Thunder Bay event centre: 3 reasons arenas can be bad investments

A new arena and convention centre could be a nice addition to Thunder Bay's entertainment district, but an economist who studies the impact of new stadiums says it's unlikely to be much of a money maker. 

The city of Thunder Bay recently released a report laying out its financial plan for the proposed $114.7 million facility, which it expects will boost employment and tax revenue. 

But research shows that the economic benefits of such facilities are often overestimated said Victor Matheson, who teaches at the College of the Holy Cross in Worcester, Massachusetts. 

"There's no doubt that an arena will be a nice amenity for the residents of Thunder Bay but there's not a lot of evidence that suggests it's going to make them rich," he said. 

3 reasons new arenas can be financial flops

• 1.   Locals buy most tickets

A new arena may attract more concerts, or even an AHL team, but most of the people buying tickets will be local, said Matheson.  "That just means people are going spending their money there rather than other local movie theatres, bars or restaurants in the area," he added. 

• 2.   Big projects cost big bucks

While there may be an initial employment boost during the construction phase, Matheson said taxpayers could be paying the bills for years to come.

• 3.    Dude. Where's my revenue?

One benefit of a newer, bigger arena could be the ability to attract bigger entertainment acts.  Unfortunately, those acts will take a good chunk of of the profits away with them when they go, said Matheson.

On the bright side

Despite the financial drawbacks, new arenas or stadiums can make cities nicer places to live, said Matheson, and if they're heavily used by a number of sports teams, then they can even pay off. 

His advice to cities – especially cities with a relatively small tax base, like Thunder Bay – is to keep things modest. 

"The number one thing is, let's not go too crazy on how lavish a facility you want to build," he said.