Wednesday, August 21, 2013

You Can Make an Economic Impact Report Say Anything

The Rays bring $200+ million a year to Tampa Bay.  According to the Tampa Bay Rays.

The funny thing about economic impact reports is you can make them say anything you want.

When the Rays wanted to justify a new stadium in 2008, they commissioned a study that validated their nine-figure annual economic impact.  There has been some good journalism since then questioning the methodology of the Rays' study; the Times' Stephen Nohlgren pointed out spending on a baseball game is often transferred spending from other areas of the economy, not new spending.

Even the pro-baseball ABC Coalition acknowledged "economic impact studies are often overblown."

But those kind of important questions and disclosures were missing yesterday when the City of Tampa and RNC 2012 Host Committee announced its $400 million economic impact last August for the Republican National Convention.

Both the Tampa Tribune and Tampa Bay Times ran glowing reviews, and even though the stories pointed out retail, restaurants, and bars all lost out during convention time, there was little questioning the report's methodology.

Now, I'm no economist, but it was easy to see the report was using robust sales tax receipts from outlying counties (Polk, Pasco, Manatee) to make up for slow sales numbers in the convention's host county, Hillsborough.

In fact, if sales tax numbers compared to the rest of the state indicate how the RNC affected a local economy, we should blame the RNC for Hillsborough County's bad August sales tax receipts, which grew much slower than the state's average.

And I'm not sure how any economist can claim - at least with a straight face - that a boost in spending at places like LEGOLAND (Polk Co) or Weeki Watchee (Hernando Co) had anything to do with the RNC.

One thing is clear:  Tampa did a nice job hosting the event and for an up-and-coming city, the convention was a great resume-builder.  But the beautiful thing about claiming $100+ million in media impressions and other intangibles is that you can claim them and there's no tangible evidence to disprove them.

"With all my effort I have looked for evidence of any kind of economic impact from a Super Bowl or the RNC and never found any," USF economist Philip Porter told me in an e-mail.  "In terms of what people in Tampa sell, including their labor, events (like the RNC) have no impact."

Don't expect Porter to land any economic impact studies anytime soon.

Nor will Field of Schemes author Neil deMause, who wrote about a pro-Oakland Athletics study back in 2010:
Ah, "economic activity," the last refuge of the economic development consultant. As I've discussed here previously, this just adds up all the money changing hands in your city, regardless of who's spending it and who's receiving it — so that if the A's double ticket prices, that's not a horrible ripoff of Oakland fans, but rather a wonderful boost to "economic activity," notwithstanding that the people actually receiving the bulk of the cash (the A's owners and players) don't live in town.
Journalists live by the motto "question everything."  And the more we ask about these studies, the better-informed we'll be the next time we have to make decisions about which events and institutions to spend money on.

16 comments:

  1. Re:
    "The Rays bring $200+ million a year to Tampa Bay. According to the Tampa Bay Rays."

    I'm sure Rick Foster will cite this 'fact' stated by the TB Rays when it gets down to calculating the damaages to St. Pete for moving the team out of TB and breaking the contract at the TROP before 2027. At $200 million per year, with 14 years to go, we are looking at $2.8 billion at this point in time, winding down $200 million as each year of having to take action passes.

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    1. Good data. What if we were to make the dome retractable? Would that not bring in more fans and make the game more enjoyable? WCS: If a ball gets hit out of the park what will it collide into(hence a possible reason why it was bad to originally move the stadium)

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  3. Noah, you are not an economist. And you always interview or quote economists who belong to the narrow minority of economists who believe in limited/no/negative economic impact, instead of interviewing or quoting those who apply their training and expertise to the difficult task of trying to actually measure impact.

    It is measurable. Not with precision, but it is measurable. Your contention that economic impact studies can be made to say anything is true, but sheds no light. The same is true of blog posts. Fortunately, in the complex discipline of applying economics to the task of measuring economic impact, the profession benefits from loads of scholarship, peer reviewed research, and tons of impartial feedback (from US Courts, for example).

    You haven't read the study by UT's Professor Brian Kench, nor have you interviewed him (THAT would be a great way to enhance your understanding of economic impact studies, including their many pitfalls, and how those potential negatives are dealt with, and also to enhance the story). Yet, you refer to the study's methodology and attack it. Seriously, you are better than that. Attacking a report you have not read?

