TABLE OF CONTENTS
2.1 Economic Factors
2.1.1 Overall Economic Impact
2.1.3 Attracting Business and Tourism to the City
2.2 Political Factors
2.3 Social Factors
2.3.1 Quality-of-Life and Urban Regeneration
2.3.2 Land Prices
In 2004's edition of 'Vision for Leeds', local residents and businesses voiced that a development goal for the future should be constructing an arena as it would enable Leeds to attract entertainment events to the area and boost the economy of the city. Hence, the city pursued this target (Leeds Initiative 2004). The Leeds Arena is a £80m entertainment venue, which is publically funded (Hayman 2010). SMG Europe, an internationally leading operator of entertainment venues, was selected to become a partner for the arena operations (LCC 2012). In 2013, the 13,500 capacity arena will start its operation as an entertainment venue in Yorkshire (SMG Europe 2012). This report focuses on the possible impacts of the new facility and its events for the city of Leeds. This secondary research provides evidence from academic literature that help to evaluate the methods for measuring various impacts and recommend on which should be employed for the Leeds Arena.
Various detailed studies have highlighted that events have a wide range of impacts such as economic, cultural and social ones as well as political, and environmental and physical ones. Most notably research has proven that these influences are neither solely positive nor negative. Some events might have a desired benefit on one dimension while having a bad influence on another factor (Langen and Garcia 2009). While being aware that there are many areas that the Leeds Arena and its events can have an impact on, including those of social and cultural nature, environmental factors, and media aspects, besides the economic effects (BOP Consulting 2011), it is beyond the scope of this report to examine all areas of impact; hence, this work focuses on the key social, political and economic impacts linked to the Leeds Arena.
2.1 Economic Factors
The public sector often justifies the construction of new stadium facilities by highlighting probable increases in economic sectors of the host community. However, such arguments are often criticised as their assumptions are deemed as unrealistic (Ahfeld and Maennig 2009). Some evidence even proves that entertainment venues have neither a noteworthy effect on metropolitan area income nor on employment (Santo 2007). Evaluating the claims made by Leeds City Council (hereafter referred to as LCC), the report aims to point out the strengths and weaknesses of the economic predictions and consider whether or not they are realistic.
2.1.1 Overall Economic Impact
While private sector consultants typically conclude that sport facilities have a substantial economic impact, academic reports almost unanimously agree that such venues do not induce a positive economic return to the host community (Grieve and Sherry in press). However, not all investments made into venues prove to be financially viable. London's Millennium Dome was a national embarrassment as the government put £785m into the project without reaching a financial breakeven point (Gray 2003; Nutt 2011). A LCC study highlights that an arena project is economically sensible for the city as it will deliver an enhancement of up to £25m annually for the local economy (Leeds Society of Architects 2010). The projected economic impact is based on the assumption that Leeds Arena will attract 900,000 yearly. However, LCC has failed in making realistic predictions previously. When the Royal Armouries Museum opened in 1996, the city forecasted 1.3m yearly visitors; in reality the museum merely attracts 200,000 people (Hardy 2007). Making unrealistic predictions can lead to failure and disappointment. For example, a lot of the difficulties linked to the Millennium Dome may be the consequence of overambitious anticipations rather than a result of fundamental underlying problems (Ravenscroft, Chua and Reeves 2001). However, there are also cases where certain entities state to have created positive economic impacts. For instance, the Prudential Center in Newark claims to have generated more than $11m overall economic impact (Daks 2009). As promotional studies tend to present unrealistic propositions on the subject of economic effects of arenas and stadia, applying unsuitable multipliers to forecast future financial impact, the predictions of the LCC have to be viewed with caution (Siegfried and Zimbalist 2006).
While those favouring utilisation of public funds for arenas argue that new stadia will create employment, scholarly research has opposed these arguments (Delaney and Eckstein 2003). Also, critics content that new facilities merely create low-wage employment. On the other hand, one can reason that such positions might be the second job prospects that low-income households look for (Tu 2005). LCC highlights the following job creation benefits: 453 direct full-time equivalent jobs at the arena, 60 direct full-time positions in the food and beverage sector on site, as well as six positions in car parking operations. Furthermore, LCC projects an increased number of jobs in the construction sector in Leeds, emphasising that up to 364 workers will be employed at the site (LCC 2009). However, academic research has shown that neither more nor less construction employment has been created by building publicly funded facilities as jobs are shifted from ventures that would be carried out instead. There was for instance no proof that employment in St. Louis' construction sector was higher during the construction periods of the Kiel Center and the Trans World Dome.
