In recognition of the fact that the state Minnesota has invested $348 million and the city of Minneapolis a further $150 million in public funds for a new stadium, the NFL Super Bowl committee has approved Minnesota’s proposal to host a Super Bowl in the city of Minneapolis in 2018, which will be Super Bowl LII (52).
This will be the first time Minneapolis has hosted the Super Bowl since 1992, when the Bills lost the second of their four consecutive Super Bowls to the Washington Redskins—one of the greatest football teams of all time, even to stats nerds (who are right). Unfortunately, the early 1990′s Bills were probably the best overall team over multiple years in that time, but could never prove it; perhaps Minnesota Super Bowl luck rubbed off on them.
As of early April, Minnesota’s bid highlighted Minneapolis’ 180 hotels with 19,000 rooms, 48 venue options and practice sites.
No single event can justify the cost of the stadium in public monies, but the Super Bowl may go some way towards providing a positive economic effect. Even if it doesn’t, it’s something huge for the city anyway.
Back in April, I highlighted some of the debate regarding stadium economics:
The University of New Orleans released a study (perhaps under the purview of the New Orleans Super Bowl Committee) that argued that there was a $480 million in net economic impact, broken down into new jobs ($154 million in new part-time and full-time jobs), new state tax revenue ($21 million), local tax revenue ($13.9 million) and new spending ($262.8 million in direct spending and $217.2 million in indirect spending).
The Sports Management Research Institute projected nearly $600 million in new money for New York, and numerous Super Bowl Committees have found studies that agree with the assessment. Many of SMRI’s studies are conducted in concert with the NFL, so there is reason for skepticism.
On the other hand, noted public-funding stadium critics Robert Baade and Victor Matheson have found that the benefits are far overstated. There are a few factors that they point to (the same several factors, actually, that the refer to in their economic analysis of stadiums) to make this claim. The first is that the studies rarely subtract those visitors who would have otherwise come for an event but didn’t in order to avoid the hubbub of the Super Bowl (“crowding out”). The second, which is probably much more significant than the first, is the number of dollars that would have been spent there anyway simply being attributed to the Super Bowl (“substitution”).
That is, people may move their vacation forward or back to meet up in line with the Super Bowl—money that the city was going to get regardless. With that, many studies also do not take into account another substitution effect, which is the amount of local money that is attributed to the event, when it would have been spent anyway. Over the years, I’ve noticed that studies have done a much better job taking this other substitution effect into account (this is a little less important in the “Super Bowl impact” debate than the “stadium economic impact” debate, as the Super Bowl money almost always comes from out-of-state fans of other teams).
Another argument Baade and Matheson marshal in their favor is the concept of “leakage,” where local monies provide profits for off-site executives (CEOs and to some extend stockholders) but not necessarily local workers paid a wage (clerks, housekeeping, etc.).
Honestly, I do think that Baade and Matheson (and many others, including Phil Porter, Brad Humphreys, Dennis Coates, etc.) overstate the effects of these ameliorating influences—crowding out doesn’t happen as often for big events as people seem to predict, and not many people sacrifice a summer vacation for a winter one. Leakages are usually resolved not by wage increases but by new temporary hiring.
That said, a lot of double-counting occurs when assessing the positive economic impact—new jobs and indirect spending tend to coattail while “direct” spending tends to include secondary and tertiary spending without being honest about it (though important to count).
The biggest argument in favor of the mythbusters is the question of opportunity cost, where the cost required to host the event usually can be better spent elsewhere. Nevertheless, opportunity cost tends to be applied against an ideal scenario (new schools, for example) instead of what is politically feasible.
As Sports on Earth points out, these effects change city-by-city, and the infrastructure, tourism culture and general capacity of each of these cities matters quite a bit. A while back (very, very early in my blogging career) I argued in favor of a stadium and in so doing argued that Minneapolis is the kind of city (along with New Orleans and Seattle) that would benefit from a stadium. Many of those reasons are the same reasons they would be a good city to host a Super Bowl.
Astute readers (like yourself—you deserve a pat on the back) pointed out that there is no great comparison between known money losers like the Olympics and hosted events like the Super Bowl, because Olympic stadiums are often unused after their construction, but still cost money in maintenance.
Ted commented and had this to say:
The Substitution Effect is, in many respects, such a canard for the ‘New Stadium/Super Bowl In Your City’ detractors.
The Substitution Effect assumes that the people who had the disposable income to spend money on Super Bowl related events would simply spend that money on something else instead. While that may be true, it’s money that wouldn’t be spent in Minneapolis, St. Paul, or Minnesota in general. Because let’s face it, those 100,000 people won’t be coming to Minneapolis. In January.
And although economic impact on an area varies, Minneapolis would benefit more along the lines of an Indianapolis than a diluted effect of say New York. People are going to go to NY year round, and like I mentioned, there’s not 100,000 people in the world you get get to go to Minneapolis in January on a bet.
One of the issues that economists had in figuring out the impact of the World Cup in Germany was determining what percentage of people 1) decided against vacationing in Germany because of the hubbub, and 2) moved around vacation plans that already would have been made to align with the World Cup.
