1 / 32

New York Sports and Convention Center: A Definite “False Start”

New York Sports and Convention Center: A Definite “False Start” Rajasekharan Pazhaniappan Erica Shinohara Jessica Strong April 30, 2005 Outline Scope of our study Overview of New York Sports and Convention Center (NYSCC) Arguments for / against stadiums Key assumptions and Methodology

johana
Download Presentation

New York Sports and Convention Center: A Definite “False Start”

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. New York Sports and Convention Center:A Definite “False Start” Rajasekharan Pazhaniappan Erica Shinohara Jessica Strong April 30, 2005

  2. Outline • Scope of our study • Overview of New York Sports and Convention Center (NYSCC) • Arguments for / against stadiums • Key assumptions and Methodology • Cost and Benefits of the project • Synthesis • Conclusions

  3. Scope of Our Study • Brief comparison between NYSCC Developer report and the NYC IBO analysis • Critical examination of assumptions made for Cost Benefit computation • Analyze the impact of the assumptions made on the reported net benefits • Limited to City of New York’s perspective

  4. Jets’ Background Information • Since 1984, home games held at the Meadowlands Stadium in New Jersey (shared with the New York Giants) • 2004 franchise value = $567 million • Current capacity is 80,242 seats • Average attendance from 1983-2004 was 65,731 • In 2003, average ticket price was $66 per ticket; $368 per game for a family of 4

  5. Hudson Yards Project Background • Multi-purpose facility construction and renovation • Construction of new 75,000 seat open-air stadium, exhibition and entertainment center • Expansion and renovation of existing Jacob Javits Convention Center; 1 million new sq.ft. • Extension of No. 7 subway line

  6. Current use of area

  7. Future plans

  8. Proponents argue that stadiums bring economic development to cities • Increased revenue through tourism spending, new jobs, and taxes • City becomes a “big-league” city through publicity and new businesses • Benefits accrue and offset the subsidies so there’s no cost to the city over time

  9. However, detractors say there are definite costs with publicly-subsidized stadiums • Benefits and multiplier effects are usually overestimated • Gross revenues spent at stadium are substitutes for other entertainment • Future popularity of team is uncertain • Opportunity cost: money could be spent to increase social welfare in other ways

  10. Key Assumptions in Calculating NPV • Number and types of events • Attendance • Type and mix of visitors • Ticket and event prices • Multiplier effect • Timeframe and discount rate • Number of jobs and tax revenue generated

  11. Event & Attendance

  12. Visitor Type and Mix

  13. Ticket and Event Prices

  14. Multiplier

  15. Construction Lagged tax benefit from construction Operation Lagged tax benefit from operations Timeframe and Discount Rate 2006 2009 2010 2015 2036 2043 Discount Rate = 6%

  16. Jobs and Tax Revenues Generated

  17. Methodology

  18. PV Benefits $399 million PV Costs – $306 million NPV $93 million The Basic Math IBO

  19. Challenging Cost Assumptions Costs are grossly understated: • Opportunity Cost – foregone property tax • Cost of additional public service • Costs of additional infrastructure • Encumbrance or reduction in City’s bonding capacity

  20. Challenging Benefit Assumptions Benefits are vastly overstated: • Optimistic stadium attendance • Number of expositions – not incremental • Number of jobs and quality of jobs • Multiplier – no consideration of leakages • Incremental Property Tax • Tax revenue growth rate - optimistic

  21. Synthesis Scope – Reexamining crucial assumptions: • Opportunity costs • Constant revenue growth of 2.5 % • Discount rate of 6 % • Stadium attendance • Number of expositions • Incremental property tax • Multiplier

  22. Synthesis - Actual Base Case

  23. Synthesis - Opportunity Cost • Opportunity cost of foregone property tax revenue

  24. Synthesis - Revenue Growth of 2.5 % • Business cycles mean growth and recession

  25. Synthesis - Discount Rate

  26. Synthesis - Stadium Attendance

  27. Synthesis - Number of Expositions

  28. Synthesis - Incremental Property Tax

  29. Highly Sensitive Synthesis - Multiplier

  30. Combined Synthesis - Realistic Scenario

  31. Conclusion • Developers greatly exaggerate the benefits to the city • Including a convention center does not offset net losses • The project is a drain on current and future generation of city taxpayers • Stadium politics • Alternatives exist

More Related