Chargers “study” finds that spending money causes money to be spent, calls this success

The San Diego Chargers announced yesterday that a study by two local economists found that construction of their “convadium” plan, which would cost $1.15 billion in public money, would “increase regional output by a total of $2.1 billion, increase labor income by more than $800 million, and will have a value-added impact of $1.2 billion.” The study was paid for by the Chargers, but its authors insist (according to the Chargers) that they had “complete freedom to do our research over the summer months and to come to whatever conclusions we believed were warranted.”

Okay, so with at least one eyebrow raised, let’s click on that “Read a complete copy of the economic impact study” link, and we find … oh, look it’s a whole 13 pages of report! Two of which are renderings of the convadium, and the rest of which are, from what I can tell, just the result of plugging the cost of building the convadium into the Commerce Department’s RIMS II formula, and reading the numbers that were spit out. Nice work if you can get it!

A bit of explanation: RIMS II is mostly a set of multipliers, which take a certain kind of spending — construction, in this case, then operations of a football stadium after that — and tell you how much of an effect that’s ultimately likely to have as the money filters out into the local economy. So it could tell you that if a company spent another $1 million on hiring, that would increase to, say, $1.5 million worth of impact as those new hires went out and spent their paychecks at local stores, which would hire new employees in turn, etc.

What RIMS doesn’t tell you is what would happen if you didn’t spend the money. In this case, the city would still have a 4% lower hotel tax rate, which would presumably boost hotel stays somewhat by making San Diego more competitive against other places to go on vacation — or, if you want to look at it another way, the city would have the option of raising hotel taxes 4% to spend on something else that could then be plugged into the RIMS model. RIMS also can’t tell you what would happen to Chargers fan spending if the team were to leave (would they all drive up the coast to see them in L.A.? buy more Padres tickets instead? spend it on big-screen TVs?), so you’re comparing apples to a box of oranges that you haven’t even opened to count yet.

In short: Studies like these are almost entirely worthless for telling you whether a project is worth doing. Developers love RIMS II and its ilk, though, because if you put big enough numbers into them, they’ll spit out even bigger numbers, and big numbers look good! In the end, though, all it says is that if the public spends a billion dollars on a new football stadium and convention center expansion, that’s a billion dollars that somebody else will earn. You don’t need an advanced degree in economics to figure that out — though it sure helps when you’re trying to get hired to write a 13-page report that a sports developer can tout on its website.

One comment on “Chargers “study” finds that spending money causes money to be spent, calls this success

  1. What did you think about their decision to assume that the impacts of the Chargers’ operations should be included as an economic benefit of the project? Moving the Chargers’ game-day operations (their offices and training facilities will not be impacted) from Mission Valley to downtown shouldn’t create many jobs. I’m not sure why it should create any, unless the food service providers need extra servers for the additional luxury boxes.

    Maybe I’m picking nits here, but these “new” jobs are something I’ve heard about for years and I just don’t see where they are supposed to come from.