Ask Greece about economic gains from Olympics

Liars line up to hype future Super Bowls, NCAA Final Fours, Olympics

2005 Final Four, played in Edward Jones Dome in St. Louis
  • 2005 Final Four, played in Edward Jones Dome in St. Louis

Many in San Diego’s corporate welfare crowd are laying plans for megasporting events at a new Chargers stadium/convention center and at Olympics facilities. So the megahype is escalating.

On September 9 on KPBS TV, Chargers supersalesman Mark Fabiani claimed that if the City coughs up for a stadium, future Super Bowls will provide $500 million to $600 million in net economic impact, or positive effect on local business, employment, and incomes.

Mark Fabiani

Mark Fabiani

Future National Collegiate Athletic Association Final Four basketball tournaments will bring in $70 million each, said Fabiani. And then there is hogwash about raking in loot from hosting an Olympics.

Just a few years ago, the National Football League was claiming that a Super Bowl would generate $350 million in net economic impact to a metro area. But as the league began using that bloated figure as propaganda to seduce taxpayers into plunking in more than 70 percent of a new stadium’s cost, those estimates soared.

I asked Fabiani how he reached $500 million to $600 million. He said that he was basing that on the $480 million estimate for the New Orleans Super Bowl earlier this year. He claimed “inflation and the growth of the game” would jack up that sum by the time the facility could be built, in 2018 or 2019. (Of course, if inflation gets high, it will also push up the cost of the stadium, now lowballed at $1.2 billion.)

That highly inflated $480 million New Orleans figure is a blatantly false premise. The study coming up with that number was sponsored by the New Orleans Super Bowl Host Committee. ’Nuf said.

Not surprisingly, Texas once topped Fabiani’s bloated claim. That state’s propagandists estimated that the 2011 Super Bowl would bring a net $611 million to the area around Dallas/Fort Worth. After the game, a prominent accounting firm estimated that the game actually resulted in $200 million in direct spending — a number that would not produce $611 million in net impact. Then there is another Texas city, Houston. In 2004, it predicted the game would bring $330 million in revenue. It got $129 million in direct spending.

Texas propagandists overestimated Super Bowl revenues at Cowboys Stadium, now AT&T Stadium.

Texas propagandists overestimated Super Bowl revenues at Cowboys Stadium, now AT&T Stadium.

Fabiani, Texas, and the entire National Football League are full of horse manure, of course. I questioned Professor Victor Matheson of the College of the Holy Cross, an economist who studies sports economic impacts objectively. He said that he and Rob Baade, a professor at Lake Forest College, studied Super Bowl net impacts from 1970 to 2001.

Net impact per game: $90 million. “Updating that to 2013 dollars and we are at about $120 million,” he says. That’s a long way from $500 million to $600 million.

Some economists come up with much lower numbers. Philip Porter, professor of economics at the University of South Florida, simply says, “There is no net impact of a Super Bowl. In terms of the economy, it is not an extraordinary event.” Some believe that the game is actually a net negative to the host city because of factors such as additional trash pickup and police costs.

In a 2006 study, Matheson and Baade said the probability that a Super Bowl would bring in $400 million was less than 1 percent and the odds of it bringing in $100 million were only 47.4 percent. And there was a 23 percent chance the game would result in a net loss.

Fabiani does not talk about how often San Diego would get a Super Bowl. “As for repeat Super Bowls, there are now about 12 cities, all of whom believe they are in a four- or five-year rotation for the Super Bowl,” says Matheson. “That math doesn’t work out well.” That’s especially true since the league is now awarding games to cold-clime cities that have built new stadiums at taxpayer expense.

Then there are those basketball Final Fours. Fabiani says Atlanta netted $70 million from this year’s National Collegiate Athletic Association (NCAA) Final Four. In 2005, St. Louis said it received an impact of $72 million but admitted that only $41.4 million remained in the area as personal and tax income. (Forbes magazine’s Patrick Rishe, in assessing the economic impact of a sports event, counts only the amount of new money that flows into the area and is retained as local household, corporate, or tax income.)

The NCAA is in the process of selecting host cities for 2017 through 2020. The venue must seat 60,000 and have 10,000 hotel rooms within “a reasonable proximity.” A new stadium/convention center downtown could meet those requirements. In this case, there could be repeats. Since the turn of the century, Indianapolis has hosted three tournaments and will get another in 2015. Atlanta has had three.

Of the $70 million claim, Matheson advises: “Cut it way down. Then plan on getting one every decade or two.”

Then there is the Olympics. Former mayor Bob Filner wanted a binational 2024 San Diego/Tijuana Summer Olympics. It didn’t fly, and he didn’t remain as mayor. Others in the community would like to see a San Diego Summer Olympics some year.

