) prime sports tenants or to lure a prime tenant to the facility
-Intercollegiate facilities are financed by private donations, endowments, student fees, fundraising campaigns, and, in the case of public institutions, public grants
-Public owner may manage its own facility or contract our for private management
-Recent trends in facility construction include adjacent practice facilities for the primary tenants to increase event bookings
-Outdoor or domed facilities for baseball, football, and outdoor soccer teams
-Stadium managers try to maximize bookings, but it is more difficult with a stadium than an arena
-Far fewer nonsport events can play in stadiums, primarily because stadiums are significantly larger than other venues and most other events cannot attract stadium-sized crowds
-Stadium managers have become increasingly effective in creating events for their venues that take advantage of all available spaces
Convention Centers
-Almost always built and owned by a public entity
-Built to lure conventions and business meetings to a particular municipality
-Publicly financed because the rents and feed they charge do not always cover costs
-The economic impact the convention or business meeting has on the municipality can be large
-Public assembly facilities that are primarily utilized for the presentation of live artistic entertainment
-House prime tenants such as symphony orchestras, opera and dance companies, and resident theater groups
-Profits are rare, but the spinoff business from theater attractions justifies public subsidies
-Provide culture and entertainment for a community, enhancing its quality of life
Describe various methods for financing public facilities
• Federal government allows state and local governments to issue tax-exempt bonds
• Tax exemption lowers interest on debt and thus reduces the amount that cities and teams must pay for a stadium
• Public vs. private financing
• Team owners have had to look for additional revenue to compete for, and pay, their players while maintaining profitability
• Building public assembly facilities meant other services had to be neglected
• Team owners look for a city or state willing to build a new facility but let the team control the stadium revenue streams, thereby allowing the owner to maximize revenue without heavy debt service expenses
• Bonds: promise by the borrower to pay back the lender a specified amount of money, with interest, within a specified period of time
General obligation bonds
backed by the local governments ability to raise taxes to pay off the debt (safe)
Revenue bonds
backed specifically by the facility;s ability to generate revenue (risky)
-Property taxes: paid by homeowners, who are often long-term residents of a city
-Occupational tax: anyone who works in the community; more likely to pass in vote
-Hospitality tax: forces visitors to pay directly for the facility
-General sales tax: affects both local residents and out-of-town visitors
Corporate Investment
-Sale of naming rights for stadiums and arenas is a current trend
-Facility pouring rights: being the facility’s exclusive soft drink or beer distributor
-Outright corporate donations: defray costs in exchange for the publicity and public relations benefits that may result from such a donation
Facility revenues
-Personal seat licenses (PSLs): down payments on luxury suites and club seating
-Ticket tax
-Revenue from other sources (parking, rent, concessions)
Why do cities subsidize facilities?
• Sports facilities are thought to improve the local economy in four ways:
-Building a facility creates construction jobs
-People who attend games or work for the team generate new spending in the community, expanding local employment
-Team attracts tourists/companies to the host city
-New spending has a “multiplier effect” as increased local income causes still more new spending and job creation
What are benefits of subsidizing sport facilities?
-Building a stadium is good for the local economy only if a stadium is the most productive way to make capital investments and use its workers
-New sport facility: extremely small effect on economic activity and employment
-Sport facilities attract neither tourists nor new industry
-A professional sport team creates a “public good”
What are the economic realities of publicly subsidized facilities?
-Goal: to provide a clean, safe, and comfortable environment for patrons
-Functions: security, cleanup, marketing and sales, scheduling and bookings, operations, event promotions, and finance and box office operations
-Private management: provides expertise with dedicated personnel and network of facilities that create leverage in cultivating key event relationships and in-turn event bookings
Issues to be considered relative to the marketing of facilities?
Marketing, promoting, and facility revenue
Issues with marketing
-Account for location of venue, culture of community, and production of events
-Internet has allowed easier booking of events
-Saturate markets: markets with several venues in the local vicinity
-Local economy will be driving force for ticket sales
Issues with Promoting
-Co-promotional model: facility and promoters split the risk and revenue
-Rental agreements: promoters pay specified amount up front and other costs covered by promoter
-Majority of shows are brought by out side companies
Issues with facility revenue
-Ticket sales offer lion’s share of revenues
-Ticket rebate: surcharge on ticket that goes to facility
-Ancillary revenue: sale of food, beverage, parking, fees, and sponsorships
-Marketing fund: profits from other shows put aside to incest in future programs
Describe some of the current issues associated with the design, construction, and operation of today’s stadiums and arenas.
-Ensure safe environments after 9/11
-technology is HUGE
-crowd management plan: know surroundings and team environment of rivalry
-More energy per square foot
Americans with Disabilities Act
-Prevent discrimination against qualified people with disabilities
Cutting edge facilities
-Estimate nearly 6 billion dollars spent on facility renovation in 2009

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