Introduction

Economic impact in sporting events can be defined as the net change in an economy resulting from a sport event. The change is caused by activity involving the acquisition, operation, development, and use of sport facilities and services (Lieber & Alton, 1983). These in turn generate visitors’ spending, public spending, employment opportunities, and tax revenue. Specifically, the economic impacts of expenditure are composed of direct, indirect, and induced effects. Direct effects are the purchases needed to meet the increased demand of visitors for goods and services. Indirect effects are the ripple effect of additional rounds of re-circulating the initial spectators’ dollars. Induced effects are the increase in employment and household income that result from the economic activity fueled by the direct and indirect effects (Dawson, Blahna, & Keith, 1993; Howard & Crompton, 1995).

Economic impact is an important topic of discussion and debate in sport marketing and/or management fields because estimating the economic impact of a sporting events is very difficult and frequently too subjective. Because of the nature of social science, everyone has their own ideas and methodology for conducting economic impact studies. The main difficulty in doing social science research is based in the fact that everyone believes that they have an innate understanding of the material. Social objects are hidden behind a screen of pre-constructed discourses which present the worst barrier to scientific investigation, and countless sociologists believe they are talking about the object of study when they are merely relaying the discourse which, in sport as elsewhere, the object produces about itself, whether through its officials, supporters or journalists (Bourdieu, 1999). Therefore, construction of truly scientific objects implies a break with common representations, which can notably be effected by taking these prenotions as the object of study.

Statement of Purpose

Although many previous studies have contributed to economic the impact research of sport and/or recreational events, most studies are based upon the researchers’ personal perception and arguable methodology. The purpose of this study was to review previous economic impact studies and to develop strategies for conducting an economic impact study.

Reasons of Conducting Economic Impact Study

Hosting a sport event has revealed a number of benefits in our communities. Of those benefits, some reasons like increasing community visibility, positive psychic income, and enhancing community image are all common and acceptable postulations. However, there is doubt that sport events that utilize public subsidies always bring positive economic benefits into communities. There are following reasons to conduct economic impact studies of sport events. First, because many sport events in our communities were financed by public tax support, economic impact studies continue to be an important public relations tool for city government. Secondly, there is doubt that sporting events may actually help develop a community in relative to its economy. Therefore, accurate estimates should be proposed and the results should be reported to community members. Thirdly, as sport is not just an entertainment, but an industry, the results of economic impact may be a cornerstone to develop many related businesses in communities. Finally, positive or negative economic results of sport events may be an important method to determine communities’ draft budget for the coming year.

Literature Review on Economic Impact Studies

Unfortunately, economic debates often center around the appropriateness of the size and type of multipliers used for Economic Impact Studies (EIS). The multiplier effect accounts for the overall economic impact of a sport event. The multiplier effect demonstrates the process through which initial spending in a region generates further rounds of re-spending within the region. The ripping process of subsequent re-spending is the multiplier effect. The basic principle of the multiplier effect begins with an initial spending as an increased income into an economy. A portion of the increased income is spent and further re-spent within the region (Archer, 1984; Crompton, 1995; Wang, 1997). In summary, there are three elements that contribute to the total impact of visitor spending: Direct impact (the first-round effect of visitor spending), Indirect impact (the ripple effect of additional rounds of re-circulating the initial visitors’ dollars), and Induced impact, which is further ripple effects caused by employees of impacted business spending some of their salaries and wages in other business in the host community (Howard & Crompton, 1995).

A variety of multiplier used modeling techniques are available: TEIM (Travel Economic Impact Model), RIMS (Regional Input-output Modeling System) (Donnelly, Vaske, DeRuiter, & Loomis, 1998; Wang, 1997), TDSM (Tourism Development Simulation Model) (Donnelly, et al., 1998), RIMS II (Regional Input-output Modeling System, version II) (Wang, 1997), ROI (measuring financial Return On Investment) (Turco & Navarro, 1993), and IMPLAN (Impact Analysis for Planning) (Bushnell & Hyle, 1985; Dawson, Blahna, Keith, 1993; Donnelly, et al., 1998; Howard & Crompton, 1995; and Wang, 1997). Of those modeling techniques, IMPLAN is one of popular methods. The IMPLAN model was developed by the U.S. Forest Service and Engineer Economics Associates, Inc. The IMPLAN develops input-output models for all states and counties in the United States. This model was used to estimate the employment, income, and net sales and adopted as the regional impact analysis program-of-choice. Another often-used model is RIMS, which was developed by the U.S. Department of Commerce, Bureau of Economic Analysis (BEA). This model also offers input-output tables down to the country level (Turco & Kelsey, 1992). Also, a lot of simple formulas were developed to conduct economic impact study of sport events by local sport commission companies. Table 1 shows standard formulas, which were derived from the National Association of Sport Commission (NASC).

Table 1 NASC Economic Impact Formulas
Organization Multiplier Formula Spending per person/day
Albuquerque Sports Council 1.7 # of visitors x # of days x $200 x 1.7 = EI $200.00
Bloomington/MD DVB _ _ # of visitors x # of days x $183 = EI $183.00
Greater Augusta Sports Council 3.0 # of visitors x # of days x $167 x 3.0 = EI $167.00
Greater Cincinnati sports & Events Commission _ _ # of visitors x # of days x $125 = EI $125.00
Lee Island Coast CVB _ _ # of visitors x # of days x $100 (over 18) = EI
# of visitors x # of days x $54 (under 18) = EI $77.00 (average)

Lisle CVB/
Lisle Sports Commission _ _ # of visitors x # of days x $158.41 (1st person in room) = EI
# of visitors x # of days x $85.41 (2-4 people in room) = EI
$97.94 (average)
Shreveport Regional Sports Authority 2.0 # of visitors x # of days x average $ spent x 2.0 = EI
(average $ spent varies from event to event) _ _
Siouxland Sports Congress
2.5
# of visitors x # of days x $90 x 2.5 = EI
$90.00

Tallahassee Sports Council 1.73 # of visitors x # of days x $79 x 1.73 = EI $79.00
Waterloo CVB 2.5 # of visitors x # of days x $100 x 2.5 = EI $100.00
EI indicates the Economic Impacts Source by National Association of Sports Commissions
According to the report by National Association of Sports Commissions (NASC), the average multiplier score is 2.37 and average spending per person/day is approximately $146.89 across the United States.

