Category Archives: economic impact studies

Cardinals leave Flagstaff training camp, local economy surges

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The Arizona Cardinals moved their summer training camp back to the team’s regular-season home in Glendale this summer after 25 years in Flagstaff, which no doubt was gripping news to all of you Arizona Cardinals training camp fans. But since the whole move was over money — money the Cardinals didn’t want to pay in rent to Northern Arizona University, money NAU didn’t want to spend on further renovations to its facilities, and money that football advocates claimed Flagstaff would lose without the annual influx of Cardinals fans — it’s interesting to see how the city fared with summer football gone.

And the answer is pretty darn well indeed:

Sales tax revenues from restaurants and bars for July and August were up by 5.3 percent over the same two months in 2012, according to city data.

For August alone, when much of the camp was held, restaurant and bar spending was up 11.6 percent even without the Cardinals.

Spending in hotels and motels also was up, although many Cardinals fans from the Valley are day-trippers. Lodging tax collections increased 7.7 percent in July and August, and 7.3 percent in August alone.

Taken together, August revenues from the 2 percent BBB tax were up 9.9 percent compared with August last year.

“This tells me that the Cardinals training camp has some entertainment value for Flagstaff but is not as significant an economic driver as we perhaps thought it was,” said Mayor Jerry Nabours.

Now, it’s hard to tell from these numbers alone whether the Cardinals leaving truly had no impact — local sales tax revenues have been up almost every summer since 2007, as the city has been marketing itself as a cooler summer destination for Arizona residents, so it’s possible the numbers would have been even better with the Cardinals. Still, it’s a pretty significant sign that losing visiting sports fans needn’t mean disaster for a local economy: If Cardinals tourists are being replaced by Grand Canyon tourists who don’t have to worry about fighting with football fans for hotel rooms and restaurant reservations, all the better — especially since the Grand Canyon doesn’t demand new locker rooms.

Study: Minor-league ballparks not quite as completely useless as big-league ones

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All you journalists and editors out there who like man-bites-dog ledes, check it out: There’s a new contrarian dog in town, and it’s Reason’s A. Barton Hinkle, who starts off an article with this monster of a sentence:

Is everything we know about sports stadiums wrong? Not really. But it might not always be right, either.

Boom! Time to step up your game, #slatepitches!

So, what exactly is the not-always-right thing that we don’t know about sports stadiums? In short: Minor-league baseball teams might actually have a small but positive impact on local economies.

The work comes from Nola Agha, an assistant professor of sports management at the University of San Francisco. It appears in the Journal of Sports Economics and arrives at what Agha terms “an unexpected outcome”: Certain types of teams and facilities can produce gains in regional income (albeit small ones: about $67 to about $117 per capita). This contradicts “the vast majority of academic research” on big-league sports, which “has found nonpositive effects on income…employment…sales tax revenues…and spending.”

I haven’t read Agha’s paper yet (it’s on my list), but this finding isn’t exactly surprising: Since one of the main complaints about sports facilities’ alleged economic benefits is that they mostly reshuffle spending in a region (the “substitution effect”), and minor-league teams tend to play in small cities and towns where reshuffled money is more likely to come from outside the city limits, you absolutely should expect to see a bigger economic gain.

Of course, minor-league teams come with their own pitfalls, first among them that they don’t stay put very long, raising the risk that any small boost in economic activity will be short-lived. (Hinkle notes that affiliated minor-league teams stick around for an average of 16 years, far better than the four-year lifespan of the average independent league team, but still pretty crappy if you’re paying off 30-year stadium bonds.) And Agha didn’t make any attempt at a cost-benefit analysis, meaning that even if per-capita income does creep up, it may not be enough to make the expense of building a new stadium, even at a minor-league price tag, worth it.

It’s a nice addition to the pile of stadium economic impact research, anyway. Coming on the heels of Geoffrey Propheter’s exhaustive research on NBA cities, it shows promise that economists are starting to be able to refine their view of stadium and arena subsidies from “not worth a damn” to “sometimes worth a fraction of a damn, depending on the circumstances.”

