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‘What about the community impact?’: The Corpus Christi ‘hook’
Sport Management Review 16 (2013) 524–532
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‘What about the community impact?’: The Corpus Christi ‘hook’ Emily S. Sparvero a,b, Stacy Warner b,* a b
The University of Texas at Austin, Department of Kinesiology and Health Education, 222 Bellmont, Austin, TX 78712, United States East Carolina University, Department of Kinesiology, 173 Minges Coliseum, MS 559, Greenville, NC 27858, United States
A R T I C L E I N F O
A B S T R A C T
Article history: Received 19 June 2012 Received in revised form 11 September 2012 Accepted 26 November 2012
This case study draws on theory in the following areas (1) public financing of sport facilities and in particular, the method of bonds and the impact on and involvement of local taxpayers, (2) community impact of minor league sport teams, and (3) leveraging of sport teams and facilities. This case is centered on Justin Drew, the president of the Corpus Christi Hooks, who must work with city officials to ensure that his minor league baseball team does not lose local support. The city of Corpus Christi helped finance the Hooks’ stadium a few years prior, and now with new members on City Council, tough economic times, and a history of folded professional sports teams in the city, Drew must be proactive in seeing that the Hooks do not meet a similar fate. The case presents a common challenge confronted by communities that host professional sport teams. In many cases, cities must provide some level of public financing for sport facilities in order to attract or retain a team. To gain public support, various promises are made about the potential for the team to transform the community. However, once public funding is secured and a team and facility is in place, it is unclear who has the responsibility for delivering on these promises. The situation presented in this case is not unique. In fact, similar claims are made about the impact of a sports team, regardless of the size of the host community or the type of team. This case gives students the opportunity to measure impact and also think critically about how to leverage a sports team to create value for the community. Although the characters in the case are fictitious the case draws upon actual facts and data from public records regarding Corpus Christi and their minor league baseball team, the Hooks; thus, providing students with a realistic dilemma to consider. The case is intended for use in Sport Finance/Economics and Sport Policy courses, but could also be adapted for other courses such as Sport Marketing, Sport Communication, Facilities and Event Management or even Research Methods. ß 2012 Sport Management Association of Australia and New Zealand. Published by Elsevier Ltd. All rights reserved.
Keywords: Community benefits Public financing of sport facilities Sport economics Sport leveraging
Teaching note This case study draws on theory in the following areas (1) public financing of sport facilities and in particular, the method of bonds and the impact on and involvement of local taxpayers, (2) community impact of minor league sport teams, and (3) leveraging of sport teams and facilities. This case is centered on Justin Drew, the president of the Corpus Christi Hooks, who must work with city officials to ensure that his minor league baseball team does not lose local support. The city of Corpus Christi helped finance the Hooks’ stadium a few years prior, and now with new members on City Council, tough economic
* Corresponding author. Tel.: +1 252 328 0095. E-mail addresses: [email protected], [email protected] (S. Warner). 1441-3523/$ – see front matter ß 2012 Sport Management Association of Australia and New Zealand. Published by Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.smr.2012.11.003
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times, and a history of folded professional sports teams in the city, Drew must be proactive in seeing that the Hooks do not meet a similar fate. The case presents a common challenge confronted by communities that host professional sport teams. In many cases, cities must provide some level of public financing for sport facilities in order to attract or retain a team. To gain public support, various promises are made about the potential for the team to transform the community. However, once public funding is secured and a team and facility is in place, it is unclear who has the responsibility for delivering on these promises. The situation presented in this case is not unique. In fact, similar claims are made about the impact of a sports team, regardless of the size of the host community or the type of team. This case gives students the opportunity to measure impact and also think critically about how to leverage a sports team to create value for the community. Although the characters in the case are fictitious the case draws upon actual facts and data from public records regarding Corpus Christi and their minor league baseball team, the Hooks; thus, providing students with a realistic dilemma to consider. The case is intended for use in Sport Finance/Economics and Sport Policy courses, but could also be adapted for other courses such as Sport Marketing, Sport Communication, Facilities and Event Management or even Research Methods. 1. Public financing of sport facilities The issues presented in this case are especially relevant to any sport management lectures or lessons that cover the issue of facility financing and/or the role of sport teams in their host communities. While this topic is multi-faceted, instructors of sport finance, sport economics and sport policy will likely find this case well suited for their classes. Given the recent trends of public subsidization being utilized for sport facilities, this case is also quite relevant to courses that deal with current or ethical issues in sports. 1.1. Background on public financing of sport facilities While the case is set in an American context, the use of public funds for sport facilities can be observed in various countries, at various governmental levels, and for various sporting events. In Australia, an estimated A$2.1 billion was spent on sport facilities in 2000–2001, with much of the expenditure concentrated on facilities for the Sydney Olympics (Wilson & Pomfret, 2009). Still, public finance of sport facilities is not limited to sport mega-events such as the Olympics. Wilson and Pomfret (2009) provide a list of recent Australian stadium projects, including facilities for cricket, the NRU, the AFL, and soccer, and the sources of public funds committed to these projects. Long (2005) provides a comprehensive analysis of the public sector cost of all major professional sport facilities in the U.S. (i.e., 99 of the stadiums and arenas used for the top professional leagues in football, basketball, baseball and hockey). From 1990 to 2001, the total cost of development for sport facility projects was $242 billion, and the average public subsidy during this time was $195 million. From 2003 to 2009, 90.3% of stadium construction was publicly financed (Brown, Rascher, Nagel, & McEvoy, 2010). In recent years, the cost of construction of sport facilities has increased dramatically, and in 2009, the Dallas Cowboys became the first team to play in a billion-dollar stadium. Local governments continue to subsidize sport projects in spite of the wealth of literature that suggests that economic benefits are often overstated (see Siegfried & Zimbalist, 2000 for overview). As of May 2012, both the Minnesota Vikings and the Atlanta Falcons are pursuing taxpayerfinanced stadia. While the costs associated with minor league stadiums are significantly less than the cost of major-league stadiums, the burden on taxpayers could be similar since most cities that host minor-league teams have a smaller tax base than their major-league counterparts. In order to contribute to the construction of sport facilities, local governments need to secure additional revenues. A common method of public finance of sport projects in the United States (and the method used by Corpus Christi in the case) is to issue a municipal bond. The local government needs money to cover the construction of the project before construction begins, and a bond issue allows the government to secure the needed funds through debt financing and pay back the capital over time. The municipality (city of Corpus Christi) issues the bonds, and the bondholders (any individual or entity desiring to make a financial investment) give the municipality the funds for the project (Whataburger Field). The bondholder receives interest payments (from Corpus Christi residents in the form of increased sales tax) over the life of the bond, and the principal is paid back at the end of the life of the bond. In this instance, the amount owed to the bondholder is paid back using sales tax revenues. However, a municipality may raise revenue by taxing various activities. If the municipality issues a general obligation (GO) bond, then the amount owed will be paid back using revenue from sales, income, or property taxes. A GO bond is backed by the full faith and credit of the local government, which can guarantee payment to the bondholder because of its power to tax its citizens. Municipalities can also generate revenue necessary through nonguaranteed debt (e.g., ticket taxes, hotel–motel taxes, etc.). A complete explanation of the bond process and state/local finance issues can be found in Howard and Crompton (2004), which would be an excellent prerequisite reading to consider assigning students. A GO bond issue frequently requires a public referendum, which allows voters to approve or reject public funding. In this case, the majority Corpus Christi citizens (55%) vote for 1/8 cent sales tax increase to fund the Hooks stadium. Referendum approval is not always a predictable outcome, as Brown and Paul (2002) found that voters approved only 24 of 40 sport facility referendums from 1984 to 2000. After an electoral defeat, many sport facility projects eventually find funding, whether through legislative action or a subsequent referendum. Delaney and Eckstein (2003) provide examples of how
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various financing packages for major league stadiums were implemented in various cities. This would be another relevant article for background reading. Students can use the facts presented in this case to discuss equity concerns related to the method of public financing that is chosen. Community leaders in Corpus Christi chose to provide 100% of the funding for the stadium, and they increased sales tax in order to do so. An increase in sales tax, as well as increases in property or income taxes, may raise issues of fairness, as residents are required to pay these taxes, even if they do not support the team, attend any of the events at the stadium, or derive any other benefits from the presence of the team and its facility. Alternative methods of financing, such as a tax of tickets to events at the stadium may be perceived as more equitable, as those who benefit the most from the team and stadium are the ones who provide the revenues needed for the project. Instructors may want to consider asking students to prepare a report to the Corpus Christi City Council outlining alternative funding recommendations they might have considered had the referendum not passed. Or to add greater depth to the discussion instructors could assign students a professional stadium to research and determine the financing arrangements.1 More specifically, student should research (a) who paid; (b) what was the percentage of public versus private financing; (c) estimates of total cost of the facilities; and (d) if there any significant opposition or previous efforts? Discussion questions related to sport facility financing in a community would be: 1. What other financing options could Corpus Christi City Council have chosen? 2. Why do you think the city opted to publicly finance the stadium (instead of pursuing a public-private partnership, as is the norm)? 3. Given the election results and the information provided in the case on the funding advantage of the pro-stadium group, do you believe that the public finance decisions reflect the preferences of local Corpus Christi residents? 4. Corpus Christi linked the stadium issue to two other important community concerns – economic development and affordable housing. How important do you think this linkage was to passage of the stadium issue? What opportunities did it provide for coalition building? (While this case provides an opportunity for students to apply public finance concepts to professional sports, it is worth noting that similar financing methods are used for any public sector sport, including local parks and recreation projects and even public high school athletic facilities.) 2. Community impact and leverage In order to justify public expenditure on sport projects, supporters often cite the economic benefits. There is widespread agreement among many economists that sport facilities have a minimal or even negative economic impact (e.g., Coates, 2007; Siegfried & Zimbalist, 2000). However, when communities engage in strategic planning for sport facilities and events, there is the potential to create value for their host communities (e.g., Chalip & Leyns, 2002; Sparvero & Chalip, 2007; Warner, 2012). First, instructors can use the economic impact summary that is provided in the case as a starting point for a discussion of economic impact analysis. The economic impact report in the case is a report of the overall tourism industry in Corpus Christi. Students can be asked to discuss whether the report can legitimately be used to support the claims that Drew makes about the impact of the team and stadium. The economic impact report in the case highlights the problems associated with using secondary data to justify Corpus Christi’s expenditure on the stadium, and students may be asked to develop an economic impact questionnaire and sampling design that would yield more useful information for Drew’s working group. Beyond economic impact, there are a number of non-economic benefits of hosting a sports team. For example, community self-esteem and community collective conscience are derived benefits citizen who are not fans receive as a result of living in a city with a professionals sports team (Eckstein & Delaney, 2002). In addition recent sport scholars have also focused on sports ability to foster a sense of community among fans, which has been found to have direct impacts on an individual’s quality of life (Clopton, 2008; Swyers, 2010; Warner, 2012; Warner, Shapiro, Dixon, Ridinger, & Harrison, 2011). These benefits are more difficult to quantify than economic benefits, although there are at least two methods that are frequently used to capture the value of such intangible benefits. First, contingent valuation method relies on individual’s willingness to pay for a sport facility. Contingent valuation method is a pricing strategy that simply surveys individuals and gauges the monetary value that individuals perceive something to have. For examples of contingent valuation method studies, see Johnson and Whitehead (2000), Johnson, Groothuis, and Whitehead (2001), and Walton, Longo, and Dawson (2008). Hedonic rent and wage analysis also allow for an objective measurement of the value of hosting a sports team. If hosting a sports team confers intangible benefits on the community, then residents are willing to pay higher rents or accept lower wages in return. Individuals internalize the value provided by the presence of a sports team and act accordingly in the marketplace. Dehring, Depken, and Ward (2007) and Tu (2005) specifically address both the potential positive and negative hedonic rent impacts and could also serve as prerequisite readings for lectures on the measuring the intangible benefits of sport.