Problems of Economic Impact Study

As stated before, the economic impact study of sporting events is controversial because of its subjective aspects. There are other problems of the study based on the literature review. First, the use of different and conflicting concepts of the multiplier itself (Howard & Crompton, 1995). A danger in the multiplier and the way it is presented in research reports aimed at the policy maker is that its basic concept and application are deceptively sample. This means that economic impact studies are primarily used by consultants hired by sport entrepreneurs and boosters to demonstrate the value of a proposed sport event (Johnson & Sack, 1996). Secondly, inclusion of local spectators, time-switchers, and casuals in the study. Economic impact attributable to a sport events should include only new cash flow injected into an economy by visitors and other external businesses such as media, banks, and investors from outside the community. In addition, because expenditures by time-switchers and casuals would have occurred without the event, impacts of their expenditures should be excluded in conducted economic impact study. Thirdly, economic impact study by hired consultants from political power usually estimates only positive aspects, which means benefits both economically and socially. They never measured substantial economic costs and potential social problems. For the side of economic impact, only gross benefits rather than net benefits are measured and reported. In the case of non-economic impact, negative social impacts including such as traffic congestion, vandalism, environmental degradation, disruption of residents’ lifestyle, and so on are rarely reported. Finally, economic impact studies are too subjective depend on researchers to trust their results. Even if some models and formulas for economic impact studies were developed and utilized, the results and their interpretations could be changed based on the intent of the researchers and the unrealistic expectations of proponents.

Discussion and Recommendation

Conducting an economic impact study is important because it becomes a useful tool to evaluate a community’s development both economically and socially. Therefore, professionals who have the responsibility of conducting an economic impact study should consider the following suggestions. First of all, limit and define the purpose of study. Limiting and defining the purpose of study can save study time and make the outcomes more useful and specific to people whom want apply them. Secondly, prepare alternatives to be considered. The number of alternatives that should be considered depends upon the number of realistic options available and on other constraints, such as time, information, funding, and political realities. It is a very useful activity for the leadership to reduce the number of alternatives to the realistic three or four to include in the analysis (Goldman & Nakazawa, 1997). Thirdly, prepare enough information to conduct a meaningful economic impact study. In order to produce exact and non-arguable results, appropriate and diverse information for the study like a demographic profile on potential visitors and/or study respondents, the degree of economic development for the potential hosting community, tax impact, and other social guidelines. This information will be effective to make research questionnaire and other necessary research tools. Fourth, conduct a study based not on assumption, but on evidence and information. One of the arguable issues in economic impact studies is that the researcher and/or proponents of the event rely on their assumptions. These assumptions lead not correct results and apply to community’s decision on hosting a sport event. Fifth, consider all possible impacts for the community not just on economic impact. Economic impact studies should contain economic as well as social impacts. Frequently, the negative impacts on community life such as vandalism, increasing traffic congesting, environmental degradation are not considered and reported. Sometimes, however, these social impacts can be more important to a community than the economic impact. Sixth, do not exaggerate the results of study. Because the results of an economic impact study can make a decision to use public tax supports, the political sponsor may tend to exaggerate or misinterpret the results of the study. Seventh, on the side of estimating economic benefits, under estimation is better than over estimation. The proponent of a sport event frequently over estimates on their projects to attract public approval and political support. This is related to moral and ethical issues. Even if no one can produce an exact estimation on sport events, the researchers should keep the study based on the result data. Also, based on the results, other alternatives for the sport event can be considered.

References

Archer, B. (1984). Economic impact: Misleading multiplier. Annals of Tourism
Research, 11(4), 517-518.

Bourdieu, P. (1999). The state, economics and sport. In Dauncey, H., & Hare, G. France and the 1998 World Cup: The national impact of a world sporting event, (pp. 15-21). London, England: Frank Class Publishers.

Bushnell, R. C., & Hyle, M. (1985). Computerized models for assessing the economic impact of recreation and tourism. In D. V. Propst (Ed.), Assessing the economic impact of recreation and tourism. Asheville, NC: Southeastern Forest Experiment Station.

Crompton, J. L. (1995). Economic impact analysis of sports facilities and events: Eleven sources of misapplication. Journal of Sport Management, 9, 14-35.

Dawson, S. A., Blahna, D. J., & Keith, J. E. (1993). Expected and actual regional
economic impacts of Great Basin National Park. Journal of Park and Recreation
Administration, 11(4), 45-59.

Donnelly, M. P., Vaske, J. J., DeRuiter, D. S., & Loomis, J. B. (1998).
Economic impacts of state park: Effect of park visitation, park facilities, and county economic diversification. Journal of Park and Recreation Administration, 16(4), 57-72.

Goldman, G., & Nakazawa, A. (1997). Determining economic impacts for a community. Economic Development Review, 15(1), 48-51.

Howard, D. R., & Crompton, J. L. (1995). Financing sport. Morgantown, WV: Fitness Information Technology, Inc.

Johnson, A. T., & Sack, A. (1996). Assessing the value of sports facilities: The
importance of non-economic factors. Economic Development Quarterly, 10(4),
369-381.

Leiber, S. R., & Alton, D. J. (1983). Visitor expenditures and the economic impact of public recreation facilities in Illinois. In Leiber, S. R., & Fesenmeier, D. R.
Recreation planning and management. State College, PA: Venture Publishing.

National Association of Sports Commissions. (April, 1999). National Association of
Sports Commissions Annual Meeting Book. Unpublished manuscript.

Turco, D. M., & Kelsey, C. W. (1992). Conducting economic impact studies of
Recreation and parks special events. Washington, DC: National Recreation and
Park Association.

Turco, D. M., & Navarro, R. (1993). Assessing the economic impact and financial return on investment of a national sporting event. Sport Marketing Quarterly, 2(3), 17-23.

Wang, P. C. (1997). Economic impact assessment of recreation services and the use of multipliers: A comparative examination. Journal of Park and Recreation Administration, 15(2), 32-43.

With
new state of the art sporting arenas costing anywhere between
$30 million to $300 million to build, huge financial investments
must be made. There are many options in financing sport and
recreation facilities than involve both public and private
arrangements and investments. This paper will address various
financial ventures and the benefits and pitfalls of those
options.

Funding
may be separated into two distinct groups public funding and
private funding. Public funding may included but may not be
limited to taxes, municipal bonds, certificates of participation
and special authority bonds. Public funding may include but
may not be limited to, cash donations, contributions, naming
rights, concessionaire and or restaurant rights, sponsorships,
lease agreements, luxury and preferred seating, parking fees,
advertising, and gifts shops revenues. Other ways of financing
in order to spread the enormous costs of building a state
of the art sporting facility is that projects have been partnered
in joint public and private funding. Often, the public funding
is in the form of land contributions or luxury taxes and the
private contributions are reflected within the facility itself.

Cities,
counties and states such as Tampa and Miami Florida, Nashville
TN. and Irving TX. have picked up the entire cost for new
arenas through public funding. More than half of the construction
costs for other facilities in Dallas, Seattle, Atlanta, Raleigh,
N.C. and St. Paul, MN. are financed by their local governments.

