Category Archives: economic impact studies

Braves owners say money pit of stadium is made up for by other stuff that isn’t a money pit, if your head hurts, that’s as intended

Posted on by

I’ve gotten used to newspapers running headlines that contradict not only reality but the stories they themselves head, so when I saw yesterday’s Wall Street Journal headline “Atlanta Braves Owner Says County Wins Big From Development Near New Stadium,” I assumed most of it was probably wrong. And it is, undeniably: The only thing the Braves “owner” — not specifically identified, but probably actually CEO Derek Schiller, since he’s quoted directly later in the piece — says is that (in the WSJ’s words) “taxes and other income generated by the site are helping offset some of the county’s costs incurred by the Braves’ controversial $672 million suburban stadium,” which isn’t exactly the same thing. (The article also notes that the Braves are turning a tidy profit on the sale of three apartment buildings near the new stadium, which is very much not the same thing.)

The article does, however, reference a September study from September by Georgia Tech’s Enterprise Innovation Institute, done on behalf of the Cobb County Chamber of Commerce, which claims that public debt service on SunTrust Park come to $9.5 million a year, while the stadium has generated $18.9 million a year in new tax collections and “other benefits.” That really would be winning big. So is it true?

The report (and some executive summaries) can be found here. It is, just in terms of readability, horribly written — the numbers in the charts bear no obvious relation to those discussed in the accompanying text — but here’s the best I can understand it.

In terms of public costs of the new stadium:

  • Debt service on Cobb County’s $300 million stadium debt is $22.5 million a year, of which the Braves owners pay $6.1 million in rent, leaving $16.4 million a year for taxpayers to pay off.
  • $10 million a year is paid off by two Cumberland Special Service District funds (SSDs), wherein businesses “tax themselves in order to contribute to the stadium project.”
  • The county is putting in $1.2 million a year to a stadium capital maintenance fund, and spending an extra $970,000 a year on public safety and other additional operational costs of the stadium.

That would seem to come to $8.6 million in remaining annual public costs, but the report says it’s $9.5 million. (The difference may be because of added cost of things like building that damn pedestrian bridge, but it’s not clear — like I said, this thing is horribly written.) This is almost exactly what the Atlanta Journal-Constitution came up with in its own calculation, so that checks out.

(There’s still one big problem here, which is that the analysis assumes that the SSD money — which is a tax surcharge on local businesses — would only come in if the stadium were built. But we’ll come back to that in a second.)

On the benefit side:

  • $817,000 in sales taxes on ticket and concession sales to out-of-county residents
  • $905,000 in hotel and sales taxes from fans who traveled more than two hours to the game, on the assumption they came specifically for the game, stayed overnight, and spent the average that an overnight Atlanta-area visitor did on food and lodging
  • $89,000 in sales tax on Braves employee spending (no source given for this, other than the LOCI™ computer model)
  • $270,000 in taxes on taxable office property in the tax-exempt stadium, including copiers and ice-making equipment

That all leaves SunTrust Park as a $7.4 million annual loss to the county, which over 30 years would be cost taxpayers about $100 million in present value — not as bad as at first feared, but also nothing like “winning big.”

Ah, but that’s just the stadium! The big benefit of the stadium, according to the report, is actually the development that the Braves owners built next to it, plus the “halo effect” of rising property values on adjacent land. This is probably best presented in a chart from the report:

In short, the Braves’ stadium remains a money pit for taxpayers, but they’re building a whole lot of other stuff that’s not a money pit, so yay, win!

The problem here isn’t one of math, but one — really two — of logic. Yes, building a stadium at a public loss next to a mixed-use development project that’s a bigger public gain is a net public gain. But who the hell said anybody had to build the stadium? If people in Cobb County are clamoring to live and work and eat in a new fake urban district in the suburbs, by all means give it to them, but unless you think they’ll only do so if there’s a baseball team playing next door 81 times a year, don’t shackle it to a money-losing stadium.

Also, if Atlanta suburbanites were indeed hankering for more places to walk around and pretend they’re in the city without actually being in the city, there’s every indication that somebody would have given it to them somewhere — just not necessarily in Cobb County. Yesterday’s WSJ article even notes that Cobb may just be benefiting by stealing economic activity from other parts of the metro area:

“We have friends in Buckhead,” one of Atlanta’s upscale neighborhoods, said Mike Plant, chief executive of the Braves Development Corp. “We hear from them. They’re not real happy.”