1 Students can find this information through a search of the archives of a local newspaper or a search of newspapers available through LEXIS/NEXIS, Newsbank, or a similar database.
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While the measurement of the indirect benefits of hosting a sports team is important, it is unlikely that benefits will be realized without strategic planning and action. Sparvero and Chalip (2007) provide a framework for the leverage of professional sport facilities that can be used to identify potential points of leverage for Corpus Christi. Thus, it would be an ideal ancillary reading for classes focused on leveraging sport and sport facilities. While much of the research on leverage in the sport context has focused on events, Sparvero and Chalip demonstrated the potential to transfer this knowledge to professional sport teams. Their work suggests that professional sport teams have the potential to create benefits related to economic development, place marketing, and social welfare of host communities. For example, Chalip and Leyns (2002) found that business owners who implemented aggressive leveraging strategies during the Gold Coast Honda Indy benefitted from the event. Specifically, retail and restaurant owners implemented traditional marketing tools (e.g., extending hours, creating advertising tie-ins, theming the area, providing entertainment) and realized increased sales. The relatively permanent presence of a sport team provides additional opportunities for leverage related to economic development. A city may also leverage the presence of a sport team to enhance its image. When a city pursues a sports team, there is often talk of creating or maintaining the city’s reputation as a ‘‘world class’’ or ‘‘major league’’ city (Eisinger, 2000; Smith, 2005). Research on sport event leverage suggests that the destination image can be enhanced through the use of event media (Chalip, 2004). In the case of a sports team, various media and marketing can be used by a city to enhance its brand overall, as well as to specifically target businesses, tourists, and residents (Sparvero & Chalip, 2007). With regard to social welfare, Chalip (2006) proposes that sport events can foster celebration and camaraderie, and he identifies the following five ways in which this can be achieved: (1) enable sociability, (2) create event-related social events, (3) facilitate informal social opportunities, (4) produce ancillary events, and (5) theme widely. These points of leverage are consistent with Sparvero and Chalip’s (2007) framework that suggests that the presence of sport teams can be used to build communities, if there is an opportunity for socialization at the team’s venue as well as other informal gathering opportunities and a strategic development of fan groups. For lessons related to community impact and leveraging instructions, the assignments and class discussion can be viewed in two parts. First, the students can focus their attention on the idea of maximizing the value of the team, given that it is already in place and funding is established. Sport Policy course instructors would find this case useful for lessons related to stakeholder analysis and using sport to achieve desired policy outcomes. Sample assignments could require students to develop a list of strategy/tactics to maximize benefits of the Hooks and/or to conduct stakeholder analysis. As individuals or in groups, students could then conduct mock presentations of their ideas to ‘‘city council’’ in an effort to gain their support for the actions necessary for successful leverage. Friedman and Mason (2004), Chalip and Leyns (2002), and O’Brien (2006) would be excellent prerequisite readings for such an assignment. Instructors may consider asking students to write a persuasive opinion column in support of the stadium and what it can potentially do for the city. The following questions could be used as a discussion guide lessons related to community impact and leveraging: 1. How can Drew show that the team is valuable to the city? What steps do community stakeholders need to take to maximize the benefits associated with the team? 2. Why has Councilman Green been a particularly vocal critic of local spending projects? What strategies could be employed to change his mind? 3. How could the potential benefits of hosting the Hooks be linked to other community policy concerns? For example, how might the presence of the team affect education, crime, health/wellness, job attraction. 4. What strategies and tactics have local sport teams (in your given geographical area) used to demonstrate their value to the community? Readings Table Case teaching topic
References
Application
Community impact and leverage
Coates (2007) and Siegfried and Zimbalist (2000)
Coates (2007) and Siegfried and Zimbalist (2000) provide a review of the literature on the economic impact of professional sport facilities. These articles address the intangible benefits associated with sport (e.g., community self-esteem, psychic income, sense of community). These articles provide a means to quantify the intangible benefits associated with hosting a profession team or sporting event (e.g., contingent valuation method, hedonic rent, and wage analysis). The conceptual and empirical work in these articles elaborate on the ideas of leverage introduced in the case. Sparvero and Chalip (2007) provide the most specific framework for professional sport teams. This article uses stakeholder theory to examine stadium issues. It can be used by students to think of the various categories/actors in the community who can be involved in leveraging tactics.
Clopton (2008), Eckstein and Delaney (2002), Swyers (2010), Warner (2012), and Warner et al. (2011) Dehring et al. (2007), Johnson et al. (2001), Johnson and Whitehead (2000), Tu (2005), and Walton et al. (2008) Chalip (2004), Chalip (2006), Chalip and Leyns (2002), O’Brien (2006), and Sparvero and Chalip (2007)
Friedman and Mason (2004)
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(Continued ) Case teaching topic
References
Application
Public financing of sport facilities
Brown et al. (2010), Long (2005), and Wilson and Pomfret (2009)
These articles provide a summary of public subsidization of sport facility projects in the Australian and American contexts. This chapter from a Sport Finance text provides specifics on the municipal bond process. This article provides the results of stadium referenda in the United States and discusses their implications.
