NFL draft generated bajillion dollars for Philly economy, say people who would say that

Oh, look, it’s an article about how much economic impact resulted from a sports-related event, this time the 2017 NFL draft in Philadelphia. If you were guessing the answer is “gobs and gobs” and that the study was conducted at the behest of the local tourism bureau, you are a winner:

A record 250,000 fans attended the three-day event held along the Ben Franklin Parkway, with $56.1 million spent at the event, resulting in an estimated $94.9 million in economic impact for the city. Initial projections and estimations put the impact around $80 million. The event also created 30,000 jobs during and leading up to the event.

Let’s do a sniff test on this. A quarter-million fans spending $56.1 million over three days is $224.40 per person, which sounds a bit high, but sure, maybe? And spinning that out into $94.9 million in economic impact would then be reasonable, since money gets re-spent through the local economy as sports bar waiters go home and buy groceries with their tip money, etc. As for 30,000 jobs, it sounds like that counts temporary positions, so it could well be true, if not necessarily that impressive.

Except: There’s our old friendly bugaboo, the substitution effect. How many of those 250,000 fans were locals who would have been spending money in Philly regardless? And how many out-of-towners displaced other out-of-towners who steered clear of the city because it was crawling with NFL draft fans? I can’t find the actual study — the NFL didn’t bother to link to it in its press release — but there’s no indication that the study’s authors accounted for any of this. And in fact, not only economists but hotel operators have thrown cold water on these estimates, with the director of the Greater Philadelphia Hotel Association comparing the draft to “a large medical convention that doesn’t quite sell out the city, but does well.”

None of which means that the NFL draft has zero economic impact, or isn’t worth hosting (depending on the price for your city, obviously). But news organizations — I’m looking at you, CSNPhilly, assuming you consider yourself a news organization — do have at least some responsibility to note the caveats that come with tourism-board-issued economic claims. A nice big “RATING: UNCONFIRMED” would do nicely.

WashPost says economists predict $100m in MLB All-Star Game impact (spoiler: they don’t)

Hey, look, it’s another headline — this one in the Washington Post — claiming that hosting a sporting event would have huge benefits for a city:

The 2018 MLB All-Star Game could bring $100 million to D.C., economists say

If you actually read the article, only one economist is cited — Anirban Basu of Sage Policy, a consulting firm — who says that the All-Star Game has averaged $60 to 100 million in “economic impact.” (Remember, “impact” isn’t actual public revenues, it’s just money that changes hands in your city.) That seemed high to me, so I checked in with College of the Holy Cross economist Victor Matheson to see if he knew of any other studies. And lo and behold, he actually co-wrote one in 2001. It’s a bit involved in terms of stats and regression analysis, but in short, it says: Once you control for all the other variables that you’d expect to cause economic growth (as seen in other comparable cities), the actual impact of the MLB All-Star Game appears to be negative:

Our detailed regression analysis reveals that during the period 1973 to 1997, All-Star Game cities had employment growth below that which would have been expected. Instead of an expected gain of around 1,000 jobs in the year a city hosts an All-Star Game, employment numbers in host cities have actually fallen more than 8,000 jobs below what would have been expected even without the promised $60 million All-Star boost.

Is this one study, which looked at All-Star Games from 1973 to 1997, absolutely conclusive? No, of course not. But if journalists are going to assert that “economists” think something, they might want to at least google for what economists think, or even put in an email to one who’s actually studied it. (Matheson replied to my query within a couple of hours. On a Saturday.) Instead, the Post’s Alex Schiffer appears to have only contact (or read a press release by) Basu, a guy who says this stuff about the All-Star Game every year, and who appears to come up with his numbers just by assuming every ticket sold is new money to the economy, and then slapping on a multiplier. But then, Schiffer appears to be on the reprinting corporate press releases beat, so maybe we should cut him some slack … nah.

