Economic Development

Sticking it to the Cities

Revenue losses add up in localities where hockey teams are supposed to play.
by | May 2005
 

The National Hockey League would normally be roaring through its Stanley Cup playoffs now, to the delight of cities lucky enough to host the games. Instead, a labor battle has killed the entire 2004-05 hockey season, leaving the 30 NHL cities in the U.S. and Canada to tally up their losses from all those empty arenas.

Like all pro sports, ice hockey drives its own micro-economy before, during and after 41 home games a year. Cities take in substantial sums from parking fees, ticket surcharges and sales taxes on souvenir hockey pucks, drinks and meals purchased both inside and outside the arena. Places that have backed arena construction with public funds are more intimately tied to their hockey teams' fortunes. After the NHL called off the season in February, Fitch, the bond rating firm, put arena bonds backed by hockey revenues in Los Angeles and Denver on a watch list for downgrades.

St. Paul, home of the Minnesota Wild, figures that bars, restaurants and souvenir shops outside of its hometown arena took at least a $10 million hit from lost business. The city budget, meanwhile, lost $368,000 in sales tax revenues. "In the grand scheme of things, it's not a large amount of money," says Matt Smith, St. Paul's finance director. "On the other hand, in a city where we struggled over whether we could fund one or two police positions, the lost revenue is probably worth about six officers."

Detroit, which so loves its Red Wings that many in the city call their hometown "Hockeytown," figures it has lost $10 million from parking revenues, ticket surcharges and other sources. The regional chamber of commerce, using a generous calculation that includes everything from players' salaries to lost gas tax revenue from fans staying home, puts the overall loss to the local economy at $153 million.

Long term, the cities that may have the most to lose are in the Sun Belt. In recent years, the NHL has been trying to convert new fans to ice hockey by placing teams in such unlikely cities as Raleigh, Nashville, Atlanta and Dallas. It's been a slow go to build enthusiasm, but Tampa was able to muster enough excitement last year to hold a parade when the local team, the Lightning, won the Stanley Cup. Now, that momentum is slipping away.

Many economists who study sports say that some hockey cities' worries are overblown. Brad Humphreys, a professor at the University of Illinois, argues that hockey fans are simply spending their money elsewhere--neighborhoods around hockey arenas are suffering from lost business, but businesses elsewhere are doing better. Humphreys has studied the impact of past work stoppages in baseball, football and basketball, and says that he's never found an overall negative effect on a regional economy. "Professional sports is one element of the entertainment options people have," he says. "When that's not there, they go to bowling alleys or the movies."

Melissa Armstrong, research director for the Detroit Regional Chamber, disagrees with that assessment. She's the one who came up with the whopping economic loss figure in Detroit. She says it was a conservative estimate. "In Detroit, we have a huge number of season ticket holders, who go to game after game," Armstrong says. "They're huge hockey fans. But they may not be huge movie or symphony fans."

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