Howard and Crompton (2004) Delaney and Eckstein (2003)
References Brown, C., & Paul, D. M. (2002). The political scorecard of professional sports facility referendums in the United States, 1984–2000. Journal of Sport and Social Issues, 26, 248–267. Brown, M. T., Rascher, D. A., Nagel, M. S., & McEvoy, C. D. (2010). Financial management in the sport industry. Scottsdale, AZ: Holcomb Hathaway. Chalip, L. (2004). Beyond impact: A general model for sport event leverage. In B. W. Ritchie & D. Adair (Eds.), Sport tourism: Interrelationships, impacts, and issues. Buffalo: Channel View Publications. Chalip, L. (2006). Towards social leverage of sport events. Journal of Sport & Tourism, 11, 109–127. Chalip, L., & Leyns, A. (2002). Local business leveraging of a sport event: Managing an event for economic benefit. Journal of Sport Management, 16, 132–158. Clopton, A. W. (2008). College sports on campus: Uncovering the link between fan identification and sense of community. International Journal of Sport Management, 9, 343–362. Coates, D. (2007). Stadiums and arenas: Economic development or economic redistribution? Contemporary Economic Policy25(4). Dehring, C. A., Depken, C. A., & Ward, M. R. (2007). The impact of stadium announcements on residential property values: Evidence from a natural experiment in Dallas-Fort Worth. Contemporary Economic Policy, 25(4), 627–638. Delaney, K., & Eckstein, R. (2003). The devil is in the details: Neutralizing critical studies of publicly subsidized stadiums. Critical Sociology, 29, 189–210. Eckstein, R., & Delaney, K. (2002). New sports stadiums, community self-esteem and community collective conscience. Journal of Sport and Social Issues, 26, 235– 247. Eisinger, P. (2000). The politics of bread and circuses. Urban Affairs Review, 35, 316–333. Friedman, M. T., & Mason, D. S. (2004). A stakeholder approach to analyzing economic development decision making: Public subsidies for professional sport facilities. Economic Development Quarterly, 18, 236–254. Howard, D., & Crompton, J. L. (2004). Financing sport (2nd ed.). Morgantown, WV: FIT. Johnson, B., Groothuis, P., & Whitehead, J. (2001). The value of public goods generated by a major league sports team: The CVM approach. Journal of Sports Economics, 2(1), 6–21. Johnson, B. K., & Whitehead, J. C. (2000). Value of public goods from sports stadiums: The CVM approach. Contemporary Economics Policy, 18, 48–58. Long, J. G. (2005). Full count: The real cost of public funding for major league sports facilities. Journal of Sports Economics, 6, 119–143. O’Brien, D. (2006). Event business leveraging: The Sydney 2000 Olympic Games. Annals of Tourism Research, 33, 240–261. Siegfried, J., & Zimbalist, A. (2000). The economics of sport facilities and their communities. Journal of Economic Perspectives, 14, 95–114. Smith, A. (2005). Reimaging the city: The value of sport initiatives. Annals of Tourism Research, 32, 217–236. Sparvero, E. S., & Chalip, L. (2007). Professional teams as leverageable assets: Strategic creation of community value. Sport Management Review, 10, 1–30. Swyers, H. (2010). Wrigley regulars: Finding community in the bleachers? Champaign, IL: University of Illinois Press. Tu, C. C. (2005). How does a new sports stadium affect housing values? The Case of FedEx Field. Land Economics, 81(3), 379–395. Walton, H., Longo, A., & Dawson, P. (2008). A contingent valuation of the 2012 London Olympic Games: A regional perspective. Journal of Sport Economics, 9, 304–317. Warner, S. (2012). Sport and community. In G. B. Cunningham & J. N. Singer (Eds.), Sociology of sport and physical activity (2nd ed.). Center for Sport Management Research and Education. Warner, S., Shapiro, S., Dixon, M. A., Ridinger, L. L., & Harrison, S. (2011). The football factor: Shaping community on campus. Journal of Issues in Intercollegiate Athletics, 4, 236–256. Wilson, J. K., & Pomfret, J. (2009). Government subsidies for professional team sports in Australia. Australian Economic Review, 42(3), 264–275.
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‘What about the community impact?’: The Corpus Christi ‘hook’ Case study Justin Drew walked into the Corpus Christi City Hall in southern Texas, unsure of why the Mayor had asked to meet with him. As the president of the Corpus Christi Hooks, the city’s minor-league baseball team, Drew was no stranger to City Hall. In the years since 2005, when the team moved to Corpus Christi and Whataburger stadium opened, there had been many meetings with the Mayor, the City Manager, and various City Council members. In the early days, the meetings were to work out financing details and issues related to the stadium location. Then, there was recognition and appreciation of the team’s successes on the field (including a Texas League Championship in 2006) and off the field (the team’s varied and significant contributions to the community). Drew got along quite well with all of the government officials with whom he had worked, but this time he was a little uneasy. The Mayor hadn’t given him any information on the purpose of the meeting, so Drew was uncharacteristically unprepared. The city was in the midst of its annual budget hearings, and early reports indicated that the city was facing significant budget cuts that would affect the city’s services. The financing arrangement for the team’s stadium was somewhat unique. The city of Corpus Christi had provided 100% of the funding for the Hooks stadium, which amounted to $27.7 million, so Drew was worried that this had the potential to cause some problems both for the team and for those officials who had negotiated the deal in 2002. 1. Team history and financing background Efforts to attract a minor-league baseball team2 to Corpus Christi began in May of 2002, when Hall of Fame pitcher Nolan Ryan expressed his interest in bringing professional baseball back to the city and formally signed an agreement with city leaders. Many citizens were not only opposed, but outraged by the agreement (see Appendix A for examples of citizen’s comments). The agreement stated that the city would build a minor league stadium, and in turn, Ryan-Sanders BaseballTM would bring an affiliated minor league team to play in the stadium. In an effort to maximize support for the baseball stadium, the public funding was explicitly tied to economic development and affordable housing initiatives. In November 2002, Corpus Christi residents voted on the following proposals: Proposition 2. The adoption of a sales and use tax for the promotion and development of new and expanded business enterprises at the rate of 1/8 of one percent to be imposed for 15 years. Proposition 2A. If Proposition 2 is approved, authorizing the use of a portion of sales and use tax for the construction, operation, and maintenance of a minor league baseball stadium. Proposition 2B. If Proposition 2 is approved, authorizing the use of a portion of the sales and use tax for affordable housing, up to $500,000 annually.3 Corpus Christi voters approved Proposition 2 by a vote of 57–43%, they approved the baseball stadium funding by 55–45% (Proposition 2A), and they approved affordable housing by 56–44% (Proposition 2B). Thus, with a majority of voters’
2
Overview of Major and Minor League Baseball. Major League Baseball (MLB) is a professional baseball league and one of five major sport leagues in North America. MLB has 30 teams, of which 29 are located in major American cities, and 1 plays in Toronto, Ontario. MLB is divided into two leagues – the American League and the National League. Bud Selig is the current Commissioner of MLB, and he oversees the operations of MLB. MLB is organized under a franchise system. Under this system, teams are owned by an individual, group of individuals, or in some cases, a corporation. The team owner has decision making authority for the team and must operate within the parameters established in the league’s collective bargaining agreement. The Major League Baseball Players Association (MLBPA) represents current MLB players in collective bargaining and assists players with disputes (e.g., salary arbitration, grievances) as they arise. Each MLB team has a representative and an alternate to represent the players’ interests. Each MLB team is affiliated with minor league teams that serve as the player development system for MLB. Players in Minor League Baseball sign a contract with a MLB organization. The player is then assigned to one of the affiliated teams. There are four levels of play that allow a baseball player to develop skills as he progresses from level to level. Class A and Rookie level leagues are the lower levels of competition and the teams are typically composed of new draft picks and/or players who have little experience. Triple-A and Double-A leagues feature players with more experience and talent than the lower leagues. These leagues include players working their way up from lower levels of competition as well as MLB players who are either returning to the game after an injury or who have been demoted. The minor league baseball team in this case plays in the Texas League, one of three Double-A level leagues in affiliated minor league baseball. Occasionally minor league teams will relocate when there is a change in team ownership or a new city entices the team to move with financial incentives. In these cases, the owner will either have a personal preference to move the team to a specific area or be motivated by the prospect of greater financial gain resulting from the relocation. 3 Snyder, N. (2002, November 5). Votes that don’t OK funding still to be tallied; but if Prop 2 isn’t approved by half, baseball, affordable housing won’t pass. Corpus Christi Caller Times.
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approval, the city levied a 1/8 cent sales tax increase in order to raise the additional funds required for the cost of the stadium (i.e., construction costs plus interest), as well as economic development and affordable housing. The stadium was originally estimated to cost $15–18 million. However, final construction costs of the stadium totaled $27.7 million,4 and the final cost to the city was much greater because of the debt service. Most local politicians thought that the team was worth the cost, since it would add another entertainment option to this already popular tourist destination and would give the residents a first-class baseball operation in which they could take pride. There was some opposition from local residents, but supporters of the baseball stadium had a substantial funding advantage in the lead-up to the bond referendum. An organized group in favor of the stadium spent nearly $170,000 to promote the project as a key engine for economic development, whereas the opposition spent only $10,075 on efforts to defeat the ballot initiative. Additionally, stadium supporters assumed that linking the stadium initiative to the affordable housing issue would help generate support. The team’s first year was an unqualified success. A beautiful stadium was crafted from historic cotton warehouses on the site, and the sparkling Corpus Christi Bay provided a scenic backdrop past the outfield walls. A popular fast food restaurant, Whataburger, procured the naming rights to field. The team didn’t have a great year on the field – finishing next to last in the League – but the people of Corpus Christi loved the Hooks! Everywhere you looked, you saw people wearing Hooks merchandise. The next year was even better. In 2006, Roger Clemens was rehabbing an injury and made a 6-inning appearance with the Hooks. This appearance attracted national attention, and over 9000 fans came to the ballpark to see the star. The team won the Texas League Championship and claimed both the Texas League Manager and Pitcher of the Year. The excitement surrounding the team that year led to the team’s single-season attendance record of 506,398. In 2007, the team hosted the Texas League All-Star Game, which drew top executives and fans from all levels of baseball. Plus, the All-Star Game was a great opportunity to have community-wide celebrations in the days leading up to the game. Over the past several years, the team has produced some great major league talent. Justin Timberlake even starred in a movie as a Hooks player, and several of the movie scenes were filmed in the ballpark. The team was receiving noteworthy attention, however, it was unclear to all the stakeholders involved if the support and excitement could be maintained over the long term. The city’s track record supporting professional teams did not inspire a great deal of confidence. In the 20th century, Corpus Christi hosted eight minor league baseball teams, but none of these teams lasted more than four seasons. More recent history also provided cause for concern, with three local minor league teams closing up shop since 2007. The Coastal Bend Aviators, an unaffiliated minor league team that began play in the Corpus Christi area in 2003, ceased operations in 2007, citing a lack of local fan support. In 2009, the Corpus Christi Sharks of the af2 (arena football) ceased operations after three seasons. The Sharks averaged 4114 fans per game, but were ultimately unable to generate sufficient local support from individuals or sponsors. Similarly, in 2010, the Corpus Christi IceRays ceased operations and were replaced with a junior hockey team. The IceRays had played in Corpus Christi as a member of the Central Hockey League since 1997, but its owners were losing approximately $600,000 per season and could not afford to continue operations. Drew was worried that the Hooks could be next, and the loss of the Mayor’s support would be devastating to Hooks. With this history in mind, Drew entered the Mayor’s office, where he was greeted warmly. The mayor without hesitation said, ‘‘Let me cut right to the chase, Mr. Drew. The Hooks have done great things for this community and we love the team. But we’ve got some new members on the Council who weren’t around when you brought the team here and they are starting to ask a lot of questions about the city’s financial priorities. They don’t see the big picture of all the good things that have happened since the Hooks came to town. Instead, they are focused on the money that we are spending on the baseball stadium while we are considering cutting public services and shutting down senior centers. I guess these individuals – especially Larry Green – are just a reflection of the national mood – fiscal responsibility, cutting spending, and holding us all more accountable with how we spend tax dollars.’’ Drew knew that Councilman Green had been a particularly vocal critic of several local spending projects. Drew responded to the Mayor: ‘‘I appreciate Councilman Green’s concerns, but you are right that he is missing the big picture. When we fill the stadium, you are looking at six thousand people who are out on the town, enjoying Corpus Christi, spending money, and driving tax revenues. Then on top of that add all of the events that we are hosting that attract visitors from all over the state and even the country. I don’t think there’s any question that we have helped the Corpus Christi economy.’’ ‘‘I agree. That’s why I want us to get out in front of this issue. As the Council has to make tough budget choices in the coming weeks, I don’t want the Hooks to become some kind of political ping-pong ball. And I certainly don’t want our residents to start doubting the value of the city’s investment in the Hooks,’’ the mayor added. ‘‘I’m willing to do anything I can. What did you have in mind?,’’ Drew said. The mayor then responded, ‘‘I want you to head up a special task force for Tourism and Economic Development. You’ve got great relationships with all of the major stakeholders in town – get them together and come up with a strategy of how the city can measure and maximize our return on investment. I believe we are in great shape now, but we can do even more if we work together.’’ Drew left City Hall enthusiastic about the project. He knew in his heart that the team had done some great things for the city, but he didn’t have much hard data to support it. He also knew that there was an opportunity to generate even greater
4 Sturdevant, M. (2005, March 27). The real cost of revitalization; Final prices for arena, stadium on par with other cities’ costs. Corpus Christi Caller Times. P. A1.
