sport management facility management. history of public facilities 1. stadiums professional baseball...

Sport Management

Facility Management

History of Public Facilities

1. Stadiums Professional Baseball became popular in the

early 1900’s Open fields and parks were inadequate Team owners began to construct stadiums Since owners paid for them…teams stayed

in their home cities for years Era of team movement didn’t begin until the

late 1950’s and 1960’s. NFL founded in 1923…increase in

popularity…need for larger stadiums grew


1. Stadiums (cont.) MLB and NFL became partner tenants in

stadiums originally built for baseball. Quirks for football -

End zones too short Poor sightlines

Today stadiums also host – Concerts (big enough to fill a stadium) Use Parking Facilities for…

Fairs/Carnivals Drive and Buy Car Shows Circuses


2. Arenas NHL started in 1927…became very popular Hockey owners followed baseball owners

and built arenas for their teams. NHL season 1/3 the length of baseball (back

then 50 games per season compared to baseball’s 154)

Dark Nights! – empty nights in an arena Hockey owners had more empty nights to fill

their arena with events.


2. Arenas (cont.) What filled dark nights?

Originally, boxing (but occasional fights were not enough)

NHL owners founded Ice Capades – skating variety show (still not enough)

Basketball Originally capitalized on college basketball Then the NBA came along…

NBA and NHL became partner tenants


2. Arenas (cont.) Today arenas also host –

Indoor soccer Arena football Lacrosse Concerts Ice Shows Family Shows (Circus, Wiggles, Sesame Street) Graduation (like PHS uses Stabler)


2. Arenas (cont.) Recent trend in arena construction adjacent

practice facility for prime tenants Availability of the main arena is critical for

maximizing revenue because it increases the ability to book events!

Nationwide Arena, Columbus, OH (home of NHL’s Blue Jackets) opened in 2000 with an attached NHL practice rink

FedEx Forum, Memphis, TN (home of the NBA’s Memphis Grizzlies) opened in 2004 with an attached basketball practice facility

Modern Era of Public Facilities

1. 1960 and 1970’s Baseball and football team owners realized

they could save money by having their host city build their stadium rather than building it themselves.

Cities complied to keep teams enthusiastic about staying in their city.

Cities still built for 2 prime tenants justified the investment.


1. 1960 and 1970’s (cont.) Civic Centers and Arenas also sprang up Cities competed for sport teams by building

new facilities Summary: City leaders believed publicly

built sport facilities were a good investment.1. Contributed to the city’s quality of life by

providing entertainment to the citizens

2. Spin off benefits to the local economy


2. Today Trend over the last decade Single

Purpose Stadiums Specialization has extended into soccer Besides the design benefit, teams want

single purpose facilities for their REVENUE! Revenue from single purpose facilities do not

have to be shared – desirable!


2. Today (cont.) Team owners seek lucrative stadium leases

to provide revenue from sources like..1. Preferred Seating (PSL’s, luxury seats, club

seats)

2. Parking

3. Concessions

4. Sponsorships (signage, naming rights)

This revenue helps teams compete for free-agent players and boost their own profits!


2. Today (cont.) The lore of lucrative stadium leases has

resulted in “Franchise Free Agency” Cities often entice teams to leave one city for

another promising stronger revenue streams through lucrative lease terms.

Facility Financing (Public vs. Private)

Will The Facility Be Financed Publicly or Privately?

Argument #1: Any “for profit” enterprise, like a professional sport team, should build its own facility.

Argument #2: Sport facilities provide significant economic benefits, and teams are a source of civic pride and community spirit.


Financing has fluctuated between public and private over the years Early years – team owners built their own

facilities Public building boom of multipurpose facilities

in the 1960’s and 1970’s Recently – single purpose facilities – some

funded privately, and some publicly

Facility Financing (Private)

Joe Robbie Stadium, now Dolphin Stadium, is a good example of private funding of a single purpose facility 1980’s - Joe Robbie, owner of the Miami Dolphins Unhappy with the Orange Bowl, proposed a new

stadium Not approved for public financing by Florida voters Novel solution – pledged stadium revenue as

collateral to bankers and privately funded the stadium

Other’s followed, even with privately funded arena construction Palace at Auburn Hills – Detroit Pistons

Facility Financing (Private)

But private financing is not a perfect world for owners it takes revenue away from profits remember, teams need more revenue to pay the high salaries that resulted from Free Agency

So…to maximize revenue, owners pushed for public financing of single purpose facilities

The idea was that the team controls the facility revenue without the heavy debt of financing

building

Facility Financing (Public)

The cities of Baltimore and Cleveland are good examples of public funding of single purpose facilities Both cities decided to construct in downtown

areas to attract teams and revitalize decaying areas of their cities

Both were successful and benefited economically!


Summary Today the trend is public funding of single

purpose facilities. Owners push for it to maximize revenue that

doesn’t have to be shared with another tenant. This revenue is used to pay athlete’s

expensive salaries, which ensure a winning a team.

Winning teams attract fans, which keeps the revenue flowing in.

Private Financing Mechanisms

1. Facility Revenues (like Joe Robbie did) Preferred seating… concessions… parking...

rent from other tenants

2. Corporate Sponsorship Naming Rights Pouring Rights Outright Donations

Public Financing Mechanisms

1. Bonds The most typical way of obtaining public financing Issued by cities, counties or states Promise by the borrower (bond issuer) to pay back

the lender (bond holder) a specified amount of money, with interest, within a specified period of time.

General Obligation Bonds – backed by the local government’s ability to raise taxes to pay off the debt (very safe for investors)

Revenue Bonds – backed by the facilities ability to generate revenues, which must cover annual operating expenses and debt repayment (riskier)

Public Financing Mechanisms

2. Taxes Imposed on local residents

Property Taxes Occupational Taxes

Imposed on visitors Hospitality Tax Rental Car Tax

Taxes affecting both local residents and visitors General Sales Tax Sin Tax Meals and Transportation Tax

Private Management Companies

With most facilities owned by the local government, would you want your facility run by government employees, who know nothing

about sport management? Facilities are meant to be run profitability, so

management is crucial. Most large facilities use Private Management

Companies Spectacor Management Group (SMG) Global Spectrum – subsidiary of Comcast Spectacor

Private Management Companies

Benefits of Private Management Companies1. Dedicated Corporate Staff – otherwise staff

would have come from municipal departments

2. Network of Facilities – Makes it easier to cultivate relationships and

increase bookings Provides purchasing leverage for supplies

and maintenance items

3. Career Opportunities – growth and advancement for employees willing to relocate

Current Issues

1. Security Has become a big issue since 9/11/01. Bag checks, pat downs, and metal detectors

are now normal. Barricades or fencing around the perimeter

of facilities are used to create a “moat” effect. Every event must be evaluated for security

risk. Consider… Who the performer is Crowd profiles Anticipated media coverage

Current Issues

2. Americans with Disabilities Act (ADA) Enacted in July, 1990 by President George

Bush. Intended to prevent discrimination against

people with disabilities in employment, public services, transportation, telecommunications services, and public accommodations.

ADA requires new and renovated facilities must be accessible to people with disabilities.

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