Public
funding in the form of taxes

In
the state of Texas, there was a controversy around the arena
funding bill called House Bill 92. Passed in 1997, House Bill
92 is a tool that communities can use as possible funding
options for the development of new sport facilities by levying
taxes and tapping sales tax funds. The bill authorizes cities
to tap the sales tax to fund other economic development projects
as well (San Antonio Business Journal, 1998). Many have their
eyes on the funding source. One of those interested was State
Senator Frank Madla, who had a proposal using the House Bill
92 to couple the funding of a new arena, community projects
and a campus expansion at the University of Texas, San Antonio.
Considering the little support that voters had toward approving
a sales tax to fund a new sports arena, a referendum involving
a combination of many different projects, might have had more
of an appeal. Community leaders reacted to the idea of a bundled
project referendum with apprehension. Although, it may have
more of a voter support, the plan will limit the amount of
money that could be raised for any one project. A half cent
sales tax would bring in about $50 million a year and spread
out over several projects, it is not a lot of funding. A ½
cent sales tax was also desired solely for the building of
a new arena for the San Antonio Spurs, the Livestock Show
& Rodeo and ice hockey. Arguments opposed to the use of
the ½ cent sales tax came from the Metropolitan Transit
in San Antonio. The sales tax that the House Bill 92 refers
to is what Texas voters had previously designated as the Mass
Transit Authority (MTA) sales tax. The state legislation allowed
for the MTA to receive a full cent for operating a public
transit system. The Metropolitan Transit decided to collect
only a ½ cent with the expectation that the additional
½ cent would be available for future needs. It is that
extra ½ cent that was wanted for the development of
projects. The MTA claims not only address the transportation
needs of the community, it also maintains 550 full time jobs,
and provides returns three times its cost in business revenue
to the communities it serves. Its argument is that the building
of a sports arena only satisfies the private interests of
a few people and its supporters (San Antonio Business Journal,
1997). A similar argument echoed in Dallas, where citizens
questioned by they should pay higher taxes to benefit the
team owners who are two of the wealthiest citizens in Dallas.
Even though the teams were contributing $105 million to build
the arena, the city was getting no revenue directly from the
facility (Dallas Business Journal, 1997). These arguments
have lasted for several years and in 1999, the city of San
Antonio was exploring other funding options for the new arena.
Not only would voters be asked to back 1/8 of a cent a tax
revenue, but the San Antonio Spurs and other private donors
would be expected to contribute funds. Besides the use of
sales taxes, House Bill 92 authorizes the levying of other
public taxes such as motor vehicle rental tax, event parking
tax, hotel occupancy tax and facility use tax, which allows
visiting teams to be charged up to $5,000 per game for the
use of the facility. The burden of the taxes levied fall on
the visitors rather than the general public. This attracted
opposition from trade groups, and convention groups whose
members depends on tourism. The thought is that when hotel
and car rental taxes are increased, fewer people will consume
those services. Those opposed to the idea feel that the city
visitors gets poorer by paying for something he or she may
not use, a new arena, but the owners and players get richer.
The cities of Dallas and Houston have taken advantage of the
hotel and car rental taxes. Dallas has a $230 million downtown
arena project that is publically and privately financed. The
Dallas plan as approved by the City Council ended up as roughly
a 50/50 deal between the city and the two teams to use the
facility. The city contributed a total of $110 million for
the construction of the arena and an additional $15 million
in infrastructure improvements and the teams kicked in $105
million for construction costs. In San Antonio, voters did
approve $110-147 million to be raised through hotel and car
taxes only by slim margins. Of the 125,000 votes casts, the
arena referendum passed by just 1,642 votes. (San Antonio
Business Journal, 1999).

Often
residents are concerned with how much a new arena would cost
them. One question also to be considered is how much would
it cost not to build at all. In a recent study done by the
St. Louis Cardinals, a new stadium would bring a tax revenue
to both St. Louis and Missouri, from $14.5 million last year
to $23.2 million by 2005. By 2035 the projected revenue is
estimated at $77 million (St. Louis Business Journal, 2000).
Without a new stadium, the city stands to loose that much.
Over the years, the Cardinals by investing millions in stadium
upgrades, has already increased tax revenues from$6.3 million
in 1995 to $16.4 million in 2000. The proposed ball park,
would cost approximately $370 million to build and the city
and state would allocate a portion of taxes to fund the costs.
Without a new stadium, the team president fears they will
not be able to compete with division rivals and fund a higher
payroll. The same fate happened to the Minnesota Twins and
the city of Minneapolis in 1992. After winning the 1991 World
Series, the Twins asked for a new stadium to compete with
the Metrodome. They were turned down, the payroll was cut
and attendance fell. As a result, the $3.2 million generated
in taxes from ticket sales, fell to $500,000 as of last year.
The city of St. Louis may face the same situation and needs
to weigh their economic opportunities for their city.

At
the national Council For Urban Economic Development conference,
Rick Horrow, President of Horrow Sports Adventures spoke of
the revenues lost by not building needed facilities. He reported,
“80%-85% of team revenue that is shared comes mostly
from ticket sales and television contracts. The 15%-20% balance
comes from skyboxes, parking concessions and club seats..”
(Amusement Business, 1997). It is this 15%-20% that is fueling
new sports facility development. The average annual revenue
income of the NFL is $71 million, and the top five teams average
$86 million. Horrow also said, the building of new NFL facilities
generally requires cooperation between cities, counties, and
states, and that the financial risks and burdens borne by
the public sector have been increasingly shifted onto tourists,
who pay through hotel and car rental taxes and other mechanisms
that minimize the cost to local taxpayers. The latest trend
is to package other community needs with facility funding.
Many of the new facilities are multipurpose facilities which
can offer concerts and other events.
Public funding in the form of bonds.

Bonds
are a way for a city government to generate money needed for
the construction of a new or the renovation of a sports facility
or arena. A bond is defined as ” an interest bearing
certificate issued by a government or corporation promising
to pay interest and to repay a sum of money (the principal)
at a specified date in the future”(Samuelson and Nordhaus,
1985, Sawyer, 1999). Bonds sold by a government are referred
to as municipal bonds. The two most common type of municipal
bonds are general obligation bonds and non guaranteed bonds.

Some
state governments permit the state to fund construction and
other capital expenses by selling general obligation bonds
(GO) that are backed by their tax bases. They are considered
to be full faith and credit obligation bonds . Both state
and local governments usually ask voters to approve proposed
GO bond issues, an opportunity not available to voters by
federal governments. Most of the time voters approve the issues
even though it may increase local debt and taxes. Since 1993,
a majority of public referenda (23 of 41 ) have been approved
totaling $4.4 billion in public funding. (Amusement Business,
1999). The funding for development may be desirable if the
development spurs economic growth.

One
example is that of Scottsdale in Arizona who is pursuing to
redevelop an old neighborhood. The redevelopment plan called
“Los Arcos Redevelopment Project” is being funded
with private and public funds. This hefty redevelopment plan
can be seen on the Internet page www.newlosarcos.com. The
project costs are as follows: arena costs- $175-183 million,
land acquisition/parking- $172-182 million, retail development-
$90-98 million, construction- $63-72 million, subtotal: $500-590
million, the over 30 year total: $1066-1125 million. The public
will pay for a portion in taxes as follows: land acquisition-
$120-135 million, public infrastructure (streets, sewer, plazas)-
$30-50 million, sub total: $150-185 million, over 30 years-
$340-390 million, the total public participation is 30-35%
of the total redevelopment plan. The arena itself will be
funded by the developer and the Coyotes. The plan is designed
to satisfy the redevelopment of the neighborhood by joining
the arena with a mall, restaurants, supermarket, retailers,
and a movie complex. (Amusement Business, 1999).

