Do professional sport franchise owners overpromise and underdeliver the public? Lessons from Brooklyn’s Barclays Center

• Date: 14 January 2019
• Pages: 80-101
• DOI: https://doi.org/10.1108/IJPSM-01-2018-0002
• Published date: 14 January 2019
• Author: Geoffrey Propheter
• Subject Matter: Public policy & environmental management,Politics,Public adminstration & management

Do professional sport franchise

owners overpromise and

underdeliver the public? Lessons

from Brooklyn’s Barclays Center

Geoffrey Propheter

School of Public Affairs, University of Colorado Denver, Denver, Colorado, USA

Abstract

Purpose –The purpose of this paper is to evaluate a number of promises typically made by owners of

professional sports franchises in the USA that are also typically ignored or underevaluated by public bureaus

and their elected principals using the Barclays Center in Brooklyn, New York as a case study. Ex post subsidy

outcomes are evaluated against ex ante subsidy promises in order to draw lessons that can inform and

improve subsidy debates elsewhere.

Design/methodology/approach –The case study adopts a pre-post strategy drawing on data from

multiple sources over a period of up to ten years in order to triangulate the narrative and build credibility.

The franchise owner’sex ante promises and financial projections were obtained from various media including

newspaper, video and interviews between December 2003, when the arena was publicly announced, and

September 2012, when the arena opened. Data on ex post outputs were obtained from financial documents and

government records covering periods from September 2011 through June 2016.

Findings –The franchise owner is found to have exaggerated the arena’s financial condition, under-

delivered on its employment promises, and exaggerated the scope and timeliness of ancillary real estate

development. Only promises of event frequency and attendance levels, measures of the public’s demand for

the facility, have been met during the first three years.

Research limitations/implications –Because the evaluation is a case study, causal conclusions cannot be

drawn and some aspects of the Barclays Center context may not be applicable in other jurisdictions or

subsidy debates. In addition, the case study does not evaluate an exhaustive list of the promises franchise

owners make.

Practical implications –Franchise owners have a financial incentive to overpromise public benefits, since

subsidy levels are tied to what the public is perceived to receive in return. This case study demonstrates that

the public sector should not take owners’promises and projections of public benefits at face value. Moreover,

the case study reveals that the public sector should put more effort into ensuring ex post policy and data

transparency in order to facilitate benefit-cost analyses of such subsidies.

Originality/value –The data required to evaluate promises, other than economic development ones, made

by franchise owners are not systematically collected across state and local governments in the USA, making

large-n studies impossible. Case studies are underutilized approaches in this area of public affairs, and this

paper illustrates their usefulness. By focusing on a single facility, an evaluation of the franchise owner’s less

acknowledged and arguably more important promises about the facility and its local impact is possible.

Keywords Public policy, Economic development, Sport, Local government

Paper type Case study

Introduction

Considerable academic research undermines the oft-repeated argument that sports facilities

and sporting events create net positive impacts for local economies. This conclusion holds in

both the US and international contexts, particularly as it relates to professional sports and

the Olympics (Allmers and Maennig, 2009; Coates and Humphreys, 2008; Feddersen et al.,

2009; Hagn and Maennig, 2009; Kasimati and Dawson, 2009; Wilson and Pomfret, 2014).

Nevertheless, governments across the world continue to spend considerable public

resources subsidizing construction and operation of these facilities and events (Jones, 2002;

Wilson and Siegfried, 2018; Flyvbjerg and Stewart, 2012). In the USA alone, based on data

from 49 subsidies deals collected by the author since 2000, at least $11.8bn (in 2017 dollars)

has been spent in direct subsidies to construct new facilities or renovate existing ones for the

International Journal of Public

Sector Management

Vol. 32 No. 1, 2019

pp. 80-101

© Emerald PublishingLimited

0951-3558

DOI 10.1108/IJPSM-01-2018-0002

Received 10 January 2018

Revised 27 April 2018

Accepted 29 May 2018

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0951-3558.htm

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IJPSM

32,1

country’s five major leagues, an average of $241m per facility[1]. Moreover, Flyvbjerg and

Stewart (2012) report that 69 percent (£5.83bn) of the London 2012 Olympics was paid by

the government, a lower-bound percentage because infrastructure costs were excluded but if

representative of all Olympics since 1960 indicates that at least $58bn has been spent by

governments. Theories as to why governments continue to invest in professional sports

facilities range from collective foolishness and rent-seeking (Coates and Humphreys, 2008)

to civic paternalism (Kellison and Mondello, 2014).

A review of academicresearch on sports andpublic outcomes revealsa curiosity–scholars

focus on a narrow group of economic outcomes: employment, income, property values,

intangible benefits, and, in the USA, sales tax revenue. These outcomes dominate academic

research in large part because the topics dominate subsidy debates in the USA (Buist and

Mason, 2010) and abroad ( Jones, 2002; Levermore and Beacom, 2009), and further the data

required to estimate such impacts tend to be systematically collected and publicly available.

Team owners and othersports elites, though, make manymore promises than these to secure

public financing. For example, owners of professional sports teams often argue that new

facilities would be profitable government enterprises that would yield net revenue for the

general fund (Depken, 2006; Trumpbour, 2007). Similar arguments are made by the

International Olympic Committee but the focus tends less to be about receipts to government

and more about increasing exports (Rose an d Spiegel, 2011). In most cases, the faci lities are

owned by state or local governments, and if a facility does not generate enough revenue to

cover its own debt, public transfers to keep facilities solvent are needed. Do sports facilities

perform financially as well as forecasted?

Another promise is that of private real estate development (Rosentraub, 2009, 2014).

For instance, the owners of the Los Angeles Rams have promised a mixed-use $2.6bn

development adjacent to the stadium. Similar promises have been made in Detroit,

Sacramento, and Minneapolis in the USA and in Cardiff, Manchester and London in the

UK (Davies, 2005; Thornley, 2012). Does the public obtain the development promised in

the timeframe promised? The public’s opportunity cost of funds is predicated upon how

much private investment it receives in exchange for subsidies and how long it

takes to receive it in total. If the scope of a development project or the timeliness of its

completion changes after a subsidy has been approved, then the public’s opportunity cost

changes, and with it the project’s social benefit-cost calculus. For example, in 2004 voters

in Commerce City, Colorado approved a $130m plan to build an MLS-specific stadium and

finance infrastructure improvements for 200 acres of real estate development promised by

the owner of the Colorado Rapids. The stadium was to open by 2007 and associated

development was to be completed by 2015. To date, no real estate development has

occurred save for a new municipal building which was completed about the same

time the stadium opened. The development is still planned but currently is 12 years

behind the initial timeframe to completion that was promised. Learning the cause of such

delays is key to identifying the steps that can be taken for other jurisdictions to avoid the

same fate.

This paper contributes to the literature in sports and public affairs by evaluating a

number of underevaluated promises franchise owners regularly make to lawmakers using

the Barclay’s Center in Brooklyn, New York as a case study. More precisely, the study

endeavors to answer two research questions:

RQ1. Has the Barclays Center developer delivered on its promises to New York City and

New York State?

RQ2. If not, why?

The study does not intend to explore every promise the developer made in order to secure

public financial support but instead only on promises that received wide publicity and

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Professional

sport franchise

owners