But hosting the Olympics adds little if anything to an economy and can be a serious deterrent, say Matheson and Baade. One problem is that structures built at great expense, such as equestrian centers, are not easily converted to other uses after the event. Redirection of capital into unproductive infrastructure socked Sydney, Australia, in 2000. In Lillehammer, Norway, which hosted the 1994 Winter Olympics, 40 percent of full-service hotels went bankrupt after the games ended. Montreal was still paying off debts from the 1976 Olympics three decades later.

Greece, always a profligate spender, thought it would get rich from the 2004 Olympics. The country spent 5 percent of its total economic output hosting the games. It was one factor that pitched the country into its current despair.

Claims of a big economic impact have three main flaws: (1) failure to account for the substitution effect — when people spend money on sports, they don’t spend it elsewhere; (2) failure to consider “crowding out” — a big sports event in an area reduces other activity that would take place, such as travel for other reasons; (3) failure to consider that much of the money spent for special events such as the Olympics, Final Four, or Super Bowl does not stay in the host cities. For example, hotel and vendor profits may go elsewhere.

Sums up Matheson, “A rule of thumb that economists not associated with teams or leagues use to determine real economic impact is simply to take whatever the league or promoter says and move the decimal point one place to the left.”

In 2005, members of the American Economic Association were asked if local and state governments should eliminate subsidies to professional sports franchises. Result: 58 percent strongly agreed, 28 percent agreed, and only 5 percent disagreed.

Comments

The proposed new stadium, by the bay, would be in walking distance of the Santa Fe Depot, Hilton, Marriott, Hyatt, Embassy suites, Hard Rock, Omni Hotel etc. This would translate into over 70% of the ‘Super Bowl’ or ‘Final Four’ crowd being able to walk to and from the stadium. The best way to enjoy San Diego is to be outside in the weather. The players could walk back to their hotel after the game or party in the Gas lamp district. Waiting for the MTS trolley to get home after a Chargers game is like waiting to cross the border back to USA from Tijuana. This years ‘Super Bowl’ is being held in a New Jersey stadium that 100% of the patrons (except for Jimmy Hoffa) will have to travel to and from the game in a heated vehicle.

So what? We are not a sports town. Let the private entrepreneur pay for his business costs like other businesses do. We have roads to fix. Most of our tourists come here for the weather...guess what, that doesn't cost a dime.

Yankeedoodle: Amen. And you know what? If the politicians hold out, private capital will finally relent and put its own money behind the project.

It happened in Boston. The Kraft family tried to get fat subsidies from various governments. All held out. The Krafts threatened to move the team to Hartford -- a laughable ploy. Finally, the Kraft family anted up for the stadium, although governments did pay for much of the infrastructure. Best, Don Bauder

Don: It also happened in San Francisco when the Giants had had enough of Candlestick Park. They asked the good people of San Francisco to pay for a new one downtown, suggesting relocation if not publicly funded, and the voters politely declined to underwrite the project, rightly feeling that they would be paying at the box office and that ought to be enough. The Giants' owner then discovered that he did, in fact, have enough of his own capital to build a beautiful ballpark downtown. A happy ending. Would that our citizenry practiced such tough love, but according to an answer you gave a couple of weeks ago, not all of these decisions are on the ballot: we trust to our city council to sift through many options and make sound choices for us.

Yankeedoodle: You are absolutely right. San Francisco kept holding out until private capital finally capitulated and built the ballpark. Remember: many if not most of these owners are billionaires. In the NFL, 18 of the 32 owners are billionaires. Best, Don Bauder

So you want to build a stadium with a roof (retractable or not)? The best way to enjoy San Diego, if you are a sports fan, is to be in an open-air stadium and enjoy the game in the weather (I realize that eliminates the city from any "Final Four" hostings. Too bad.). Oh, and please give us your financing plan as to how it will be paid for. I'm curious as to how many hundreds of millions of dollars you feel the city should contribute to this project.

aardvark: Generally, taxpayers pick up the tab for 70% to 80% of a stadium. Teams will say they are putting $x millions into the project. But included in those millions are naming and advertising rights, which actually should go to the city paying the freight. Best, Don Bauder

clockerbob: So if San Diego got a Super Bowl -- say, once every ten years -- those hotels would be able to raise prices sharply and make out splendidly. Is that worth the taxpayers shelling out $800 million for a stadium/convention center? Of course not. Best, Don Bauder

Visitors might walk from the proposed Stadium to the Gaslamp district and downtown hotels, but if they did they would step over the homeless or addicted that the city pretends to be too broke to help. We should clean up our dirty laundry, and straighten up our home before we try to attract guests.