    Further, Professor Porter's claim is ludicrous on its face, and it is also not supported either by any set of facts or any principles of economics.

    Fortunately, YOU can actually do some reporting on this and help your readers. Start with finding hotel occupancy for the seven to ten day window (bracketing the four day convention) in 2011, and compare that to 2012. Figure out what part of the HUGE increase in 2012 during one of the slowest weeks of the year for hotels/out of town tourists can be reasonably attributed to growth or improved tourism year to year, and the remainder represents how many hotel room nights the Convention created. If you want, you can even ask the area's largest hotels for their "customer purpose" survey information which indicate what percentage of their rooms were convention related.

    Similarly, you could reach out to a dozen local limo and cab companies and ask them for comparisons (keep individual numbers confidential and only report overall results) from the same period in 2011 and 2012.

    In short, Noah, I implore you to actually investigate and report on this issue, instead of simply dismissing a detailed, professional and sound study of the economic impact.

    Professor Porter makes the impossible claim that adding 50,000-100,000 hotel room nights has no economic impact. He claims that the MILLIONS of dollars that went into the pockets of all the cab drivers, limo drivers, bartenders, servers, dancers, hotel workers, law enforcement officers does not represent increased expenditures for labor. That defies economics.

    Consider just the isolated transfer effect of taking $50,000,000 in federal grant money for security and spending a good deal of that on police labor. It might be true that nationally this has no economic impact (Or even negative economic impact), but it cannot be true that there is no local economic impact from this inflow of cash which goes directly into the pockets of local residents, who turn around and spend much of that money locally, flooding the pockets of hair dressers, pet groomers, home improvement companies, car washes, restaurants, and so on.

    I will close by restating that you are better than this. You do not need to fail because you are uninformed. Pick up the phone and call an economist you've not yet interviewed.

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    1. Thank you Rick! FINALLY SOMEONE ELSE AGREES WITH WHAT I BEEN SAYING ON THIS BLOG FOR OVER A YEAR! "You Can Make an Economic Impact Report Say Anything", and sadly you NO'ah can make anything say what you want it to as well like you have been for years on this lil' blog of yours! Rereporting only articles that goes along with your believes ISN'T real "investigating reporting"!

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  4. B. Dufala, you are by no means alone. There are many who know that Noah's repeated presentation of junk science in this space undermines his credibility.

    It is fine to weigh competing theories and evidence, and come to one's own conclusions. But that is not an avenue laid out for Noah's readers. Importantly, Noah never responds to the specific request/suggestion that he actually investigate or do journalism. Instead, he merely repeats several myths as fact.
    The truth is, economic impact studies are based on real applied science. Like ALL science, they are only as good as the methodology and stated assumptions. 50,000 people came to town and booked an average of 5 hotel room nights during one of the slowest weeks of the year for local hotels. To claim that this had no economic impact is not just bad science, it is baseless. Noah seems to know this, but he continues to pretend.
    If one is being critical, one must evaluate all claims and counterclaims for validity and applicability. Professor Porter makes claims that are essentially wild and without any foundation in economic theory or in fact. Noah has an agenda, so he willingly serves as a mouthpiece for this hokum. I suggest everyone would be better served if Noah actually did some investigating.

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    1. That's what I been saying. If you have a general opinion of building a ballpark @ Channelside, OK, but again, to purposely try to put yourself in the forefront of an opposition to progression in Tampa without REAL "investigating" on the what having the Tampa Bay Rays in downtown Tampa would do for the local area 10 or 20 years from now is bad journalism, even for a Red Sox from Boston like Noah is. Stadiums are like restaurants, no two situations of owning them are the same, just because Miami overpaid for a ballpark in the hood which is the same place the Miami Hurricanes spent years trying to get out, doesn't mean the Rays situation will be the same! The worst part about it is that, we have all this negative post by Noah, and the Tampa Bay Rays haven't even revealed a plan! All I know is that before I talked all this shit on someone or about something, I'd do some homework, and the best part about it is that there's lots to "investigate" on! But, we know NO'ah, your to busy for all that, it's easier to simply post articles that goes along with your ideology of predictions of the future of Major League Baseball in Tampa 20 years from now, sort of like the article I debunked that was posted about how Washington DC wasn't benefiting from it's ballpark built...
      (dam, I didn't know Rick your debates back dated that deep, lol)
      http://shadowofthestadium.blogspot.com/2013/08/could-tampa-stadium-money-be-better.html#comment-form

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    2. In fairness, I'll be happy to address your claims.