In
New Jersey, the Governor offered this year the sum of $75
million toward the $325 million needed for the development
of a new arena. The arena in Newark is apart of a plan to
bring new retail growth to a suffering city. The state plan
has two options: stay in East Rutherford and build a new arena
at the Meadowlands Sports Complex for $250 million or move
the New Jersey Devils and Nets to downtown Newark. Both projects
need voter approval. Those who want the arena built in downtown
Newark claim that the funds not only build an arena but rebuild
a city. The funds will go to improving access arteries, highways,
exit ramps and a new parking garage. But the minimal state
investment may keep the teams in the Meadowlands since the
Governor is not convinced that new downtown sports arenas
can spur economic revitalization in the cities. One assemblyman
disagrees, Wilfredo Caraballo, D-Essex said that the lawmakers
need to seek more state funds for the Newark project, “In
the Meadowlands, the land is already publicly owned. In Newark,
the land still needs to be purchased. Moreover, the Meadowlands
property might be used for more lucrative ventures for the
residents of this state. In Newark, the arena investment would
be part of an overall, long term strategy to revitalize the
state’s largest urban center.” (The Record, 2000).

Non
guaranteed bonds such as special authority bonds, revenue
bonds and certificates of participation are other sources
of finance that can be used to build, own and operate utilities,
airports, transportation systems and public purpose facilities,
such as arenas, and have no power to tax. They derive their
revenues from user fees and other sources and must finance
general and capital expenditures out of these receipts and
whatever they are permitted to borrow. When issuers undertake
capital projects, they sell long term bonds. One type of bond,
called an industrial development bond, can raise up to $10
million. This type of bond known as an industrial revenue
bond offer low interest rates and in order to be eligible
for the issuance of these bonds, the borrower must show to
the government that the deal will create jobs. Generally,
for each $50,000 in capital raised by industrial development
bonds, there should be one new job. This will qualify the
interest income as tax exempt to the buyers of the bonds.
The city council must approve all projects using these bonds.
(Nation’s Business, 1998).
Since their securities cannot be backed by expected tax collection,
often the issuers pledge the revenues from their operations,
giving the name revenue bonds. These are considered a greater
risk for the investors than full faith bonds and credit bonds
and therefore likely to pay a higher interest. Instead of
GO bonds, which are backed by the city’s tax receipts, revenue
bonds would be sold and backed by specific revenues generated
by the new sports facilities. Such revenues may be concessions,
ticket sales, and advertising rights. By using revenue bonds
rather than GO bonds the city may avoid criticism that may
ensue from using funds needed to improve the schools, create
affordable housing or other city priorities.

One
example of creative financing to lower taxpayer risks is the
city of West Sacramento who teamed with two other governments,
the county of Yolo and neighboring Sacramento County to sell
bonds to build the new baseball stadium, Raley field. The
bonds are to be repaid entirely from team and stadium proceeds
over the next 30 years, where by then the River Cats will
own the stadium outright. The deal is structured so the team
could pay off the bonds with an average game attendance of
just 3,500, the lowest of any AAA team. At the present time
the River Cats are averaging more than 12,000 fans a game.
An innovated part of their plan is to have daily deposits
put into a lock box account to assure that the bonds are repaid
to a Joint Powers Agency. Joint Powers Agencies are common
for government entities to band together to pay for law enforcement,
fire protection, and insurance but are not common to finance
sports facilities (Business First, 2000). If other governments
could get together, it is a promising financial package that
will not raise taxes to back the bonds and lessen the risk
for all involved.

The
down side is that revenue bonds may not be as popular with
the fans since they are the ones coming up with the extra
fees. The city of Boston is considering imposing a surcharge
up to $100,000 on luxury box and club seats. They are also
considering a personal seat license for all ticket holders.
The personal seat license requires season ticket holders to
purchase the right to buy certain seats every year.

Revenue
bonds which are sold by state and local governments account
for about 2/3rds of the $100-200 billion in new state and
local government debt. GO’s account for about 1/3rd. In the
Las Vegas NV. area, Clark County’s total bonded indebtedness
is $2.9 billion, which is up 18% from last fiscal year. The
largest fiscal year percentage increase was posted by the
Las Vegas Convention and Visitors Authority, which had $172
million in debt last fiscal year and is $312 million this
year. The 82% increase was due primarily to the issuance of
bonds for the current conventional hall expansion project.
According to Nevada’s Taxpayers Association President, Carole
Vilardo, “We’re still well below our legislatively imposed
GO(General Obligation) limit.” (Las Vegas Business Press,
2000). Under state law, Clark County GO bond issuance is limited
to 10 % of its assessed valuation. Current assessed valuation
stands at $34.1 billion while the county’s GO bonded indebtedness
stands at $1.2 billion or 35% of its limit. Revenue bonds
are not considered in the debt cap. Clark County’s $1.6 billion
in revenue bonds account for more than 54% of all its indebtedness.
The total indebtedness for the 5 area cities in the Las Vegas
area and special authority entities such as the water district,
water authority, and international airport amount to $8.6
billion for FY00-01, up 12.1% from the previous year.(Las
Vegas Business Press, 2000).

Because
income from state and local GO and revenue bonds is exempt
from federal income tax, they have a strong appeal to many
taxpayers. Unlike the federal government which has maintained
its reputation for prompt payment of debts, state and local
governments have periodically, in recent years, defaulted
on their bonds or have come close to doing so, making it important
to be mindful of the credit quality of the government securities.

Municipal
bonds whether GO or revenue, are rated by the rating agencies
in a manner similar to their ratings of corporate bonds rating.
The most credit worthy corporations are given a AAA rating.
The next three grades are AA, A, and Baa. The bottom ratings
go to the most speculative or junk bonds, which would be rated
as, Ba, B, Caa, Ca, and C (Renberg 1995). The rating can be
improved as the company’s finances are monitored and upgrades
it if the issuer’s situation improves. It also may be downgraded
if the situation deteriorates. Many of the corporate bonds
have maturities of 30 years, which may involve call risk,
which is similar to the prepayment risk of mortgage backed
securities. An investor should expect to be compensated for
the degree of risk that they will accept. Securities with
the highest rating, will offer the lowest yields and likewise,
the lower ratings will be higher yields. Revenue bonds tend
to have lower yields due to their debt is met out of fees
and receipts and therefore, may be affected by recessions,
a fall in supply and demand by falling out of favor, or being
affected by other services such as water, and utilities. (Renberg
1995).

Investment
Grades are as follows:

High
Grade

AAA:
Bonds with this rating are judged to be the best quality.
They carry the smallest degree of investment risk.

AA:
These are high quality by all standards. They are rated lower
because their margins of protection is not as large.

Medium
Grade

A:
These bonds possess many favorable investment attributes.
Even though, factors giving security to principal and interest
are considerable, elements may be present that suggest a susceptibility
to impairment some time in the future.

