Ohio official says LeBron’s return worth $500m, or $50m, or something with a “5” in it, anyway

Early yesterday, the office of Cuyahoga County Executive (and Ohio gubernatorial candidate) Ed FitzGerald, he of the “win tax,” announced that FitzGerald would be giving an afternoon press conference on just how much money LeBron James’ return to Cleveland would mean to the local economy. FitzGerald had previously claimed that county ticket tax receipts measurably went down when LeBron left four years ago — not too much of a surprise, since people stopped going to Cavs games and presumably did something else not subject to the ticket tax — so the only question was how huge a number FitzGerald was going to come up with.

The answer: $500 million. Per year.

That certainly sounds crazy, but let’s do some rough math and figure out just how crazy. The Cavs had about $145 million in total revenue last year, about $30 million of it via gate receipts, the rest from concessions, cable fees, and so on. Let’s assume that every single Cleveland fan were to double their spending as a result of LeBron’s return — buying twice as many tickets, twice as many hot dogs, twice as many cable contracts. Let’s further assume that 100% of that money would otherwise have been spent outside of Cuyahoga County if not for LeBron, because we all know how many attractions there are in the distant Cleveland suburbs. And then let’s apply a multiplier of 2x, just for the hell of it, under the assumption that all money spent on Cavs games is recirculated in the local economy, because surely NBA players cash their paychecks and immediately spend them at the local Dave’s.

This would get us a yearly impact of $290 million. Still not half a billion.

Or to look at it another way: Last year the Cavs sold 710,000 tickets, and had 132,000 go unsold. Even if the team were, let’s say, to double ticket prices next year, each of those 132,000 new attendees would have to spend $3560 apiece on their visit to a game in order to generate $500 million in economic activity.

Fortunately — or unfortunately, depending on your perspective — it’s not clear that FitzGerald himself believes that $500 million figure. Sure, his deputy chief of staff, Nate Kelly, said it at yesterday’s press conference, but the actual figures mentioned by his staff were far lower. (I’ve requested a spreadsheet or any kind of document at all detailing the economic impact data, but I’m still awaiting a promised call back from FitzGerald’s economic development aide.) From the summary published in today’s Cleveland Plain Dealer:

  • Cuyahoga County will collect about another $3.5 million in ticket taxes this year. The ticket tax rate is 8%, so that would imply an additional $43.75 million in ticket sales, which if they jack up prices to $60 a pop and go deep into the playoffs … sure, maybe.
  • Cavs fans will spend an additional $34 million a year, and the Cavs’ overall economic output would rise by $53 million. Again, that’s not unreasonable, though at least some of this spending would be cannibalized from money that would otherwise be spent on other things in Cuyahoga County, something FitzGerald’s office didn’t attempt to account for.

And … that’s it? That’s not anything close to $500 million a year, and probably not that close to $50 million a year either. The Plain Dealer called Kelly’s half-billion-a-year claim “a much more aggressive interpretation of the data,” which is a nice way of saying “we have no clue why that came out of his mouth.”

Meanwhile, the source of these numbers is in dispute as well: The initial Bloomberg News report said they came from “calculations by the Cuyahoga County Fiscal Office,” but the Plain Dealer reports that FitzGerald said his office worked with the tourism agency Positively Cleveland, drawing on a dubious study commissioned by the team in the heat of last winter’s sin tax extension battle.

In other words, this is a big-ass mess, and there’s no reason to take any of these numbers the slightest bit seriously. Yet the headlines have been written, and you know that the next time some sports team owner is looking for cash to subsidize a new arena, or tax breaks to boost his profits at an old arena, or the purchase of a new point guard, someone will point to this and say, “Keep in mind that even a single player like LeBron James can be worth $500 million a year to a local economy.” (We already went through this with the last NBA superduperstar, don’t forget.) Zombie ideas can be a dangerous thing.


12 comments on “Ohio official says LeBron’s return worth $500m, or $50m, or something with a “5” in it, anyway

  1. $500 mill? Looks like Fitzgerald has been talking to the ThinkBig propagandists in Sacramento.