So basically, what we have is that the Braves owners built a stadium that is costing taxpayers lots of money, but they also held out the carrot of an accompanying development that would steal enough revenue from neighboring areas to put the final numbers in the black — if you assume that nobody ever could have been convinced to build development there without a stadium. This is indeed an exceedingly common gambit, dating way back to the Brooklyn Nets‘ money-losing-arena-plus-a-bunch-of-development plan, and dating right up to the Worcester Red Sox‘ similar minor-league stadium project. It relies on the fact that it’s nearly impossible to say if a mixed-use development would have been built “but for” the accompanying subsidies — so if you attribute all the new taxes being paid to the subsidy, any new development looks like free money.

All of this makes it very, very hard to determine exactly where the Braves stadium falls in terms of historically bad sports subsidy deals, which is precisely the point. Ancillary development projects bring in new revenues, yes, but more importantly they muddy the waters of determining who’s paying what — still nobody, including me, has a good number for how much that Nets arena is costing New Yorkers — and justify handing over public cash to a baseball team that was turning a tidy annual profit even before building new apartment buildings next to its new stadium and selling them for a 22% return on investment.

If the Braves stadium is the wave of the future, in other words, it’s less a revolution in figuring out how to absolve taxpayers of stadium costs than a revolution in how to confuse taxpayers about who’s paying for what. They’ve already succeeded in confusing the Wall Street Journal — tomorrow, the world!

[ADDENDUM: Atlanta-area sports economist J.C. Bradbury responded to this report on Twitter last month — something I missed because Twitter is but a blur passing before my eyes — and came to similar conclusions: “The report isn’t as bad as many I’ve read, but it’s estimated $18.9 mil impact isn’t correct.” He also raises questions about whether the SSD taxes are really “businesses taxing themselves” or just taxes that the county could have levied on businesses and used for other purposes, which is an excellent point that is beyond the scope of this post, because it’s long enough already, but maybe another time.]

Are sports leagues trolling Arizona media by refusing to release full economic impact studies?

Posted on by

Emerging briefly from my travel-imposed radio silence to note that Arizona tourism officials are once again talking up how sports is a mammoth contributor to the state’s economy, to the tune of $1.3 billion over the last three years. That’s according to figures come up with by the Arizona State University’s W.P. Carey School of Business, and since they go against pretty much every other study conducted of sports economics ever — which conclude that most sports spending just displaces other spending, whether it’s by locals or tourists — I heartily pooh-poohed the latest of those studies when it came out last month, noting that a previous enthusiastic study of spring-training impact in Florida turned out not even to have been conducted by an economist.

After I wrote that, I got a very friendly under the circumstances email from one of the Arizona State economists, who assured me that the people behind the report had degrees and everything. He also indicated that the study had tried to avoid crediting sports with economic activity from visitors who would have come to Arizona anyway by asking survey respondents, “How strong a factor was the 2018 Cactus League in your decision to visit Arizona?”

This was very interesting, I told my correspondent. Where could I find the complete study, so I can see the full methodology?

Sorry, I was told. These reports were commissioned by the sports leagues (MLB, the NFL, and NCAA), and they were only releasing summaries, not the full reports.

This, needless to say, is a problem: Without seeing the methodology, there’s no way to tell if these studies truly show something unprecedented is going on in Arizona, or if every other study is correct that one-time and seasonal sports events don’t have any measurable economic benefit. So instead we just have the sports leagues picking and choosing which numbers to put in their press releases, with no way to tell how those figures were generated.

And if the notion of sports leagues deliberately trolling the media with cherry-picked stats is bad enough, one has to ask: Why the hell are Arizona media letting themselves get trolled? Pretty much every news outlet in the state has been running these stories at face value, without ever noting that there’s no way to evaluate the claims. That’s a dereliction of duty way worse than anything the leagues (who only have obligation to profit, not to truth) or the economists (who are just doing what their clients ask of them, though I suppose they could always refuse to take on projects with secrecy clauses on the grounds of academic openness) are doing.

Anyway, sports leagues are devious and secretive and news outlets are lazy and eager to suck up to the sports industry that provides them with many of their dwindling number of readers. Glad to see nothing has changed in my absence, in other words.

