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Cubsidies: The Cubbies Want in on the Subsidy Action

2012 July 17
by Phil Miller

The ownership of the Chicago cubs want to restore Wrigley Field and, surprise, surprise, surprise, they want public funding.  Here’s Phil Rogers of the Chicago Tribune:

The round figure being thrown around for Wrigley updating is $500 million, with $300 million going to the ballpark itself and $200 million going to the long-proposed “triangle building” adjacent to the park. It has been reported that the team will construct the building itself but would like about $150 million in public funding to help pay for the ballpark improvements.

Here’s what Rogers has to say on the subject of economic impact:

You can argue about economic-impact studies all day long and not find a method acceptable to all. But MLB has found that the bigger the market, the bigger the impact.

How much?

While local officials estimate that this year event in Kansas City carried an economic impact of about $60 million, the 2013 game at Citi Field in New York is estimated to generate $191.5 million for hotels, restaurants and other New York businesses, according to New York City Economic Development officials.

Rogers doesn’t want to hear about methodology, but I can’t help myself because the methodology is important.   Those estimates Rogers reported are generated with before-the-fact numbers.  Basically, they are guesses about what will happen.  They are *not* based on historical record.

Here’s my guess as to how the economic impact numbers were generated.  Some consultant was hired by “local officials” and the consultant asked the “local officials” how many visitors were expected to come to the various All-Star games.  Call this number V.

The consultant then took the numbers, multiplied by the spending by the average visitor (both numbers probably provided via the local Chamber of Commerce or from a hospitality interest group).  Call this average spending number A.

Then the consultant used a multiplier generated by the Bureau of Economic Analysis.  Call this number M.  The resulting numbers for total spending are thus V*A*M.

V*A*M!  Bam!  Thank you…

You know the rest.

What does the historical record say?  I’ll take History for $500, Alex.

Sports leagues, franchises, and civic boosters tout the economic benefits of professional sports as an incentive for host cities to construct new stadiums or arenas at considerable public expense. Past league-sponsored studies have estimated that new stadiums, franchises, and mega-events such as the Super Bowl increase economic activity by potentially hundreds of millions of dollars in host cities. A detailed regression analysis of taxable sales in Florida over the period extending from 1980 to 2005 fails to support these claims. New stadiums, arenas, and franchises, as well as mega-events, appear to be as likely to reduce taxable sales as increase them. Similarly, strikes and lockouts in professional sports have not systematically lead to reductions in local taxable sales.

Link here.  The historical record never lines up with the promises made by consultants and those who pay them.  The consultants are like the quarterback who always overthrows his target by 50 yards.  All.  The.  Time.

Why does the historical account never live up to the before-the-fact hype?  More later when I have time.

4 Responses
  1. Dan permalink
    July 18, 2012

    If new stadiums are such great revenue producers, why do the Jets and Giants share a stadium instead of each having their own?

  2. Phil permalink
    July 19, 2012

    @Dan good point. And why was seemingly every stadium built back in the 60′s and 70′s cookie-cutter multipurpose?

  3. Kayla Ramiscal permalink
    July 20, 2012

    I was under the impression that new stadiums and megaevents do have a positive economic impact, but the problem is the benefit is less than the cost of the structure/hosting the event. Is this completely wrong?

    And in regards to the sharing of the stadium, wouldn’t it have something to do with team popularity? I would assume that the economic benefit (if it even exists) would only work if a team were expected to have high attendance rates. In Australia, the existence of a more popular team increases attendance at the less popular team’s games, which might be the case for the Giants/Jets as the Giants are a much more popular team than the Jets. The same thing can be said about the Lakers and Clippers sharing a stadium. Or, like in the case of Boston, it could be a space or cultural issue. Just a few ideas…

  4. July 22, 2012

    Football season is right around the corner!
    Check out our “Hall of Fame Picks 2012 Preseason Top 25″

    http://www.halloffamepicks.com/the_latest

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