October 11, 2011
AP: La la la, we can't hear you, economists!
Last Wednesday, I published an article in Slate on why the NBA lockout isn't likely to harm local economies, providing evidence from multiple economic studies of previous work stoppages. The explanation is the same as for why new sports stadiums don't help local economies much: Most sports spending is just reshuffled from elsewhere in your local region, so what's good (or bad) for sports is bad (or good) for movie theaters, restaurants, bowling alleys, etc.
Twenty-four hours later, the Associated Press ran this:
Harry Buffalo is one of the downtown restaurants in Cleveland that counts heavily on the beer-drinking, burger-devouring NBA crowd to keep its doors open. Operations manager John Adams has taped an internet report outside the kitchen for his waitresses, bartenders and cooks to read.
With yellow highlighter, he's shaded the grim news of the NBA labor impasse for his employees, some of whom may soon lose their jobs if there's no deal.
This is where the lockout hits home, and hits hardest.
"It's rough," Adams said, glancing toward The Q. "I've got three single moms on my wait staff and two single dads in the kitchen. I've got their 11 children to think about. It's painful when it's out of my control, when I have to put the business first and say I can't have 15 servers on staff because we don't have the business."
Now, all of this is true — but in both economic and journalistic terms, utterly beside the point. If a restaurant across from the Cavs arena is facing layoffs if the NBA season is cancelled, there's almost certain to be a restaurant across town that will end up hiring as a result — people in Cleveland have still gotta eat. (Some people, anyway.) But that doesn't fit the desired narrative as well, so instead we get stories of how "ushers, security personnel, parking lot attendants, concession workers, restaurant employees and others all stand to have their hours cut or join the country's 14 million unemployed." Number of actual economists consulted by the six AP writers who contributed to this 1200-word article: zero.
On Friday, incidentally, I wrote another article for the Village Voice on how claims (this time by the New York Daily News) of a lost economic windfall from the Yankees not making the next playoff round were hogwash, for the same reasons as the mythical lockout disaster. So far as I can tell, the AP hasn't written an article yet directly contradicting this one with no evidence, but maybe they were all off for the holiday weekend.
February 02, 2011
How much is a Vikings stadium worth?
My MPR appearance has concluded; you can listen to my recorded archive of the whole show here. It was an enlightening hour of conversation, with not just myself and Minnesota state stadium czar Ted Mondale, but also the incomparable Judith Grant Long, compiler of the world's best database on stadium costs and subsidies and author of the hopefully soon-to-be-released book "Full Count" on the same subject.
Mondale, in particular, was far more cautious about his promises of getting a Vikings deal done than I've heard him in the past, repeatedly stressing that Gov. Mark Dayton would only do a deal if it generated "public benefits." He also, of course, cycled through the main pro-stadium arguments, saying that a new stadium was needed to keep the Vikings in town (while later backtracking and saying that move threats were not "helpful to the cause"), asserting that keeping the Vikings would have economic benefits (Mondale claimed $18-20 million in annual benefits to the city of Minneapolis, though he didn't cite a source), saying it's important for the team to remain "economically competitive," and so on.
One of his most telling statements, I thought, came about five minutes into he segment, when the MPR host asked why the Vikings owners shouldn't just build a stadium themselves, given all the windfall profits they'd earn. Mondale's response:
"I don't think it's economically viable to think that the Vikings are going to pay for the entire new stadium. Because I don't think it fits within the value of what they are going to get back."
Read that again: The Vikings wouldn't build a new stadium with their own cash because they'd lose money on the deal. It's confirmation, in other words, that most new stadiums don't actually make money; they're actually big money losers, which can only allow teams to turn a profit if there's a public subsidy.
The big questions, then, is whether there are enough public benefits, in increased tax revenues, job creation, and just the feel-good-ness of having a pro team to root for, to make a subsidy worth it. Or rather, to better state the question: What level of subsidy can be justified in terms of real tangible public benefits?
Here's where Long gave us an intriguing glimpse at the findings of her new book:
"My prescription on [stadium] deals is that the average deal in the U.S. over the last 25 years has been a 75/25: public 75, private 25. And my best deal is actually a flipflop: 25 public, and 75 private. And my rationale actually tries to gather up some of the things that Mr. Mondale has suggested, which I believe are true — there is some benefit associated with having a stadium. And so how do we try to figure out what the correct formula is?
"My 25 percent tries to bring in the urban redevelopment component, the civic image/civic pride, the idea that having a sports team is an amenity — by the way, it doesn't even crack the top ten of important amenities for people looking for jobs, but it is in the top fifteen. So there are some benefits, but let's try to keep the benefits proportional in the deal."
I haven't seen Long's latest research yet, but from what I've found myself, that certainly sounds like in the right ballpark: Teams get about three-quarters of the benefits of a new stadium, whereas the public gets (at best) one-quarter. The question I then asked on the air: What happens if, with a price tag of nearly $1 billion, a 25/75 split turns out to be too rich for the blood of the Vikings and the taxpayers?
Mondale replied that it's entirely possible that a new stadium deal can't be made to work. It'll be very interesting to see if he says the same thing when push comes to shove in the state legislature later this spring.
December 29, 2010
K.C. Business Journal parrots debunked NFL economic impact numbers
It's sports playoff season, which means it's time for another round of stories claiming huge economic windfalls from postseason games. Today's contestant is the Kansas City Business Journal's Krista Klaus:
The Kansas City area is poised to reap a significant economic benefit from the coming Chiefs playoff game in January, the first hosted at Arrowhead in six years.
Estimates of how much money might be poured into the local economy range from $6 million to $20 million.
A study commissioned by the NFL and conducted by Washington-based Edgeworth Economics placed the average economic effect of NFL teams on local communities at $160 million, or $20 million a game for an eight home-game season.
Another study conducted by the University of Minnesota put the economic effect of a single NFL game at closer to $6 million.
A summary of the U of M study is here, and makes clear that the authors merely took the total number of people who came from out of town for a Vikings game (in this case, a playoff game against Dallas last January), multiplied it by the average spending, and came up with a figure of $9 million. There's no adjustment for the substitution effect, however: How many of those people would have gone into Minneapolis to spend their money some other way if they hadn't been blowing it on the Vikings? And did any of those Vikings fans displace other spending — say, people who chose to stay home that day because they didn't want to fight the football crowds on the highways and in the downtown restaurants?
As for the Edgeworth study (which was actually done for the NFL players union, not the NFL), I haven't been able to find the complete study, but the talking points make it clear that the numbers aren't to be taken seriously:
The studies used in this assessment were commissioned to justify a start, increase, or continuation of public funding for NFL stadiums and/or to retain or draw a team to a city. As such, the numbers are based on the League's and facilities' own projections of the economic activity associated with NFL games.
But don't just take my word for it: Read what sports economists told the Atlanta Journal-Constitution about the study last month. Which Krista Klaus could have found out about as easily as me, if she'd bothered to type "Edgeworth" and "NFL" into Google. Guess she was too busy feeding the hamster wheel.