Financing packages for stadiums and other sports venues are among the largest incentive deals many states and communities will ever encounter. How can smart incentive practices be applied to help leaders make wise decisions during often fraught negotiations? Here are a few questions to consider, drawing on our past analyses of megaproject deals and our framework for crafting effective but responsible incentive packages. 

1. What is the track record of the entity seeking incentives? Do they have a history of keeping their promises?

Smart incentive use begins with basic, upfront diligence on potential incentive recipients. Among the key factors to assess are past project history and use of incentives. Financial stability, restructuring plans, leadership changes, recent news, and future strategy are additional topics that state and local governments need to consider before joining in an investment with a prospective partner.  

2. Are the assumptions underlying the economic and fiscal impact model realistic? Does the deal require heroic assumptions to make financial sense?

Moving from the recipient to the deal, how is this deal expected to generate net benefits for the state or community based on project attributes and economic and fiscal impact model calculations. Impact models accompany most stadium deal proposals. It’s also important to look under the hood of the model to understand the assumptions that drive the impact. Do they make sense, and do they capture both the costs and benefits associated with the project? The point of using these analytical tools to be confident that all parties are negotiating a good deal that is likely to generate real gains for the community – not just a ribbon cutting. 

3. Has a sensitivity analysis been conducted to account for differing economic and use conditions over the venue’s lifespan?

Stadium projects are highly unlikely to play out exactly as projected (they are projections after all).  Most economic and fiscal impact analysis reports provide one set of numbers, often assuming consistent operations at peak levels for multiple years – an unlikely scenario. What do the costs and benefits for the community look like in different economic and use and attendance scenarios? Does the deal account for this risk?  

4. Similarly, what are the ramifications if the project is not sustained for the expected period of time?

Too often, incentives have a longer lifespan than the underlying investment they are supporting. If the incentive or financing package runs for 30-40 years, but the expected lifespan of a stadium is only 20 years, where does that leave the community? What do the sites or facilities look like in year 10, 20 or 30? Are they still generating fiscal and economic benefits, or will they become a drain on the community?  It is a question worth asking because many communities must devote substantial resources to redeveloping properties where the physical life has exceeded the economic utility. 

5. Is the project consistent with what the surrounding community wants?

Finally, one of our core Smart Incentives tenets is that good incentive use is not about doing deals, but about accomplishing economic development objectives. The metric is not whether the transaction was completed, but whether the investment is going to make people and places better off. This is the essence of economic development. So even when a project shows overall net fiscal or economic benefits, project proponents still need to be able to explain how the incentivized project meets local community needs and how any negative effects will be ameliorated.