Economists can write papers which illustrate the lack of economic impact from major sports until we’re blue in the face. As long as there is a paid consultant who can supply survey based, multiplier enhanced economic impact analysis, the two approaches: hypothetical & wishful, vs. evidence & skepticism, tend to cancel each other out in the minds of the public.
But the debate may be advanced when non-economists in the media start turning over rocks and reporting what they find. Byron Harris of WFAA in Dallas just did that, in examining local tax receipts for the month of February, when the NBA held its all star game at Cowboys Stadium in Arlington. Here’s the story, in both written and video form. Both are worth a look.
The predicted impact was $152 million in additional spending, supplied by a firm called “Marketing Information Masters.” Here’s what Byron Harris found:
Tax receipts from the State of Texas show the game brought in zero.
The numbers are reflected in tax receipts from five North Texas cities which were predicted to post large hotel, restaurant and alcohol revenue increases as a result of the game.
But instead of that boost, year-to-year revenue comparisons with 2009 — during the depth of the economic downturn — show only small increases or decreases during February, the month of the game. The All-Star contest was early in the month, allowing businesses ample time to report their revenues.
Dallas had been predicted to reap the biggest bonus from the game. Marketing Information Masters forecast that fans would spend $22 million on hotels in Dallas for the February game. But state tax receipts show hotel revenue for Dallas was actually down $800,000 from the year before — when the economy was worse.
The consultant said fans would spend $20 million on alcohol in Dallas alone. But tax receipts show people spent $1.2 million less for the whole month than they did a year earlier, when there was no All-Star game in the area.
In short, Harris looked at data on tax receipts and could find no evidence that the NBA all star game — a game in which attendance was a record 108,713 — resulted in increased spending in the Dallas metroplex area. It would be a useful exercise for an economist to follow up on this, and examine economy-wide trends with a bit more precision than the Dallas TV reporter; a good project for advanced undergrads or masters students, perhaps. Despite this potential caveat regarding the bottom line figures that Harris reports, major kudos go his way for getting his hands dirty and reporting the facts.
Here is an early version of what you have in mind: , but here is what you may have in mind:
http://college.holycross.edu/RePEc/spe/CoatesDepken_MegaEvents.pdf
Craig and I have been slow at getting this published, in part because we keep adding events and extending the time period of the analysis beyond what is included in the working paper version linked above. The current incarnation is under revision in response to an R&R at the Journal of Sports Economics.
Not exactly what I had in mind, unless you and Craig included the 2010 NBA All Star Game in your paper. I know Craig is a quick study, but kudos to you if you have.
My point, with no disrespect to Mr. Harris, was that it would be useful to examine more than year over year changes for this particular game, to verify (or perhaps overturn) his conclusions for this particular event, using tools like those in your working paper. That 2010 may be post-recession and 2009 is a recession year does not automatically imply that expected hotel tax revenues for 2010 are higher than those for 2009. Although his assumption is reasonable, it would still pay to do for this event the sort of analysis you and Craig do for previous ones.
Tis a sad day when tv reporters are better economists than economic consultants.
Whatever the numbers are, the boosters of these events will take a cue from the Obama administration and make the claim that it was $152 million in created or saved sales. After all, they can claim sales may have gone down a little but they would have gone down a lot more without the game. Every mayor and city councilman that got courtside seats will be happy to use that argument and dare anyone to prove otherwise.
This issue has taken on greater importance in Texas due to the way the state funds the “Major Events Trust Fund.” Forecasts of additional sales and use tax revenues set the baseline for the amount of revenue municipalities in the event area may remit to the state, which will then match at 6.5 to 1. Those funds, then, are payed back to municipalities, ostensibly to offset costs associated with hosting the major event. As it happens, the same few consultants do all the forecasts – always strikingly high in their impact estimates – and municipalities go along with it for the reasons that Dan described above and … because that entitles them to the state’s multiplier match!
The Formula One race proposed for Austin will provide an interesting case. The law was changed to allow Formula One and to allow trust funds to go toward site selection fees – $25 million for the race. In a happy coincidence, the legislature also approprated – you guessed it – $25 million into the trust a few months before the public announcement of the race. Based on estimates from Marketing Information Masters, area governments will also be getting $25 Million per year to offset event related costs.
Finally, though the race is scheduled for a 10 year run starting in 2012, the law provides no mechanism for adjusting trust allocations based on actual receipts in early years.
Finally, though the race is scheduled for a 10 year run (starting in 2012),