Economists duel over whether Republican convention did squat for Tampa

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If you’ve ever found yourself wondering, “Hey, that University of South Florida economist, does he spend all his time hating on Super Bowls and other mega-sporting events as having no benefit to local economies?”, the answer is no, he does not. He takes the time to puncture the economic-windfall balloon of political conventions, too:

Porter says the [2012 Republican National Convention in Tampa] fails to show up in tax revenue and taxable sales statistics for Hillsborough County. For the evidence, he says, look at this:

From August 2010 to August 2011, sales tax revenues in Hillsborough grew at 5.88 percent — faster than in the rest of the state, where growth was 5.44 percent.

But from August 2011 to August 2012, the month of the convention, tax revenues in Hillsborough rose about 6.75 percent — lower than the 6.92 percent seen in the rest of the state.

Taxable sales statistics were similar, Porter said.

From August 2011 to August 2012 sales in Hillsborough rose 5.83 percent — less than the 6.31 percent seen in the rest of Florida.

“Comparing August to August over time, it is apparent that the RNC did not stimulate economic activity in Hillsborough County,” Porter concludes.

The article quoted above — by Tampa Bay Times reporter Richard Danielson — then goes on to quote rebuttals from University of Tampa economist Brian Kench, who was hired by the convention host committee to find an impact, and found $214 million worth, as well as host committee president Ken Jones, who accused Porter of comparing “apples to bicycles.” Kench said that Porter had erred in looking at onlytaxable sales, and then when you include overall sales — including untaxed items like groceries and services — “Hillsborough’s overall sales rose nearly 10.5 percent from August 2011 to August 2012 — nearly double the 5.8 percent growth in the rest of the state for the same two months.”

To which Porter replied … well, we don’t know, because Danielson ended his article there. But because this is apparently Email Economists So Journalists Don’t Have To Week here at Field of Schemes, I asked Porter what he made of this. His reply:

  • Taxable sales are absolutely the right metric to use, because “RNC visitors aren’t buying medicine, groceries, hiring attorneys and getting haircuts while in Tampa. They pay for hotel rooms, buy meals at restaurants, and buy souvenirs, all of which are taxable. … If taxable sales don’t respond, these visitors are no different than the visitors we normally have in town in August.”
  • Overall sales in Hillsborough were indeed up more than in the rest of the state from 2011 to 2012 — but that’s because they’re always up more in the Tampa area than the rest of the state: “Because we are a port city with significant export activity (not subject to sales tax), our gross sales are large relative to the rest of Florida and growing rapidly as we come out of the recession. …Comparing August 2010 to August 2011 gross sales in Hillsborough rose 11.7%.  Comparing August 2011 to August 2012 the increase fell to 10.4%.  This mirrors the rest of the state wherein August to August sales rose 1.5 percentage points less in the 11-12 period compared to the 10-11 period.”

So, it looks like the Republican convention, like most of the sports mega-events that Porter has studied, doesn’t actually do anything measurable to help the local economy despite how eagerly cities chase after hosting it. Unless Kench has a counter-counter-counter-counter-argument; I’ve emailed him as well, but haven’t — oh wait, here’s a reply from Kench right this second!

That assertion is proven false one month prior (July 2012), when the rest of the state grew faster (8.7% y/y) than Hillsborough county (6% y/y).

Time to go back to Porter to see what he says. I’m starting to have just a smidge of sympathy for why reporters on deadline don’t do this…

Chicago impact study assumes DePaul will nearly quadruple attendance at new arena

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That 12,000-seat DePaul University basketball arena that Chicago Mayor Rahm Emanuel wants to spend $125 million in city money on already sounded like a pretty bad idea, given that DePaul is 1) a private college that 2) only draws 8,000 fans a game and 3) has plenty of other arenas it can play at. But it sounds even more craptacular now that Crain’s Chicago has revealed the figures for how many of those tickets are actually used:

Attendance at Blue Demons home games in suburban Rosemont over the last three years has averaged around 2,900, according to Allstate Arena ticket records obtained by Crain’s. That’s about 35 percent of the school’s reported numbers and 30 percent of what McPier officials are projecting for the new arena…

This past season, the official average number of fans that went to DePaul home games at Allstate Arena was even lower: 2,610 based on the Ticketmaster scan system, which tracks exactly how many people come inside.

