Orlando Magic: Tax Dollars for New Arena?

Overview

Carpe Diem Consultants recently undertook research to understand the general perceptions of residents of Orange County as to whether or not their tax dollars should be spent to build a new arena for the Orlando Magic basketball team. We undertook this research in response to the public debate about the importance of keeping the Magic in Central Florida and the general perception that in order to do this the community will have to help fund a new arena for the Magic to replace the TD Waterhouse Center. The objective of building the new arena is to provide increased revenue opportunities for the owners of the Magic through a significantly greater number of better located luxury boxes and more concourse space for retail outlets.

The voluntary, online survey was fielded in May/June 2005 and 119 Orange County residents completed the survey. The findings from the research are both compelling and directionally significant. They have serious implications for local government and the Magic as they both attempt to gain popular support for funding the renovation/construction of stadiums and arenas.

Respondents

In general, the 119 respondents were an affluent, well-educated group. A profile of the respondents is as follows:

Age 17% of the respondents were over 60 years old 58% were between the ages of 40 and 60 25% were under 40
Gender 67% of the respondents were male 33% of the respondents were female
Race Respondents were representative of overall population
Income 23% have a household income in excess of $100,000 19% have a household income between $75,000 and $100,000 31% have a household income between $50,000 and $75,000 27% have a household income between $25,000 and $50,000
Education 32% have post graduate degrees 38% graduated from 4-year colleges 20% graduated from 2-year colleges 10% had high school degrees

General Impressions

The first set of questions focused on general impressions about the importance of sports teams to a community and the impact of spending on arena/stadiums. Respondents believed that revitalizing downtown Orlando is an important local priority (rated 7.39 out of 10), however new arenas and stadiums are not necessarily perceived by respondents to be part of the solution. Arenas and stadiums, for example, are not seen as having a significant positive impact on the surrounding community (4.49 out of 10) or benefiting the local economy (4.92 out of 10).

Moreover, the respondents do not feel that the Magic are important to the image of the community or Orlando’s quality of life. Respondents rated all of the following questions under 5.0 out of 10:

Furthermore, the respondents did not believe that local government should take an active role in financing new arenas and stadiums (3.27 out of 10). This is not surprising given the low overall perceived value to the community in either economic or quality of life terms.

To a certain extent, we believe these scores reflect the failure of many professional sports teams to generate a sense of community that seems to exist in northern cities where generations of fans have grown up with a rooting interest in the local teams. When you add to this the uninspiring performance of the Magic on the court, poor management of basketball operations (e.g., losing Shaquille O’Neal, poor draft choices, player personnel decisions being made by a hockey guy, etc.), absentee ownership, and a community rich in both indoor and outdoor entertainment options, there is very little civic pride associated with being a Magic fan.

22% of respondents felt that having a major professional team was important for Orlando’s image (rating it 8-10). These respondents also rated the other questions significantly higher than other respondents (see chart below). Of particular note is the willingness of this segment to tolerate local government having a role in financing stadiums and arenas. They also believe that this spending is beneficial to the community and the areas immediately surrounding the arena.

Question	Overall	"8-10 Segment"	Difference
Revitalizing downtown Orlando is an important local priority	7.39	8.38	+0.99
Spending on arenas and stadiums benefit the local economy	4.92	7.54	+2.62
Having a major professional sports team improves the quality of life in Orange County	4.15	7.73	+3.58
Local government should play a key role in financing arenas and stadiums for sports teams	3.27	6.15	+2.88
New arenas and stadiums have a positive impact on the surrounding community	4.49	7.81	+3.32
It would be a major loss to the city and county if the Magic were to leave	4.45	7.85	+3.40

No significant demographic differences exist between this group and other responses. From a behavioral standpoint, however, this group rated attending professional sporting events as their second favorite leisure time activity (after going out to eat). This is in stark contrast to the overall scores where attending professional sporting events was only the 7th most popular leisure time activity out of 8 possible choices.