Top Florida economic advisor lacks econ degree, avoided using real data because it’d look bad

I’ve made fun of Florida’s propensity for giving its sports teams lots of money based on doofy economic impact studies before, such as when Pinellas County moved forward with a plan for giving the Toronto Blue Jays $65 million for a new spring training facility in Dunedin based on an economic report that assumed that every single ticket sold went to a different person who traveled to Florida just for that game. But this, this, from WTSP’s Noah Pransky, takes the damn cake:

10Investigates found the author of so many economic impact reports that support public sports subsidies may not be the expert economist state leaders believe he is.

The resume of Mark Bonn, Ph.D., a professor at Florida State University’s Dedman School of Hospitality, boasts of dozens of reports compiled for municipalities all across Florida, including some statewide organizations.

Bonn’s side company, Bonn Marketing Inc., recently received $23,000 from just one study, commissioned by the Toronto Blue Jays and city of Dunedin to show the economic impact of spring training…

Nobody on the committee questioned Bonn’s qualifications.

But 10Investigates did, asking if Bonn considered himself an economist.

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.

Study finds higher home values cause NFL stadiums to spontaneously appear

Correlation does not imply causation” is one of the basic principles of statistics and logic — basically, just because your alarm goes off every morning right before sunrise doesn’t mean the sun is controlled by your alarm clock. Yet journalists and (especially) people putting together reports to promote their businesses forget it time after time after time.

In unrelated news, this:

Trulia_AllNFLStadiums_Graphic2Feel free to explicate on your own conclusions from this, but I’m going with “don’t go to a real estate listings site for your sports stadium economic analysis.” Or for proper use of commas.

Five out of five economists agree: Letting Rams, Chargers leave is a fiscal win for cities

SI.com asked a bunch of economists whether St. Louis and San Diego should have coughed up more money to keep the Rams and (potentially) Chargers from moving to Los Angeles, and if you read this site with any regularity, you can probably guess what they said:

Brad Humphreys, sports economist and professor at the University of West Virginia: There is no evidence in any peer-reviewed scholarly journal that a professional football team will generate any tangible positive economic impact on a city. There is no evidence that the departure of a football team ever harmed a city’s economy.

[Peter] Von Allmen[, president of the North American Association of Sports Economists]: There is a substantial body of economic research indicating that funding stadiums is not a successful economic development strategy.

[Victor] Matheson[, sports economist and professor at College of the Holy Cross]: I would advise them to let the teams go. I don’t think these teams are worth that amount of money. We don’t spend that sort of money on anything else. Way more people go to movies every year than go to NFL games, yet we don’t have the government build movie theaters.

All of the economists noted that if you want to go ahead and build a stadium just because you think sports are keen and not in search of elusive economic benefits, go right ahead. Which is where I kind of wish SI had reached out to Centre College economist Bruce Johnson, who conducted surveys to determine how much monetary value residents typically put on the joy they get from the presence of a pro sports franchise, and came up with a number under $40 million — which, needless to say, is typically way less than cities are spending on most new sports facilities.

Still, good article to take note of for the next time you need evidence that economists do occasionally agree on something. Elected officials not so much, but hey, maybe some of them read SI.

LeBron James still isn’t worth $500m a year to Cleveland economy, people, get over it

While we’re on the subject of bad journalism, let’s check in with the Guardian, which is generally one of my preferred news outlets, even if it has a reputation for occasional sloppiness. I haven’t been following the paper’s sports coverage lately, so what’s it been up to?

Oh, wow, yeah, that’s not good.

To recap for those who missed the whole “LeBron is worth $500 million a year” fiasco when it broke last year:

  • A staffer for Cuyahoga County Executive Ed FitzGerald was reported by Bloomberg News to have said that the Cleveland Cavaliers re-signing LeBron James would be worth $500 million a year to the local economy.
  • FitzGerald’s office said that Bloomberg got it wrong, and they were only claiming LeBron was worth $53 million a year in local economic activity.
  • Lots of people, including me, pointed out that even this lower number was pretty implausible, and the overall impact of LeBron’s presence was at most something on the order of a few million a year, of which maybe a few hundred thousand gets returned to the city or county as actual tax receipts.