Baa:
They are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present
by certain elements may be lacking or may be characteristically
unreliable over any great length of time.
Speculative (junk)

Ba:
Their future cannot be considered well assured. Safeguards
and protection for security may be very moderate

B:
These bonds lack characteristics of the desirable investment.
Assurance of interest and principal payments over any long
period of time may be small.

Caa:
These are of poor standing. They may be in default or elements
of danger of the principal or interest.

C:
These are the lowest rated class of bonds. They are considered
to have extremely poor prospects of attaining any real investment.
(Renberg 1995).

General
obligation vs. revenue bonds. General obligation bonds are
serviced out of appropriations and backed by the credit and
tax base of the issuing unit of government. Interest and principal
on revenue bonds are paid from the revenues of the facilities
that were built with the money received from their sale. Generally
the supply of revenue bonds is greater in longer maturities,
while the supply of general obligation bonds are greater in
intermediate maturity. GO bonds are considered a better credit
risk because of the taxing authority behind them.
Many long term municipal bonds timely payments are insured.
It is intended to protect the funds against loss in the event
of a state or local governments unit’s default. The literature
of the bond should state whether or not it is insured. Three
types of insurance are involved in tax free bond funds. First:
New insurance is what state and local governments or their
underwriters obtain if the issuers qualify. Higher ratings
such as AAA may result from the coverage. Second, secondary
market insurance is purchased by investors, to cover bonds
as long as they are outstanding. Third, portfolio insurance
is bought by funds to cover bonds in a portfolio (Renberg
1995). It is not enough that the bonds that funds buy have
ratings that meet their standards, they must have the claims
paying ability of the insurance company providing the coverage.
Most funds make certain the insurance companies are rated
AAA and remain at that standard. Insurance is an extra layer
of protection. Bond insurance negates the need for costly
letters of credit and grants an instant AAA rating, and interest
rates paid to bond investors are lower. Therefore, refinancing
at a later date would not be necessary. With most sporting
arenas now being built as revenue palaces, underwriters and
investors are more open to insuring private sports deals.

Other
risks to watch for in long term municipal bonds purchase is
bonds being “called” prior to maturity (Barker 2000).
Simply, if a long term bond gets called after five years,
the purchaser want to make sure that its total yield is similar
to that of other 5 year bonds. The longer the term the bond,
the more likely it is to lose value before maturity if interest
rates rise. On the other hand, lower rates boost a bond’s
value. Some bond brokers advise against bonds with maturities
past five years or so unless they are likely to be called
sooner. For example, the average AAA rated five year municipal
bond may trade 4.64%, while a 10 year bond may yield just
4.93%. The interest rate risk with the 10 year bond may not
be worth the risk (Barker 2000). When purchasing or trading
bonds, one usually goes through a bonds broker who will charge
a commission for the transaction. An alternative would be
to call a firms such as Charles Schwab or Fidelity Investments
and they will sell from their inventory of bonds, not as brokers
but as principal. They make their money on the bid spread
and not commissions. (Barker 2000).

Certificates
of participation are a government buying a facility or land
and then leasing it out to pay off the facility’s expenses.
An example is that of the city of Boston. Several plans are
being considered for the new Fenway Park in which the city
could invest $200 million. The city may issue revenue bonds
to buy a proposed site for a new ball park next to the 88
year old Fenway and assist with construction costs. It has
not been determined yet as to whether the city will own the
new ball park and require the Boston red Sox to pay an annual
lease or it the new facility will be jointly owned by the
team and the city (The Boston Globe, 2000).

Residents
frequently do not support bonds or increases in tax bases.
In Columbus Ohio, financing for a new facility is needed.
Polled residents said that they do not support a sales tax
increase to fund a stadium, the present location of their
stadium is fine and if the Clippers did move, they would prefer
a new location outside of town (Business First, 2000). In
Dallas, residents resisted the tax increase for a new arena
to replace the outdated Reunion Center. One resident’s opinion
was that the only reason to develop a new center was to add
luxury suites which doesn’t add back to the community but
pays for the escalating player salaries (Dallas Business Journal,
1997). Likewise, voters struck down proposed tax increases
to help construct a $160 million basketball arena for th4
NBA Rockets in Houston, and a $325 million baseball stadium
for MLB’s Twins in St. Paul MN. Other sources of revenues
for the building of sports facilities are available for team
owners to look at such as private funding.

Private
funding is a way to finance a new or renovated facility without
a tax increase and little risk to taxpayers. New arenas in
San Francisco, Denver, Washington D.C., Boston, and in Vancouver,
Montreal, and Ottawa in Canada all have been built entirely
with private funds. Minimal public funding was used for arena
projects such as in Columbus, Portland and Philadelphia.
Private funding through naming rights.

The
San Francisco Giants’s privately funded ballpark opened this
year. The sale of licenses and naming rights was a key source
of income for the ballpark. The San Antonio Spurs will sell
its naming rights to the Ellerbe Becket venue. Similarly,
possible naming rights may contribute to the new Boston stadium
which could add up to $50 million toward the financing. The
city may plan to allow the Red Sox to retain revenue generated
from the sale of naming rights but still be a city owed facility.
But Bostonians have an affiliation with the name Fenway Park
and fans may be furious with the changing of the name(The
Boston Globe,2000). American Airlines paid $2.1 million a
year for 20 years for the naming rights of the American Airlines
Arena in Miami FL. The Miami Heat who predominately plays
at the arena signed up sponsorships with CitiCorp/Citi Group,
Lucent Technologies, Carnival Cruises and Florida Power &
Light.(South Florida Business Journal, Miami-Dade Edition,
1998). Dallas’s Stars, of the NHL will receive revenues from
naming rights , concessions, parking and other arena income
when their new arena will open. In Seattle the Seahawks will
split arena revenues with the city and the owner. Fans may
be getting tired of the corporate naming of stadiums. On the
web site www.epinion.com. the user can look up stadiums by
option of name, sport or city. A brief description and rating
of the stadium/arena is available with comments from the fans.
One critic wrote, “Personally, I hate corporate names
on buildings. Candlestick Park is now 3Com Park, Joe murphy
Stadium is called Qualcomm, and Joe Robbie is Pro Players
Stadium. What’s next? The Preparation H Arena? Kibbles and
Bits Stadium? Depends Fieldhouse?” (Craigmoosh, 2000).
The comment rings true, but it is the corporate sponsors that
pay for the upgrades, player salaries and other costly expenses.
It is an amusing and interesting site to browse.

