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Michigan is famous for its long, cold winters, so it is no surprise that sports such as ice-skating and hockey are popular activities among the state's citizens. Exploding demand for access to skating arenas has led to a boom in ice rink construction. Entrepreneurs have emerged to build and operate arenas open to the public, but many are finding that they must compete with government-subsidized skating facilities. Why should private operators be forced through taxes to subsidize their competition? The answer is that they should not. Government should get out of the ice arena business.
The booming popularity of hockey and ice-skating is not confined to Michigan. Approximately 2,200 ice rinks throughout the United States serve an American public thirsty for sport, and another 200 arenas are under construction. Part of this increased demand is explained by the growth of female hockey teams in recent yearsup 511% in the past seven seasons.
In Michigan as in other states, ice rinks are built and operated by both the public and private sectors. Evidence suggests, however, that the pace of privately built and operated arenas is outpacing government ones. DTS Architects, an ice arena construction company based in Grand Rapids, has built seven ice rinks in the past four years, and six of them were privately owned. The seventh is in Walker, Michigan, and even it contracts out to a private firm for facility management.
The increase in privately owned arenas has spurred a debate among some citizens and government officials over the availability of public skating ice time. Advocates of government-subsidized rinks claim that private rinks will block out large time slots for the most profitable skating time (hockey games, for instance) and recreational public skating time would suffer. Others say that such logic flies in the face of the profit motive: After all, it is in the best interest of private rinks to establish the best mix of times and rates for each group in order to please as many customers as possible while maximizing profits.
The positive incentive of profits is precisely what may keep public skating time plentiful for consumers. Some rink owners are diversifying their recreational products to help increase revenues, and when necessary, they may cross-subsidize the overall operation, making up for losses in public skating times with profits from concessions, for example.
Many private ice arenas do in fact offer a variety of recreational activities:
The Compuware Sports Arena in Plymouth was built with a two-ice-rink arena seating over 4,000 combined. It has a weight room, two concession stands, a restaurant, and pro shop. The facility is worth an estimated $16.5 million.
The Big Bear Arena in Sault Ste. Marie also has a two-sheet arena, weight room, two concession areas, a pro shop, and other customer conveniences. It cost approximately $18 million to build.
NHL Skate at Michigan's Play Park in Birch Run has two sheets of ice and plans to build a dome baseball field for year-round play, a nearby golf course, and a bowling alley.
The Troy Sports Center in Troy has three sheets of ice and an indoor soccer facility.
By contrast, government rinks often offer far less to consumers and frequently require municipal subsidies to maintain their operations. For example, the Washington Square Ice Rink in Lansing had a total revenue of $188,960 for fiscal year 1998 and expenses of $273,302. If this were a private arena the owners would be forced to make up the difference. Unfortunately, in this instance, taxpayers who would never use the facility must be forced to subsidize those who do use the facility.
The sale of government ice arenas would not only save tax dollars, it would have a positive benefit for state revenues, says State Representative Robert Gosselin of Troy. He points out that private ice arenas generate income in ways that government-operated arenas cannot. For instance, private arenas pay federal, state, and local taxes on profits derived from patrons who voluntarily pay to use the facility. Municipal facilities, on the other hand, are exempt from paying taxes and actually consume taxes in construction and operation if revenue does not cover expenses.
Several cities, including as Wexford, Grand Rapids, and Southfield, are moving forward with plans to privatize their existing municipal rinks. With the demand for ice time increasing and entrepreneurs working diligently to supply it, Michigan citizens would be better served if government would get out of the ice skating and hockey business altogether and focus on their core responsibilities such as police, courts, roads, and other essential public services.
