Correlation does not imply causation: professional sports facilities and economic development

Admittedly, because finals are starting, I’ve been a bit preoccupied and am coming into the game a little late on this one.  I wanted to piggyback on the discussion by Tom Kirkendall, Dennis Coates, and Anne Linehan regarding stadia and economic development.

I’ll toss in my two-cents by offering up two of the better scholarly studies on the economic impact of professional sport franchises and stadia.  The first study is by John Siegfried and Andrew Zimbalist: “A Note on the Local Economic Impact of Sports Expenditures,” Journal of Sports Economics, Vol. 3, No. 3, 361-366 (2002).  Here is the abstract (unfortunately, the article is gated unless you have an academic subscription):

Most campaigns for public support of new stadiums argue that the new sports facilities and teams boost the local economy.  This argument of economic development has been persuasive even if it is not correct.  This article looks at economic impact multipliers to determine if the impact is overestimated and misrepresented by politicians seeking to pass a referendum that will use public money to subsidize a new stadium.  This study estimates that a standard local economic impact multiplier exaggerates the effects of funding a sports stadium/team by over 400%.

Well… there’s a surprise.  Local boosterism oversells the impact of a new stadium.

The second study is by Mark Rosentraub: “The Local Context of a Sports Strategy for Economic Development,” Economic Development Quarterly, Vol. 20, No. 3, 278-291 (2006).  It’s also gated, but here is the abstract:

Three streams of research offer results in conflict with the conclusion that governments that provide tax dollars to build sports facilities are wasting money. Hamilton and Kahn and Rosentraub and Swindell found instances where the value placed on the intangible benefits of teams could exceed the cost of facilities. Carlino and Coulson’s analysis indicated the presence of a National Football League franchise accounted for an 8% increase in rent levels, and Santo’s work, also using regression models, found regions with teams and new facilities had higher income levels. Despite possible regional gains, the value of a sports investment rests on its context and the outcomes for the city and county that invested in the facilities. This analysis focuses on the outcomes for Cleveland and then offers a framework to assess the range of economic effects on investor communities.

So… the value of a pro sports team and stadium depends on the “context” of the investment, eh?  In the case of the proposed Dynamos’ Downtown stadium, I’ll venture to guess that “context” means that the ownership makes a load of money on the public’s dime.  Just curious, but if Continental Airlines or Texaco/Shell were to threaten to move from Houston, would we have politicians falling all over themselves offering to build a state-of-the-art Downtown office tower in order to entice these companies to stay?

Contrary to the boosterism of the Greater Houston Partnership, the Harris County/Houston Sports Authority, and Mayor White, professional sports teams just do not have the economic benefit that they ballyhoo.  If they did, perhaps some actual research studies and economic impact analyses would be displayed for all to see via HCHSA’s, the Partnership, and/or Mayor White’s websites?  But they’re not there. Why? If there is some statistically significant scholarly research lurking at HCHSA, the Partnership, or City Hall that would act as a counterfactual bulwark to the growing evidence that pro sports teams are, at best, an economic and political luxury for a city or region, then show it.

In fact, there is little in the way of tangible economic benefits from a professional sports team unless you’re: 1) an owner who can use a threat to move to engage in some legalized extortion, 2.) a politician who can claim that they “saved” the team, and/or 3.) happen to be in souvenir or beer concession sales… There sure as hell isn’t much of a direct, positive economic benefit to the people who subsidize billionaire owners and millionaire players: the taxpayers — you know, the ones that actually foot the bill.

Always count on the ability of a professional sports franchise owner to either entice or panic local and state politicians into dropping hundreds of millions of public dollars into a new facility (or facilities in the case of Houston), based on both bad economic research and the misguided notion that a city/region’s self-esteem is somehow tied to a professional sports franchise.

For fun — and consternation — take a look at Field of Schemes…