[Originally published 31 July 2012]
The Christchurch blueprint has been out for a day, and we’ve had a little time to digest its contents. Perhaps unsurprisingly, among the major components is (a) a convention centre, (b) an indoor sports facility, and (c) a covered stadium to seat 35,000. There are concerns about the reliability of a convention centre as far as the contribution it might make to a local economy (see here). Eric Crampton at Offsetting Behaviour has his thoughts on the wider plan and the convention centre idea here and thoughts on convention centres in general here. Needless to say there are very hard questions that need to be answered. Just like the role of the role of the new stadium. Evidently the Prime Minister is in favour of the new stadium, saying “… I would have thought that it is the right step to take”.
I have posted earlier on the stadium issue in relation to Christchurch (here, here and here) but I think it is worthwhile to reiterate a few salient points as people contemplate the role of a stadium in the context of the wider Christchurch rebuild.
Firstly, does Christchurch need a new stadium? The sports fan in me (yes, there is one!) says yes, as they have lost the spiritual home of sport in Lancaster Park/AMI Stadium. QEII Park was built to house the 1974 Commonwealth Games and despite upgrades since then, it was likely considered economically obsolete before the earthquakes in any case. There is certainly a gap in the landscape. Any economist will tell people to consider the recent investment in the new ‘temporary AMI Stadium’ at Addington as a sunk cost, and that it is not relevant to the discussion of how much to invest in a new covered stadium. The presence of the temporary stadium does, however, play an important part in the role of the new stadium, as it offers the alternative to a new stadium. As such, those backing the new stadium will have to demonstrate how the new stadium provides greater benefits to the Christchurch populace than the temporary facility, perhaps for such things as location (convenience, proximity to the centre of town and hotels/motels/bars/restaurants etc), better within-facility amenities (improved sightlines, etc) as well as the presence of the roof. (Just off the top of my head, I am not aware of anyone having explicitly tested whether there has been any difference between covered and uncovered stadium construction and the legacy of these facilities. This would be an interesting topic if indeed I haven’t missed an obvious piece of work.) If the benefits from these aspects and possibly others are sizeable, then one has something to compare against a possible cost to in order to determine whether the stadium is a good idea or not.
Secondly, tempered and realistic expectations of the contribution of the stadium to the recovering local economy are paramount. Past research in both New Zealand and international contexts have routinely failed to connect stadium construction and/or the presence of a sports franchise to improved economic outcomes for host cities. One might counter this point with the fact that Christchurch is in a different situation with an almost total rebuild of the city after a natural disaster, and so the results don’t necessarily apply here. The difficulty with this claim is that the impact of a stadium rebuild in the context of a natural disaster is highly likely to be clouded by other construction activity occurring at the same time. In many respects, the case of a ‘typical’ new stadium construction is a best case scenario.
Directly connected to the previous point is that the new stadium is a replacement facility, so the best one can hope for is a return to what happened prior to the earthquakes as far as the contribution of the stadium to the Christchurch economy. Yes, a roof might well mean the new facility could have greater use, but the ‘new’ use will likely come at the expense of the use presently held elsewhere within Christchurch (think Westpac Arena). The same thing can be said about the new indoor sports facility and its expected usage.
Thirdly, don’t expect the attraction of events to act as economic stimuli, either. Research I have conducted into the effects of hosting major internationally-oriented events (the research is being written up and is almost available as a working paper – I’ll link it as a future blog post when it is available) in New Zealand has indicated that realised economic impacts are the exception, not the rule.
A sounder economic case for investment in facilities, I believe, can (and should) be made for intangible benefits of a new facility and the recognition of the importance to local citizens rather than through the hopes of attracting vast sums of money from an influx of visitors to the city, a la “build it and they will come”. The benefits to local users (and non-users) are much more meaningful to local politicians as to the true worth of the facility to those that will likely end up paying for it, ratepayers. The only problem with these benefits is their intangible nature and the credibility (or lack thereof) attached to estimates of these benefits. They have been estimated in other stadium contexts in the US (see this 2005 working paper by Johnson, Mondello and Whitehead on the estimation of public good benefits in Jacksonville, Florida for the NFL’s Jaguars, and this 2008 working paper by Fenn and Crooker who looked at the value of the Minnesota Vikings and a proposed new stadium – these are just two, there are plenty more!). The Christchurch case is a perfect scenario upon which to base a similar type of study (another possible future research project!).
To sum up (for this post, at least), the stadium decision should be based on sound economic rationale. Christchurch must learn from lessons learnt elsewhere, and heed the experience of others in the same boat as far as expectations are concerned. Above all, if a new stadium is justified on non-economic grounds, then let’s see an analysis (or something similar) that demonstrates how the new stadium addresses these grounds. Leave the economic impact analysis out of it. If it is justified on economic grounds, let’s see an analysis that answers the question of whether the stadium is a good use of scarce government (and ratepayer) funds. I eagerly await further developments.