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economic benefits for the city, if he could get the right people engaged and willing to contribute. Drew would need to assemble key business, community, and government leaders and work with them to identify economic priorities and the vision for development. The next day, Drew met with Councilman Green – his first official act as the head of the working group. ‘‘Good morning, Councilman, and thank you for agreeing to meet with me. I am really glad that you are willing to help us think about the value that the team creates for the city.’’ ‘‘My pleasure. In an ideal world, you and the Mayor would have thought about this ten years ago – before the city spent $28 million of the taxpayers’ money. But that is water under the bridge. The situation before us now is to figure out how to capitalize on the presence of the team and the facility. I’ve been looking over the last economic impact report the city commissioned. It’s from 2008 – three years after the Hooks came to town. Have you seen this?’’ Green passed a copy of the report across his desk to Drew (see Appendix B). ‘‘Oh, yes. I was on the Board of the Convention and Visitors Bureau when we received the results of that study. If I recall correctly, the bottom line was that visitors to Corpus bring over $1 billion into the local economy.’’ ‘‘That’s true, but the belief that a baseball team is responsible for that is just wrong-headed. The Hooks are too small of an organization to have any meaningful effect on the local economy. I’d be surprised if the team by itself brings enough money into the economy to cover the debt service on Whataburger Field. If you look closely at this report, you’ll see that only 3% of visitors reported attending a sporting event. Based on 7.2 million annual visitor-trips, that means only 216,000 people who visited our fine community went to a sporting event, and that includes all sporting events – high school, college, hockey, etc. To make matters worse, the visitors surveyed for this study are only spending $12 a day on entertainment. As I see it, we need to figure out a way to make these visitors stay longer and spend more – whether that means adding a night at the ballpark or nature tourists’ visits, or maybe even adding some other tourist attraction to the itinerary of people who come to see a ballgame.’’ Drew began to feel more relaxed as he realized that, while Green may have been critical of the choice to spend money on the ballpark, he seemed to be enthusiastic about trying to maximize the economic benefits to the community. ‘‘I agree with you completely. To be honest, I don’t think that we have done all that we could in terms of a coordinating among the different tourism groups in town.’’ ‘‘You are right. When the Hooks came here, everyone talked about all the possibilities. What has the team delivered? As far as I can see, there hasn’t been much development; the area around the stadium is remarkably similar to how it was when the team came to town. And any gains in tourism seem to be happy accidents and not the result of any coordinated effort to attract visitors, especially for sport events. Without any tangible outcomes, it is hard not to see this as one more case of corporate welfare. You all sit back and watch the money roll in, while the taxpayers of Corpus Christi pay the bills.’’ ‘‘Councilman, I don’t think that you are being completely fair. It isn’t up to the team to make all of these things happen. We are in the business of baseball, and we do baseball pretty well. We would love to have all of those things you just mentioned happen, but we can’t do it alone. Even if we had all the knowledge and resources, this still needs to be a community effort. We need to develop a coherent strategy, and that’s what I want to do with this task force.’’ It was clear Drew had a lofty task in front of him. The Hooks obviously need to garner community support from not only Councilman Green, but also numerous other stakeholders. Consequently, the Hooks must either demonstrate their ability to positively impact the community, or risk finding themselves on the ever-growing list of failed baseball teams in Corpus Christi. Appendix A. Letters to the Editor ———————————— Pie in the sky In regard to the latest boondoggle (i.e., the new baseball stadium) and the City ridiculous idea to consider supporting it. I hope the City Council will not let their potential pledge of support turn into a charity for an already wealthy baseball team owner, Mr. Ryan. Why not have Mr. Ryan pay to have his team here and not subsidize his pie in the sky ideas while City Council focuses on what they should be doing. Not neglecting the streets, parks, waterways, and the rest of our decaying infrastructure that so desperately need repairs. I don’t think Corpus Christi should even consider this idea, unless Mr. Ryan is shouldering a sizeable portion of the development, building, and operation and maintenance costs associated with it (including the ever-present parking problem in that area). Sick of corporate greed, Julian Forrester ————————————
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Take me out to the Library! On the very day of your featured article reporting the deplorable state of our library system, your editorial praised the spending of tax monies to build the baseball stadium and its surrounding infrastructure improvements. Obviously, this represents the misguided priorities of not only the city administration, but the Caller – Times Editorial Board as well. This city has sorely needed an improved library branch that is centrally located in Corpus Christi for decades. Citizens have to brave the dangerous freeway intersections to navigate their way to a remote corner of an obsolete shopping center parking lot in a deplorable situation to check out a book. We need a new library branch, not a baseball stadium. What good will a new baseball stadium do if our children can’t read the game program! Wake up City Council! Dorothy Waller ———————————— Don’t drink the water Let me get this straight. The City of Corpus Christi has tax money available to build a baseball stadium, which, of course, is a toy. It will never be used by a significant number of citizens by choice. Not every is a baseball fan, folks. Many of our citizens that might be baseball fans can’t afford game tickets. Yet this city, which does not have enough tax money to provide a drinking fountain at a community playground, is funding a baseball stadium! This is demeaning for every parent that wants to let their child go out and play and disgrace for the city. Need I remind everyone that we are in Texas and have a city full of kids that want to enjoy one of the few community playgrounds? We also have a major obesity epidemic, and are doing enough but encouraging our children to eat nachos, drink soda, and sit and watch others play at the new stadium. Thank you City Council for keeping our children inside playing video games, and providing them with another unhealthy activity to do. Not drinking the water, G. Edgar Radcliff 2.24.2004 ———————————— Appendix B. Economic impact summary
* * * b b b * * b b * b b b b b * b b * b b b
5
2008 Corpus Christi economic impact summary5 Visitors 7.2 million visitors (person trips to metro area) 17 million visitor-days (2.3 days per trip) Average traveling party of 2.3 17% day travelers, 54% hotels/motels, 7% camp 70% leisure travelers/30% business travelers 22% of visitors go to the beach/waterfront, 20% go sightseeing, 8% go hunting/fishing, 3% attend sporting event Spending Over $1 billion in total visitor destination spending in 2008 $110.70 per visitor per day Spending by category: restaurants and bars (25%), lodging (22%), local transportation (18%), shopping (15%), recreation and entertainment (11%) Visitors account for 81% of sales in local hotels, 60% airport activity, 55% car rentals, 26% local transportation, 25% amusements, 22% restaurants and bars Economic impacts Direct impacts of local tourism $514.4 million in value added (output) $275.6 million in wages and salaries 12,999 jobs $23.2 million in local taxes, $59.7 million in state taxes Tourism directly accounts for nearly 5% of local business activity and 7% of local workforce Tourism employment by sector: Restaurants and bars = 5733; hotels/motels = 2341 Amusements = 1777; retail trade = 1683 Total impacts $1.2 billion in value added $457.5 million in wages and salaries 21,737 jobs
http://www.visitcorpuschristitx.org/userfiles/file/TourismImpactStudy_2009.pdf.
