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Controversy Reigns Over Plans for Philly Stadiums

Wed July 05, 2000 - Northeast Edition
Lori Lovely

What do sports, politics and construction have in common? Besides hotly contested divergent opinion, the local economy. Proposed construction of two new sports stadiums in Philadelphia has sparked numerous controversies based on conflicting opinions. From issues such as where to locate the stadiums to who shall pay for them and will bids be let to only union contractors, the two facilities face a mixed bag of reaction.

Veterans Stadium, home to the Philadelphia Eagles football team and the Philadelphia Phillies baseball team, was built in 1970 at a cost of $50 million — one of the most expensive parks of its day. It seats more than 62,000 for baseball and more than 65,000 for football.

Today, with many cities building new state-of-the-art facilities exclusively for baseball or football, Philadelphia faces a similar demand. Many want to keep the Eagles from leaving town by providing a new stadium, with a separate new facility for the Phillies. Proponents of the project indicate that it would be an economic boon to the city, attracting more spectators, which equals more money.

Not everyone, however, is in agreement.

Cost Benefits of New Stadium

After analyzing the economics of public involvement in new stadium construction, the city of New York Independent Budget Office concluded (in “Double Play: The Economics and Financing of Stadiums for the Yankees and Mets”):

“Research consistently finds that new stadiums do not produce economic growth in metropolitan areas. These results imply that new stadiums do not lead to increases in tourism, nor do they serve as a significant attraction to non-retail establishments. To the extent that stadiums benefit the businesses near them, the benefits reflect the expenditures of metropolitan area residents.”

Similarly, Stanford University Professor of Economics Roger G. Noll and Smith College Professor of economics Andrew Zimbalist, authors of “Sports, Jobs & Taxes,” conclude that, “Regardless of whether the unit of analysis is a local neighborhood, a city or an entire metropolitan area, the economic benefits of sports facilities are de minimus.”

The city Controller’s Office claims that fans attending games at new stadiums are merely substituting one form of entertainment for another. Therefore, the amount of money generated in the local economy remains the same. To gain true economic growth, people from outside the city must attend games and spend money locally, or residents must spend money in the city that they would have otherwise spent elsewhere for entertainment.

The Need for a New Stadium

The Phillies baseball team claims that with the advent of new state-of-the-art baseball-only stadiums in Baltimore, Cleveland and Arlington, older multi-purpose facilities like “The Vet” must keep pace technologically. Team management envisions a classic grass-field, open-air venue with intimate seating for 45,000 designed for comfort.

A team of architects has been assembled to design a ballpark with an old-time feel but all the amenities of a modern facility. A wide main concourse will offer a full view of the field from anywhere in the park and will feature a variety of food options. In comparison to The Vet, the new stadium will be much smaller in size and scale.

The Central Philadelphia Development Corporation retained Arthur Andersen LLP to measure the economic impact on the Center City District, and on city and state revenues. The study concluded that erecting a stadium in Center City would improve the overall economic impact 82 percent — from $229 million (Veterans Stadium) to an estimated $417 million.

The Controller’s Office agrees that the operation of Veterans Stadium is a revenue-generator for the city. Operational costs and recent improvements total approximately $10,000 annually. Revenue from The Vet reaches about $13,000 annually, leaving a net profit of $3,000 each year.

Additional benefits could include taxes generated by activities at The Vet and the incalculable national attention derived from sports activities.

Furthermore, according to the terms of the lease, in 2001 the city will begin collecting increased revenue from luxury box income — part of the deal to keep the Eagles in town when they threatened to move to Phoenix during the 1980s. Total anticipated costs, including operations, improvements, etc., is $12,000 annually. With $14,000 in revenue expected from The Vet itself and an additional $4,000 from the luxury suites — totaling $18,000 annually — the projected net income is $6,000.

Costs of Old vs. New

Even if the city was to maintain Veterans Stadium in lieu of building two new facilities, there are costs involved. While vague estimates circulating in the media have the estimated capital needs of the stadium in excess of $100 million, an independent review of The Vet’s condition performed for the Department of Recreation returned different findings.

Ewing Cole Cherry Brott compiled the Veterans Stadium Building Assessment and Capital Requirements report to assist the city in formulating budgets for the remaining life of the stadium. It found that, based on the present condition of the main building elements and engineering systems, the city would spend approximately $23 million between 1999 and 2004 to enable Veterans Stadium to continue to function as a multi-purpose sports facility.

