Major League Soccer has a new stadium. The 25,000 seat Red Bull Arena opens today in Harrison, New Jersey. Home to New York’s Red Bulls,the $200 million stadium was launched 13 years ago.The project was envisioned as a way to spur redevelopment in the former manufacturing town of Harrison. The 250 acres around the arena was to be developed into 6500 housing units, with commercial and retail space. But the recession changed that. So far a hotel and a 313-unit condominium complex have been completed. More construction is slated to follow this year.
Harrison, like the rest of the nation, is facing a budget crunch and drop in revenues. Their immediate worry is how to pay back the $40 million bond it floated to buy the land for the stadium. The town’s first payment of $3.2 million is due in December. Will it payoff? Economists generally agree public investment to spur stadium construction doesn’t stimulate economies.
Using the public purse to boost economic activity owes its origin to John Manyard Keynes. This notion has been used to justify government involvement in any number of projects, including the Olympic Games.The costs of development tend to far outweigh the potential profits.Vancouver is a recent example. The city is $1 billion in debt from bailout of Olympic Village.
For more on the economics of sports check out Playbooks and Checkbooks by economist Stefan Szymanski.