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Sport Management Review journal homepage: www.elsevier.com/locate/smr
‘What about the community impact?’: The Corpus Christi ‘hook’ Emily S. Sparvero a,b, Stacy Warner b,* a b
The University of Texas at Austin, Department of Kinesiology and Health Education, 222 Bellmont, Austin, TX 78712, United States East Carolina University, Department of Kinesiology, 173 Minges Coliseum, MS 559, Greenville, NC 27858, United States
A R T I C L E I N F O
A B S T R A C T
Article history: Received 19 June 2012 Received in revised form 11 September 2012 Accepted 26 November 2012
This case study draws on theory in the following areas (1) public financing of sport facilities and in particular, the method of bonds and the impact on and involvement of local taxpayers, (2) community impact of minor league sport teams, and (3) leveraging of sport teams and facilities. This case is centered on Justin Drew, the president of the Corpus Christi Hooks, who must work with city officials to ensure that his minor league baseball team does not lose local support. The city of Corpus Christi helped finance the Hooks’ stadium a few years prior, and now with new members on City Council, tough economic times, and a history of folded professional sports teams in the city, Drew must be proactive in seeing that the Hooks do not meet a similar fate. The case presents a common challenge confronted by communities that host professional sport teams. In many cases, cities must provide some level of public financing for sport facilities in order to attract or retain a team. To gain public support, various promises are made about the potential for the team to transform the community. However, once public funding is secured and a team and facility is in place, it is unclear who has the responsibility for delivering on these promises. The situation presented in this case is not unique. In fact, similar claims are made about the impact of a sports team, regardless of the size of the host community or the type of team. This case gives students the opportunity to measure impact and also think critically about how to leverage a sports team to create value for the community. Although the characters in the case are fictitious the case draws upon actual facts and data from public records regarding Corpus Christi and their minor league baseball team, the Hooks; thus, providing students with a realistic dilemma to consider. The case is intended for use in Sport Finance/Economics and Sport Policy courses, but could also be adapted for other courses such as Sport Marketing, Sport Communication, Facilities and Event Management or even Research Methods. ß 2012 Sport Management Association of Australia and New Zealand. Published by Elsevier Ltd. All rights reserved.
Keywords: Community benefits Public financing of sport facilities Sport economics Sport leveraging
Teaching note This case study draws on theory in the following areas (1) public financing of sport facilities and in particular, the method of bonds and the impact on and involvement of local taxpayers, (2) community impact of minor league sport teams, and (3) leveraging of sport teams and facilities. This case is centered on Justin Drew, the president of the Corpus Christi Hooks, who must work with city officials to ensure that his minor league baseball team does not lose local support. The city of Corpus Christi helped finance the Hooks’ stadium a few years prior, and now with new members on City Council, tough economic
* Corresponding author. Tel.: +1 252 328 0095. E-mail addresses: [email protected], [email protected] (S. Warner). 1441-3523/$ – see front matter ß 2012 Sport Management Association of Australia and New Zealand. Published by Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.smr.2012.11.003
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times, and a history of folded professional sports teams in the city, Drew must be proactive in seeing that the Hooks do not meet a similar fate. The case presents a common challenge confronted by communities that host professional sport teams. In many cases, cities must provide some level of public financing for sport facilities in order to attract or retain a team. To gain public support, various promises are made about the potential for the team to transform the community. However, once public funding is secured and a team and facility is in place, it is unclear who has the responsibility for delivering on these promises. The situation presented in this case is not unique. In fact, similar claims are made about the impact of a sports team, regardless of the size of the host community or the type of team. This case gives students the opportunity to measure impact and also think critically about how to leverage a sports team to create value for the community. Although the characters in the case are fictitious the case draws upon actual facts and data from public records regarding Corpus Christi and their minor league baseball team, the Hooks; thus, providing students with a realistic dilemma to consider. The case is intended for use in Sport Finance/Economics and Sport Policy courses, but could also be adapted for other courses such as Sport Marketing, Sport Communication, Facilities and Event Management or even Research Methods. 1. Public financing of sport facilities The issues presented in this case are especially relevant to any sport management lectures or lessons that cover the issue of facility financing and/or the role of sport teams in their host communities. While this topic is multi-faceted, instructors of sport finance, sport economics and sport policy will likely find this case well suited for their classes. Given the recent trends of public subsidization being utilized for sport facilities, this case is also quite relevant to courses that deal with current or ethical issues in sports. 1.1. Background on public financing of sport facilities While the case is set in an American context, the use of public funds for sport facilities can be observed in various countries, at various governmental levels, and for various sporting events. In Australia, an estimated A$2.1 billion was spent on sport facilities in 2000–2001, with much of the expenditure concentrated on facilities for the Sydney Olympics (Wilson & Pomfret, 2009). Still, public finance of sport facilities is not limited to sport mega-events such as the Olympics. Wilson and Pomfret (2009) provide a list of recent Australian stadium projects, including facilities for cricket, the NRU, the AFL, and soccer, and the sources of public funds committed to these projects. Long (2005) provides a comprehensive analysis of the public sector cost of all major professional sport facilities in the U.S. (i.e., 99 of the stadiums and arenas used for the top professional leagues in football, basketball, baseball and hockey). From 1990 to 2001, the total cost of development for sport facility projects was $242 billion, and the average public subsidy during this time was $195 million. From 2003 to 2009, 90.3% of stadium construction was publicly financed (Brown, Rascher, Nagel, & McEvoy, 2010). In recent years, the cost of construction of sport facilities has increased dramatically, and in 2009, the Dallas Cowboys became the first team to play in a billion-dollar stadium. Local governments continue to subsidize sport projects in spite of the wealth of literature that suggests that economic benefits are often overstated (see Siegfried & Zimbalist, 2000 for overview). As of May 2012, both the Minnesota Vikings and the Atlanta Falcons are pursuing taxpayerfinanced stadia. While the costs associated with minor league stadiums are significantly less than the cost of major-league stadiums, the burden on taxpayers could be similar since most cities that host minor-league teams have a smaller tax base than their major-league counterparts. In order to contribute to the construction of sport facilities, local governments need to secure additional revenues. A common method of public finance of sport projects in the United States (and the method used by Corpus Christi in the case) is to issue a municipal bond. The local government needs money to cover the construction of the project before construction begins, and a bond issue allows the government to secure the needed funds through debt financing and pay back the capital over time. The municipality (city of Corpus Christi) issues the bonds, and the bondholders (any individual or entity desiring to make a financial investment) give the municipality the funds for the project (Whataburger Field). The bondholder receives interest payments (from Corpus Christi residents in the form of increased sales tax) over the life of the bond, and the principal is paid back at the end of the life of the bond. In this instance, the amount owed to the bondholder is paid back using sales tax revenues. However, a municipality may raise revenue by taxing various activities. If the municipality issues a general obligation (GO) bond, then the amount owed will be paid back using revenue from sales, income, or property taxes. A GO bond is backed by the full faith and credit of the local government, which can guarantee payment to the bondholder because of its power to tax its citizens. Municipalities can also generate revenue necessary through nonguaranteed debt (e.g., ticket taxes, hotel–motel taxes, etc.). A complete explanation of the bond process and state/local finance issues can be found in Howard and Crompton (2004), which would be an excellent prerequisite reading to consider assigning students. A GO bond issue frequently requires a public referendum, which allows voters to approve or reject public funding. In this case, the majority Corpus Christi citizens (55%) vote for 1/8 cent sales tax increase to fund the Hooks stadium. Referendum approval is not always a predictable outcome, as Brown and Paul (2002) found that voters approved only 24 of 40 sport facility referendums from 1984 to 2000. After an electoral defeat, many sport facility projects eventually find funding, whether through legislative action or a subsequent referendum. Delaney and Eckstein (2003) provide examples of how
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various financing packages for major league stadiums were implemented in various cities. This would be another relevant article for background reading. Students can use the facts presented in this case to discuss equity concerns related to the method of public financing that is chosen. Community leaders in Corpus Christi chose to provide 100% of the funding for the stadium, and they increased sales tax in order to do so. An increase in sales tax, as well as increases in property or income taxes, may raise issues of fairness, as residents are required to pay these taxes, even if they do not support the team, attend any of the events at the stadium, or derive any other benefits from the presence of the team and its facility. Alternative methods of financing, such as a tax of tickets to events at the stadium may be perceived as more equitable, as those who benefit the most from the team and stadium are the ones who provide the revenues needed for the project. Instructors may want to consider asking students to prepare a report to the Corpus Christi City Council outlining alternative funding recommendations they might have considered had the referendum not passed. Or to add greater depth to the discussion instructors could assign students a professional stadium to research and determine the financing arrangements.1 More specifically, student should research (a) who paid; (b) what was the percentage of public versus private financing; (c) estimates of total cost of the facilities; and (d) if there any significant opposition or previous efforts? Discussion questions related to sport facility financing in a community would be: 1. What other financing options could Corpus Christi City Council have chosen? 2. Why do you think the city opted to publicly finance the stadium (instead of pursuing a public-private partnership, as is the norm)? 3. Given the election results and the information provided in the case on the funding advantage of the pro-stadium group, do you believe that the public finance decisions reflect the preferences of local Corpus Christi residents? 4. Corpus Christi linked the stadium issue to two other important community concerns – economic development and affordable housing. How important do you think this linkage was to passage of the stadium issue? What opportunities did it provide for coalition building? (While this case provides an opportunity for students to apply public finance concepts to professional sports, it is worth noting that similar financing methods are used for any public sector sport, including local parks and recreation projects and even public high school athletic facilities.) 2. Community impact and leverage In order to justify public expenditure on sport projects, supporters often cite the economic benefits. There is widespread agreement among many economists that sport facilities have a minimal or even negative economic impact (e.g., Coates, 2007; Siegfried & Zimbalist, 2000). However, when communities engage in strategic planning for sport facilities and events, there is the potential to create value for their host communities (e.g., Chalip & Leyns, 2002; Sparvero & Chalip, 2007; Warner, 2012). First, instructors can use the economic impact summary that is provided in the case as a starting point for a discussion of economic impact analysis. The economic impact report in the case is a report of the overall tourism industry in Corpus Christi. Students can be asked to discuss whether the report can legitimately be used to support the claims that Drew makes about the impact of the team and stadium. The economic impact report in the case highlights the problems associated with using secondary data to justify Corpus Christi’s expenditure on the stadium, and students may be asked to develop an economic impact questionnaire and sampling design that would yield more useful information for Drew’s working group. Beyond economic impact, there are a number of non-economic benefits of hosting a sports team. For example, community self-esteem and community collective conscience are derived benefits citizen who are not fans receive as a result of living in a city with a professionals sports team (Eckstein & Delaney, 2002). In addition recent sport scholars have also focused on sports ability to foster a sense of community among fans, which has been found to have direct impacts on an individual’s quality of life (Clopton, 2008; Swyers, 2010; Warner, 2012; Warner, Shapiro, Dixon, Ridinger, & Harrison, 2011). These benefits are more difficult to quantify than economic benefits, although there are at least two methods that are frequently used to capture the value of such intangible benefits. First, contingent valuation method relies on individual’s willingness to pay for a sport facility. Contingent valuation method is a pricing strategy that simply surveys individuals and gauges the monetary value that individuals perceive something to have. For examples of contingent valuation method studies, see Johnson and Whitehead (2000), Johnson, Groothuis, and Whitehead (2001), and Walton, Longo, and Dawson (2008). Hedonic rent and wage analysis also allow for an objective measurement of the value of hosting a sports team. If hosting a sports team confers intangible benefits on the community, then residents are willing to pay higher rents or accept lower wages in return. Individuals internalize the value provided by the presence of a sports team and act accordingly in the marketplace. Dehring, Depken, and Ward (2007) and Tu (2005) specifically address both the potential positive and negative hedonic rent impacts and could also serve as prerequisite readings for lectures on the measuring the intangible benefits of sport.