 

Leisure Time Preferences

We asked respondents to force rank 8 activities with the lowest score being their favorite leisure time activity and the highest score being their least favorite activity. The results are as follows:

Most Favorite		1 - Going out to eat 2 - Going to the movies 3 - Going to a live concert 4 - Going to an arts event 5 - Boating 6 - Going to a college sporting event 7 - Going to a professional sporting event 8 - Playing golf
Least Favorite

Respondents who listed attending professional sports events in their top three leisure preferences also rated the general impressions questions significantly higher than the overall scores.

This is football country! We asked respondents what major professional sports team they would prefer to have in Orlando if they could only have one team. By almost a two to one margin, respondents chose football (57 mentions) over basketball (30) and baseball (27).

When it came to purchase intent, two-thirds of the respondents indicated that they would be unwilling to purchase season tickets for any professional sports team. Only 12 respondents indicated a willingness to purchase season tickets for basketball games; 2.5 times more people indicated a willingness to purchase season tickets for football games.

What professional sports teams would you purchase season tickets for?

For individual game tickets, football was the clear preference with basketball finishing third after baseball.

What professional sports teams would you purchase individual game tickets for?

Purchase intent seems to have a strong positive relationship with a respondent’s belief in the value of a professional sports team to the community and the impact that the construction of the arenas and stadiums has on the surrounding area. The stronger a respondent’s interest in the team as indicated by willingness to purchase tickets, the higher the scores to the general impression questions.

Question	Overall	No Tickets	Buy Game Tickets	Buy Season Tickets
Having a major professional sports team is important for Orlando's Image	4.81	3.68	6.55	8.58
Revitalizing downtown Orlando is an important local priority	7.39	6.44	8.31	9.52
Spending on arenas and stadiums benefit the local economy	4.92	3.99	6.31	8.17
Having a major professional sports team improves the quality of life in Orange County	4.15	3.15	5.56	8.58
Local government should play a key role in financing arenas and stadiums for sports teams	3.27	2.44	4.50	7.42
New arenas and stadiums have a positive impact on the surrounding community	4.49	3.62	5.69	8.33
It would be a major loss to the city and county if the Magic were to leave	4.45	3.25	6.41	8.67

 

Attendance

The TD Waterhouse Center is not perceived as a great place to see an event. Respondents rated it a 6.34 out of 10. The major complaints about the facility are the quality/size of seats. The viewpoint on the adequacy of the facility is consistent across all cuts of the data. The facility, while a factor in the consumer’s decision making, is not a deal breaker when it comes to attendance.

We asked respondents to rate the importance of a number of items in terms of getting them to attend events at the TD Waterhouse Center. The most important item was the quality of the event/team performing at the arena followed by quality of the seats. Other items such as location of arena, convenient dining and entertainment options before/after the event, and variety of concession stands and shops at the arena are significantly less important.

What are the most important factors in getting you to attend an event at the TD Waterhouse Center?

Not surprisingly, when push comes to shove, the public’s future attendance at arena events is driven primarily by the quality and variety of the events themselves, not the quality of the arena. The score on this item (7.85 out of 10) was over 2.5 points higher than responses to other questions in this category. Renovating the TD Waterhouse Center to include up-to-date amenities (4.50 out of 10) or building a new arena (3.93 out of 10) were rated as unlikely to influence future attendance at events. The four most frequently mentioned actions that would get people to attend more events are: lower event prices, variety of cultural/entertainment options, and quality of Magic, and quality/size of seats.

 

Funding Sources

We asked respondents for their views on the best way to fund the renovation and construction of arenas and stadiums. The results were as follows:

What do you think is the best way to fund the renovation and construction of arenas and stadiums?

We then asked if the deciding factor in keeping the Magic in Orlando were the building of a new arena, which form of tax would be the most acceptable way to fund the construction. 90% of respondents selected the Tourist Tax as the most acceptable way to fund the construction. Given the low scores reported on the importance of the Magic to the community, it is not surprising that the public does not have any interest in paying to keep the team here.

