West Side Stadium Holds Key to 2012 Olympics
Economic Viability of Project Examined

By Jay Dismukes

Without the promise of a new sports stadium on Manhattan’s West Side, officials say one thing is certain: New York City can forget about hosting the 2012 Summer Olympics. Less clear, however, is the long-term impact that this billion-dollar initiative could have on the city and state.

“The IOC (International Olympic Committee) will not take the risk of not knowing that this project is going forward,” said Andrew Kimball, director of operations for NYC2012, which is spearheading the city’s efforts to secure the games. “They need certainty that the marquee Olympic venue is going forward.”

The venue in question is the proposed New York Sports and Convention Center (NYSCC), a multiuse facility to be located over what is mostly rail yards between 11 and 12 avenues from 30th to 34th Street, and one of the main topics of discussion at this year’s Entertainment and Sports Conference on May 24 in Manhattan. The project requires a $1.4 billion to $2 billion investment to be financed over 31 years, with $300 million to come from both the city and state and $800 million to come from the New York Jets football organization, which would make its new home in the stadium. Construction would begin in 2006 and is projected to finish in 2009.

Having sweated through last-minute construction for last summer’s Olympic games in Athens, Greece, Kimball said, IOC officials are looking to avoid a similar situation at the site of future games, which is why it’s crucial that they believe the city can deliver on its stadium commitment. The IOC will select the host for the 2012 Olympics on July 6 in Singapore, leaving about one month (from the time this paper went to press) for a number of issues holding up the NYSCC to get resolved.

These issues include a forthcoming vote by the state’s Public Authorities Control Board, which approves the issuance of bonds for public projects, and legal matters concerning the environmental impact of the project, as well as the development rights awarded to the Jets by the Metropolitan Transportation Authority. At the center of the debate is the bigger question of whether or not the development of the NYSCC is the best use of public money.

“Stadiums are not terrific public-policy investments from a dollars-and-cents perspective,” said Ronnie Lowenstein, director of New York City’s Independent Budget Office. “Studies of past stadiums suggest that they don’t pay for themselves and they don’t generate lots of new economic development.”

Contrary to popular belief about stadiums, Lowenstein said they, in fact, don’t bring in many new visitors, don’t serve as an engine for permanent jobs, and don’t generate new leisure and entertainment dollars, but only create a substitution effect. Except for construction jobs, stadiums are not catalysts for big injections of new cash into the economy, and the money they do yield doesn’t necessarily stay in the region, with many stars who make multimillion dollar salaries choosing to live elsewhere, she added.

Of course proponents of the development, including conference presenter Thad Sheely, a vice president with the New York Jets, point out that the NYSCC would be anything but a garden-variety sports stadium, thus justifying the public expense.

Built with a retractable roof and seats, Sheely said the 75,000-capacity NYSCC can be configured into an Olympic stadium, a convention center, and an arena. In addition to holding football games, the complex could accommodate a wide array of events such as Formula One racing, rodeo and soccer, political conventions, the Final Four Tournament, and trade shows and exhibits.

According to a February 2005 report released by the IBO, the NYSCC, as a multiuse facility, would generate a $92 million surplus for the city, part of a combined $210 million surplus for the city, state and MTA over the duration of the project’s financing. As a stadium only, the IBO found that the city would experience a $145 million loss over the financing term, with a combined city, state and MTA loss of $244 million. To break even, the NYSCC would need to host about 14 conventions a year, less than the 20 or so the IBO actually anticipates and the 30 to 40 the Jets assume could take place.

“How successful this convention center would be is a huge wildcard,” Lowenstein said. “New York City is a very expensive place to be. For that reason it has never had great success with conventions.”

She added that the current expansion of convention space in other cities will also pose a risk to the NYSCC, should it go forward.

For Sheely, however, the arguments against the project, which could include an extension of the Javits Center, neglect to acknowledge all the benefits that the NYSCC would afford, from significant sponsorship revenue and media access to the multipurpose design of the building and a desire of users and visitors to be a part of the country’s largest market.

“If we can get the stadium done, we think we have a very good chance to be there at the end,” Kimball said of the NYSCC’s implications for the games.

In July, New York City will join London, Paris, Madrid and Moscow as the five candidates bidding for the 2012 Olympics. Of the 115 voting members of the IOC, only four are from North America, which, among other things, would appear to not bode well for the city’s chances. But, Kimball said, there are number of considerations that work in the city’s favor. In particular, he noted the melting pot of nationalities that could virtually guarantee each team and sport hometown support and interest; a no-strike pledge from unions; a large amount of revenue, a percentage of which would go to the IOC; and the long-term viability and legacy of proposed new and renovated Olympic facilities.

The NYSSCPA’s Entertainment and Sports Committee, chaired by John R. Lieberman, sponsored the Entertainment and Sports Conference. Lieberman and Vanrick A. Clarke served as conference cochairs for the Foundation for Accounting Education event.