1 Students can find this information through a search of the archives of a local newspaper or a search of newspapers available through LEXIS/NEXIS, Newsbank, or a similar database.
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While the measurement of the indirect benefits of hosting a sports team is important, it is unlikely that benefits will be realized without strategic planning and action. Sparvero and Chalip (2007) provide a framework for the leverage of professional sport facilities that can be used to identify potential points of leverage for Corpus Christi. Thus, it would be an ideal ancillary reading for classes focused on leveraging sport and sport facilities. While much of the research on leverage in the sport context has focused on events, Sparvero and Chalip demonstrated the potential to transfer this knowledge to professional sport teams. Their work suggests that professional sport teams have the potential to create benefits related to economic development, place marketing, and social welfare of host communities. For example, Chalip and Leyns (2002) found that business owners who implemented aggressive leveraging strategies during the Gold Coast Honda Indy benefitted from the event. Specifically, retail and restaurant owners implemented traditional marketing tools (e.g., extending hours, creating advertising tie-ins, theming the area, providing entertainment) and realized increased sales. The relatively permanent presence of a sport team provides additional opportunities for leverage related to economic development. A city may also leverage the presence of a sport team to enhance its image. When a city pursues a sports team, there is often talk of creating or maintaining the city’s reputation as a ‘‘world class’’ or ‘‘major league’’ city (Eisinger, 2000; Smith, 2005). Research on sport event leverage suggests that the destination image can be enhanced through the use of event media (Chalip, 2004). In the case of a sports team, various media and marketing can be used by a city to enhance its brand overall, as well as to specifically target businesses, tourists, and residents (Sparvero & Chalip, 2007). With regard to social welfare, Chalip (2006) proposes that sport events can foster celebration and camaraderie, and he identifies the following five ways in which this can be achieved: (1) enable sociability, (2) create event-related social events, (3) facilitate informal social opportunities, (4) produce ancillary events, and (5) theme widely. These points of leverage are consistent with Sparvero and Chalip’s (2007) framework that suggests that the presence of sport teams can be used to build communities, if there is an opportunity for socialization at the team’s venue as well as other informal gathering opportunities and a strategic development of fan groups. For lessons related to community impact and leveraging instructions, the assignments and class discussion can be viewed in two parts. First, the students can focus their attention on the idea of maximizing the value of the team, given that it is already in place and funding is established. Sport Policy course instructors would find this case useful for lessons related to stakeholder analysis and using sport to achieve desired policy outcomes. Sample assignments could require students to develop a list of strategy/tactics to maximize benefits of the Hooks and/or to conduct stakeholder analysis. As individuals or in groups, students could then conduct mock presentations of their ideas to ‘‘city council’’ in an effort to gain their support for the actions necessary for successful leverage. Friedman and Mason (2004), Chalip and Leyns (2002), and O’Brien (2006) would be excellent prerequisite readings for such an assignment. Instructors may consider asking students to write a persuasive opinion column in support of the stadium and what it can potentially do for the city. The following questions could be used as a discussion guide lessons related to community impact and leveraging: 1. How can Drew show that the team is valuable to the city? What steps do community stakeholders need to take to maximize the benefits associated with the team? 2. Why has Councilman Green been a particularly vocal critic of local spending projects? What strategies could be employed to change his mind? 3. How could the potential benefits of hosting the Hooks be linked to other community policy concerns? For example, how might the presence of the team affect education, crime, health/wellness, job attraction. 4. What strategies and tactics have local sport teams (in your given geographical area) used to demonstrate their value to the community? Readings Table Case teaching topic
References
Application
Community impact and leverage
Coates (2007) and Siegfried and Zimbalist (2000)
Coates (2007) and Siegfried and Zimbalist (2000) provide a review of the literature on the economic impact of professional sport facilities. These articles address the intangible benefits associated with sport (e.g., community self-esteem, psychic income, sense of community). These articles provide a means to quantify the intangible benefits associated with hosting a profession team or sporting event (e.g., contingent valuation method, hedonic rent, and wage analysis). The conceptual and empirical work in these articles elaborate on the ideas of leverage introduced in the case. Sparvero and Chalip (2007) provide the most specific framework for professional sport teams. This article uses stakeholder theory to examine stadium issues. It can be used by students to think of the various categories/actors in the community who can be involved in leveraging tactics.
Clopton (2008), Eckstein and Delaney (2002), Swyers (2010), Warner (2012), and Warner et al. (2011) Dehring et al. (2007), Johnson et al. (2001), Johnson and Whitehead (2000), Tu (2005), and Walton et al. (2008) Chalip (2004), Chalip (2006), Chalip and Leyns (2002), O’Brien (2006), and Sparvero and Chalip (2007)
Friedman and Mason (2004)
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(Continued ) Case teaching topic
References
Application
Public financing of sport facilities
Brown et al. (2010), Long (2005), and Wilson and Pomfret (2009)
These articles provide a summary of public subsidization of sport facility projects in the Australian and American contexts. This chapter from a Sport Finance text provides specifics on the municipal bond process. This article provides the results of stadium referenda in the United States and discusses their implications.