  2. You know, Neil, you are absolutely right… But it doesn’t matter. All an elected official has to do is say, “It’s true!”, and we’re done.

    MCG is right. It’s a lesson I’ve learned. Our own downtown arena will generate $11B in NEW revenues over 36 years! Wow!

    These guys are gonna be so disappointed when the actual total turns out to be $0. I can’t get parking in downtown sac already. The City garage across the street fills up every day. So what’s going to happen when nearly 4,000 city-owned off-street spots cease to exist?

    I only bring up this boring stuff to point out that once KJ said it, it became carved in stone. He’s right, we’re wrong, done.

    I’m used to it now. That means I won’t feel guilty when I vote against the inevitable bailout.

  3. And after seeing part of the terms of LeBron’s contract, I hope Cleveland doesn’t get to comfy.

    2 years, and he can opt out after 1. Better get a proposition ready that makes James a public employee.

  4. Do the Cavs even have a million fans let alone a million of fans willing to spend $500 more just because of Lebron?

  5. MikeM, don’t forget that the local media plays their role too by purposely reporting one side of the issue. Mouthpiece shills like Marcos Breton are assigned the duty of denouncing any opposition to the scheme as obstructionists to progress.

  6. We don’t have media in Sacramento that do any reporting – we have publishing companies for KJ’s and the kings press releases and statements (with apologies to Sacramento News and Review).

  7. Another example of what Alan Greenspan called “irrational exuberance”. Remember this when “hoping” for politicians to be more than what they are – flawed mortals.

  8. All of a sudden, Ed FitzGerald realized how ridiculous $500 million sounded. The more sound number seems to be floating between $50 – $150 million (according to “experts”). The Cleveland Plain Dealer just posted another article stating it will be roughly $50M.

  9. MikeM: It’s a problem that exists everywhere in our present society. How many elections have been won based on a claim or promise that turned out to not just be false but obviously and demonstrably false? Do we ever hold anyone to account for their lies, cheating or outright stealing?

    And the lapdog media simply parrot back any ridiculous claim that their “guest” (who only agreed to the interview if the media company promised not to question any of their outlandish claims, just accept them fully as they are presented) may make.

    What we are seeing in sports is just an extension of the deep and fundamental flaws that our failing public education systems have made all too clear. We live in a lowest common denominator world.

    BTW, anyone know what colour is the terrorism threat matrix today? Should we be more or less worried today than we were told we should be yesterday?

  10. Is the question “what is James’ value to the Cavaliers”? Or what is James’ value to “Ohio/Cleveland”?

    If it’s the former, I think we can safely say it is a large amount… like Bill says, probably at least $50m.

    But what is his economic value to Cleveland taxpayers? I’d argue absolutely nothing. Any increase in consumer spending on basketball and associated businesses will be redirected from spending that Ohio residents would have conducted anyway. There might be a small uptick due to more playoff games and more out of state visitors… but you have to balance that out with “road spending” done by Cavs fans when they attend games elsewhere, which reduces the amount the have to spend in their own backyards.

    The overwhelming likelihood is that Gilbert will get richer, but neither taxpayers nor public coffers will see any net benefit at all. It isn’t an accident that Fitzgerald specifically noted only the ticket tax revenues. If he’d looked at discretionary spending across the board and the tax revenues associated with same, he would have either had to shut up or admit that there was no appreciable difference.

  11. Thanks (sort of) for noting this.

    I swear, when I saw a top-of-page cleveland.com headline “County Executive Press Conference to Discuss LeBron James’s Economic Impact: LIVE COVERAGE,” I basically concluded that it’s just hopeless.

    The fact that adults, let alone the people who (judging by the sin tax debacle) steer policy for the entire region, actually got together to entertain the premise that the Cleveland Cavaliers’ signing of one basketball player (whom 99% of the local populace has spent four years hating) has an “economic impact” worth discussing, let alone treating as an event…

    I’m not sure if “banana republic” is approved for sub-national entities, but otherwise it certainly seems to fit, here. What a complete J O K E. The sad part is that because I live here, the joke’s on me; the really sad part is that most other cities and regions are equally bad or else trying hard to be, as well-documented by this fine site…

    >:-(

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