That is far below DePaul’s reported average home game attendance of 7,938 over those 16 home games. Over the course of the entire season, the school reported total attendance at Allstate Arena at 127,020. The actual attendance was 41,771.

Why are more than 5,000 people a game buying tickets and then not using them? They’re not, explains Crain’s — the discrepancy is largely because of tickets that the university itself buys, then makes available to students or charities free of charge. But even students and charities don’t want to go to DePaul basketball games, so the seats remain empty.

Why does any of this matter? Because the economic impact study commissioned to support the arena project counts those phantom fans as actual money-spending consumers:

That report projects an average attendance of 9,500 at DePaul men’s basketball games in the new 10,000-seat arena, or 152,000 people over 16 games. That’s more than 40 percent of the projected annual attendance of 370,000 for all events at the arena, including concerts, shows and conventions.

While the school would likely still pay to reserve student seats to games at the new arena, recent history suggests the butts won’t actually be in the seats, nor would the fans be out and about spending money in the neighborhood.

So, to recap:

Sacramento arena projection: JOBS! JOBS! JOBS!

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It’s time to play “What’s Wrong With This Arena Impact Report,” with your special guest, University of the Pacific Business Forecasting Center director Jeff Michael! Take it away, Sacramento Bee:

The planned construction of a new Kings arena in downtown Sacramento should provide a significant boost for the area’s economy and job market, a University of the Pacific forecaster said today.

Although the region’s job growth will remain modest this year, the effect of arena construction should begin to be felt sometime next year, said UOP’s Jeff Michael in his quarterly forecast.

Michael, director of the university’s Business Forecasting Center, said California and the Sacramento area are experiencing another year of moderate economic growth this year. Prospects should improve statewide in 2014, he said, and the arena effect in Sacramento will bring a spark to the region’s otherwise “tepid job growth.”

I bet you’ve already spotted the problem here, but to make it easier, let’s make this multiple-choice. Is it:

  1. The Sacramento arena financing plan still hasn’t been approved by the city council, so it’s uncertain at best whether the project will get underway and start hiring people until well into 2014.
  2. Sacramento is paying for the arena out of future parking revenues (and probably hotel taxes as well), yet Michael fails to take into account the opportunity cost of the lost economic activity that would arise if the city were spending that money elsewhere (or lowering taxes with it).
  3. Even if the arena does start construction soon, and does front-load the 6,000 construction jobs that the city is promising, the short-term effect on unemployment may be fairly modest. The unemployment rate in Sacramento County is 9.2%, out of a labor force of 679,939. That would mean the arena could put one out of every eleven unemployed county residents to work — assuming they’re all trained construction workers, of course. If not, then the project would have to bring in workers from elsewhere, not helping Sacramentans any. And, of course, those jobs would disappear once the arena was complete — but the construction bills would keep on going.

And the answer is: all of the above!

Now, for your bonus question: When Michael wrote that the arena project “has the potential to accomplish broader city goals and help other city assets like the Convention Center,” what is the appropriate response?

Oh, I’m sorry, the correct answer was “shake your head sadly, with just the faint hint of a bitter laugh.” But we have some lovely parting gifts.

Those Deadspin charts on Final Four spending may not mean what you think they mean

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Deadspin ran a really cool graphic the other day claiming to show how spending in Atlanta was up during the Final Four relative to the previous week. (They later posted an even better-presented comparison, with one of those slidey things.) Sales tax data isn’t available nearly that fast, so instead Deadspin used data from Square, a company that makes credit card readers for cellphones, and which apparently knows how to make cool graphics to get some free publicity.

Deadspin’s conclusion:

Square reports that this is a week-to-week 11 percent increase in total sales, from $1.6 million to $1.8 million. This is more than double the $800,000 in sales that Square reported for their similar Super Bowl map, which makes sense given that that bigger event took place in a much smaller metropolitan area.

