Wednesday, June 13, 2012

Why the False Link between Stadiums and Economic Development Has Staying Power

My hide is chapped. Long time readers will know why if they happened to see the front page headline on Tuesday's Dallas Morning News. Above the fold, the paper read:

Pinch-hitting for weak economy,
Rangers score for city, merchants

I bristled, then became introspective. My stance on this site is well known (and known and known). Is there a something new that I have missed. Have those who researched the topic over the vast many years missed something that Staff Writer Jeff Mosier has found out? Surely with such a dominant headline, there must be some hard hitting numbers and examinations of spending and tax data that really hits that idea (ahem) out of the park.

Turns out, no...not really.

Here's a sample of the lack of any actual data, complete with correlation being confused for causation.

Though it is difficult to quantify (emphasis mine), baseball is giving some businesses and Arlington's economy a noticeable boost.

This was the second paragraph. Turns out, there would be very little quantification, and what was there surely didn't even have a waffling positive response that Arlington is benefiting from the Rangers.

Arlington officials said they have not looked closely at the economic impact of the team this year. Sales tax payments lag, so numbers for April and May won't be available until this summer.

Some facts would have been nice for such a prominently displayed article. Funnily enough, this was the closest Mosier's article would come to an actual fact.

Arlington Mayor Robert Cluck said that no comprehensive studies are planned but that the city finance staff has estimated the economic impact of Ranger's games this year at $1 million each. He said that the city is on pace to break $50 million in total sales tax revenue for the first time, with the help of the Rangers.

Yes, of course no studies are ordered, they never are after the fact. Why study something that exists and doesn't need to be debunked. It is easier to turn a blind eye to these things and trumpet the perceived good news.

As for the math, at 81 homes games, the economic sales tax generated for Arlington, using Cluck's numbers, would be $6.7 million this year or 13% of the city's total, more if there is playoff games.

But, leading words like "for the first time," suggest that this is ground breaking. Prior to the football stadium's construction, Arlington was near the mid-$40 million collection range. Then the economy crashed. Now that the economy is rebounding locally, complete with unusual inflation during a recession, is it really that big of a surprise?

The rebounding sales tax numbers of an economy on the mend will be a common thread throughout the rest, illustrating why assuming an effect from correlation is a bad idea.

Even without a comprehensive study, Arlington Convention & Visitors Bureau officials can see the Rangers' effect on hotel bookings. Figures collected by the hotel research firm  STR Global found that the number of room nights sold  in Arlington in the first three months of the year was up 5 percent from the same period in 2011. The number of room nights increased 11 percent for April, when the Rangers season started.

Burress said said room rates also increase at the beginning of baseball season, which added to the economic impact.

So room nights are increasing in Arlington huh? Did Mosier check to see if Arlington is the anomaly or is it happening elsewhere? The answer is yes, Dallas, Fort Worth, Plano, Denton, etc. are all seeing increases in room occupancy. The economy is better, therefore hotels will do better. Notice it didn't say STR Global attributes this increase to the Rangers attendees.

As for the April spike, that also happens to coincide with the beginnings of summer travel season. In Arlington, it happens every year. Senior trips happen in which Arlington is the destination (of which the Rangers are an attraction to be sure, but not the only), graduations (UTA students walk at the beginning of May, as does the four high schools within the municipal limits), Memorial Day, etc. all happen around this time.

Where Mosier could have made his point is that they are up 11 percent when the Rangers play at home. When they are on the road, it is only 3 percent. That would be the beginnings of a causation. As it stands, there is no comparison, no depth, no factual numbers to back any claim up.

Later in the article, he cites James Shandor, the GM of the Arlington Hilton, who spoke about two guests, one from Seattle, one from Iowa. They were in town for business and then went to a Rangers game. Shandor said the guests couldn't wait to go to another Rangers game.

In the end, that means nothing. They weren't in town for the Rangers, so that is useless in proving the stadium as a positive. Then, how many times has any person on the planet said they would do something and then didn't? I said I would have the laundry folded by now, but it still sits in the dryer. Did they mean return to Arlington just to see a game later this year? Go to another tomorrow while they are still in town? Next year when they return for the same business trip? Ultimately is is anecdotal, and therefore useless. Setting public policy on hearsay is a bad idea.

Terry Clower, director of the Center of Economic Development and Research at the University of North Texas, said regular-season Rangers games probably wouldn't have a large effect on the regional economy. Much of the spending, he said, is from people in the Dallas area.