In Denver a state of the art facility, the Pepsi Center, was
developed entirely by private funding. The facility which
costs $170 million almost didn’t get built when one of the
original funding partners pulled out of the deal. The one
company left would had to pay $2 million a year for 25 years
and not even own the asset at the end of the period. The two
primary teams who would play at the new center are the Nuggets
and the Avalanche who had a prior lease agreement with the
city at the McNichols arena. In order to break the leases,
the city wanted a commitment from the Nuggets and the Avalanche
to stay in Denver for 25 years at the new center. The teams
resisted. There was a stall of building for 2 years. Finally
a deal was struck with the city. The arena would be deeded
to the city of Denver when it opened but leased back to the
teams for 25 years to ensure they did not move during the
span of the city’s agreement. During the 25 years the city
will take all sales tax proceeds generated by the arena as
compensation for the teams breaking their prior leases. Ascent
Entertainment Group Inc. who owned the Colorado Avalanche,
agreed to pay the arena’s construction costs and an exemption
on a 10% city/county seat tax. At the end of the 25 years,
the teams will own the arena. The city was happy that no tax
money was spent and the received additional sales taxes from
the Pepsi Center. Major sponsors contributed their funds in
exchange for naming rights, such as Pepsi, who contributed
millions. The amphitheater is called Coors Meadow, which provides
a direct path to the Coors Tap Room bar inside the arena.
Private concession stands who pay leases offer items from
all over Colorado’s eateries. Other sponsorships include the
Denver Post to got the Fanway and upscale restaurant on the
club level. The business center is named for US west Inc.
who offers the business community benefits from the new Pepsi
center because it offers state of the art conference rooms
for rent. Another major sponsor Conoco, has a service stations
and mini marts next to the arena, and is one of the few stations
in the down town area. The deals with the sponsors are termed
for 10 to 30 years. Recently, Ascent Entertainment sold the
teams and the Pepsi Center for $461 million (Denver Business
Journal, 1999).

Not
always do naming rights work out so well especially when the
facility is sold. In Buffalo, home of the NHL Sabres, there
was a contract dispute regarding the name of their arena.
The arena which was called Marine Midland after a bank which
no longer exists. The parent company HSBC wanted the named
changed of the arena. The Sabres dispute was over the fact
that their contract with the bank was for the arena to be
called Marine Midland, who was to pay $15 million over 20
years for the right. The facility’s standpoint is that they
spend lot of time and money promoting the name and then they
have to change it. The Buffalo Sabres who was in default on
their loan with HSBC because of a $15 million loss last year
has changed the name of the arena to HSBC arena.

Naming
right experts report that during the early entitlement deals,
sponsors fail to protect themselves in the event that a merger
or buy out forces them to change their name (Business First,
Western New York, 1999). In recent entitlement deals, sponsors
have provisions in the contracts for a name change during
the course of the agreement. In name rights sponsors this
occurrence happens mostly with banks due to buy outs. The
costs of changing a name may average around $2 million. Corporate
sponsorship of naming rights is well established in professional
sports such as the Pepsi Center in Colorado and the Continental
Arena in New Jersey.

A
recent trend in college athletic is naming rights for multipurpose
sports facilities. On Ohio State University’s campus, the
facility the Schottenstein Center and the basketball and hockey
arena the Value City Arena are named after the retail store
chain and owners. The owners of the retail chain paid $12.5
million for 75 years of advertising. The University of Wisconsin
sports facility is named after Kohl’s Department Stores. Syracuse
University in 1979 was the first sports facility to sell naming
rights for $2.75 million for the Carrier Dome. Some companies
buy naming rights for name recognition, tax deductions or
support of the community. Experts have not agreed as yet if
the tax deductible millions spent on naming rights actually
pay for themselves (Business First, Columbus 1995).

Asset
Backed Securities

Securities
for the multi million dollar arenas are being backed not only
by naming rights and sponsorship, but from revenues from luxury
suite sales and food concessions. The Pepsi Center in Colorado
is an example of how asset backed securities were used to
build the arena. The borrowed funds are backed by the sale
of luxury suites, sponsors, and food concession sales. The
original owner of the Pepsi Center and its teams, Ascent Entertainment
Group, reported while securing funds, “One benefit was
that we received an investment rating…we were able to get
an A rating from Fitch, the highest rating for a sports financing.”(Treasury
& Risk Management, 1999). This led t a 6.94% interest
rate, which helped in raising $139.85 million towards the
total cost of the arena. D. L. Auxier, the director of securitization
services in Ernst & Young, a structured finance group
reports some set backs with asset back issues. He fears, “the
interest for sports franchises is short lived.” (Treasury
& Risk Management, 1999). If the securities are backed
by luxury suites and a team projects a certain amount of sales,
falling short means adjusting the financial picture. In Florida,
the Miami Heat’s arena’s $180 million in private revenue bonds
was able to get bond insurance. It was the first time that
private bonds issued for a new arena had received an insurers
guarantee even though there is a shadow of a doubt of meeting
revenues. According to Larry Levitz, of MBIA Insurance Corp.,
“The Heat’s expected revenues could fall 40% but over
half of the arena revenues is from contractually obligated
income.” (South Florida Business Journal, Miami-Dade
Edition, 1998) It seems that luxury suites are in demand.
The Reunion Arena in Dallas and the Continental Arena in New
Jersey are both outdated because they don’t offer enough suites.
The American Airlines Arena in Miami was able to raise $180
million toward their arena, home of the Miami Heat. The arena
has 65 luxury boxes and is able to take in approximately $13
million a year from leases. The arena leased four first of
a kind court side luxury boxes for $500,000 each. (South Florida
Business Journal, Miami-Dade Edition, 1998). Other luxury
boxes have gone for $300,00 at the Staples Center in Los Angeles
and at Madison Square Garden in New York City. For the new
arena that will house the San Antonio Spurs and the Live Stock
Show/Rodeo in will have 50 new luxury suites and 340,00 potential
seats that are sold out in advance. The center will receive
100% of parking , concession, ticket and adverting revenues
as well. (Amusement Business 1999).

Extra
revenues may be offered to a new arena by management companies
who want the contract to manage the facility. In 1998, two
big management companies were in competition with each other
for the management rights over the smaller version of the
SuperDome in New Orleans. The Philadelphia based company,
Spectator Management Group (SMG), who already has a contract
with the SuperDome, offered $5.6 million cash toward the construction
of the Baby Dome. Another management company, Houston based
Leisure Management Inc. (LMI), offered $6 million for both
contracts. The extra cash would allow the building of luxury
suites that would be necessary to attract corporate contracts
and big league teams. LMI has 10 arena management contracts
in the South. Two other companies made offers in the form
of cash loans. Globe Facilities Services of Tampa, FL. and
a New York based management company, Ogden Entertainment,
made cash loan offers. Ogden Entertainment has 34 other arenas
that it manages and also had made offers for cash loans. But
a offer of cash without interest is certainly more desirable.
In order to make an arena management bid, the company must
submit information on their assets. Ogden Entertainment reported
$3.6 billion, SMG reported their assets totaling $64.7 million,
leisure Management International reported $2 million in assets
and Globe Facility Services reported $409,000 in assets (
New Orleans city Business, 1998). Those who do not submit
the information would not be in the running for consideration.
Joint management of both Domes would save millions in equipment
and personnel sharing, and in attractive contracts with vendors
and sponsors.

