So the answer to Friday’s question about why the promised economic projections had vanished from the Buffalo Bills‘ new stadium report when it was finally released in the news-cycle dead zone just before Christmas weekend is: I didn’t scroll down far enough in the original news report to see it. The economic impact report section was done in January 2021, and includes the following … you know, let’s call them “findings” for now until they’re proven guilty:
- The presence of the Bills generates $385.8 million a year in state economic impact and $15.8 million in state taxes. For Erie County, the numbers are $350.2 million a year in economic impact and about a $2 million a year loss in revenues (thanks to county costs of hosting the team); for Buffalo, it’s $44.2 million in impact (presumably mostly from visiting fans who stay in Buffalo hotels or eat at Buffalo restaurants, since the games are in suburban Orchard Park) and $328,000 in city tax revenue.
- For the entire Pegula Sports and Entertainment company, which also includes the Sabres, the Buffalo and Rochester arenas, and the Sabres’ practice risk, the corresponding figures are: $784 million in annual state economic impact and $30.1 million in tax revenues; $700.6 million in county economic impact and $2.1 million in tax revenues; and $220.2 million in city impact and $1.5 million tax revenues.
- All those numbers were calculated by taking the estimated actual spending by Bills fans (“gross expenditure”) and applying a multiplier for the number of times each dollar is re-spent in the area, using the standard IMPLAN planning software.
- Since not all gross expenditure is net new spending — lots of money spent on Bills tickets and the like would be spent in Buffalo, or at least in New York state, regardless of whether the team existed — the study subtracted “key adjustments” first, removing spending by people from the jurisdiction in question, under the assumption that while fans from inside Buffalo might spend their entertainment dollars there one way or another, those from outside the city (or the county or state, depending on which numbers were being adjusted) amounted to new economic activity.
Accounting for cannibalization of existing spending is good, but there are still some big assumptions in there, such as that no outside visitors would be spending their entertainment dollars within jurisdictions if not for the Bills. There have to be at least some people from, say, Rochester who would choose to go to a Sabres game instead if the Bills didn’t exist — which would actually be a net positive for the city of Buffalo, since the Sabres play in the city while the Bills play in Orchard Park, but let’s ignore that for the moment.
Meanwhile, there’s an even huger implicit assumption: that without a new stadium, the Bills would move out of Buffalo. In fact, aside from a section on the economic activity directly caused by hiring construction workers, there’s nothing in the entire report about the benefits of having a new stadium rather than the old one; it just says, in effect, “We’re a big business in this city/county/state, and you wouldn’t want anything to happen to all the money that people spend at our games if you didn’t make us happy, capisce?”
That report from the Buffalo News back in September, in other words, that a new stadium “would generate an estimated average of $793 million annually for Erie County and Buffalo economy over the next 30 years” was 100% inaccurate. What the report actually says is that the entire Bills/Sabres/other stuff entertainment empire controlled by Kim and Terry Pegula handles money that eventually amounts to more than $700 million in economic activity (that specific $793 million figure seems not to appear anywhere in the document), so if not building a new stadium put all of that at risk, it would potentially cost the local economy that much.
But, sure, let’s take the CAA Icon analysts at their word: Without a new Bills stadium, the Pegulas would take the NFL team, and the Sabres, and their arenas in Buffalo and Rochester, and move them all to Greensboro. And none of the people visiting from out of state would set foot in New York otherwise. What would all this be worth to local taxpayers?
Adding up all the state and county and city tax revenues from all of the Pegulas’ business comes to $33.7 million a year. At a dirt-low interest rate of 3%, that would be enough to pay off maybe $600 million in stadium costs. So even under the most Pegula-friendly scenario, where the entirety of all their sports and concert businesses disappeared from the state of New York without a new Bills stadium, the $700 million minimum that the Bills owners are reportedly asking for would leave taxpayers swimming in red ink. And if only the Bills and their tax revenue would get blipped by the lack of a new stadium, then spending anything over about $230 million on a stadium would be a sure money-loser for New York state.
That’s a pretty damning bit of math, and one that we all could have known months ago if either 1) Gov. Kathy Hochul had agreed to release the report when it was first requested, or 2) the Buffalo News, which had access to the report, had bothered to think about the numbers rather than just skimming the summary. I would love to think that now that it’s all out in the open, the entire house of economic-impact cards would come crashing down and no one would ever mention that “$793 million in economic impact” claim again; this not being my first rodeo, though, I’d put the over/under on the next time it gets repeated in the press as … Thursday? Thursday sounds about right.
Shocking. Just shocking!
Hey Neil, I know so much of this is covered ground…the script/hustle is pretty similar but the financial smoke and mirrors are effective when put in the dryest and most boring terms imaginable (TIF anyone?) and now my Buffalo fam are starting to wade into the mess.
The local strategy seems to be 1) get them to agree existing stadium is cold and old 2) agree that “losing Bills” is bad
do you have any updated links or summaries/FAQs for noobs? like the studies on the “Data” page but summarized for the uninitiated?
thanks!!
I’m tempted to say “Yeah, that’s what the book is for,” but I’ve probably written up something more concise somewhere, depending on which argument you’re trying to address. Do you want something on bogus economic benefits, on fake move threats, on something else?
This is a decade old, but still a decent overview:
https://www.thenation.com/article/archive/why-do-mayors-love-sports-stadiums/
Mostly the bogus economic promises, that’s the core appeal to the WNY audience. From afar it seems like the Ralph Wilson era ‘off to Toronto’ threats were never gaining traction even before COVID, so be curious to see if the project hits serious opposition and starts flogging that horse again…
appreciate the link! And sent my FIL the book for Xmas:)
Seems about right… even Victor Matheson’s (?) “move the decimal one place to the left” rule for actual economic impact v projected seems a bit generous for the Buffalo/Orchard Park region.