An 11% increase in sales sounds at least moderately impressive, and would counter previous reports that cities don’t see any jump in spending from hosting events like the Final Four. There are two problems with the Square numbers, though:

  1. Just because people spent more money using Square devices doesn’t necessarily mean people spent more money overall. Square provides readers to vendors, remember, not consumers, so if they handed out lots of card readers to people operating during Final Four weekend (which you’d think they would, if they’re going to go through the trouble of touting their product based on the resulting numbers), then this just might mean there were a lot of extra Square-enabled folks running around Atlanta last weekend. If people were spending less money at, say, restaurants across town that don’t use Square devices, then that wouldn’t register on the Deadspin maps.
  2. Even if people in Atlanta spent more money during the Final Four, they could have spend less money at other times as a result. Call it the “temporal substitution effect”: If I go splurge on, say, tickets to the All-Star Weekend Futures Game (as I, in fact, have done), that means I spend more money in Queens on a certain weekend in July; but it also means I have less money left in my back account, so I’m less likely to, for example, splurge on those crazily overpriced tickets to see Tom Petty play at the Beacon Theater in May. To see that, we’d need to examine spending over several weeks and months, not just a weekend, and compare to a similar time period in the previous year — which is what the economic studies that found no positive impact from the Final Four have done.

So: Nice maps, but they should be used for amusement purposes only. It’s possible that there is some increase in spending in Final Four cities — people do come from out of town, after all, and don’t drive absolutely everyone else away during that time — but these numbers don’t tell us much about what that might be.

Nine out of ten economists agree: Sports stadium subsidies are dumb

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The Tampa Bay Times ran a story on Saturday headlined “How much do the Tampa Bay Rays boost the local economy?“, and for once, this one talked to actual economists. The result was an article that provides an excellent primer on how it is exactly that despite all the people you see attending games and spending money, study after study shows that sports teams have minimal economic impact.

Do local economies see increased activity when a sports team is playing?

In 2008, [Holy Cross economist Victor] Matheson studied sports projects from across the country to see if taxable sales rose after stadiums were built. The study also examined whether tax collections dipped when sports leagues shut down for strikes or lockouts.

“There was simply not any bump at all,” Matheson said.

But what happens to all that money that fans are spending, then?

When a couple spends $100 for dinner and a movie, much of that money goes to waiters, ticket takers and other local workers and suppliers. Those people, in turn, spend their paychecks on rent, food and other sectors of the local economy.

Each dollar of original spending can contribute $3 to $4 to economic activity and job creation.

Professional sports mute this ripple effect.

“Spending that goes on inside a stadium tends to flow into the pockets of a relatively few, high-income individuals who live a large portion of the year outside the city,” [University of Maryland economist Dennis] Coates said. “Much of that money flows out.”

What about all those economic impact studies released by the teams that show massive tourism revenues as the result of sports spending?

One, commissioned by the Rays, noted that 160,000 tickets were bought via credit cards with out-of-state addresses — presumably tourists. Since the average Florida tourist spent $775 on their visit, the study estimated that the Rays added $122 million to the economy. The actual impact could be higher, the study suggested, because the credit card count did not capture cash-paying tourists.

However, this methodology failed to distinguish between tourists coming specifically for Rays games and tourists who came for other reasons and just happened to take in a ball game.

“A person in town to visit relatives or attend a business meeting or conference is already in town,” said Matheson, the Holy Cross professor. “That visitor would have stayed in a hotel room, gone out to dinner, even if the Rays had not had a game.”

The economists note other reasons why sports spending is overblown (some studies could be double-counting fans for each game that they attend even if they’re in town for an entire series, among other things); the whole article is worth reading. And when you’re done with that, check out Shadow of the Stadium’s rundown of other reports on how economists nearly unanimously agree that stadium subsidies are a really, really bad idea. Not that economists are always right, but it should if nothing else put the burden of proof on team owners to show why the heck they should be getting hundreds of millions of dollars in public cash, when nobody can spot any significant public benefits.