Clower said previous research even questioned the impact on Arlington. One of his graduate students conducted research about a dozen years ago and concluded that the Rangers made little difference in the city's sales tax revenue.

In the second to last column, he fianlly gets to the heart of the matter. Disposable income will be spent. The Rangers aren't generating new revenue, just redistributing it. It may work out for Arlington, if Dallas people, who would have spent it in their area, instead spend money there.

However, what is ignored is what is tax-exempt, which is virtually everything directly related to the stadium. Did you buy a hot dog? Arlington sees $0.00 in tax revenue (neither does the state for that matter). It is tax-exempt. Same thing with alcohol, ticket sales, stadium- or owner-owned parking lots, gift shops, etc. With stadiums, the vast majority of attendees are get in, get out. There is little ancillary spending. Why does the area get so jammed immediately before and after the event? Because that is all people are going to go do or see. Ultimately, the region actually loses out, since they get less revenue as awhole then they would have otherwise.

In the next paragraph, though, Mosier had to add this caveat.

Clower said he's not sure if that's true any longer.

"That was a different team and different attendance numbers," he said.

 So Mosier rebutted a researched fact with conjecture. BTW, the attendance number the Rangers are breaking these past couple of seasons were set about a dozen years ago. They are breaking, not shattering them. So therefore I am skeptical there is much difference, especially when inflation is factored in, unless you are the owner of the team.

Pam Dawson, mall manager of Lincoln Square, the closest large shopping center to Rangers Ballpark, said this year is unlike any she has seen. Ridership on the center's shuttle buses to Rangers games has approximately doubled from last year, when the team set an attendance record. The buses this year have averaged 500 to 600 fans, peaking at nearly 800.

"People are coming earlier, and they are in a good mood and happy to spend money," Dawson said.

She said she spent 2 1/2 hours in a meeting with the Rangers and city officials last month to discuss how to get fans to the ballpark faster.

Dawson, who called the Rangers "America's Team," said that as demand continues to increase, she is considering requiring fans to make a purchase at one of the stores to be eligible to park there for baseball games.

So what does this ultimately mean? Nothing. Is anyone surprised that people are taking advantage of free parking and a free shuttle bus? She said they are in a mood to spend money, but then why require a store purchase to park there? Shouldn't they already be doing that if they are in a good mood to spend? Once again, anecdotal evidence means virtually nothing.

In fact, overall, there was nothing with hard facts. The $50 million and $1 million number that Cluck threw out were estimates. No quotes from a business owner or hotel operator that said our numbers are X when the team is in town and Y when it isn't. No breakdown of what the economic dollars are being spent toward followed with a comparison of previous years. Just some lazy estimates, anecdotal quotes and hometown cheerleading. He also ignores that if there is increases, could there be another cause. If north Arlington is up in sales tax revenue and south Arlington is flat, then certainly a case could be made, but we don't see any of that.

This is part of why the public perception exists that these are good deals for the public. I took a critical eye, but if someone who wasn't versed in the subject looked at it, saw all these claims, they would conclude it has to be a great thing. However, looking at each individual claim in depth reveals they are worth near nothing. 0+0+.5+0+.5+0+0 is so low to be worthless.

As has been concluded over and over again, the only true beneficiary is the team and/or owner. The most expensive bars are in Uptown. The Rangers sell their beer for more. However, unlike in Uptown, the Rangers keep all the money, since none of it is taxable.

The other benefit they receive, and often overlooked, is the power of government, primarily in eminent domain. They save a ton, and sometimes more than the actual monetary contribution from the city to build their stadium, by having this power, claiming it is for the public good.

I can't help but think this was a story that was written when it was assigned. Only the quotes needed to be gathered and the words typed. Everything that was introduced as fact has existed as a reason before and is still as flimsy as ever. And like arguments and stories before this one, the only thing that was missing were actual numbers, facts and reasons.


Ken Duble said...

Sales in stadiums are tax-exempt? I've never heard that. What's the rationale behind that?

Branden said...

I don't know that there is a rationale behind it. It maybe that in some facilities when these first started being public entities that the public actually owned it, so it was moot. It maybe that the operator is paying the city a fee for concessions and such. It is also possible that in some cases, the owner was the one that drew up the contract, rather than the city. Either way, it is these things that often get overlooked from public scrutiny.