Out of Control Policy Blog

Want to subsidize that stadium? Donít forget the ìhunker-downî and ìskedaddleî factors

    A new statewide study co-written by a University of Texas at Arlington economist found that sales tax revenue drops by more than $560,000 every time a city hosts a regular-season NFL game.

    NBA games lower sales tax revenue by $16,000 per game, the study found, while NHL and Major League Baseball games tend to boost average sales tax revenue by small amounts.

    "When it comes to NFL games, that number seems awfully large and negative, but I'm convinced it's there," said UTA's Craig Depken.

    Large traffic jams that accompany Dallas Cowboys and Houston Texans games also lead to what Dr. Depken calls the "hunker-down" and "skedaddle" factors. Fans might spend money in Irving during a Cowboys game, but more residents are likely to avoid gridlock by staying home or driving to a neighboring city to shop or dine.

According to the study, NBA Finals games produce a modest boost in economic activity, but not enough to make up for drain other playoff games bring. Certain pro game seem to generate revenue. The Super Bowl was the biggest winner and political conventions were the biggest losers.

    Critics of the study say it is too focused on sales tax revenue and doesn't take into account many benefits of professional sporting events.

    Linda DiMario, president and CEO of the Arlington Convention & Visitors Bureau, said she's seen plenty of studies like Dr. Depken's in the past. Most have a narrow focus, she said.

    The teams promote civic pride, attract millions of dollars in free publicity and help support adjacent businesses, Ms. DiMario said.

Often adjacent businesses don't get much in the way of positive impact because fans spend their dollars inside the stadium. But hey, if owners of pro sports teams want to build fancy stadiums with their own dough, then more power to 'em.

And how about all that civic pride and free pub?

    Football has increased Irving's name recognition, [Maura Gast, executive director of the Irving Convention and Visitors Bureau] said, but all people know is that the Cowboys play there and it's near Dallas. That doesn't necessarily translate into a big boost in tourism.

Article here; UTA study here.
(Thanks to Stacey for the tip.)

Len recently pointed to this:

    But while arenas with big-time tenants may bolster a city's self-image and quality of life, evidence shows they have a minimal economic upside. Most operate at a loss.

    In "The Economics of Sports Facilities and Their Communities," published in 2000 in the Journal of Economic Perspectives, authors Andrew Zimbalist of Smith College and John Siegfried of Vanderbilt University argue that "independent work on the economic impact of stadiums and arenas has uniformly found that there is no statistically significant positive correlation between sports facility construction and economic development."

    The authors cite several studies, including one by sports economist Robert Baade that found "no significant difference in personal income growth from 1958 to 1987 between 36 metropolitan areas that hosted a team in one of the four premier professional sports leagues and 12 otherwise comparable areas that did not." The authors' conclusion: Arenas put a drag on the local economy by hurting spending on other activities in the city and boosting municipal costs such as security.

Related: Subsidies and Lies

Related: "large public subsides cannot be justified on economic grounds"

Related: Big Box Boondoggles

Ted Balaker is Producer


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