Repairs fall into three categories: first priority — conditions considered to be a safety hazard to the users, teams and/or general public; second priority — conditions that are not yet safety hazards, but if not addressed may become hazards; and third priority — conditions that should be addressed, but are not threats to safety/building operations.

Two new stadiums obviously would cost far more than either the estimate or the rumored estimates for upkeep of The Vet. How much more is undetermined, and no agreement has been reached as to who should pay for what. Estimates for construction of two new facilities have run as high as $1.2 billion, depending on whether both are built at the sports complex or the Phillies ballpark is constructed in Center City.

Demolition and repaving of the old stadium alone would cost $18 million. Even if the old stadium is demolished, the city is still responsible for paying debt service on recent renovations.

Where to Dig, Who to Charge

While the city Controller’s Office supports a plan to build the Phillies ballpark in the Center City District — due to greater economic benefit — State Senator Vincent J. Fumo claims that it would cost 50 percent more to build it there than at the sports complex, and he fears taxpayers will wind up footing the bill.

“I must question the financing at this time,” he explained. “We don’t know where that money is going to come from at this time. Taxpayers must have an explanation of where the extra money will come from.”

The Phillies estimated the cost of building the stadium in South Philadelphia at $315 million, while the Rendell administration estimated the cost of building in Center City at $395.4 million. According to Fumo’s analysis, one of the factors driving up the cost of building in the city is the expense of multilevel parking facilities, which he says could run as much as $85 million. The Philadelphia Industrial Development Corp. projects the cost at $30 million.

Fumo complains that if the state pays $85 million, the city contributes $100 million and the Phillies pay $130 million toward the cost of the new stadium, the taxpayers are left to make up the difference.

“We are very seriously concerned about whether or not the Phillies can pay that extra amount and also pay their share of $130 million,” Fumo said. “There’s a lot of unanswered questions here, and I think it’s only fair that some people start answering these questions.”

A recent draft of a lease agreement between Philadelphia and the Eagles and Phillies would have the city essentially absorb the extra cost of building a baseball stadium downtown and cover the tab, in part, with ticket surcharges and personal-seat license fees. The mayor has so far declined to make his stadium-financing plan public, and his staff said the administration’s proposal for dividing the costs constantly is being revised.

The document laid out a plan under which the city would pay for all the costs of acquiring and clearing for construction the proposed stadium sites. The Phillies would pay an unspecified portion of construction costs, and the Eagles would pay all of the costs to build their stadium in the sports complex.

That means the extra costs associated with buying land, reconfiguring streets and relocating utility lines for the downtown site — a figure estimated to be more than $300 million — would be paid by the city. The total cost of the proposed site at 12th and Vine, just north of Chinatown, is estimated at $650 million.

Cost estimates for the 12th and Vine site have been coming from other quarters. State Sen. Vincent Fumo’s staff has estimated the cost of the site at $685 million.

The city’s current cost estimate for the site is more than $100 million more than the first estimate of $545 million. Sources familiar with the city’s latest figures say the cost now stands at $650 million to $675 million.

Each year of delay could add about $20 million to the total cost of the project, Albright said.

City Council is planning its own investigation into how the stadiums can be financed, passing a resolution calling for hearings, according to The Philadelphia Inquirer. “This resolution asks that the people of Philadelphia be able to be heard on the impact of financing,” said Councilman David Cohen, who sponsors the measure. “We toss around money as if it means nothing. Where does that money come from?”

Cecilia Moy Yep, a board member of the Philadelphia Chinatown Development Corp., urged Council to exercise financial restraint.

“I call on all council members to say, ’No, we’re not buying anything we can’t afford,’ ” Yep said. “We’d like to buy the Mercedes, but the fact of the matter is we can only afford the Ford.”

Mayor Street has declared 12th and Vine the best place in Philadelphia to build a baseball stadium. The Phillies dislike the location, and the Eagles, who also are to get a new stadium in a package deal, are balking at the finances.

The public quarrel over costs highlights the complicated politics involved in selecting a site, which is expected to generate substantial revenue but create traffic, parking and other headaches for the neighborhood.

Area residents have deluged the city and the media with protests over the proposed Center City site.

One major complication has been the Phillies’ reluctance to buy into the site. Though team officials have said they are committed to trying to make it work, they have questioned the viability of the site, particularly with respect to cost.