Howard and Crompton (2004) Delaney and Eckstein (2003)
References Brown, C., & Paul, D. M. (2002). The political scorecard of professional sports facility referendums in the United States, 1984–2000. Journal of Sport and Social Issues, 26, 248–267. Brown, M. T., Rascher, D. A., Nagel, M. S., & McEvoy, C. D. (2010). Financial management in the sport industry. Scottsdale, AZ: Holcomb Hathaway. Chalip, L. (2004). Beyond impact: A general model for sport event leverage. In B. W. Ritchie & D. Adair (Eds.), Sport tourism: Interrelationships, impacts, and issues. Buffalo: Channel View Publications. Chalip, L. (2006). Towards social leverage of sport events. Journal of Sport & Tourism, 11, 109–127. Chalip, L., & Leyns, A. (2002). Local business leveraging of a sport event: Managing an event for economic benefit. Journal of Sport Management, 16, 132–158. Clopton, A. W. (2008). College sports on campus: Uncovering the link between fan identification and sense of community. International Journal of Sport Management, 9, 343–362. Coates, D. (2007). Stadiums and arenas: Economic development or economic redistribution? Contemporary Economic Policy25(4). Dehring, C. A., Depken, C. A., & Ward, M. R. (2007). The impact of stadium announcements on residential property values: Evidence from a natural experiment in Dallas-Fort Worth. Contemporary Economic Policy, 25(4), 627–638. Delaney, K., & Eckstein, R. (2003). The devil is in the details: Neutralizing critical studies of publicly subsidized stadiums. Critical Sociology, 29, 189–210. Eckstein, R., & Delaney, K. (2002). New sports stadiums, community self-esteem and community collective conscience. Journal of Sport and Social Issues, 26, 235– 247. Eisinger, P. (2000). The politics of bread and circuses. Urban Affairs Review, 35, 316–333. Friedman, M. T., & Mason, D. S. (2004). A stakeholder approach to analyzing economic development decision making: Public subsidies for professional sport facilities. Economic Development Quarterly, 18, 236–254. Howard, D., & Crompton, J. L. (2004). Financing sport (2nd ed.). Morgantown, WV: FIT. Johnson, B., Groothuis, P., & Whitehead, J. (2001). The value of public goods generated by a major league sports team: The CVM approach. Journal of Sports Economics, 2(1), 6–21. Johnson, B. K., & Whitehead, J. C. (2000). Value of public goods from sports stadiums: The CVM approach. Contemporary Economics Policy, 18, 48–58. Long, J. G. (2005). Full count: The real cost of public funding for major league sports facilities. Journal of Sports Economics, 6, 119–143. O’Brien, D. (2006). Event business leveraging: The Sydney 2000 Olympic Games. Annals of Tourism Research, 33, 240–261. Siegfried, J., & Zimbalist, A. (2000). The economics of sport facilities and their communities. Journal of Economic Perspectives, 14, 95–114. Smith, A. (2005). Reimaging the city: The value of sport initiatives. Annals of Tourism Research, 32, 217–236. Sparvero, E. S., & Chalip, L. (2007). Professional teams as leverageable assets: Strategic creation of community value. Sport Management Review, 10, 1–30. Swyers, H. (2010). Wrigley regulars: Finding community in the bleachers? Champaign, IL: University of Illinois Press. Tu, C. C. (2005). How does a new sports stadium affect housing values? The Case of FedEx Field. Land Economics, 81(3), 379–395. Walton, H., Longo, A., & Dawson, P. (2008). A contingent valuation of the 2012 London Olympic Games: A regional perspective. Journal of Sport Economics, 9, 304–317. Warner, S. (2012). Sport and community. In G. B. Cunningham & J. N. Singer (Eds.), Sociology of sport and physical activity (2nd ed.). Center for Sport Management Research and Education. Warner, S., Shapiro, S., Dixon, M. A., Ridinger, L. L., & Harrison, S. (2011). The football factor: Shaping community on campus. Journal of Issues in Intercollegiate Athletics, 4, 236–256. Wilson, J. K., & Pomfret, J. (2009). Government subsidies for professional team sports in Australia. Australian Economic Review, 42(3), 264–275.
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‘What about the community impact?’: The Corpus Christi ‘hook’ Case study Justin Drew walked into the Corpus Christi City Hall in southern Texas, unsure of why the Mayor had asked to meet with him. As the president of the Corpus Christi Hooks, the city’s minor-league baseball team, Drew was no stranger to City Hall. In the years since 2005, when the team moved to Corpus Christi and Whataburger stadium opened, there had been many meetings with the Mayor, the City Manager, and various City Council members. In the early days, the meetings were to work out financing details and issues related to the stadium location. Then, there was recognition and appreciation of the team’s successes on the field (including a Texas League Championship in 2006) and off the field (the team’s varied and significant contributions to the community). Drew got along quite well with all of the government officials with whom he had worked, but this time he was a little uneasy. The Mayor hadn’t given him any information on the purpose of the meeting, so Drew was uncharacteristically unprepared. The city was in the midst of its annual budget hearings, and early reports indicated that the city was facing significant budget cuts that would affect the city’s services. The financing arrangement for the team’s stadium was somewhat unique. The city of Corpus Christi had provided 100% of the funding for the Hooks stadium, which amounted to $27.7 million, so Drew was worried that this had the potential to cause some problems both for the team and for those officials who had negotiated the deal in 2002. 1. Team history and financing background Efforts to attract a minor-league baseball team2 to Corpus Christi began in May of 2002, when Hall of Fame pitcher Nolan Ryan expressed his interest in bringing professional baseball back to the city and formally signed an agreement with city leaders. Many citizens were not only opposed, but outraged by the agreement (see Appendix A for examples of citizen’s comments). The agreement stated that the city would build a minor league stadium, and in turn, Ryan-Sanders BaseballTM would bring an affiliated minor league team to play in the stadium. In an effort to maximize support for the baseball stadium, the public funding was explicitly tied to economic development and affordable housing initiatives. In November 2002, Corpus Christi residents voted on the following proposals: Proposition 2. The adoption of a sales and use tax for the promotion and development of new and expanded business enterprises at the rate of 1/8 of one percent to be imposed for 15 years. Proposition 2A. If Proposition 2 is approved, authorizing the use of a portion of sales and use tax for the construction, operation, and maintenance of a minor league baseball stadium. Proposition 2B. If Proposition 2 is approved, authorizing the use of a portion of the sales and use tax for affordable housing, up to $500,000 annually.3 Corpus Christi voters approved Proposition 2 by a vote of 57–43%, they approved the baseball stadium funding by 55–45% (Proposition 2A), and they approved affordable housing by 56–44% (Proposition 2B). Thus, with a majority of voters’
2
Overview of Major and Minor League Baseball. Major League Baseball (MLB) is a professional baseball league and one of five major sport leagues in North America. MLB has 30 teams, of which 29 are located in major American cities, and 1 plays in Toronto, Ontario. MLB is divided into two leagues – the American League and the National League. Bud Selig is the current Commissioner of MLB, and he oversees the operations of MLB. MLB is organized under a franchise system. Under this system, teams are owned by an individual, group of individuals, or in some cases, a corporation. The team owner has decision making authority for the team and must operate within the parameters established in the league’s collective bargaining agreement. The Major League Baseball Players Association (MLBPA) represents current MLB players in collective bargaining and assists players with disputes (e.g., salary arbitration, grievances) as they arise. Each MLB team has a representative and an alternate to represent the players’ interests. Each MLB team is affiliated with minor league teams that serve as the player development system for MLB. Players in Minor League Baseball sign a contract with a MLB organization. The player is then assigned to one of the affiliated teams. There are four levels of play that allow a baseball player to develop skills as he progresses from level to level. Class A and Rookie level leagues are the lower levels of competition and the teams are typically composed of new draft picks and/or players who have little experience. Triple-A and Double-A leagues feature players with more experience and talent than the lower leagues. These leagues include players working their way up from lower levels of competition as well as MLB players who are either returning to the game after an injury or who have been demoted. The minor league baseball team in this case plays in the Texas League, one of three Double-A level leagues in affiliated minor league baseball. Occasionally minor league teams will relocate when there is a change in team ownership or a new city entices the team to move with financial incentives. In these cases, the owner will either have a personal preference to move the team to a specific area or be motivated by the prospect of greater financial gain resulting from the relocation. 3 Snyder, N. (2002, November 5). Votes that don’t OK funding still to be tallied; but if Prop 2 isn’t approved by half, baseball, affordable housing won’t pass. Corpus Christi Caller Times.
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approval, the city levied a 1/8 cent sales tax increase in order to raise the additional funds required for the cost of the stadium (i.e., construction costs plus interest), as well as economic development and affordable housing. The stadium was originally estimated to cost $15–18 million. However, final construction costs of the stadium totaled $27.7 million,4 and the final cost to the city was much greater because of the debt service. Most local politicians thought that the team was worth the cost, since it would add another entertainment option to this already popular tourist destination and would give the residents a first-class baseball operation in which they could take pride. There was some opposition from local residents, but supporters of the baseball stadium had a substantial funding advantage in the lead-up to the bond referendum. An organized group in favor of the stadium spent nearly $170,000 to promote the project as a key engine for economic development, whereas the opposition spent only $10,075 on efforts to defeat the ballot initiative. Additionally, stadium supporters assumed that linking the stadium initiative to the affordable housing issue would help generate support. The team’s first year was an unqualified success. A beautiful stadium was crafted from historic cotton warehouses on the site, and the sparkling Corpus Christi Bay provided a scenic backdrop past the outfield walls. A popular fast food restaurant, Whataburger, procured the naming rights to field. The team didn’t have a great year on the field – finishing next to last in the League – but the people of Corpus Christi loved the Hooks! Everywhere you looked, you saw people wearing Hooks merchandise. The next year was even better. In 2006, Roger Clemens was rehabbing an injury and made a 6-inning appearance with the Hooks. This appearance attracted national attention, and over 9000 fans came to the ballpark to see the star. The team won the Texas League Championship and claimed both the Texas League Manager and Pitcher of the Year. The excitement surrounding the team that year led to the team’s single-season attendance record of 506,398. In 2007, the team hosted the Texas League All-Star Game, which drew top executives and fans from all levels of baseball. Plus, the All-Star Game was a great opportunity to have community-wide celebrations in the days leading up to the game. Over the past several years, the team has produced some great major league talent. Justin Timberlake even starred in a movie as a Hooks player, and several of the movie scenes were filmed in the ballpark. The team was receiving noteworthy attention, however, it was unclear to all the stakeholders involved if the support and excitement could be maintained over the long term. The city’s track record supporting professional teams did not inspire a great deal of confidence. In the 20th century, Corpus Christi hosted eight minor league baseball teams, but none of these teams lasted more than four seasons. More recent history also provided cause for concern, with three local minor league teams closing up shop since 2007. The Coastal Bend Aviators, an unaffiliated minor league team that began play in the Corpus Christi area in 2003, ceased operations in 2007, citing a lack of local fan support. In 2009, the Corpus Christi Sharks of the af2 (arena football) ceased operations after three seasons. The Sharks averaged 4114 fans per game, but were ultimately unable to generate sufficient local support from individuals or sponsors. Similarly, in 2010, the Corpus Christi IceRays ceased operations and were replaced with a junior hockey team. The IceRays had played in Corpus Christi as a member of the Central Hockey League since 1997, but its owners were losing approximately $600,000 per season and could not afford to continue operations. Drew was worried that the Hooks could be next, and the loss of the Mayor’s support would be devastating to Hooks. With this history in mind, Drew entered the Mayor’s office, where he was greeted warmly. The mayor without hesitation said, ‘‘Let me cut right to the chase, Mr. Drew. The Hooks have done great things for this community and we love the team. But we’ve got some new members on the Council who weren’t around when you brought the team here and they are starting to ask a lot of questions about the city’s financial priorities. They don’t see the big picture of all the good things that have happened since the Hooks came to town. Instead, they are focused on the money that we are spending on the baseball stadium while we are considering cutting public services and shutting down senior centers. I guess these individuals – especially Larry Green – are just a reflection of the national mood – fiscal responsibility, cutting spending, and holding us all more accountable with how we spend tax dollars.’’ Drew knew that Councilman Green had been a particularly vocal critic of several local spending projects. Drew responded to the Mayor: ‘‘I appreciate Councilman Green’s concerns, but you are right that he is missing the big picture. When we fill the stadium, you are looking at six thousand people who are out on the town, enjoying Corpus Christi, spending money, and driving tax revenues. Then on top of that add all of the events that we are hosting that attract visitors from all over the state and even the country. I don’t think there’s any question that we have helped the Corpus Christi economy.’’ ‘‘I agree. That’s why I want us to get out in front of this issue. As the Council has to make tough budget choices in the coming weeks, I don’t want the Hooks to become some kind of political ping-pong ball. And I certainly don’t want our residents to start doubting the value of the city’s investment in the Hooks,’’ the mayor added. ‘‘I’m willing to do anything I can. What did you have in mind?,’’ Drew said. The mayor then responded, ‘‘I want you to head up a special task force for Tourism and Economic Development. You’ve got great relationships with all of the major stakeholders in town – get them together and come up with a strategy of how the city can measure and maximize our return on investment. I believe we are in great shape now, but we can do even more if we work together.’’ Drew left City Hall enthusiastic about the project. He knew in his heart that the team had done some great things for the city, but he didn’t have much hard data to support it. He also knew that there was an opportunity to generate even greater
4 Sturdevant, M. (2005, March 27). The real cost of revitalization; Final prices for arena, stadium on par with other cities’ costs. Corpus Christi Caller Times. P. A1.
