Economics and Finance of Sport

Construction of a stadium normally benefits the local area and its residents which makes it normal to seek extra financial support by the local government. The main source of financing construction of a sports facility without using public funds is private funding which in turn increases taxes and reduced risk to taxpayers. Additionally, avoidance of government bureaucracy eases the process of construction and in most instances takes less time.

Putting of brand names on stadiums is extremely valuable. Different companies can be granted brand rights to sponsor the construction of stadiums with the promise of putting their brand names on the stadium before and after their completion.  Benefits that the given companies acquire after sponsoring the construction of the given stadium is considerable. Putting a name on a venue makes a positive brand impression in the minds of potential buyers as visitors in the venues, passers-by and those watching the live events such as television audiences are able to learn about the given brand which impacts positively on their sales (Siegfried and Zimbalist 107). Money acquired from sales can always be used by the given companies to sponsor construction of other stadiums which eases the burden of stadium construction by the local government.

The partnership between the public and private funding can ease the construction of stadiums without overstretching the local governments. The local government for instance may provide the construction area or simply the land while the private firm caters for the construction cost. This simply means that the private firm is granted management rights until it recovers the agreed amount according to the deal signed.  On recovering their funds, the management can always be returned to the hands of the local government. This is a clear way of easing the burden of taxation on the local people.

Non-guaranteed bonds for instance authority bonds and revenue bonds are finance sources that can be utilized in the construction of stadiums. Finances are derived from the users of the specified facility such as the stadiums and other sources and must finance general and capital expenditures out of these receipts and whatever additional funds they are permitted to borrow. Tickets sold, advertisement rights and concessions are means by which the funds are raised. This enables the local government to concentrate on other service delivery such as improving schools and creation of affordable housing through the collected taxes.

The local authorities uses a considerable amount of tax collected to build stadiums which attracts visitors from outside the given area to attend a sporting activity. These visitors spend their money which is a source of income and employment to the locals. This is through accommodation by offering hotel services, transport services and hiring caretakers of the sporting facility therefore, creating employment. Creation of employment reduces the rate of crime in the local area which can be associated with high unemployment rates. Reduction of crimes creates a conducive environment for businesses to thrive which impacts positively on the economy.

Sports stadiums also impact the economy through establishments of other social services such as good schools and hospitals. Construction of good schools improves the education levels in the local area and the country as a whole as modern facilities are provided making the reading environment conducive thereby producing elites (Crompton 17). Good hospitals also improve health conditions thus increasing expectancy rate which is good for the economy. By doing so, the local government is able to save a significant amount of money which can be directed to the development of other development projects such as construction of roads thus improving the economy through easing of transport of goods and services.

In conclusion, sales in the local area increase considerably. Hotels are able to make good profits through selling of food while those selling sporting materials yield high. This simply means personal income increases thus improving standards of living of the locals at the same time more taxes are collected due to the emergence of other businesses in the area. Collection and utilization of more taxes means growth of the economy through provision of other basic social services.

Works Cited

Crompton, John L. “Economic Impact Analysis of Sports Facilities and Events.” Journal of Sport Management (1995): 14-35.

Siegfried, John and Andrew Zimbalist. “The Economics of Sports Facilities and Their Communities.” The Journal of Economic Perspectives (2000): 95-114.

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Economics and Finance of Sport

Paper details
Assignment #2 (25 points)
Student Name:
1. How can a stadium or arena be built without putting too much financial burden on a
local government? (10 points)
2. Explain economic impact with an example in the sports industry and the direct,
indirect and induced effects. (10 points)
• Please follow the guideline below for the citation of sources (5 points):
“You must credit the source whether paraphrasing or quoting an author directly. For a
direct quotation in the text, give the author, year, and page number in parentheses.
Include a complete reference in the reference list. When paraphrasing or referring to an
idea contained in another work, you are not required to provide a page number.”