In case you missed it, on October 16, 2018, a 9.3-acre portion of the former Desoto Speedway in Desoto, Texas, sold for $16,000/acre. The seller was American Electric Power which purchased the property for the purpose of creating a renewable energy generation facility.
It’s safe to assume that when American Electric Power bought the land, they didn’t perform an appraisal, calculate a discounted market price, and multiply it by 9.3, in order to calculate how much money they could make from that specific property. This was a common sales strategy of realtors and bankers prior to the COVID-19 pandemic, as it allowed them to cherry-pick a highly-sought-after piece of real estate for a steal. However, with real estate values taking a nosedive, this strategy no longer works. The best course of action for American Electric Power would have been to hire an appraiser and engage in proper due diligence before committing to such a large purchase.
Why Did Desoto Speedway Matter?
Desoto Speedway was once considered one of the premier minor league stadiums in the country. It seated 16,000 people and was an excellent location for concerts and other large-scale events. It also had a grassy knoll that was perfect for families and individual players to come together and enjoy a game. The stadium was built in 1929 and is one of the most architecturally-significant structures of its type in the country, due mainly to the futuristic look of its design.
It was home to the Double-A Tulsa Oilers of the Texas League from 1929-31 and later served as the spring training facility for the Houston Astros. In 1940, the stadium was the site of the infamous ‘Battle of the Bands’ where a high school marching band from Houston went head-to-head with a high school marching band from Dallas. The Houston band won, and the Dallas band walked off with their instruments, never to perform in public again. (Sad but true!)
In addition to serving as the spring training home of the Astros, the stadium was also home to the Washington Senators from 1946-67. The last game held at Desoto Stadium was on October 4, 1967, when the Senators defeated the visiting New York Yankees 4-3 in 10 innings. (The Senators eventually moved across the state to D.C., where they became the Nationals.)
The Economic Impact Of Desoto Speedway
The ballpark was originally built with a flour mill in mind. AEP made the right call in not building a factory on the site, but rather using the stadium’s infrastructure for the manufacturing of renewable energy equipment. The property purchased by AEP was previously owned by Interstate Batteries which manufactured car batteries at the site. In 2008, Interstate Batteries constructed a brand-new factory at a different location after buying and renovating the old Desoto Speedway property.
The stadium’s location is arguably one of the best in the country, as it’s directly off of Interstate 35, which connects Dallas and Houston. The interstate cuts through the center of Desoto, giving the town a direct link to two of the largest cities in the country. (FYI: The third-largest city in Texas is also located directly off of the interstate, and is named after the creator of the fast-food chicken wing – the Austin-Bexar Chick-fil-A. Yes, they’re that good!)
The stadium’s location directly off of I-35 made it an ideal location for trucking companies to park their rigs while en route to larger cities. That, in turn, helped contribute to the town’s revitalization during the latter part of the 20th century. (Desoto was once referred to as the ‘On-ramp to the Future’ due to its strategic location and promising economic future. It has since been dubbed the ‘Hub City’ by the locals.)
How Much Does It Cost To Maintain A Stadium Like Desoto Speedway?
Today, the cost to maintain a stadium of this size and quality would be quite high. Even with American Electric Power footing the bill for maintenance (including police and fire protection), it would still cost the company over $1 million per year to keep the stadium up to code. (This is assuming that they want to keep up with the Joneses and don’t want to cut corners.) If AEP wants to truly make money from this investment, they will need to get a handle on the maintenance costs and create a solid business plan to offset these expenses. (Perhaps they could even pass the savings along to season ticket holders or make a contribution to a worthy charity in town.)
The good news for AEP is that they can apply for a 20% tax credit from the state of Texas for upgrading their facilities to generate renewable energy. This could potentially cut the cost of the project by $300,000 and make this particular property quite the profitable investment.
What If AEP Runs Out Of Money?
This is the million-dollar question. The state of Texas requires AEP to pay for utilities in advance – something unheard of in the industry, let alone in financially-challenged Texas. (They usually have to ask for money repeatedly before the utility provider finally agrees to work with them.) If AEP wants to keep the lights on and secure the investment, they will have to find additional sources of revenue to cover these expenditures. (This is where naming rights come in. Perhaps the company that owns the stadium can purchase some for $100,000 or more a year.)
To date, there have been no formal studies conducted regarding the economic impact of Desoto Speedway. However, it has been well-documented that minor league sports can have a significant effect on a city’s overall economy. (For example, the Brewers have a payroll of over $9 million and the Rays have a payroll of just under $3 million.) Clearly, the value of this particular property is in the billions, but how much is actually out there? (Hint: There’s a reason why the Nashville Predators have played at the Sodo Arena for so long.)
It’s time for AEP to take the field and put their best foot forward for the benefit of the community. Hopefully, this small-scale study will shed some light on the importance of these sorts of facilities to the cities that host them and their surrounding areas.