Psycholizard: Suppose San Diego leaders concluded, intelligently, that the problems you cite, along with the rundown infrastructure, are inhibiting tourism. And suppose those leaders realized that the convention center expansion is a huge waste of money because of the national glut, and that the hotel money slated for the expansion should go into infrastructure and the homeless. thus boosting tourism.

... Nah, it's not going to happen. Best, Don Bauder

Use the homeless as stepping stones to fill the holes in the pavement that the City does not have the money to repair (sarcasm - least they actually adopt that policy).

The NFL has covered up the traumatic brain injury issue. If I want to witness brain injury, extreme cage fighting is better than football.

Americans, like the Romans, enjoy being entertained by violence. The stadium is a colliseum of modern times. They MUST have it or they will get a new Emperor. Football is a business, not a sport.

OK, put me down if you will. That's my take.

Aguirre says they will put it to a vote. Fine. Why not bull fighting?

Diogenes: I am certain Aguirre wants to put a subsidized stadium to a vote because he believes it will fail. I believe his statement is a politician's way of saying no.

In re the NFL. Yes, if you want to witness brain injuries, cockfighting or dogfighting may be more pleasurable, but I think bloodthirsty fans would rather see football players' brains knocked out of commission....permanently. Best, Don Bauder

We like to watch violence.

I'd like to run an fMRI on a fan's while fans watch football and determine what really stimulates their pleasure center. What part of the game turns them on the most. With gamblers, it's when they lose that they register the most pleasure.

Diogenes: I can't buy the argument that gamblers get the most pleasure from losing their bets. I think gamblers get as much pleasure from beating the point spread as some fans do seeing a player getting his brains beaten out. Best, Don Bauder

While I wasn't paying close attention when LA hosted the Olympics back in the 80s, I remember reports that things went pretty smoothly, surprisingly so. And they were able to use some existing sites, so didn't have to build everything.

How long did it take LA to end up on the plus side?

Is there a way to determine the reasonableness of hosting the Olympics vs the fiscal craziness?

Regarding Lillehammer, it really is more of a small town with one main street, and doesn't get that much traffic as a rule, although it is a nicely situated, beautiful spot. Not surprising that many of the hotels didn't make a go of it.

I think San Diego is a sports town, but not as much of a spectator sports town.

If a certain sector of the population is determined to make a bid for the Olympics, is there any way for it to happen in a way that would be an intelligent use of what we have and what we can really use in the future so that San Diego could end up facilities that are useful, well-planned and an asset?

eastlaker: I remember the LA Olympics went surprisingly smoothly, but don't know the economic consequences. I know a lot of people simply stopped using the freeways. Did they get to work? Did productivity suffer? Dunno.

I doubt that there is an intelligent way for a San Diego Olympics to end up a winning economic venture. Best, Don Bauder

Don, here is a quote from a site that lists the (unofficial?) results from the last three decades of Olympic gains and losses:

Los Angeles 1984

"The first Olympic Games to make a profit since 1932, the LA games changed the way modern Olympics were run. The city made adjustments to existing stadia – constructing only the velodrome and aquatics centre specifically for the Games – helping bring the total profit of operating the Games to $222.7 million, with wider economic impact for Southern California estimated at $3.3 billion. Corporate sponsorship, television rights and ticket sales took the burden off the tax-payer, and 40% of profits from the Games was directed into over 1,000 youth sports organisations and programmes."

  • by Future Cape Town @ This Big City

http://thisbigcity.net/olympic-cities-urban-legacies-from-three-decades-of-the-olympic-games/

As far as I know, only LA managed to keep the games profitable, and for the reasons you mention. It didn't have to build a whole new Coliseum, and didn't spend all that much on the old one, a throwback to the 1932 games. It also had a number of existing venues for various events, such as Dodger Stadium for baseball and some other competitions.

Visduh: This could certainly be true. It's a good reason to give the games to L.A. again, and keep them from San Diego, which doesn't have these advantages. Best, Don Bauder

Duhbya: The 1984 Olympics may have been positive for L.A. But watch out for those "ripple effect" or "net indirect economic impact" wet dreams. Most of that is economic prestidigitation. Best, Don Bauder

The real reason that a large swath of the public likes having their taxes spent on stadia and enclosed arenas is that they really, really like pro sports. And for many, it is the only way they see any benefit to themselves for their taxes. Then there's the always-reliable "civic pride", which allows them bragging rights when dealing with those from other cities. Talking economic benefits is preaching to the choir, and frosts the cake. But the economic benefits argument also provides some cover for the politicians to claim that their votes were rational and responsible.