Friday roundup: Bad spring training math, Beckham’s curse, and the opening of Megatron’s Butthole

Posted on by

No time for quips today, just the news:

  • A study by Arizona State University found that spring-training baseball was worth $373 million to the Arizona economy in 2018. I can’t find the actual report itself, but it looks like they came up with this number by interviewing a sample of out-of-town visitors at spring training games about how much they were spending on their trips — which would be a perfectly good methodology if not for the fact that lots of people travel to Arizona and then think “I’ll go see a baseball game while I’m there,” instead of traveling there just for baseball and thinking, “Sure, I’ll check out that big canyon, too.” Which is why when spring-training games have been canceled for labor conflicts, the observed impact on local economies has been pretty much zero. I wonder if the people who wrote this Arizona State report are actual economists, at least.
  • Nashville is getting an MLS franchise because it promised to build a soccer stadium, but it still might change its mind and not build a soccer stadium, and this is going to be great fun to watch if it does. (Not if you’re a Nashville MLS fan, I guess. But [insert requisite jibe about anything being more fun to watch than MLS soccer].)
  • MLB commissioner Rob Manfred said last week that he hopes MLB expands by two more teams during his lifetime (or during his tenure as commissioner — he wasn’t exactly clear), specifically mentioning “Portland, Las Vegas, Charlotte, Nashville in the United States, certainly Montreal, maybe Vancouver, in Canada. We think there’s places in Mexico we could go over the long haul.” That got people in those cities all excited, which is presumably the point in saying such things — of course, none of those cities have MLB-ready stadiums (unless you count Olympic Stadium in Montreal), so prepare for a stadium arms race sometime before Manfred dies.
  • Megatron’s Butthole is now fully operational.
  • The estimated cost of renovating Key Arena has risen from $600 million to $700 million, but the city won’t have to pay any of that because their deal with the developers says those guys have to pay any cost overruns. Kids, when signing your next arena deal, do that.
  • A Florida man was arrested for setting fire to golf carts at the golf course where David Beckham wants to build his soccer stadium, but police say it was just arson and has nothing to do with the stadium proposal. Except insomuch as David Beckham is cursed, okay? If construction on this place ever begins, I fully expect it to be interrupted by all its milk cows going dry.

Friday roundup: More renderings, more on the LeBron effect myth, and more bad Raiders PSL decisions

Posted on by

Wow, it’s Friday already? How did that happen? Anyway, let’s see what’s left in the ol’ news hopper:

  • Whoops, forgot to include the stadium renderings that David Beckham’s group released this week in my last post, probably because they’re really boring and have no fireworks or spotlights or lens flare or anything. Also not pictured: the fleet of trucks carrying off the toxic waste that sits under the site.
  • Somebody has finally studied the actual economic impact of LeBron James on the Cleveland area, and far from the urban legend, data from the Federal Reserve Bank of St. Louis shows that overall GDP growth in the metro area has actually slowed since James returned from Miami. Now, that doesn’t mean that James is bad for the Cleveland economy — there are way bigger factors at work that affect GDP — but it does mean that at best, he didn’t really move the needle much on local earning. Can somebody please tell Drake now?
  • The Las Vegas Raiders announced their PSL pricing, and it’s a whopping $20,000 to $75,000, more in line with what the San Francisco 49ers are charging than, say, the Atlanta Falcons or Minnesota Vikings. And there will be other seats with no PSLs attached, so if fans want to go to games, they can always opt for the no-down-payment option and just sit in the nosebleeds. I feel like I’ve seen this somewhere before and it didn’t go well — oh, right.
  • The Arizona Coyotes have a new CEO, Ahron Cohen, so what does he have to say when asked about the team’s arena plans? “Really, the most important thing for us right now and what we’re focusing on is achieving our core goals. Those are building hockey fandom in Arizona, building a competitive team on the ice, and positively impacting our community. Ultimately, we have to figure out our long-term arena solution. But that problem is solved by achieving those three goals I laid out.” Put that into Google translate, select Corporate Bureaucrat to English, and we get, let’s see: “Hell if I know.” Glad to see some things are consistent with the Coyotes!

Friday roundup: Kraft tries to use World Cup to get new stadium, Roger Noll says Austin MLS subsidies are indeed subsidies, NC mulls new tax breaks for Panthers

Posted on by

Posting this while watching the first World Cup match at the crazy stadium with the seats outside the stadium. (I haven’t honestly even noticed who the teams are yet, I’m just watching the architecture.) Anyhoo:

Minnesota made a squillion dollars from Super Bowl LII, say people paid to say such things

Posted on by

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:

Minneapolis All-Star Game impact overstated by 27-72%, says state revenue department

Ah, well. We’ll always have the excited headlines.

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

Posted on by

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)

Posted on by

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

Posted on by

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

Posted on by

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.