If an increase of 1% in the Tourist Tax were put in place, respondents did not perceive that this increase would have a negative impact on tourism in Orange County. Furthermore, there was a high level of agreement that a portion of the funds raised through the Tourist Tax should be used for initiatives designed to improve the quality of life in Orange County (7.79 out of 10). Local leaders need to determine whether or not it is appropriate to use some of these funds for arena construction/renovation. As in most primary tourist destinations, the amount of local taxes levied on tourists, regardless of how the monies are used, has no diminishing impact on the numbers of tourists who come here, whatsoever.

Despite this potentially acceptable funding source, the Magic may not be perceived as a worthy recipient of the funds because of the quality of the product and the public’s perception that the Magic are a “nice to have” but not a necessity or a positive contributor to the community’s image. If the Magic are to make headway in getting public financial support with a public that thinks this way, they need to demonstrate the value of Magic to the community (e.g., charitable activities, youth programs, etc.). In essence, the Magic need to demonstrate that they are worthy recipients of the funding based on their contributions to the community because the quality of the product and apathy of the community work against getting public support.

In terms of the use of tax funds, 57% of respondents think that renovating the Citrus Bowl is a better use of funds. As we’ve already seen, this is football country, so it’s not surprising that those people who indicated a willingness to buy Magic tickets also felt that renovating the Citrus Bowl was a better use of funds.

As it relates to private funding, participants were told that the Magic would use the facility about 50 days per year. We then asked them what percentage of the renovation/construction costs should be paid by the Magic as the primary tenant of the arena. 80% of the participants responded that the Magic should pay more than 25%; 45% felt the Magic should pay over 50% of the costs. As it relates to private funding, participants were told that the Magic would use the facility about 50 days per year. We then asked them what percentage of the renovation/construction costs should be paid by the Magic as the primary tenant of the arena. 80% of the participants responded that the Magic should pay more than 25%; 45% felt the Magic should pay over 50% of the costs.

 

Conclusions

Using tax dollars for stadiums and arenas will never be popular given other local priorities. So the challenge for local government and the Magic is to make the amount and source of local government funding palatable.

Despite general dissatisfaction with the arena across all segments, the quality of the arena is not an important factor in a respondent’s decision to attend an event. Much of the public discussion about the need for a new arena has been on the need for increased revenue sources for the Magic from luxury boxes and retail outlets—these are not drivers for getting fans to the arena.

While the TD Waterhouse Center is the second oldest arena in the NBA, Magic fans that responded to the survey generally believe that renovating the Citrus Bowl is a better use of funds than renovating the TD Waterhouse Center. Ironically, the oldest arena in the league, the Palace of Auburn Hills where the Detroit Pistons play, does not have many empty seats on game nights. The data are clear that team performance impacts attendance more than anything else.

Given perception that stadiums do not benefit the local economy or positively impact the surrounding community, getting popular support for spending tax dollars on an arena that is seen to principally benefit the Magic will be difficult. Would this be different if the Magic were a winning team? Probably not, given the issues we mentioned previously.

If tax dollars are required for the renovation/construction of an arena, it would be wise to emphasize the multi-use nature of the facility to appeal to a broader segment of the population and explore increasing the Tourist Tax to fund the costs. And the Magic must pay at least their fair share of the costs—the greater the multi-use benefits of a new/renovated facility are positioned, the lower the dollar amount required to meet public perception of fairness.

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Add Your Comment

Comments Gerald Monday 19th of September 2005 This is an excellent and timely analysis. It ought to contribute greatly to a more clear-headed examination of whether, when, and what type of public funding of sports franchises' arena/stadium wishes makes public policy sense. Carpe Diem should do these analyses all over the country! Nice job. nzlwfqaov qfajxt Tuesday 26th of February 2008 vjatcs fasd tlbxi kjreltz uinoy tyapwdfvh sgohlckw

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