Monday, 30 June 2014

World Cup: Green Is the Colour that Matters Most

They Spent HOW MUCH Building the Stadiums in Brazil?

The 2014 World Cup has reached the so-called "knockout round," where teams who have survived round-robin group play now face off in single-elimination brackets.  The first games of the huitième saw the Netherlands, Colombia, Brazil, and Costa Rica - the latter two on penalty kicks - move on.  As time goes by and I get older, my interest in professional sport has declined significantly, and I have never been any sort of fan of soccer.  Still, living in Paris, it's difficult not to take some interest in the games, as the French team, who barely qualified to begin with, are actually now in decent shape to make at least the quarterfinals.  Les Bleus face off tonight against Nigeria, a team that they are heavily favoured to defeat.

Nate Silver, who gained fame applying mathematical models to election cycles, has a web-site dedicated to various and sundry topics, including politics, sports, entertainment, economics.  He and his team of writers apply their models in non-traditional ways, and one I have been following is his model that estimates the likelihood for each team still in the Cup to advance to various stages, all the way to the end.  The current favourite are the hosts, Brazil, whom Silver pegs at about an even-money bet to win it all (as of this moment, a 41% estimate to win it all).  Additionally, the estimated chances for the next three teams - Argentina (16%), the Netherlands (14%), and Germany (10%) - sum to about the same cumulative chance.  

France is estimated at about 1 out of 11 (9%).  

But what caught my eye today was this piece written by Victor Matheson, an economics professor at the College of the Holy Cross in Massachusetts.  

According to Matheson's data, Brazil spent an enormous amount of money constructing the venues for the cup.  $3.6 BILLION to construct or renovate the 12 sites that will be used.  When Brazil bid on the Cup, the price tag was of course enormous - but at the time, more than three of every four dollars was supposed to be spent on infrastructure improvements - roads, public transit, communications.  Because of delays and cost over-runs, the stadiums were about a billion dollars more - which means that the long-term infrastructure projects will have a billion dollars less spent on them.

To put these figures in to some perspective, the construction of a single stadium - Estadio Nacional Mane Garrincha in Brasilia - cost $622 million.  The entire cost to France of the 1998 World Cup was $603 million.  When the US hosted in 1994 (one of the games was played in Stanford Stadium in Palo Alto, California, where I was living at the time), a paltry $5 million was spent, mainly refurbishing existing facilities, as no new venues were built.

Russia will host the next World Cup in 2018, and are expected to almost double the spending of Brazil.

This provoked Matheson to do some analyses on the return on investment that stadiums present.  It's a timely debate, as across the US, there is a semi-regular push by professional sports teams to extort request public funding for stadiums and parking. These requests are often sweetened to a degree by the economic and social benefits that professional sports bring.  Right now, the city I lived in during my high school years - Cleveland, Ohio - is involved in a debate about extending a 'sin tax' to help finance the baseball stadium and basketball arena that the local teams use.

I'm not so sure.

For example, the massive, $622 million palace in Brasilia will host several World Cup matches, but there is no professional team in the Brazilian capital.  Just who will play there when all is said and done is uncertain.  

In Matheson's analysis, a couple of meta-statistics are presented.  The first is the stadium use index (SUI), which estimates, based on seats sold for events, divided into the total capacity of the stadium, four years on from construction.  It essentially presents the number of days per year that the stadium is fully occupied.  The second is the fan cost index (FCI), which is a ratio of the amount spent to how many dollars were spent to construct the facility, divided into the number of fans who attend.  It's essentially how much it costs, per fan, to fill the stadium.

So, for example, the most expensive project for France in 1998 - the Stade de France, cost $394 million to construct for the 2002 Cup.  Four years later, the stadium - which hosts several French and Premier League matches, as well as concerts, had 612,000 spectators at 10 events during the year.  That works out to an SUI of 7.7 (according to Matheson), or that it is filled to capacity 7.7 times per year.  The FCI is then $644.  It 'costs' about $644 per fan to construct.

That seems like a fairly large investment of public money, doesn't it?

Data for Brazil remain unknown, since the stadiums are new, and four years have not passed.  It seems unlikely that a massive stadium in a city with no professional team will have a tough time to recoup the cost.  Matheson does some projection - the stadium was ready in 2012, and it hosted 7 events that year.  The total attendance for those events was 14,000.  The corresponding SUI is 0.2 - the stadium was 'filled' on less than two tenths of a day.  

This works out to a FCI of $44,565.

If these data from 2012 are projected to 2018 when the World Cup is a memory, the Brazilian government will have spent more than forty-four thousand dollars per fan to build this massive, white elephant.

Economic analyses on the impact of stadiums beyond the immediate revenues from ticket and food sales - which largely go to the teams anyway - are somewhat mixed. What these numbers show is, basically, that cities like Cleveland who spend large sums of public money on stadiums mainly do so because having a professional baseball or football team is little more than a talisman to show that the city remains a "big league city."  Sure, the schools may be awful, the roads approaching third-world status, and industry is evaporating, but hell.  We've still got a big league team.

Recently, the city of Atlanta, Georgia announced that a new stadium will be constructed for its professional team, the Atlanta Braves.  The cost - estimated to be around $600 million, will be a "private-public partnership."  The county will be kicking in nearly $400 million of the costs.

This comes, ironically, less than 20 years after the city built Turner Field, ostensibly for the 1996 Summer Olympics in Atlanta.  This was at a cost of $209 million, mostly footed by NBC who broadcast the games, and "other Olympic sponsors."  According to Braves' management, the 16 year old stadium offers an insufficient "fan experience," so the team is setting sail 10 miles outside of downtown. Key to the deal is that the Braves will control a vast commercial area around their new (public funded) stadium, whereas Turner Field, in downtown Atlanta, is surrounded by existing business that do not generate revenue for the team.

The Cleveland Browns, a professional football team, abandoned the city when they could not get a 'free' new stadium, moving to Baltimore, Maryland, who did provide one.  The loss of the Browns was a trauma for many residents in Cleveland - far more, it seems, than the loss of quality public education. A few years later, the Browns were re-incarnated, with a brand-new $290 million facility, 75% of which was paid for by the public.

Cleveland gets to continue being "big league."

Detroit, Michigan made the news last week when it cut off the water to thousands of its residents who either did not or could not pay, provoking the United Nations to declare that perhaps the Motor City was contravening a fundamental human right to clean water.  Detroit has a host of problems, but it has  professional baseball and  professional football teams.  The Tigers and Lions both play in new facilities, built to "revitalise" downtown Detroit, and financed with significant public funds.

Interestingly, the city of Los Angeles has had no professional football team since the Raiders and Rams left.  One of the problems is that the two played in the LA Coliseum, an aging relic of the 1932 Summer Olympics.  The city has refused to build a giant new stadium, and the NFL has not come back.  

But Los Angeles does not need a professional sports team to argue that it is a big-league city.  

According to Silver's blog, a big factor in Brazil's favour is that they are hosting the World Cup.  No Brazilian team has lost a major international match on its home turf since 1975.  Not one of the Brazilian players was even born at that time.

The country has spent an enormous sum of money to get the games, and one might argue that part of that investment is the increased chances that Brazil will hoist the cup this summer.

Seems to me a poor ROI, however.

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