According to The Philadelphia Inquirer, Mayor Street’s team of negotiators has been meeting behind closed doors with team representatives and council members had hoped that they would have an outline of an agreement in time for the June hearing. But Street has not released any information, although he originally said he would provide a cost estimate on the proposed site for the Phillies stadium and details of the city’s financing proposal.

A City Council hearing on stadium financing turned into an unrelenting, eight-hour tirade against the mayor, the Phillies, the Eagles and their stadium plans. Community members attacked Street on his key agenda issues of neighborhoods and children.

Advocates hate that the site is called “Chinatown” since it’s to the north and west of Chinatown proper. The Philadelphia Inquirer reports that “they hate that their arguments — how a stadium in Center City is better for the city as a whole, how traffic and parking problems could be addressed through creative solutions, how a stadium is a better use for the north-of-Vine area than the underused and undervalued properties there right now — forever seem to be

lost in the fist-shaking from opponents. Many have joined to form a coalition of pro-stadium forces called BAT — or Baseball Action Team — which listed statistics about jobs to be created and tax dollars to be generated by the Chinatown site.”

The construction trades have been strong advocates and have packed council chambers a number of times in recent months when the issue of has been on the table.

But the only ones invited to attend the hearing were two economists. The economists — professors, Andrew Zimbalist of Smith College and Mark Rosentraub of Indiana University, who have written books critical of public funding for stadiums — cautioned against spending public funds in the hope of generating more money for the city.

“If you want to do it for cultural or social reasons, then that’s one thing,” said Zimbalist, who argued that stadium projects merely shift resources from one place within a city to another, rather than generate an increase. “Don’t do it because you think it’s going to generate jobs.”

Rosentraub said he believed the teams could still turn a profit even if they shouldered all of the costs of the stadiums. “Both could be built without any tax dollars whatsoever from the city of Philadelphia, and both teams could still earn in excess of 10 percent per year return on their operations,” he explained.

Rosentraub said the teams would not leave such a large media market as Philadelphia, which currently ranks fifth, because there were no cities of comparable size that needed teams.

Cohen contended that because most teams have received public money to build stadiums, the Phillies would be at a competitive disadvantage if they had to bear the costs themselves. The two are not alone in their assertions.

Very few economic studies, except those funded by teams or stadium proponents, have shown an economic return to cities that invest in sports facilities.

Who Wields the Shovel

While politicos, ball teams and residents debate the cost and location of the proposed sports facilities, another battle looms. The Southeast Pennsylvania Chapter Associated Builders and Contractors Inc. has expressed a concern that the city may be pressured by labor unions to adopt a policy limiting stadium construction to union contractors.

The process by which public construction work is limited to contractors who are signatory to labor agreements is knows as a union-only project labor agreement. ABC asserts that these arrangements are discriminatory and provide no benefit to the hardworking taxpayers who fund them. Union-only PLAs generally require that workers come from union hiring halls.

ABC Executive Vice President Geoffrey Zeh explained that this is less a union/non-union issue than a competition bid issue. “If you limit the number of bidders,” he said, “prices rise.” ABC has published reports reflecting the significant cost overruns in PLA-constructed projects, including the Detroit Tigers Stadium, the Cleveland Browns Stadium, the Seattle Mariners Stadium and the Milwaukee Brewers Stadium.

These and many more show the “consistent pattern of cost overruns, limitations on competition, construction delays, construction defects, safety problems and diversity issues,” according to Zeh.

Not only is 80 percent of all construction work nationwide performed by non-union labor, but that free enterprise “keeps prices down, promotes competition and ensures better work,” Zeh emphasized.

Other problems, according to Zeh, when a PLA is in force include discrimination against minority workers and unemployed construction workers looking for jobs and/or training. “They’re frozen out in this circumstance,” he said. “There are plenty of kids in Philadelphia who could use job training, but you won’t see apprentice situations with a PLA.”

Zeh explained that the ABC’s responsibility is to “communicate the problems associated with union-only contracts to the politicians making decisions. Maybe it will take a Big Dig [Boston Central Artery/Tunnel Project], $8 billion over budget project with no end in sight, to make them understand.”

A spokesman for the deputy mayor’s office cautions against jumping the gun on this issue. “We’re not even at the bid-letting point,” he said. “Once we determine the site, we’ll let it out for bid.”

Zeh and the ABC are hoping that when it does let for bid, the bid is open to all.

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