      1) I have no agenda other than watchdog journalism and providing the complete picture when it is otherwise not provided.

      2) You say I never respond to the specific request/suggestion that I investigate or do journalism. This is patently false. But don't confuse this blog's aggregation and education mission with the need to "investigate" something new every single day. The body of work speaks for itself.

      3) Dufala, who often quotes outrageous numbers with no basis or even a slanted economic study to back it up, admits right here that a slam-dunk Channelside stadium is merely his "opinion." I'm still waiting for his evidence.

      4) Just like there's no guarantee a Rays stadium would be a failure like the Marlins' (thanks Dufala), there's no guarantee it would be a success like Colorado's.

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    3. 1)"complete picture", LOL! "when it is otherwise not provided"(except in every newspaper in Tampa Bay, or other websites like Field of Schemes), LOL!
      2)what did you personally "investigate"?
      3)My opinions are opinions that are hard to argue against.
      4)So if there's "no guarantee" either way, then why does this blog continue to re-post articles that only support the idea of Tampa & the Rays won't benefit financially with a new ballpark?

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    4. There are pro-stadium links on this site, but don't interpret perspective as opposition.

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  5. One cannot simultaneously assert that the Rays bring no economic benefit to the City of St Pete, AND acknowledge that the basis for the unbreakability of the Rays Use Agreement at the Trop is, as stated in the agreement, that the City would suffer severe economic losses from a premature disruption in the Agreement's term.

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  6. I didn't assert that.

    St. Petersburg probably enjoys modest value by having the Rays. Not $200M/yr, as some studies have claimed.

    But breaking a contract could include damamges greater than just economic impact.

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  7. Noah, I appreciate your frank and direct reply.

    1. I accept your assertion regarding motivation, and suggest your reliance on a single school of economic thought damages your stated effort to present a complete picture.

    2. I accept your correction about my inaccurate portrayal of you not previously addressing criticisms of the type I offered. I apologize for my mistake.

    3. I do not know Dufala and do not believe it is important to prove his opinions. I believe it is important to give interested readers a more complete picture of these issues. I think most unbiased readers of this blog will admit that you have formed certain opinions and that you value certain claims and criticisms more than others. This is natural, as all journalists do the same thing. What I think would be most helpful would be if you would endeavor to be a little more accurate in your portrayal of the economics.

    4. I don't think there is any reasonable argument that the Ray's occupation/use of Tropicana Field is a winner for St. Pete and the region. First and importantly, because the debt service and repayment of development costs was something area governments committed to before the Rays came to be. The roughly $6 Million the City currently spends on the Trop is arguably close to what the City would spend if the Trop were sitting empty. The latter scenario would involve net negative economic impact, and we also would not have the current downtown.

    5. Again I will tell you I appreciate your frankness in addressing my assertions. And I am not alone in having much appreciation for this blog.

    6. In the vein of giving readers a more complete picture, please let me offer the following.

    7. In the Post above "You Can Make an Economic Impact Study Say Anything" you say the Rays commissioned an economic impact study, and include a link to an article in the (then) St Pete Times which discusses an economic impact study that was commissioned by the St. Petersburg/Clearwater Area Convention and Visitors Bureau. That study was conducted by Walter J. Klages of the Klages Group. To date, I have not seen any mention in this blog of an interview or exchange you have had with Klages. Oddly, you have offered quotes from people who have taken potshots at Klages' work. This overshight/shortcoming is most probably related to the fact that this blog is a sideline interest of yours. Your misidentification of the linked article/study as being "the Rays" is probably related to the same regrettable shortcoming. The Convention and Visitors Bureau is clearly not in the business of leveraging spending on things that yield no return. Thus, it is entirely appropriate that they commission a professional study to measure the actual size of economic impact.