Visduh: Sadly, you are right: too many taxpayers don't mind paying for a stadium because they love pro sports. Around 20% are absolute fanatics, and that's enough to sway politicians. But look at this way: almost 100% of taxpayers love pizza, too, but do they subsidize pizza parlors? Best, Don Bauder

I am struck by the images of recent Olympic venues that begin decaying the minute the hoopla ends, and still sit unused, an homage to the shortsightedness of the organizers, Beijing and Greece being the most recent examples. And I understand that flights departing London immediately prior to the games staged there far exceeded incoming ones. Many Londoners wanted no part of the attendant traffic, dining, etc., woes. The "windfall" that the Stupor Bowl delivered to San Diego was similar in many ways.

You're absolutely right. If the city didn't have some on-going use for a facility they should never have built it. The SD stadium was remodeled to satisfy the Chargers and the NFL, and soon the NFL declared it inadequate for future super bowl games. That bloated facility is used far less than it should be, and in part because of its current design.

Visduh: After promising that his team would stay there at least through 2020 (that's the date I recall), Alex Spanos quickly decided Qualcomm was not good enough for the Chargers. It was hardly surprising that the NFL decided it wasn't good enough for a Super Bowl. Super Bowls are awarded to cities that are dumb enough to pay for 70% to 80% of a stadium. Best, Don Bauder

And the beat goes on: I was watching the ESPN warm-up to the Charger game tonight. Kicking off the happy talk, Chris Berman introduced the broadcast team of Jon Gruden and Mike Tirico by asking if they were ok with the condition of the staging room he had "left" to them after announcing a recent game from Qualcomm. Tirico shot his eyes to the ceiling, then glanced around the room and said "Well, as bad as this place (stadium) is, this room is ok." Marching orders from the league, methinks.

Duhbya: Oh yes. The major complaints seem to be substandard digs for reporters and millionaires (players). The poor dears. They are only there ten times a year for three hours. Best, Don Bauder

Duhbya: But the promoters such as the NFL, NCAA and Olympics committee are able to keep up the fiction. Best, Don Bauder

Duhbya: Those data from London are telling. Best, Don Bauder

San Diego is a lot farther from the "center of mass" of college basketball than Indianapolis or Atlanta. Most Final 4 teams tend to come from the midwest or Atlantic coast. And in early April a lot of places have decent weather so the weather in San Diego wouldn't be as big a draw as it is during football bowl season.

I'd bet we could get at least one Final 4 here if there was a wonderful expensive facility and a big push for it but I wouldn't count on San Diego being considered a great place for a recurring Final 4 site.

ImJustABill: I think you are right: San Diego would get some Final Fours, but not many. And they would not have a great economic effect. Best, Don Bauder

viewer: First and foremost, pro sports is not sport. It is a business. And owners make unconscionable (and concealed) profits because taxpayers are willing to subsidize them. It is absurdity squared. Best, Don Bauder

You have to conceal your profits if you call yourself a non-profit and the gov't somehow goes along with it. Absurdity cubed?

ImJustABill: The leagues won't let the teams reveal the piles of money they are raking in, because that would look bad when the teams are begging for taxpayer money for a stadium. Best, Don Bauder

viewer: The Chargers are papering the house for its Monday night game. That is, companies are buying the tickets and the Chargers are giving them away, so there won't be a blackout Monday night. A number of games were blacked out locally last year. Yet local politicians are scared to death of offending Chargers fans, whose numbers are dwindling. Best, Don Bauder

Don: I think there are still the same number of Charger fans--just fewer of them that want to deal with the expense of going in person to a game. And for those that want a new stadium, wait until you see the ticket prices for that.

viewer: Aardvark is right. As soon as an owner gets a massively subsidized stadium, he or she jacks up prices sharply. The prices stay sky-high until the novelty wears off. That's how the scam works. Best, Don Bauder

aardvark: The number of fans is important in swaying politicians, but the number of rabid fanatics constitutes the swing vote. Politicians won't oppose the mad dogs -- perhaps 20% of team followers -- out there. They will vote in huge numbers for a giveaway to a pro team. Best, Don Bauder

viewer: After all, fantasy football and fantasy baseball are big activities these days. Why not go all the way and wear the uniform to work? Best, Don Bauder

viewer: Not sure I understand what you mean about deducting hourly pay of employees. Deduct from what? Best, Don Bauder

I'll just make this point again. I like pro sports. I hope the Chargers stay here. I hope the Padres stay here.

I just don't think it's an appropriate use of tax dollars to subsidize those teams. And I think that "win-win" analyses purporting to demonstrate that tax dollars spent on sports teams end up saving tax money in the long run are deeply flawed.

ImJustABill: I think most San Diegans would like to see the Chargers and Padres stay in town.

Unfortunately, I am not convinced that most San Diegans realize that the use of taxpayer funds to subsidize sports structures is a colossal waste of money, particularly with infrastructure and neighborhoods rotting, and services still slashed. Best, Don Bauder

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