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Greener Grass, Episode 3: San Jose Specifics Begin to Emerge


So, before I do this, I have to say... This is the place to really get the dish on developments in the A's quest for the grail (or new stadium).

A long time ago, I rambled on and on about markets in which the A's might play and then I made up a sequel about two specific cities in the market in which the A's already play... and then one of those two municipalities went and released an Economic Impact Report.

The frog in my pocket and I are back to wax profusely, if not profoundly, on what this report says about the A's plans.

First, there is always speculation about if these Economic Impact Reports can be trusted. The fundamental question is always "Does building this stadium really benefit the local community?" The answer is generally  "No" even though the reports says "Yes." There is a great deal of explanation at this site. But why is the answer No?

In a nutshell it has to do with how the stadiums are paid for. Here is a table that shows the percentage of funding for each of the recently built MLB Stadium that is "private" and "public."

funding sources

 

So what we have here is 21 stadiums, and only 4 were built with more private than public money. Simply put, the greater the public investment the less likely that the economic activity will be a net positive for the community. All those fans a spending money, they are going to have to spend A LOT of money for the tax revenue to increase enough to offset the tax revenue spent on the stadium.

Another thing to consider here, is that evaluating the economic impact also requires an understanding of whether or not all that money being spent by those money spending fans is actually new to the City.

In both of these respects, San Jose has a huge advantage over most of the stadiums on the list. First, the stadium (if it is built) in San Jose would cost approximately $460M (long ago I suggested it would be about $450M plus land acquisition to make $550M total). The stadium itself would be privately financed. Ray Ratto made some offhand remark in a column recently about the A's seeking public funds, but it turns out that is to build a Parking Garage in the area that would be used for Sharks games, A's games and High Speed Rail, etc. I think that will be needed regardless of a new baseball yard.

Second, in a sharp contrast to all of these stadiums above... This stadium would be built in a different city than the prior stadium. This means that some portion of the fans going to San Jose in the potential future are not coming to San Jose today. The EIR speculates that 50% of the fans coming to the A's games would be net new money spenders in San Jose. We, the frog in my pocket and I, think that is a conservative estimate.

The one area that seems a bit of a stretch is the number of new jobs created. The EIR calls out over 900 post construction jobs. That includes the A's front office staff, but not the players. I don't know what a more realistic number might be, but that just sounds pretty high.

The next thing that is sort of important to note is the estimated size of the stadium and number of fans included in the money spending fan calculations.

Another table! This one about new stadium attendance trends.

Photobucket

 

The EIR is based on a capacity of 32k and an average attendance of around 24k. That column called "Fifth Year Number" tells us, me and the frog in my pocket, why the 32K. But we both think that the 24k estimate is a very conservative estimate because it is basically the A's average in Oakland over the past few seasons. So we imagine an initial uptick from 24k to 32k and then a stabilized number somewhere around 30k.

So far, we would have to say the positive numbers projected in the EIR are actually underestimates (which is good, we think).

A couple other things that are important to note. First, we expect the number of premium seats to decline in a new San Jose yard. What you ask? Decline? Isn't the idea to get more boxes and club seats.

We present... Another table!!!!!

Premium Seating Comparison

 

The A's have a lot of premium seating right now. So much in fact, that they probably wanted to tarp those things off more than the third deck. What jumps out at me in this table is that both the A's and Marlins have way too many premium seats (maybe because they play in football stadiums?). I would expect the A's to have something similar to the Giants premium inventory in a new yard, and they will have some innovative premium products like mini suites. These are those sort of changes that will help with the overall revenue stream from the stadium... The things that help get the payroll up to Chicago White Sox territory!

And now... for our last table!

ticket prices

 

I know some folks are going to be concerned that a new stadium will result in most of us being priced out of the market. Especially with the smaller capacity. I look at the table above and think that perhaps we shouldn't be so scared. Smaller inventories of the premium seats and the corresponding rise in prices for those premium seats will make the most expensive season ticket prices much more expesnive. But we believe, me and the frog in my pocket, that the impact will be to actually drive overall prices to look more like the bottom row on the chart... the MLB averages.

So, In summary... the EIR for San Jose is not complete bullcrap. It is actually fairly conservative as far as the total economic growth (though probably over estimates the number of jobs created after the construction period). Second, it doesn't appear that the new stadium would price most folks out of the market. And last, I'd love to compare how this would differ in Oakland but there isn't much available by way of what the plan is in Oakland. If anyone knows, email it to me and I won't rat you out.

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