Saturday, January 31, 2015

Super Bowl Economy Gone Wrong

To balance all the headlines you'll see this weekend about the great economic impact the Super Bowl is bringing to Glendale, Arizona, make sure to read Neil deMause's latest for, "The Super Bowl Windfall Myth."  Full disclosure - I was interviewed for the article.  But that has nothing to do with the fact that I think he does a great job!
Never mind that numerous economists have looked in vain for any evidence that Super Bowl host cities strike it rich. In one study, Holy Cross economist Victor Matheson (12/09) calculated that through 2001, the average increase in economic activity during each Super Bowl was about $30 million...And that’s economic activity, the total amount of money changing hands within city limits — not the amount that comes back to city coffers. When University of Maryland economist Dennis Coates (International Journal of Sport Finance, 2006) studied the 2004 Super Bowl, he found that added sales tax revenues in host Houston totaled about $5 million — well under the $30 million to $70 million that cities spend on increased police presence and other services for the game (USA Today, 1/25/15).
In addition, deMause explains the "Substitution Effect" means much of the economic activity is merely cannibalized from other economic sectors.

I was merely one of many journalists quoted in the article, but I suspect we all kind of said kind of the same thing - decimated newsrooms and the proliferation of new media have saturated the interwebs.  For every one good sports economy story out there, you will see 10 stories echoing whatever a team/league puts out in press release form.
On the occasions where journalists have taken the time to dig deeper, some excellent reporting has resulted. The dubious benefits of hosting the Olympics have gotten widespread coverage (, 7/30/12; New York Times, 8/5/14). NPR’s All Things Considered (2/3/14) investigated a British government report that projected billions of dollars in profits from the 2012 London Summer Games and found that the only economist who reviewed the study before publication — University of Michigan professor Stefan Szymanski — termed it “tantamount to a whitewash.”
Of course, hitting the Web to present a he-said-she-said report still is no substitute for real investigative journalism that attempts to determine whose claims are correct. “Our role as journalists is not to present both sides of the story, necessarily; it’s to present truth,” says Pransky. “And all too often, tight deadlines and the need for more content clouds that goal.”
And when you're done with that article, you can further your knowledge ahead of Sunday's game by reading about how the city of Glendale has struggled mightily to pay for its sports "investments".  An excerpt:
The city has found stronger financial footing since then and its bond rating has improved markedly, but not without having to raise taxes, trim 25 percent of the municipal workforce, cut back on paving projects, and reduce hours at municipal swimming pools and libraries. The 9.2 percent sales tax that shoppers and diners pay in Glendale is among the highest in the state.

To fiscal conservatives, Glendale serves as a cautionary tale for suburban cities across the United States that want to throw public money at professional sports projects.
As he navigates the financial situation, Glendale Mayor Jerry Weiers returns to a maxim he has repeated many times in his life: “I’m not living in the past. I’m just paying for it.”

In the case of the Super Bowl, he believes the city is paying dearly. He said Glendale will actually lose a “couple million dollars” by hosting the event. It’s spending huge amounts of money on overtime and police and public safety costs for the Super Bowl but not getting much back.

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