If you were running a business, how would you figure out how much money you made at the end of the year? You could do an estimate of how many customers entered your store each day, estimate how much you think they spent on average, subtract a theoretical number for your costs per item sold, and call that your best guess. Or you could, you know, actually look at how much cash you have at the end of each day, and count.
The latter method is how economists prefer to calculate the impact of sporting events: Add up the tax revenues during the big game or games, and compare it to tax revenues during a normal month. If you’re an economic impact consultant who’s paid more to come up with big numbers than accurate numbers, though, it’s often better to use the former method, since there’s a lot more wiggle room for truthiness.
Which brings us to yesterday’s headlines that hosting Super Bowl LII brought in $370 million in new economic activity for the state of Minnesota:
That was the net new spending from the 10-day event Jan. 26-Feb. 4, according to an economic impact report released Tuesday by Gov. Mark Dayton.
The results, which are in dispute, came in $50 million over pre-event projections by Rockport Analytics made years in advance. Rockport, based in Pennsylvania, also wrote the final report.
If you’ve been reading this site for a while, you’ve probably already spotted the first problem, which is that this is economic activity, not economic benefits. So part of that money includes $179 million in spending by the NFL’s broadcast partners, much of which likely went directly into the pockets of the NFL, never actually touching the Minnesota economy. As far as actual tax revenue goes, the report estimated $32 million in new receipts.
That number, though, was goosed by including increased property tax receipts, I guess on the grounds that hotels are worth more when they can sell Super Bowl stays once every couple of decades?
And then we have our old friend the substitution effect, where one has to account for any money that would have been spent locally anyway, either because it was spent by locals who’d be in town regardless, or because Super Bowl tourists displaced other tourists (and locals) who steered clear of town because they didn’t want the hassle of dealing with football fans. The study trimmed about 18% from its projected economic activity for substitution, a number that it arrived at thusly:
“The average visitor spent $608 per person per day,” said Ken McGill with Rockport Analytics, a consulting company that looks at the economics of big events and wrote the report on the 2018 Super Bowl. “We interviewed, and we literally intercepted visitors … and asked them where they were from, what they were spending in certain categories and whether they’d come back.”
This, needless to say, is not rigorous science, since people are terrible reporters of their own spending activities. And, on top of that, Rockport wasn’t able to intercept anyone who would have been in town if not for the Super Bowl, since they were off doing something else.
Fortunately, Minneapolis’s chief financial officer is calculating the actual changes to city tax revenues during the Super Bowl, and will present those numbers to the city council in June. While we wait, maybe we can pass the time by seeing how things went the last time tax officials fact-checked an economic consultants’ claims:
Ah, well. We’ll always have the excited headlines.