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economic benefits for the city, if he could get the right people engaged and willing to contribute. Drew would need to assemble key business, community, and government leaders and work with them to identify economic priorities and the vision for development. The next day, Drew met with Councilman Green – his first official act as the head of the working group. ‘‘Good morning, Councilman, and thank you for agreeing to meet with me. I am really glad that you are willing to help us think about the value that the team creates for the city.’’ ‘‘My pleasure. In an ideal world, you and the Mayor would have thought about this ten years ago – before the city spent $28 million of the taxpayers’ money. But that is water under the bridge. The situation before us now is to figure out how to capitalize on the presence of the team and the facility. I’ve been looking over the last economic impact report the city commissioned. It’s from 2008 – three years after the Hooks came to town. Have you seen this?’’ Green passed a copy of the report across his desk to Drew (see Appendix B). ‘‘Oh, yes. I was on the Board of the Convention and Visitors Bureau when we received the results of that study. If I recall correctly, the bottom line was that visitors to Corpus bring over $1 billion into the local economy.’’ ‘‘That’s true, but the belief that a baseball team is responsible for that is just wrong-headed. The Hooks are too small of an organization to have any meaningful effect on the local economy. I’d be surprised if the team by itself brings enough money into the economy to cover the debt service on Whataburger Field. If you look closely at this report, you’ll see that only 3% of visitors reported attending a sporting event. Based on 7.2 million annual visitor-trips, that means only 216,000 people who visited our fine community went to a sporting event, and that includes all sporting events – high school, college, hockey, etc. To make matters worse, the visitors surveyed for this study are only spending $12 a day on entertainment. As I see it, we need to figure out a way to make these visitors stay longer and spend more – whether that means adding a night at the ballpark or nature tourists’ visits, or maybe even adding some other tourist attraction to the itinerary of people who come to see a ballgame.’’ Drew began to feel more relaxed as he realized that, while Green may have been critical of the choice to spend money on the ballpark, he seemed to be enthusiastic about trying to maximize the economic benefits to the community. ‘‘I agree with you completely. To be honest, I don’t think that we have done all that we could in terms of a coordinating among the different tourism groups in town.’’ ‘‘You are right. When the Hooks came here, everyone talked about all the possibilities. What has the team delivered? As far as I can see, there hasn’t been much development; the area around the stadium is remarkably similar to how it was when the team came to town. And any gains in tourism seem to be happy accidents and not the result of any coordinated effort to attract visitors, especially for sport events. Without any tangible outcomes, it is hard not to see this as one more case of corporate welfare. You all sit back and watch the money roll in, while the taxpayers of Corpus Christi pay the bills.’’ ‘‘Councilman, I don’t think that you are being completely fair. It isn’t up to the team to make all of these things happen. We are in the business of baseball, and we do baseball pretty well. We would love to have all of those things you just mentioned happen, but we can’t do it alone. Even if we had all the knowledge and resources, this still needs to be a community effort. We need to develop a coherent strategy, and that’s what I want to do with this task force.’’ It was clear Drew had a lofty task in front of him. The Hooks obviously need to garner community support from not only Councilman Green, but also numerous other stakeholders. Consequently, the Hooks must either demonstrate their ability to positively impact the community, or risk finding themselves on the ever-growing list of failed baseball teams in Corpus Christi. Appendix A. Letters to the Editor ———————————— Pie in the sky In regard to the latest boondoggle (i.e., the new baseball stadium) and the City ridiculous idea to consider supporting it. I hope the City Council will not let their potential pledge of support turn into a charity for an already wealthy baseball team owner, Mr. Ryan. Why not have Mr. Ryan pay to have his team here and not subsidize his pie in the sky ideas while City Council focuses on what they should be doing. Not neglecting the streets, parks, waterways, and the rest of our decaying infrastructure that so desperately need repairs. I don’t think Corpus Christi should even consider this idea, unless Mr. Ryan is shouldering a sizeable portion of the development, building, and operation and maintenance costs associated with it (including the ever-present parking problem in that area). Sick of corporate greed, Julian Forrester ————————————
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Take me out to the Library! On the very day of your featured article reporting the deplorable state of our library system, your editorial praised the spending of tax monies to build the baseball stadium and its surrounding infrastructure improvements. Obviously, this represents the misguided priorities of not only the city administration, but the Caller – Times Editorial Board as well. This city has sorely needed an improved library branch that is centrally located in Corpus Christi for decades. Citizens have to brave the dangerous freeway intersections to navigate their way to a remote corner of an obsolete shopping center parking lot in a deplorable situation to check out a book. We need a new library branch, not a baseball stadium. What good will a new baseball stadium do if our children can’t read the game program! Wake up City Council! Dorothy Waller ———————————— Don’t drink the water Let me get this straight. The City of Corpus Christi has tax money available to build a baseball stadium, which, of course, is a toy. It will never be used by a significant number of citizens by choice. Not every is a baseball fan, folks. Many of our citizens that might be baseball fans can’t afford game tickets. Yet this city, which does not have enough tax money to provide a drinking fountain at a community playground, is funding a baseball stadium! This is demeaning for every parent that wants to let their child go out and play and disgrace for the city. Need I remind everyone that we are in Texas and have a city full of kids that want to enjoy one of the few community playgrounds? We also have a major obesity epidemic, and are doing enough but encouraging our children to eat nachos, drink soda, and sit and watch others play at the new stadium. Thank you City Council for keeping our children inside playing video games, and providing them with another unhealthy activity to do. Not drinking the water, G. Edgar Radcliff 2.24.2004 ———————————— Appendix B. Economic impact summary
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2008 Corpus Christi economic impact summary5 Visitors 7.2 million visitors (person trips to metro area) 17 million visitor-days (2.3 days per trip) Average traveling party of 2.3 17% day travelers, 54% hotels/motels, 7% camp 70% leisure travelers/30% business travelers 22% of visitors go to the beach/waterfront, 20% go sightseeing, 8% go hunting/fishing, 3% attend sporting event Spending Over $1 billion in total visitor destination spending in 2008 $110.70 per visitor per day Spending by category: restaurants and bars (25%), lodging (22%), local transportation (18%), shopping (15%), recreation and entertainment (11%) Visitors account for 81% of sales in local hotels, 60% airport activity, 55% car rentals, 26% local transportation, 25% amusements, 22% restaurants and bars Economic impacts Direct impacts of local tourism $514.4 million in value added (output) $275.6 million in wages and salaries 12,999 jobs $23.2 million in local taxes, $59.7 million in state taxes Tourism directly accounts for nearly 5% of local business activity and 7% of local workforce Tourism employment by sector: Restaurants and bars = 5733; hotels/motels = 2341 Amusements = 1777; retail trade = 1683 Total impacts $1.2 billion in value added $457.5 million in wages and salaries 21,737 jobs
http://www.visitcorpuschristitx.org/userfiles/file/TourismImpactStudy_2009.pdf.