Opinion

It
amazes me still that millions of dollars are available for
those who need to access it. In 1958, the Phoenix Sun Devils
Stadium was built for $1 million dollars. Quite a bit of money
back then. Today the new Foxboro arena is estimated to cost
$325 million when built. My husband and I priced the tickets
for the NHL all stars game in Denver, Co. Just the tickets
and hotel would costs us, $1,500 each. At some point in time
the costs of going to games is going to be more than the average
joe can afford. I do not think the economy is equating with
what the average annual salary is. Yes, there are the dot
com millionaires but not everyone has been so fortunate to
have gotten on that boat. It could be that my personal salary
never quite made it out of the range it was in the 80’s. Nevertheless,
I think with the new presidency, there will be economic changes
where going to a game will just not be affordable anymore.
The new costly arenas will not fill their seats, not be able
to pay their bills and sponsors will not be so willing to
spend up millions on advertising rights.

Chart
for Arenas and Financing

Legend
for chart:
A: City A
B: Facility B
C: Opening C
D: Total Cost D
E: Public Share E
F: Comments F

Miami,
FL.
National Car Rental Center 1998
$185 million 100%
Panthers home financed by Broward County

Nashville,
TN.
Nashville Arena 1998
$144 million 100%
Predators home in the NHL-voters approved a property tax
increase

Tampa,
FL.
Ice Palace 1996
$153 million 100%
Tourist bonds and ticket charges will repay municipal bonds

Seattle,
WA.
Key Arena 1995
$119.5 million 83%
City gutted Seattle Coliseum and rebuilt from the inside

Raleigh,
N.C.
Raleigh Sports Arena 1999
$140 million 75%
N.C. State boosters help facility for NHL and NCAA-home
of Hurricanes and Wolfpack

Atlanta,
GA.
Philips Arena 1999
$284 million 74%
Turner contributes money- home of the NHL Thrashers

St.
Paul, MN.
River Centre 2001
$130 million 73%
The city and state split the public bonds

Dallas,
TX.
To Be Announced 2000-01
$232 million 54%
all public contributions from city, not county or state,
home of the NHL Stars

Buffalo,
NY.
HSBC 1996
$122 million 37%
New York State put in $25 million and Erie county put in
$20 million-name change 1999

Columbus,
OH.
Nationwide Arena 2000
$139 million 14%
voters shot down sales tax raise for arena, home of the
NHL Blue Jackets

Portland,
OR.
Rose Garden 1995
$307 million 11%
A mulit use complex

Philadelphia,
Penn.
CoreStates Center 1995
$213 million 6%
Owner got $13 million in city and state loans- First Union
Corp. bank merger acquired CoreStates, kept name

Denver,
CO.
Pepsi Center 1999
$160 million 0
City finally approved downtown facility agreement, delays
in building for 2 years

Montreal
Canada
Molson Centre 1996
$230 million 0
Canadien’s home financed by beer giant

Washington
D.C.
MCI Center 1997
$200 million 0
Part of a redevelopment plan

Vancouver, Canada
General Motors Palace 1995
$116 million 0
Grizzlies owner built arena and bought franchise

Boston,
MA.
Fleet Center 1995
$160 million 0
Celtics and Bruins home owned by Delaware North Cos.

Ottawa,
Canada
Corel Center 1996
$145 million 0
Corel paid owner Terrance Investments $25 million for naming
rights

Arlington,
TX.
The Ballpark in Arlington 1994
$191 million 71%
Arlington voters passed ½ cent sales tax for Rangers

Irving,
TX.
Texas Stadium 1971
$35 million 100%
Cowboys pay Irving rent

Fort
Worth, TX.
Texas Motor Speedway 1997
$121 million 0
Speedway Motorsports built facility and gave title to Fort
Worth

Grand
Prairie, TX.
Lone Star Park at G.P. 1997
$96 million 68%
Grand Prairie voters approved a ½ cent sales tax
for the Ponies

East
Rutherford, New Jersey
Continental Arena 1981(original) new arena to be built
$250 million if stays in East Rutherford
AKA the Meadowlands, Home of the Devils

Scottsdale
Arizona.
Los Arcos (to be announced) 2001
$175-183 million 30-35%
New home of the Phoenix Coyotes part of a large redevelopment.

Foxboro, MA.
To Be Announced. 2002
$325 million 0
badly need new home for the New England Patriots will be
privately funded

Phoenix
AZ.
Sun Devil Stadium 1958
$1 million 100%
used by college and professional teams built on the campus
on Arizona State.

San
Antonio TX.
To Be Announced 2002
$175 million 70-80%
Taxes will pay off $260 million worth of revenue bonds in
about 20 years. The teams will lease the building from Bexar
County.

Sources
from Dallas Business Journal 1997 and www.epinion.com.

REFERENCES

Arnott,
D. (12/19/1997). Arena proposal would rob the poor to pay
the rich. Dallas Business Journal, v21, i17, p39.

Barker, R. (11/6/2000). Buying munis, not heartbreak. Business
Week, i3706, p218.

Bernstein, A. (8/23/99). Arena name dispute influences future
deals. Business First-Western New York, v15, i47, p5.

Bonded indebtedness in county up 12 percent from fy99-00.
(7/31/00). Las Vegas Business Press, v17, i30, p14.

Boston mayor leans toward financing plan for proposed new
ball park. (5/3/00). The Boston Globe.
Caywood, T. (2/2/98). Scoring the contract. New Orleans City
Business, v18, i31, p1-4.

Crawford, D. (11/27/95). Sports marketers debate impact of
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Crawford, D. (8/11/2000). Calif. model: Low risk funding of
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Dwyer III, J. (7/10/2000). The cost of not building a stadium.
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Hovey, J. (July, 1998). Cheap funding through bonds. Nation’s
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Kamerick, M. (3/20/98). Senator floats plan to fund AG campus
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Kaplan, D. (5/8/98). Insurers ok private bonds for funding
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Mitchell, E. (9/3/99). How arena became a reality. Denver
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Muret, D. (11/15/99). Two pass, two fail in new venue referendums.
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Prior, C. (May/Jun 99). Asset backed arenas. Treasury &
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Renberg, W. (1995). All about bond funds. John Wiley &
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Sawyer, T., Goldfine, B., Hypes, M., LaRue, R., Seidler, T.
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Stile C. (8/23/00). New Jersey governor approves funding for
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Suggs, W. (10/17/97). Dallas arena deal takes middle road
on funding. Dallas Business Journal, v21, i8, p8-10.

Tankerson, R. ( 6/20/97). Don’t compromise public transit
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Weiss, S. (2/19/99). City staff will draft funding plan for
arena. San Antonio Business Journal, v13, i2, p1-2.

Zoltak, J. (3/3/97). NFL economics separate haves and have
nots. Amusement Business, v109, i9, p18.

Web sites:
www.newlosarcos.com.

www.epinion.com.