    Since you commit the same omission / oversight in this post, by quoting a critic but not reaching out to the study's author, you create an impression that you are not interested in giving readers a complete picture, but instead wish to lead readers to a singular conclusion. You have asserted that this is not your motivation, and I will take your word for it.

    8. There have actually been five studies of the Rays economic impact which have been released to the greater public. As an economist who read the studies, it is obvious to me that each of these studies were thorough, employed reasonable and widely accepted methodologies, and each UNDER estimated the true economic impact of the Rays. Each assumption made in the study erred on the side of conservatively UNDER ESTIMATING impact. Taken together, all the assumptions and downward rounding yielded an outcome which, while professionally reasonable, was almost certainly on the very low side of reality. (continued)

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    1. Regarding No. 3 - Most media coverage does not provide a true and full picture of the whole stadium saga, so this blog aims to fill in the rest of the picture, whether its the Rays' perspective or that of the taxpayers who want - and should demand - fairness and payoff for any investment made.

      Regarding No. 8, we can agree to disagree. Stadiums and sports teams are often credited with creating new spending and driving economies. However, little mention is often given to the profits they remove from other areas of the economy, meaning their true economic benefit to a region is less significant than the actual dollars they come in contact with.

      .....

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  8. Noah, realizing you are busy juggling multiple responsibilities, please don't feel obligated to reply right away.

    Continuing some thoughts in the previous vein...


    9. Your chief assertion that economic impact studies can be made to say anything is true in the abstrac. But that overly broad generalization is very far removed from the circumstances of these studies. Real estate appraisals, business valuations, public opinion polls, blog posts, and indeed newspaper stories can all be characterized in the same negative light with equal accuracy. Each assertion is sorta true, but not aptly representative of the current state of true professional practices in these various disciplines (except blogging, which currently has no generally accepted standard of accuracy).

    10. The RNC impact study, along with four of the five published Rays' impact studies, relied upon rigorous use of IMPLAN modeling, which is an economic methodology practiced by THOUSANDS of economists, who are constantly involved and jointly engaged in honest, rigorous scholarship, including multiple peer-reviewed publications, which result in continuous improvements to the methodologies.

    So, it simply is not true, as you seem to suggest to your readers, that these specific economic impact studies were merely perfunctory confirmations for an audience seeking to justify the conventions. These studies actually employed the very best economic methodologies to ACTUALLY measure economic impact. Which is very different from the impression you create. This is also very different from the generic criticism offered by professor Porter, whom you quote.

    You lament that Porter won't land any economic impact studies anytime soon. I don't know if he will or won't. But I know that if he doesn't, the reason is because he practices true voodoo economics. IMPLAN modeling is real, and has been honed through open challenges, reinvestigation, and countering criticisms. There is a great deal of open debate in economic circles which continually improves the methodologies. Others have mentioned the US Courts, which are significant. In nearly every instance of team relocations and new stadium deals, there are US Court cases which involve competing claims by economists about economic impact. Courts are impartial. They examine not just the claims made, but the support provided for each claim. The results have been near unanimity from the federal courts rejecting the claims of "impact deniers" and generally accepting/confirming the approach of IMPLAN economic impact models and similar tools used by professionals like Klages and Kench.

    Professors like Porter claim diminished or negative economic impact, but they fail to prove their wild assertions. If non economists are confused by the competing claims, I suggest the impartial views of the Federal Courts would be a good guide as to which side has greater credibility. The Courts nearly always reject the unsubstantiated arguments of those like Porter, and nearly always conclude, after careful deliberation, that the approaches used by the likes of Klages and Kench are reliable and credible.

    Let me close with this. You're an investigative journalist. You do this on the side. Many of us appreciate it. Please do everyone (least of all yourself) a huge favor and actually spend some time with Klages, Kench and others to learn more about their methodologies and how they counter the criticisms of their work.

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  9. Regarding No. 9 - If you have any faith in the RNC's $400 million economic impact story, I have some swampland to sell you in Sulpher Springs...

    Regarding No. 10 - If there is wide respect for the studies previously done into the Rays' regional impact, then it stands to reason the buy-out for any possible early termination of their contract with St. Petersburg could be prohibitively expensive.


    I appreciate your in-depth comments as well as the readership and you have my word I will continue to research all of these things.

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