Monday, 16 April 2012

Keeping up with the Jones'

A belated post this one (teaching commitments have enveloped much of my spare time of late) but one I feel warrants some comment in light of an interesting discussion on Radio New Zealand's Afternoon Show with Jim Mora, and featuring Canterbury's Eric Crampton on the Crusaders attempts at moral suasion by throwing their weight behind a proposal for a new, covered, stadium to replace the condemned AMI Stadium/Lancaster Park.(Eric has provided the link to the audio in this post on Offsetting Behaviour).

A few things that I noted from this story included:

Firstly, kudos to the Christchurch City Council for remembering the relevance (or otherwise) of sunk costs in projects like these. Yes, there is a brand, spanking, new 'temporary' stadium out at Rugby League Park in Addington (latest cost $30m and counting). The Council has always pledged to revisit the AMI Stadium situation and has come up with five options, ranging in scale from repairing one stand and replacing another for $50m (to take 4.5 years) to a new, covered, 35,000 seat stadium for $145m (taking 5.5 years).

One of the reasons given by Crusaders halfback Andy Ellis and CEO Hamish Riach is Dunedin's new Forsyth Barr Stadium and how it is setting the standard. I've heard this argument before, and it is particularly prevalent in North America in particular. It is called 'keeping up with the Jones'" and it is systemic. Basically, I build a new stadium, then you'll want to build one that is even better. In the United States, this practice has led to a general shortening of the life of sports facilities, as now they are becoming "economically obsolete" if they do not contain the latest facility developments (these tend to include luxury/corporate boxes, improved sightlines, etc). In this case the roof is the latest development. Interestingly enough, one of the seminal papers in this area, written by Robert Baade and Richard Dye in 1990, noted some pecularities with respect to domed, or covered, stadiums in the US. The cost per seat (in 1989 US dollars) ranged from $4,890 for the Louisiana Superdome to $1,390 for the Metrodome in Minneapolis. If these numbers were any indication, the cost of a new Christchurch 'superdome' could be as low as $80.8m (1989 NZ dollars converted from USD at Jan 1990 exchange rate) and as high as $283.9m. If we adjust these numbers to 2011 dollars, we get $134.7m for the Metrodome and $473.2m for the Superdome. It doesn't appear that the proposed figures of the Christchurch covered stadium are beyond the realms of possibility, although neither the Metrodome nor the Superdome were as small as is presently being proposed for Christchurch. I can't help but wonder how it will be as cheap as suggested in the article - especially given that the Vector Arena in Auckland, which holds 1/3 of the capacity of what the Crusaders are touting, cost $80m, and the Forsyth Barr Stadium cost is expected to come in excess of $200m. I don't think the CCC will want a 'budget' roofed stadium, so these costs have to be viewed with considerable caution.

I agree entirely with Eric in his interview that the stadium in Christchurch must be based on a sound business case (including realistic projections of attendance - which should factor in the honeymoon effect of the new facility before falling off to pre-quake levels) and will hopefully add value to the Christchurch economy. Assuming that Christchurch ratepayers are on the hook for it, of course. Any arguments that a covered facility will bring in more trade shows, conventions and the like, must take into account the impact it will have on currently operating convention venues like the Westpac Arena, among others. Because it impacts on ratepayers, these effects must be considered as part of the overall package. It is all very well arguing that a roofed stadium will host x events - but if a large proportion of these x events were already hosted within the city then one needs to be very, very careful of the impact measures that are produced as a result.

Oh, and let's not forget, it doesn't have to be the ratepayers holding the can for this. The NZRU made a little profit from the 2011 RWC, some of which has been granted to Otago rugby to bail out their financial problems. Ideally there should be a meeting of the minds, and a public-private partnership could be the way to go. Roof on... or roof off?

2 comments:

  1. A very well-written post. I read and liked the post and have also bookmarked you. All the best for future endeavors
    IT Company India

    ReplyDelete
  2. I'm still stunned that anybody in Christchurch can reckon a stadium anywhere near the top of the priority list for something costing $400+ per capita.

    ReplyDelete