I would just note that the total amount you’ve specified as the Bills being “worth” to the local economy (and thus the amount notionally available for floating bonds or a commercial mortgage for a new stadium) is absolutely ALL the revenue the facility would ever generate – meaning it is a total loss proposition from a revenue to host city perspective… they will literally never get anything back from the project beyond the fan experience for residents (and non-residents, who mostly aren’t paying for it).
As has been mentioned before, these revenues are not “profit” for the city, county or state. They are the cost to provide government services (just as with any property tax or service fee assessed).
So, who pays for those if all the “public” revenue generated by the facility is kicked back to pay off construction?
I wonder…
Buffalo… man, that’s a cold Omaha. How the mighty stadium hustlers have fallen.
The New Stadium Shell Game has been just dead and dopey ever since Stan the Man finagled his way into L.A. for us. It was a coup to end all coups, but there’s a price to pay when you get the prize, as the game of musical stadium extortion chairs seems kaput. In the spirit of Christmas, sing along with Piggy… “And do you recall, the greatest leverage of all!?”
And now on top of losing our prime con game, he’s demanding we help with his stupid legal bills from screwing over St. Louis. What’s a Club of 32 billionaire to do in these hard times?
For me, it’s drink another glass of 100 year old cognac as I sit on my yacht in the Caribbean, counting my profits. I heard from someone that my team lost yesterday and those sucker fans back in Minnesota think I give a darn, lol. Here’s to the greatest sports league ever, the NFL. Nobody used to do extortion like us, back in the good old days… sigh.
With apologies to Paul Robeson…
“No-body knows, the trouble we’ve seeeeeen…”
People think it’s easy at the top. They don’t know. They just don’t know how hard we work to extract maximum subsidies from the great unwashed.
People who work two 5 or 6 hour shifts a day at a McJob with customers screaming at them all the time just cannot understand what it’s like to literally always be working like we are.
So the Bills payroll for just players was around $188 million. New York State’s income tax rate is 8.82% so just income taxes on player salaries alone amounts to over about $16 million a year. That part wouldn’t be made up by people spending their money on dinners and movies. You wouldn’t see restaurants spending $30 million a year hiring waiters that would compensate for Josh Allen’s income taxes.
Enough waiters to serve 70,000 people? You’re starting to get close.
The state can’t tax them on game cheques earned outside of NY though. Can New York state tax players on income earned while playing the Jets in New Jersey??? If not the effective tax rate on the Bills players would be just half of the total calculated.
They can tax visiting players, though, so should be a wash.
Well the 70K people attending each Bills game would probably be spreading out their redeployed Bills dollars so not all 70K would be going out for dinner or movies at the same time. So you probably won’t have a surge in hiring at those other professions not to mention they wouldn’t be paying the same salaries Bills players make so the tax revenues from those jobs would be lower.
Now let’s say New York State chipped in a billion for the stadium and the outlaw was spread out over 4 years. So $250 million a year. New York State’s annual budget is over 200 billion a year. So we’re talking .125% of the states budget for 4 years. That’s not exactly an earth shattering amount here.
Because tourists NEVER go to Buffalo except to see Bills games.
“Wow, the Bills are great, and these luxury-box seats are fantastic! Anything else to see around here?”
“Hmm. Yelp says there’s a pretty interesting water feature about 15 minutes away. It’s gotten some good reviews.”
“Eh, who likes water? Nope, Bills game’s what we flew here for, that’s good enough for me!”
https://www.osc.state.ny.us/files/local-government/publications/pdf/08salestax.pdf
Regarding the theory that all entertainment dollars are equal… I can’t find data from before but this link from the NYS comptroller sales tax receipts in WNY jumped ~15% from 2005 (NHL lockout) to 2006, much more than any other region in upstate NY. Correlation doesn’t imply causation completely but still…
“In November of 2005, the Erie County Legislature approved an additional 0.5% sales tax for County purposes. That 0.5% sales tax started on January 15, 2006.”
https://ppgbuffalo.org/files/documents/government/taxation/government-_erie_county_sales_tax.pdf
OOPS I’m sorry, I caught that immediately after I pressed “Submit.”
But between that and digging through old Erie County budget reports, that does bring up a question I had regarding this paper: https://college.holycross.edu/RePEc/spe/BaadeBaumannMatheson_Strikes.pdf
It does a good job of trying to find signal in the noise of sales tax revenue variance during lockouts by using the rest of the state as a control. I’d say that’s pretty airtight proof of the substitution effect, at least for Florida sports markets.
However, applying that approach is problematic for Erie County/WNY region, which is pretty noisy unto itself (between fluctuating tax rates, Canadians taking advantage of the exchange rate, etc). ?-do you have a similar paper/review but which uses different methods to find signal in sales tax revenue noise?
Thanks for the reply!!
Good question, not sure if there are alternate methods for more, uh, liminal local economies — let me ask some of the economists who’ve done these studies and see what they’ve got.
Thanks! Don’t get me wrong: the burden of proof to a certain extent rests on the team to prove their economic worth to an area. And during the lockout season, I wouldn’t be surprised if the sales tax revenue remained stable (correcting for rate changes). To explain this though, more Canadians committing minor acts of customs fraud as the USD tumbled sounds just as plausible as a Sabres season ticket holder eating an extra $1200 of chicken wings.
Victor Matheson here. I wrote that paper. Since I am on vacation for Christmas, I won’t really go full time into this, but let me just leave it with this.
1. Academic studies show that cities as a whole generally experience little to no significant economic benefits from stadiums, teams, or events.
2. Buffalo could be different.
3. Every city always says, “yeah, but we are going to be different”.
4. Nearly every city eventually finds out they aren’t sufficiently different.