Skip to content

Sports Subsidies in Texas

2010 July 1
by Phil Miller

WFAA.com has a good story on the economic impact of mega events in Texas that is largely based upon a paper written by TSE’s own Dennis Coates and Craig Depken.  Read the whole thing, like they say, but I want to focus on one secti0n of the article.

As you no doubt know, the staff here at TSE are not big fans of those economic impact statements commissioned by those seeking public subsidies for sports.  This is because the research of (independent) economists looking at the historical record find, time and again, that the claims made by the (paid) consultants in the impact statements are overblown.

The author of the article asked an official of the Texas comptroller’s office, the office charged with giving out the subsidy dollars, why his office doesn’t bother to see if the claims of the impact statements held up.

“The host committees of big games, like the North Texas Super Bowl in Arlington next year, pay consultants to write studies saying how much money the events will bring in.

“Then it’s up to (Robert – PM) Wood’s office (Texas Comptroller’s office – PM) to decide — based on the consultant’s study — how much money the state will donate.

“No one has ever been turned down.

“After the final whistle has blown, the comptroller does not check to see if the event generated the tax money the consultant said it would. “We don’t have the resources to check,” Wood said.”

Perhaps if a subsidy request were denied, then there would be some resources available.  But when you’re using other people’s money on other people….

4 Responses
  1. Dan permalink
    July 1, 2010

    One thing about the consultants address is that it is against postal regulations to use suite # for a box #.

    I wonder how many people leave town when a big event comes to town. I remember my sister-in-law knew people that left Los Angeles during the 1984 Olympics because they were concerned about traffic and security hassles and she was living in Orange County. Part of it was also the lure of renting out their homes for a tidy non-taxable profit though few people actually did cash in.

    Do cities get to collect their usual taxes on these events. I remember St. Louis had around a 17% entertainment tax on sporting event tickets and with the price of SB tickets that could be an easy way for a mayor to justify the event.

    But the reason these consultants will continue to churn out reports tabulating the great riches these events create is that everyone that matters wins. The consultant get big fees for printing out the same study where only a few numbers have to be changed and the biggest problem is making sure the city’s name is changed from the last printing. And politicians win because they can point to how successful they were at attracting money to their city plus they get good tickets. And the leagues win because so many places are happy to throw money at them and roll out the red carpet. Ordinary taxpayers are the loser but unless they can do what the voters in CO did to cancel the Winter Olympics no one will listen to them.

    I should take my 27 years of word processing and spreadsheet experience and my accounting degree and open my own sports consulting business. There’s a Mailboxes etc. location down the street from me and I can hire some college interns to do the real work.

  2. July 1, 2010

    Good point. When I was young, every summer my family used to go to Newport Beach (south of LA in Orange County) for a week from the SF Bay Area and then visit Disneyland and Universal Studios etc. In 1984 we went to Hawaii because my parents didn’t want to deal with all the mess from the Olympics.

    Steve

  3. Phil permalink
    July 1, 2010

    I think this is pretty common and it’s been mentioned in the sports economics literature. Anecdotally, my wife and I took a wine-tasting tour of the Russian River Valley in California and another couple on the tour had come from Calgary. They left because they didn’t want to deal with a big rodeo held there each summer.

  4. Dennis permalink
    July 5, 2010

    It’s always nice to see one’s name in the paper, even if attributed to a school other than where one works.

    Anyway, I like this quote from the article:

    “Robert Wood, whose department dispenses METF funds at the Texas Comptroller’s office, is certain big sports events have a positive economic impact. “Any time you bring in out-of-state people into the state, you’re going to have an impact,” he said.”

    The idea that “out-of-state people” might have gone to Texas without some major sporting event apparently never occurred to Mr. Wood. It surely matters for tax collections generated by the event if the net influx of out of staters induced by the event is zero! And it also surely matters if in-staters skedaddle to avoid those annoying out of staters clogging up the restaurants, highways, and other local attractions.

Comments are closed.