Abstract Transformational leadership and organizational culture have become increasingly popular topics over the past 10 years. Some researchers have suggested that these topics contain the key to understanding organizational effectiveness (Barney 1986; Bass & Avoilo, 1992). The purpose of this study was to review the related literature on the links between transformational leadership, organizational culture, and organizational effectiveness in sport organizations. Transformational leaders are purported to inspire followers to contribute beyond expectation (Bass & Avoilo, 1992; Yukl, 1994). These leaders provide followers with a focus and commensurate levels of support, involvement, and appreciation designed to encourage the follower to adopt the leader’s vision as their own and be committed to making it a reality (Bryman, 1992). Organizational culture is defined as the deep-rooted beliefs, values, and assumptions widely shared by organization members and powerfully shape the identity and behavioral norms for the group. Positive organizational cultures have been linked to increased staff alignment, resulting in enhanced organizational effectiveness, heightened consensus regarding strategic direction, increased employee productivity, and advanced levels of employee commitment (Barney, 1986). Only when a critical mass of their employees has taken ownership and responsibilities for the needed changes, can an organization assure a competitive advantage in today’s challenging marketplace.

Introduction

Transformational leadership and organizational culture have become increasingly popular topics over the past 10 years. There have been more than 5,000 studies on leadership (Yukl, 1994). The phenomenon of leadership continues to draw interest of academics and practitioners in many fields, including sport management. The concept of leadership carries many different connotations and is often viewed as synonymous with other, equally complex concepts such as power, authority, management, administration, and supervision. Many leadership theorists have found that ineffective leadership in any organization seems to be the major cause of diminishing the organization’s productivity and downward positioning of North American corporations on the international scale (Yukl, 1994). Transformational leaders are purported to inspire followers to contribute beyond expectation (Bass & Avoilo, 1992; Yukl, 1994). These leaders provide followers with a focus and commensurate levels of support, involvement, and appreciation designed to encourage the follower to adopt the leader’s vision as their own and be committed to making it a reality (Bryman, 1992). Leadership and organizational culture are purported to be tightly intertwined (Peters & Waterman, 1982). Leaders must have a deep understanding of the identity and impact of the organizational culture in order to communicate and implement new visions and inspire follower commitment to the vision (Schein, 1990). Transformational leaders help shape and maintain the desired culture of an organization (Schein, 1990), which may link to organizational effectiveness in sport organizations. Some researchers have suggested that transformational leadership and organizational culture contain the key to understanding organizational effectiveness (Barney 1986; Bass & Avoilo, 1992). There has been little research done on the links between transformational leadership, organizational culture, and organizational effectiveness in sport organization. The purpose of this study is to review the related literature on the links between transformational leadership, organizational culture, and organizational effectiveness in sport organizations. Transformational Leadership and Organization Effectiveness Yukl (1994) defined transformational leadership as the process of influencing major changes in the attitudes and assumptions of organizational members and building commitment for the organization’s mission, objectives, and strategies (p. 271). More recent studies on the subject of leadership have focused on transformational leadership which concerns the leader’s effect on followers (Bass & Avolio, 1992). Followers of a transformational leader feel trust, admiration, loyalty and respect toward the leader, and they are motivated to do more than they originally expected to do (Yukl, 1994). Transformational leaders pay attention to and are sensitive to the needs of their subordinates as well as their own needs. Transformational leaders cultivate the acceptance of the group mission by their followers through intellectual stimulation and individualized consideration. They seek to unite subordinates as they work toward a common purpose. Ulrich (1987) suggested a six-stage process that sport managers need to adopt if they are to function as transformational leaders: (1) creating and communicating the need for change, (2) overcoming resistance to change, (3) making personal commitment and sacrifices for change, (4) articulating a vision, (5) generating commitment to the vision, and (6) institutionalizing the vision. Sashkin (1987) stated that transformational leaders provide the basis for creating organizations that are extremely effective in terms of any criterion of performance or profit. Peters & Waterman (1982) reported that executive leadership was considered the single most important factor separating the top 100 mid-size American companies from their contemporaries. But, leadership is not viewed as the master key for organizational success. This is because organizational effectiveness is determined by a number of factors (Bryman, 1986). Kelly (1988) suggested that followers also play an important role in determining organizational effectiveness. Organizational Culture And Organizational Effectiveness Organizational culture can be defined as the deep-rooted beliefs, values, and assumptions widely shared by organizational members that can powerfully shape the identity and behavioral norms for the group. Organizational culture provides insight into the inner workings and belief system of the unit and offers behavior codes for employees. Positive organizational cultures have been linked to increased staff alignment, resulting in enhanced organizational effectiveness, heightened consensus regarding strategic direction, increased employee productivity, and advanced levels of employee commitment (Barney, 1986). Avolio et al. (1991) stated that organizational culture holds the key to increased commitment, productivity, and profitability. Transformational Leadership And Organizational Culture Schein (1990) analyzed organizational cultures from perspectives of culture strength and culture type. The researcher concluded that the strength and type of culture are critical to the organization’s success and survival. Executive leaders should put their energies on developing a strong organizational culture that supports the following activities; managing change, achieving goals, coordinating team work, and customer orientation in organization (Schein, 1990). These activities will contribute to organizational effectiveness. Denison (1990) noted that successful organizations, over time, are likely to possess a strong, well-defined culture. Golden (1992) suggested that the organizational culture must support activities linked to the mission of the organization. Weese (1995) conducted a study to investigate the concepts of transformational leadership and organizational culture with Big Ten and Mid-American Conference university recreation programs. The researcher concluded that high transformational leaders possess strong organizational cultures and carry out culture-building activities, especially the customer orientation function, to a greater extent than other leaders do. Leaders have offered tempered positions relative to the impact that a leader can have on shaping and preserving the culture of an organization (Weese, 1995). They have suggested that the culture is the organization, not something that the organization possesses, and consequently, culture change is an arduous assignment. The current thinking in the area of leadership is devoted to the leader’s role in maintaining the organizational culture or in changing it to implement a change of direction dictated by a new vision (Bryman, 1992). The researcher suggested that the leader can alter or impact the organizational culture. According to Oakley & Kruy (1991), transformational leaders not only have the vision, but also have the ability to get their employees to accept ownership for that vision as their own, thus developing the commitment to carry it through to completion. They actually don’t need to have the vision themselves; they need only to possess the willingness and ability to draw the vision from their employees and inspire and empower them to do what it takes to bring the vision into reality. Conclusions The ability to create new organizational forms and processes, to innovate organizational cultures and create stronger organizational cultures, is crucial to remaining competitive in an increasingly turbulent world. In order to have organizational effectiveness in sport organizations, it is necessary for transformational leaders to possess a stronger organizational culture and to carry out culture-building activities. By the virtue of their formal role in sport organizations, sport administrators are responsible for empowering subordinates to establish goals and the vision, and for motivating members toward achieving these goals and vision. The goal of transformational leadership is to “transform” people and organizations in a literal sense to change them in mind and heart; enlarge their vision; clarify purposes; make behavior congruent with beliefs, principles, or values; and bring about changes that are permanent, self-perpetuating, and momentum building. It requires vision, initiative, patience, respect, persistence, courage, and faith to be a transformational leader. Again, successful transformational leaders play a significant role in the development and maintenance of the culture of their organization. Transformational leaders not only have the vision, but also have the ability to get their employees to accept that vision as their own, thus developing the commitment to bring the vision into reality (Oakley & Kruy, 1991). 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