Many in San Diego’s corporate welfare crowd are laying plans for megasporting events at a new Chargers stadium/convention center and at Olympics facilities. So the megahype is escalating.
On September 9 on KPBS TV, Chargers supersalesman Mark Fabiani claimed that if the City coughs up for a stadium, future Super Bowls will provide $500 million to $600 million in net economic impact, or positive effect on local business, employment, and incomes.
Future National Collegiate Athletic Association Final Four basketball tournaments will bring in $70 million each, said Fabiani. And then there is hogwash about raking in loot from hosting an Olympics.
Just a few years ago, the National Football League was claiming that a Super Bowl would generate $350 million in net economic impact to a metro area. But as the league began using that bloated figure as propaganda to seduce taxpayers into plunking in more than 70 percent of a new stadium’s cost, those estimates soared.
I asked Fabiani how he reached $500 million to $600 million. He said that he was basing that on the $480 million estimate for the New Orleans Super Bowl earlier this year. He claimed “inflation and the growth of the game” would jack up that sum by the time the facility could be built, in 2018 or 2019. (Of course, if inflation gets high, it will also push up the cost of the stadium, now lowballed at $1.2 billion.)
That highly inflated $480 million New Orleans figure is a blatantly false premise. The study coming up with that number was sponsored by the New Orleans Super Bowl Host Committee. ’Nuf said.
Not surprisingly, Texas once topped Fabiani’s bloated claim. That state’s propagandists estimated that the 2011 Super Bowl would bring a net $611 million to the area around Dallas/Fort Worth. After the game, a prominent accounting firm estimated that the game actually resulted in $200 million in direct spending — a number that would not produce $611 million in net impact. Then there is another Texas city, Houston. In 2004, it predicted the game would bring $330 million in revenue. It got $129 million in direct spending.
Fabiani, Texas, and the entire National Football League are full of horse manure, of course. I questioned Professor Victor Matheson of the College of the Holy Cross, an economist who studies sports economic impacts objectively. He said that he and Rob Baade, a professor at Lake Forest College, studied Super Bowl net impacts from 1970 to 2001.
Net impact per game: $90 million. “Updating that to 2013 dollars and we are at about $120 million,” he says. That’s a long way from $500 million to $600 million.
Some economists come up with much lower numbers. Philip Porter, professor of economics at the University of South Florida, simply says, “There is no net impact of a Super Bowl. In terms of the economy, it is not an extraordinary event.” Some believe that the game is actually a net negative to the host city because of factors such as additional trash pickup and police costs.
In a 2006 study, Matheson and Baade said the probability that a Super Bowl would bring in $400 million was less than 1 percent and the odds of it bringing in $100 million were only 47.4 percent. And there was a 23 percent chance the game would result in a net loss.
Fabiani does not talk about how often San Diego would get a Super Bowl. “As for repeat Super Bowls, there are now about 12 cities, all of whom believe they are in a four- or five-year rotation for the Super Bowl,” says Matheson. “That math doesn’t work out well.” That’s especially true since the league is now awarding games to cold-clime cities that have built new stadiums at taxpayer expense.
Then there are those basketball Final Fours. Fabiani says Atlanta netted $70 million from this year’s National Collegiate Athletic Association (NCAA) Final Four. In 2005, St. Louis said it received an impact of $72 million but admitted that only $41.4 million remained in the area as personal and tax income. (Forbes magazine’s Patrick Rishe, in assessing the economic impact of a sports event, counts only the amount of new money that flows into the area and is retained as local household, corporate, or tax income.)
The NCAA is in the process of selecting host cities for 2017 through 2020. The venue must seat 60,000 and have 10,000 hotel rooms within “a reasonable proximity.” A new stadium/convention center downtown could meet those requirements. In this case, there could be repeats. Since the turn of the century, Indianapolis has hosted three tournaments and will get another in 2015. Atlanta has had three.
Of the $70 million claim, Matheson advises: “Cut it way down. Then plan on getting one every decade or two.”
Then there is the Olympics. Former mayor Bob Filner wanted a binational 2024 San Diego/Tijuana Summer Olympics. It didn’t fly, and he didn’t remain as mayor. Others in the community would like to see a San Diego Summer Olympics some year.
But hosting the Olympics adds little if anything to an economy and can be a serious deterrent, say Matheson and Baade. One problem is that structures built at great expense, such as equestrian centers, are not easily converted to other uses after the event. Redirection of capital into unproductive infrastructure socked Sydney, Australia, in 2000. In Lillehammer, Norway, which hosted the 1994 Winter Olympics, 40 percent of full-service hotels went bankrupt after the games ended. Montreal was still paying off debts from the 1976 Olympics three decades later.
Greece, always a profligate spender, thought it would get rich from the 2004 Olympics. The country spent 5 percent of its total economic output hosting the games. It was one factor that pitched the country into its current despair.
Claims of a big economic impact have three main flaws: (1) failure to account for the substitution effect — when people spend money on sports, they don’t spend it elsewhere; (2) failure to consider “crowding out” — a big sports event in an area reduces other activity that would take place, such as travel for other reasons; (3) failure to consider that much of the money spent for special events such as the Olympics, Final Four, or Super Bowl does not stay in the host cities. For example, hotel and vendor profits may go elsewhere.
Sums up Matheson, “A rule of thumb that economists not associated with teams or leagues use to determine real economic impact is simply to take whatever the league or promoter says and move the decimal point one place to the left.”
In 2005, members of the American Economic Association were asked if local and state governments should eliminate subsidies to professional sports franchises. Result: 58 percent strongly agreed, 28 percent agreed, and only 5 percent disagreed.