Longform

BOB's a Bust

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The number of business licenses downtown jumped the first year the stadium was open -- from 248 in 1997 to 277 in 1998 -- an increase of about 10 percent. But the number plummeted last year as stadium attendance fell 17 percent during the Diamondbacks' second season -- a campaign in which the team clinched the National League West pennant and won 100 games. Total business licenses at the end of 1999 in the downtown area were 252 -- only four more than the year before the stadium opened.

The ballpark's impact on the regional economy -- at least as far as bar and restaurant sales goes -- is also small. The downtown area accounted for 2.2 percent of Maricopa County bar and restaurant sales before BOB opened. Last year, the downtown area accounted for 2.9 percent of total bar and restaurant sales in Maricopa County.

Arizona State University economist Tom Rex says the impact of the ballpark on the economy is essentially a wash.

"When you open a big facility like that, it results mostly in a redistribution of money over a geographical area," Rex says.

Individuals have a limited amount of money to spend on entertainment, Rex explains. If they elect to spend money on baseball games and on food and drinks at businesses near the stadium, they won't spend that money on entertainment elsewhere.

Nevertheless, Rex says there is some positive impact on the local economy from fans who attend games from outside the region and from spending by visiting teams.

The weak linkage between BOB and the surrounding community is not a surprise to sports economists. Study after study conducted since 1970 concludes that public subsidies for stadiums and teams enrich athletes and owners at the expense of taxpayers.

"Across three decades, a small group of scholars has concluded that neither the teams nor the facilities they use are a source of substantial or even meaningful economic development," wrote David Swindell of Wright State University and Mark S. Rosentraub of Indiana University in a comprehensive 1998 study on public funding of stadiums and arenas.

"New facilities do not engender substantial job creation or economic development regardless of whether the frame of reference is a downtown area, a city, a county, or a region.

"In addition, placing facilities in downtown locations to influence overall development patterns seems to have no significant impact. Business location decisions are not made on the basis of the presence of a team. Thus, the economic spillovers resulting from a team's presence are minimal and do not provide the return necessary to justify the public's investment."

BOB's minimal impact on downtown businesses is also a reflection of the design of the stadium, which features two onsite full-service restaurants and bars plus an array of food, beverage and souvenir vendors scattered throughout the stadium.

A 1998 economic report prepared for the Downtown Phoenix Partnership by Valley economist Elliot Pollack noted that "the stadium and its associated restaurants account for approximately 94 percent of the increase in Downtown restaurant sales, with most of the sales captured by the ballpark's concessions stands."

As a result, Pollack noted, nearby businesses suffer.

"Apparently, visitors to the stadium are not traveling far beyond the stadium proper itself, perhaps due to the closeness of parking facilities in the warehouse district."

And this was before the fall, when Phoenix opened the 3,000-space Civic Plaza East parking garage located directly north of the ballpark. The parking garage will further concentrate baseball fans even closer to the stadium, sharply reducing pedestrian traffic that downtown restaurants and bars require to flourish.

Brian Mertz, bar manager of Fat Tuesday in the Arizona Center, says the garage, which was open for a few baseball games at the end of last season, had an immediate impact.

"We've lost a lot of business because of the parking garage right next to BOB," Mertz says. "We're three blocks away, and nobody wants to walk."

While a few bars -- Jackson's on Third, Cooper'stown, the Jefferson Street Grill and the Tee Pee Tap Room -- have flourished, at least on game days, the overall economic impact of the ballpark on the community remains murky.

Brian Kearney, executive director of Downtown Phoenix Partnership, says the value of BOB shouldn't be measured by the economic impact on neighboring businesses alone.

Instead, Kearney argues that the ballpark has helped create a "positive investment environment" downtown that is helping spur additional construction in the area.

Others would argue that BOB has had a negative impact on investment opportunities: The Diamondbacks sold $121 million in tax-free municipal bonds to help cover the team's share of construction of BOB. The bonds were sold through the Phoenix Industrial Development Authority. While the IDA is not liable for repayment of the bonds, the Diamondbacks' sale reduces IDA funds available for other projects. The tax-free bonds also amount to a federal tax subsidy to the Diamondbacks through lower financing costs.

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John Dougherty
Contact: John Dougherty
Amanda Scioscia
Contact: Amanda Scioscia