So repeating a $500 million impact figure that even the person who conducted the study says isn’t true is not a good start. But then the Guardian doubled down by citing Convention, Sports & Leisure, a consulting group that really should come with a warning label reading “objects in studies may be less lucrative than they appear”:

Or as I replied to Waldron:

 

Missouri development agency claims state would profit on Rams stadium because NFL players pay income taxes

That Missouri state hearing to talk about the economic benefits of a St. Louis Rams stadium but not whether Missouri should build a St. Louis Rams stadium happened yesterday, and the Missouri Department of Economic Development held up its end by bringing along a report claiming to show that the state would earn a net $295 million in added tax revenue over 30 years:

The biggest chunk of the money would come from personal income taxes paid by football players, staff and coaches. They will pump an estimated $9.6 million into state coffers this year, an amount that is projected to grow by at least 3 percent a year and probably, “significantly” more.

That’s $9.6 million in just state income taxes, over and above what the state gets now? The top tax bracket in Missouri is 6%, so Rams players and staff would need to be paid an extra $160 million to make that work out, this for a team whose entire player payroll currently is only $151 million. Also, as committee chair Jay Barnes pointed out, Rams state income tax payments have actually been going down the last two years, to a total of $17.8 million in 2014.

There are other problems with the report (which doesn’t appear to be publicly available yet), including that it estimates only $12 million a year in state debt payments, when currently subsidy plans would require at least double that; and that it doesn’t appear to have calculated the negative economic impact of saddling Missourians with either $24 million a year in new taxes or in lessened spending on other projects. Mostly, then, it tells us that Gov. Jay Nixon looks to be preparing to justify spending money on an NFL stadium by going down the path of Wisconsin Gov. Scott Walker: Athletes make a lot of money and keep making more money so let’s make sure they stick around by taking all the income tax they pay and giving it back to their employers and then everyone will win! It makes total sense, so long as you don’t think about it too much.

Credit card company issues lame-ass report on Super Bowl spending, gets name in headlines (but not this one)

First Data, which processes credit and debit card payments, has put out a press release about spending at last Sunday’s Super Bowl in Glendale, and Darren Rovell is ON IT:

Super Bowl XLIX in Glendale, Arizona, resulted in no significant consumer spending growth to the greater Phoenix area, according to an analysis of consumer spending patterns from payments technology company First Data, which says it annually handles 60 billion credit and debit card transactions.

The company’s data shows spending growth from the two weeks surrounding last Sunday’s game was only 3.1 percent better than average compared to the same time period a year before when the spending in the area grew 6.4 percent.

This is along the lines of what actual economic studies have found, so it’s tempting to take this as confirmation that the Super Bowl doesn’t do squat for local spending, because it mostly just displaces visitors who steer clear of town because they don’t want the hassle of dealing with the Super Bowl. First Data, though, didn’t exactly do an exhaustive study: It only looked at credit card and debit card charges, obviously, and just compared spending in the Phoenix area to the same time period the year before without controlling for any other factors. In other words, this could be an actual sign of something, or it could just be a random fluctuation that means zippo.

Also, Rovell doesn’t bother to calculate what a 3.1% hike in spending (compared to “average” — average over the whole year, average for February, what?) means in actual dollars, though presumably he has the First Data report (he didn’t link to it) and a calculator. But, you know, ESPN isn’t paying him to think, just to reprint press releases, and there’s another one on the pile, so no time to lose!

No, there’s still no Super Bowl windfall for cities, no matter what you read in the paper

If you haven’t gotten enough of me griping about media coverage of sports economic reports here — or just want to read about it all in one place — hie thee to FAIR.org’s newly expanded website, where I’ve written all about how the media all too often parrot claims of economic windfalls from sports without even checking if they have any basis in fact.

There are occasional exceptions, obviously (I cite several), but as one journalist who has done time fact-checking his peers says:

“For every one good article you see, there are ten others that don’t bother to do it, and the good ones just get lost,” says Noah Pransky of WTSP-TV in Tampa Bay, who also reports on sports economics at his own website, Shadow of the Stadium. “An industry joke is that reporters have always been mathematically challenged, but the problem has been magnified in recent years by the 24-hour news cycle and staff depletion at traditional media outlets.”

Remember, kids: Just because you read it in the newspaper doesn’t mean it’s true! Blogs, though, are 100% accurate. I read a study that said so.