I think Ted is right that the second effect is unlikely to be an issue in this case.
It should also be worth noting that sports economists do not discount future spending many times for whatever reason, though most economists find it critical to treat future spending as “less valuable” dollar-per-dollar than current spending.
It is also important to note that even if hosting the event does not net revenue, that doesn’t mean it’s not “worth it”—Minnesota and Minneapolis pay for events and sustain projects that are known money losers all the time—the Amateur Sports Commission, the Historical Society, the Arts and Heritage fund, etc. These are funded of course because they are part of creating a positive quality of life and preserving the cultural heritage of Minnesota. I don’t see why that wouldn’t apply to sports and hosting sports events.
Mark Rosentraub, director at the Center for Urban Policy and the Environment at the School of Public and Environmental Affairs at Indiana University, wrote in a 1996 article in the Journal of Urban Affairs:
Even if each of Rob Baade’s conclusions is accepted, one could still argue that he has failed to measure the real value of a sports team to a city and its economic development. While sports may have little economic impact, given their importance to society, any city without a team and a first rate facility is outside the mainstream of Western culture. Over- stated? Perhaps not.
Sports has become a defining part of life and culture in North America. When Billy Crystal’s character in City Slickers recalls his first visit to Yankee Stadium as one of his life’s perfect days, the importance of sports to society is underscored. There is a profound connection between sports and numerous parts of life: language (metaphors), holiday cel- ebrations (Thanksgiving weekend games. New Year’s Day Bowl Games, special games for Martin Luther King Day, Memorial Day, July 4th, and Labor Day games), national, regional, city, and school identities, school social life (Friday night games), etc.
This pervasiveness builds a number of emotional attachments to sports for men and women. Many people can remember where they were when they heard President Kennedy and Dr. King had been killed, what they actually did on Woodstock weekend, what they were doing when Neil Armstrong proclaimed his small step as a giant leap for mankind. Many also can recall with equal clarity where they were when the 1980 U.S. Olympic hockey team upset the Soviet Union, when the Amazing Mets of 1969 won the pennant, and when the Boston Red Sox collapsed on any of several different occasions. Sports is also a frequent medium for political messages and actions: the US boycott of the Moscow Olympics, the 1936 Olympic Games in Berlin, the killing of the Israeli athletes at the 1972 games, and the protest of African-American athletes at the 1968 games in Mexico City. While many dislike the idea, sports defines an important part of many people’s lives and of our society’s values.
. . .
Suppose I was not asking these questions about the value of sports in Western society for identity, development, and the quality of life, but instead talked about the performing arts, museums, libraries, or the visual arts. Would an investment of $3 million dollars each year by a community to ensure the existence of an orchestra and theater be considered excessive? Would anyone be surprised if it was found that the direct economic impact of an orchestra even one as famous as the Pittsburgh, Cleveland, or St. Louis symphonies did not dircctly generate substantial returns? Would that lack of return be the deciding criterion to decide if the orchestra should continue? If one agrees that the arts and culture define a community and its identity, then it has to be accepted that sports teams and their facilities are at least as crucial to a city’s identity.
He is of course talking about keeping sports teams in cities, not hosting an event. But there are a lot of comparisons to be made between the cost vs. return of hosting an events and the cost vs. return of a sports team. In fact, either has a significant cultural and social value for people. Simon Kuper, author of Soccernomics, went into a lot of detail about sports teams and hosting sporting events in his book and while I recommend the read even for those who are not soccer fans, he highlighted something interesting about both teams and events, and that’s the impact community has on general quality of life—
A statistician who works with Petridou and Papadapoulos, Nick Dessypris, went through the numbers for us. He found that in almost every country for which he had numbers, fewer people kill themselves while the national team is playing in a World Cup or a European championship. Dessypris said the declines were “statistically significant”— unlikely to be due to chance.
It is sort of shocking what effect this sort of thing has on communities, because these did not delay suicides but resulted in a general overall decline for the year, with no “rebound” year. And good news for Vikings fans:
Joiner’s article “On Buckeyes, Gators, Super Bowl Sunday, and the Miracle on Ice” makes a strong case that it’s not the winning that counts but the taking part—the shared experience. It is true that he found fewer suicides in Columbus, Ohio, and Gainesville, Florida, in the years when the local college football teams did well.
. . .
Proof of this is that Joiner found fewer suicides in the US on Super Bowl Sundays than on other Sundays at that time of year, even though few of the Americans who watch the Super Bowl are passionate supporters of either team. What they get from the day’s parties is a sense of belonging.
Importantly, similar effects are found for cities merely hosting events. All measures of happiness, including General Well-Being and the Eurobarometer indicate that satisfaction with life generally goes up when hosting a big sporting event. This is the same level of happiness that has been found to stay level despite massive increases in income and quality of life over the past 50 years. The happiness had by hosting a large event (like the World Cup or the Super Bowl) sustains itself for several years.
It is awesome that Minneapolis is hosting the Super Bowl. It’s going to be an exciting event, especially because I’m optimistic enough to count the Minnesota Vikings as a contender for participation. Minneapolis is a great city and I can’t wait to share it with the world.