In a world in which American cities have handed over billions of dollars in public money to finance sports arenas and stadiums, there is perhaps one city that stands above the rest as a warning for what can go wrong when they do so. It just so happens that place is Glendale, Ariz., which will host Super Bowl XLIX this Sunday.
Glendale has spent liberally on sports in the past decade and a half, luring professional hockey, football, and spring training baseball with millions of dollars of its own money and plenty of help from the state. Sunday will mark the second time it has hosted the Super Bowl, and the game’s biggest proponents are, in typical fashion, making the argument that helped sell all of this sporting infrastructure that brought teams and events to Glendale in the first place: it will be a boon for the local economy.
The Arizona Super Bowl Host Committee, in fact, estimates that the game will bring some $500 million in benefits to the state economy. A significant portion of that, in theory, should be reserved for Glendale, the host city that sits, with a population of just over 230,000, a few miles northwest of Phoenix.
The problem is that the Super Bowl almost certainly won’t generate $500 million in economic benefits for Arizona. Economic research has shown that for a variety of reasons — among them: a failure to account for costs, money that leaks out of the local economy, and money that would have been spent anyway or, in the absence of such an event, elsewhere in the city — Super Bowls and other mega-events and the publicly-funded stadiums built to host them virtually never have such an effect. They may provide minimal gains, and sometimes losses, to host cities, but they’re never major shots in the arm. Cities that believe otherwise, about stadiums or the events themselves, run the risk of major trouble.
For Glendale, that has become all too true.
The city “certainly sticks out like a sore thumb” as an argument against the idea of using arenas and events as economic stimulus, said Minnesota State University-Mankato economics professor Phil Miller, who contributes to the Sports Economist blog and has written about Glendale in the past. Instead of an economic boom, the city’s expenditures on sports-related infrastructure and events has created little aside from economic and budgetary headaches.
The Super Bowl or the stadium that will host it is hardly the primary culprit.
Rather, Glendale’s headaches are largely the result of the arena it built to move the NHL’s Phoenix Coyotes out of Phoenix itself, as Pat Garofalo and I detailed in 2012. Glendale forked over more than two-thirds of the $220 million cost for the facility now known as Gila River Arena, even though the team wasn’t valued at even that much and had been losing money for years. Shortly thereafter, the Great Recession hit. As the city’s economy and finances reeled, the Coyotes went bottom-up and filed for bankruptcy, leaving Glendale on the hook for massive arena costs the team couldn’t cover, all while facing the downturn of the recession.
The financial problems began before that — it was reported after the bankruptcy that the city had cut a special deal with the Coyotes that allowed the team to avoid paying rent, saving it and costing the city as much as $4 million over a year. After the bankruptcy, Glendale agreed to pay $50 million in public money to manage the arena while the NHL temporarily owned the team, then agreed to hand over $15 million annually for 15 years to cover arena operating costs. One analysis said that under the arena’s rosiest financial projection the city would lose $9 million annually on the facility. The deal quickly got even worse: last year, arena revenues fell nearly $2.5 million short of projections. Glendale was responsible for covering the gap.
To cover for the city’s “crippling financial problems,” caused in part by the $25 million in annual debt servicing costs for the arena and spring training baseball park, Glendale in recent years has been forced to cut public jobs and services. It has raised taxes. At different points, it considered putting City Hall up as collateral for a loan to cover its bond debt. At others, bankruptcy wasn’t off the table. The city’s budget picture is slightly improved now from just a few years ago, but Glendale still faced a $17.6 million initial budget gap in 2014.
The Super Bowl didn’t create these problems. But if past results and future projections are any indication, it won’t help.
“I totally believe we will lose money on this,” Mayor Jerry Weiers told ESPN’s Mina Kimes last week. The city lost $1.6 million hosting Super Bowl XLII in 2008, according to Weiers, who pegs this year’s figure around $2 million. Glendale is spending at least that much on Super Bowl-related security.
University of Phoenix Stadium, meanwhile, ran into its own funding problems last year, when a judge ruled that the tax on hotel rooms and rental cars used to finance it (and spring training baseball facilities) was unconstitutional. The issue is still weaving through courts, but more uncertainty and potential problems are ahead for the state of Arizona, which is also providing a reported $4 million in sales tax breaks on Super Bowl tickets to the NFL. Glendale should avoid any of those problems, according to city officials, as its future budget plans did not include potential revenues from the state tourism authority that are now in jeopardy because of the court ruling.
Even at its best, the Super Bowl is merely indicative of the problems with the gamble Glendale made. Professional sports were supposed to be a means of selling the city as a place to visit. But the long-term impact of those sports and big-time sporting events on tourism is, according to Miller and other economists, almost always smaller than projected. Holy Cross sports economist Victor Matheson has estimated that over the course of a season, just 20 percent of fans will come from outside a local area. Even for a mega-event for the Super Bowl, which does draw large amounts of tourists, the benefits are narrow and temporary.
Miller compared the city’s approach to that of universities that spend big on athletics as a means of building a lavish “front porch” to show off the the house.
But in Glendale, Miller said, “the front porch is in dire need of repairs.”
“I suppose they thought, ‘if you build it, they will come,'” he said. “But really, it’s just not much of an investment. With these mega-events, yeah, you’ll have people coming, staying at hotels, going to bars and restaurants. But then they go, and, OK, show’s over. It doesn’t leave behind much of a lasting impact. And it’s a very narrow impact.”
The city’s problems won’t be visible on television or even from the stands Sunday night, because when New England and Seattle take the field, the bright lights of the world will be on the part Glendale that Glendale wants us to see.
In the shadows beyond the stadium, though, will sit a city that bet big on publicly subsidized sports, and so far has only lost.