Likewise, building the sport stadia in St. Louis did not have a positive impact on wages in the city's construction sector, suggesting that the construction job creation of LCC is unrealistic (Miller 2002). This displays that predictions and promises of direct economic impact via job creation have to be made cautiously. However, when the Millennium Stadium in Cardiff opened for business in 1999, positive economic impact via job creation could be observed. A study revealed that the arena has contributed about £104m yearly to the Welsh economy, inter alia by creating 2,400 full-time equivalent jobs. Further, the Millennium Stadium is a key business itself, which employs over 70 fulltime staff and offers many more positions on event-days (Jones, Munday and Roche 2007). Likewise, the Bank One Ballpark in Phoenix, Arizona created a positive employment effect. The stadium triggered the job creation of 4,100 positions, of which 1,700 jobs were directly on site (Economic Research Associates 2003). Overall, it is noteworthy that SGM Europe has agreed to secure 20% of employment opportunities for locals. This could have a positive effect on the local economy and for individuals that will then be employed at the Leeds Arena (LCC 2010). While it is questionable if there will be a substantial job creation linked to the Leeds Arena, some individuals will definitely benefit even if it is merely via low-wage positions.
2.1.3 Attracting Business and Tourism to the City
Another goal for LCC is to attract businesses to the city (LCC 2009). Having an attractive venue displays an auspicious future with a dynamic business environment. Deductively, businesses are supposed to be attracted to this metropolitan area (Coates 2007). Increased location desirability could be observed in Columbus, Ohio, as the number of businesses in the arena district increased by over 50% in the six years after the inception of the Nationwide Arena. However, new business operations in the vicinity of an entertainment facility may be negated by corporate sector failures in other parts of the host community (Wirick 2008). Besides attracting businesses, Leeds hopes to also draw in tourists with the new venue; thus, creating new spending for the area (LCC 2009). When looking at additional spending in new businesses, only out-of-town visitors create new spending (Siegfried and Zimbalist 2006). Such spending comes from different sources like accommodation, food, and shopping while in town (Weinstein and Clower 1999). As people might not only come for an event but also for other reason, the spending cannot directly be traced back to the arena itself (Siegfried and Zimbalist 2006). Residents, in contrary to visitors, do not account for additional revenue as entertainment facilities do not change people's willingness to spend. Residents usually adhere to their regular entertainment spending and only adjust the distribution of this budget towards events and away from other substitutes like theatre and sports (Grieve and Sherry in press). Hence, event facilities rearrange expenditure but do not significantly add to it. Further, it will be difficult to relate additional spending to the Leeds Arena as businesses and tourists could also be attracted by other factors.
2.2 Political Factors
One key political issue linked to building an arena is the use of public funds. By arguing that a new arena reenergises a city, the investment of public money has been justified (Lasley and Turner 2010). SMG Europe has signed a 25-year lease on the Leeds Arena, making this a sound investment for the city; however, millions of public funds are tied up in this project (Yorkshire Post 2007; Leeds Society of Architects 2010). When making plans for a new arena, there are three options: build it with public money, funding with private money, or to not build at all. Academic research has shown that public funding is the most popular alternative as the city has more control over the project. Furthermore, residents feel a higher level of pride and social responsibility if the venue is built with public instead of private funds. As not building an arena was not an option for Leeds, publically funding it can be seen as the right decision according to this study (Monarko, Lambert and Sigmund 2007). From a city's point of view, the opportunity cost of not constructing a sporting facility may be seen as the loss of a team and the associated attendant benefits. When taking this into perspective for the Leeds Arena, that would be the loss of potential artists coming to Leeds (Siegfried and Zimbalist 2006). Orlando had problems attracting big-name entertainers due to its obsolete facilities. With the construction of the new Amway Center, the city regained the capability to attract popular performers, which is also one the main drivers for building the Leeds Arena (Jones 2011). While these are arguments supporting the investment of public funds in the arena project, there is a value of alternative uses of monetary funds employed, so-called opportunity cost. The monetary resources could be utilised to improve local infrastructure, invested in public safety and health, or used to ensure better education in the region. All opportunity costs have to be considered to determine whether public funds have been invested in the best way possible (Coates and Humphreys 1999). Furthermore, venues have a significant budgetary impact in the future. This is linked to financing costs associate with the facilities such as infrastructure maintenance and environmental remediation. Such expenditures can be financed by cutting government services or increasing taxes to fill the budgetary gaps (Siegfried and Zimbalist 2006). While the Leeds Arena looks like a sound investment at first glance, the opportunity costs of the financial investment made by the city have to be taken into consideration. To come to a rational decision, a cost-benefit analysis that recognises these opportunity costs is required to ensure that public funds are employed in the most efficient way possible (Holahan and Kroncke 2012).
- Quote paper
- Remi Bauer (Author), 2012, The Impacts of the Leeds Arena, Munich, GRIN Verlag, https://www.grin.com/document/268658