With the women’s Final Four at the 20,000-steat American Airlines Center in Dallas and the men’s finale at 71,000 seat NRG Stadium in Houston, more than 200,000 fans are likely to attend the six games. It’s a reminder that the worst fears of the pandemic—that canceled sports and other events would make the bond market for college and pro stadium financing “fall apart”—never materialized.
“Big picture, spending has definitely been there after 18 months of people not going to games in some regions,” S&P Global Ratings Infrastructure and Project Finance group director Chad Lewis said in a phone call. “There are still going to be pockets where team performance and local economic conditions can put pressure on, but it certainly seems like we’re back to pre-COVID levels in the majority of stadiums and arenas.”
In 2020, the NCAA canceled the Final Fours, and most teams on other sports played a modified schedule in front of few or no fans. That introduced teams and their facilities to “unthinkable circumstances,” according to a recent S&P report on stadium financing. That’s because large venues like those in Dallas and Houston are financed by municipal bonds that are paid off over time, usually using a combination of direct income from the facility and revenue from taxes levied mostly on visitors, such as those for hotel rooms. No fans, therefore, means no money to pay bondholders.
Yet the worst case never came about, even with the occasional dramatic (at least by muni bond market standards) call upon reserve funds to offset revenue shortfalls. Credit the major leagues’ deals with media partners that kept cash flowing to teams, along with the quick development and roll-out of vaccines, for staving off the nightmare scenario of prolonged absence of fans. Pent-up demand for live events, bringing with it strong ticket and food and beverage sales, have helped give the rebound momentum, according to the S&P report.
“Is it a concern when the whole world shuts down and doesn’t travel? Sure,” said Janis Burke, CEO of the Harris County-Houston Sports Authority, a municipal agency that sponsored the bonds that built NRG Stadium two decades ago.
“We survived 9/11 when there was no travel, we survived the 2008 credit crisis, which caused all kinds of problems with our bonds, and we survived COVID,” she said in a phone call. “And all those years we’ve never had a late payment or not paid the bondholders what they were due. So we’re pretty proud of that.”
Houston and Dallas own the Final Four venues (American Airlines arena bonds are paid off, while Houston’s are still being paid down.) One-off events like the Final Fours aren’t directly as meaningful to the health of the finances of stadiums and arenas as having an anchor tenant like a team that uses the facility for home games, but credit analysts like Lewis build assumptions of a certain level of additional events into their financial projections—things like concerts, monster truck shows and a periodic rotation of major games like the NCAA basketball rounds or a Super Bowl.
In the case of Houston, Burke estimates the total economic benefit to the city will fall somewhere between $150 million and $250 million. A better estimate will come after the games are actually held.
“That’s a big stadium, and they have floor seating, so think about all those tax dollars that are being generated from ticket sales, food and beverage, lodging, car rentals—numbers that can add up to pretty significant revenue for a city,” said Lewis. “The Dallases and Houstons of the world—and with the recent TCP PGA event, Scottsdale and Phoenix—show there are some cities that have become able to showcase large-scale events with an influx of tourists, fans and corporations that want to participate.”