No, the NCAA tournament isn’t an economic boon, next question

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With the NCAA basketball tournaments about to kick off, it’s only a matter of time before some reporter somewhere calls me to ask whether they’re really a benefit to local economies in the cities that are chosen to host games. So I’m really glad that Travis Waldron of Think Progress has written an item making clear that the answer is: no, no, a thousand times no.

In their analysis of Final Fours from 1970 to 1999, for instance, professors Victor A. Matheson and Robert A. Baade found that the average economic impact of hosting the NCAA Tournament was actually negative…

Matheson and Baade cite various reasons for the inflated economic estimates. For one, cities estimate the money spent by attendees at the events without accounting for money that goes unspent in that area. NCAA Tournament games surely attract fans to certain locations, but they can also prevent local residents from spending money at the same time, as they seek to avoid the crowd. And the estimates rarely account for the cost of putting on the events, so while a city may gross millions in new economic activity, the net gain is much more often closer to zero.

None of this should be new to anyone — even if you missed Matheson and Baade’s paper when it came out back in 2003, we just went through the exact same thing last summer with the Olympics. Not that this will stop reporters from writing stories in upcoming weeks on all that the NCAA means to its host cities, but at least now when they do, we can say “We told you so.”

Zimbalist’s “Rays need stadium” statement made while under contract with MLB

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It’s been a while since I picked on sports economist Andrew Zimbalist in this space for his habit of changing his tune on stadium subsidies depending on who’s proposing them — I even gave it a pass when he reused a report he’d written for the city of Anaheim as a report for the city of Seattle, changing “Angels” to “Sonics” and rewriting the conclusion to say that instead of the Angels’ miniscule $8 million economic impact, the Sonics leaving could have a potentially huge $2 billion one. (Zimbalist was a paid consultant for the city of Seattle at the time, which was trying to prove in court that it would be harmed if the team left.)

Now, though, it appears that Zimbalist’s penchant for getting hired by the same people whose projects he’s asked to comment on as a sports economics expert has landed him in hot water again. Last Monday, Zimbalist gave a long interview to the Tampa Bay Times in which he asserted that the Rays need a new stadium, that it should be built in downtown Tampa, and that MLB could either contract the team or let it go into bankruptcy (notwithstanding that the Rays actually turn a sizable profit each year, according to Forbes) and be moved if no new stadium is built.

Noah Pransky of the indispensible Shadow of the Stadium blog (and also WTSP-TV reporter) was skeptical of some of these assertions, and after some digging made an interesting discovery:

Andrew Zimbalist is currently paid as an MLB consultant.

Zimbalist confirmed in an email he has worked off-and-on for the league over the years (including now).  He said he has also worked for the player’s association, various teams, and numerous municipalities, but never directly for the Rays.

This isn’t to question the validity of what Zimbalist was saying; merely to point out his realtionship with MLB.  It’s an important disclosure that was omitted from the Times article; especially significant given the “MLB has lost faith in Tampa” statements made just days later.

Now, it’s not that unusual for sports economists to get hired as consultants or to write reports or testimony for one side or another in stadium conflicts — most of the economists I know have done it at least a couple of times. But it’s indeed a major omission for Zimbalist not to tell the Times that he was employed by MLB at a time when the league is actively trying to get the Rays a new stadium. That may or may not have influenced Zimbalist’s statements, but it’s something that readers should know so they can judge for themselves. (After Pransky pointed it out, the Times updated its story to include a mention that Zimbalist is an MLB consultant.)

There’s also the question of just what exactly Zimbalist is doing for MLB, since so far as I know no sports economist has ever taken a gig with a central league office before. Maybe he’s doing some bulk economic-impact number crunching for the Rays and any other teams that are pursuing stadium projects (though that’s a short list: the Oakland A’s, Chicago Cubs, um…), or maybe he’s working on something completely unrelated to stadiums, like how to tweak the league’s revenue-sharing system or something like that. Either way, it’s a far cry from the days when Zimbalist was threatening to form a rogue baseball league featuring player ownership.