Dallas Cowboys: Financing a new stadium Harvard Case Solution & Analysis

Introduction

In the year 2003,Dallaswished to build a new stadium and Texas Governor Rick Perry have signed senate bill into law. This new legislation will enable voters to vote for or against the rise in tax to fund for a stadium complex for the Dallas Cowboys of the National Football league (NFL).The reason to build a new stadium was that existing stadium was old and it has almost completed its useful life. To replace the aging stadium, a new stadium, entertainment and business complex will require up to $1 billion. 65% out of $1 billion will be required to build a 100,000 seat stadium. It is estimated that the new stadium will have attractions for adults, such as stores, bars and restaurants.

 The new stadium has potential to earn potential revenues for one of the NFL’s premier teams. The source of funds is estimated to be from sources such as tickets selling, tax on tickets, rental income, sponsors, parking and advertisement revenue.

There is another source of revenues such as income from leases. 8 seat crown I will yield annual lease income of $30,000 and lease per income is $3,500. While 10 seat Crown I is expected to earn $35,000 per year and per game is $4,500. On the other hand,12 seat circle will yield around from $45,000 to $75,000 per year, while daily lease income will be $5,500.While 14 seat crown I & II will yield $65,000 yearly income, while same can be leased $9500 per day.40 seats crown circle yearly lease is negotiable while same can be leased for $18500 per game.

Other major source of fund can be from the maintained and operating cost and lease payment that will be paid by the Cowboys.

This team wanted to build new stadium through the assistance of taxpayer funds. Now, after the passage of the bill, it has to be decided by the taxpayers to decide whether funds come from taxpayers or funds come from private sources. Stadium can be in the form of cash payment or improvement in infrastructure and subsidizing in cost.Dallas cowboys are asking for stadium subsidy. Stadium subsidy is a type of subsidy that is given to professional sports franchise to construct the stadium.

There are many benefits of construction of the stadium. Benefits will include social and economic benefits. Social benefits will include promotion of sports and entertainment the general public. On the other hand,economic benefits will include tax revenues from car parking, ticket selling and rent income from the tenants. Revenue will be helping to support other activities of the city and county as well.

Case Analysis

Before making decision to subsidize the construction of the stadium many factors should be considered such as demand and supply situation, economic situation of the city, county and source of funds. Funds can be raised through municipal bonds or federal exempted bonds. Funds that are raised can be rapid principal as well as interest through tax and if existing tax is not enough than taxes need to be raise but in volatile and fragile economy raising taxes is not a good option.

The area in which new proposed stadium should be built should be carefully assessed for it locality, population destiny as Dallas is considered to be least populated area to attract visitors that will help to cover the cost of construction and become a potential source for the government.

Dallas Cowboys Financing a new stadium Case Solution

Financial Analysis

There will be huge financial impact of construction of new stadium. An estimated of $1 billion will be required for the construction of the stadium.The construction amount is estimated to be in current year, if the project is delay than it is expected that construction cost will be increased as currently economy is down and inflation is low. Furthermore,the economy on the verge of recovery inflation is expected to increase and project might not cost $1 billion after the delay.

The amount of $1 Billion is huge for the city government that is expected to be spent on the construction of the stadium. One of the justifications could be tax revenue from the visitors. But revenue will be totally dependent on the visitors and expected spending. Visitors can be from the city or outside and if the stadium is easily assessable then more visitors can visit the stadium which could result in more tax revenue. It is not necessary that visitors only visit when there is game going on. In the off season, visitors can also visit place as a tourist place to see other attraction as well.........................

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