Hotels Among the Favored Few in the Corporate State (Along with Sports Teams, Taxi Owners, and Farmers)

The various cities in the Phoenix metropolitan area have spent a fortune renovating ten spring training fields for 15 major league teams.  I have seen a number like $500 million for the total, but this seems low as Scottsdale spent $100 million for just one complex and Glendale may have spent as much as $200 million for theirs.  Never-the-less, its a lot of taxpayer money.

The primary subsidy, of course, is for major league teams that get lovely facilities that they use for about one month in twelve.

But these subsidies always get sold on their community impact.  But that economic impact turns out to be really narrow.  For in-town visitors, the economic impact is typically a wash, as money spent on going to sports games just substitutes for other local spending.  But these stadiums are held up as great economic engines because they attract out of town visitors:

Cactus League baseball and year-round use of its ballparks and training facilities add an estimated $632 million to Arizona economy, according to a study released Monday by the Cactus League Baseball Association.

The study found that 56 percent of the 1.7 million fans attending games this past spring were out-of-state visitors and the median stay in metro Phoenix was 5.3 nights.

Spring training accounted for $422 million in economic impact in 2012, up 36 percent from the previous study in 2007. Both were done by FMR Associates of Tucson.

One of the flaws of such studies is they never, ever look at what the business displaces.  For example, for local visitors, they never look at local spending sports customers might have made if they had not gone to the game.  All spending on the sports-related businesses are treated as incremental.   For out-of-town visitors, no one ever considers other visitors coming for non-sports reasons who are displaced (March was already, without all the baseball, the busiest hotel month in Phoenix) or considers that some of the visitors might have come to the area anyway.

However, let's for one moment of excessive credulity accept these numbers, and look at the out of town visitors.  56 percent of 1.7 million people times 5.3 nights divided by 2 people per room is 2.52 million room nights, or at $150 each a total of $378 million.   So most of their spring training economic impact is hotel room nights.  This by the way is the same logic that supports various public subsidies of local college bowl games.

Which begs the question, why are we spending upwards of a billion dollars in taxpayer money to subsidize sports teams and hotel chains?  If the vast majority of the economic impact of these stadium investments is for hotels, why don't they pay for them, or split the cost with the teams?

PS- as an aside, it seems that to be successful in the corporate state, one needs ready access to consultants who will put absurdly high numbers on the positive impact of one's government subsidies.  It's like money laundering, but with talking points.  Take your self-serving spin, hand it with a bunch of money to a consultant, and out comes a laundered "study".  In this case, the "study" architects are FMR Associates, which bills itself as specializing "in strategic research for the communications industry."  The communications industry means "PR flacks".   So they specialize in making your talking points sound like they have real research behind them.  Probably a growing business in our corporate state.

  • http://profiles.google.com/kahrhoff Chris Kahrhoff

    what facility did Scottsdale spend 100m on?

  • Tom Kelly

    I totally agree that public spending on this is nuts. However, in my case, I've only been to Phoenix once in 52 years and it was for Cactus League baseball. I stayed about a week and spent a whole lot of money.

  • obloodyhell

    I have but one thing to say:

    Yyyyuuupp.

  • perlhaqr

    If the Fedgov gives me a trillion dollars, I'll create a million jobs.

  • http://www.facebook.com/andrew.m.garland Andrew M Garland

    Proponent: "Spring training accounted for $422 million in economic impact in 2012".

    The economic claims are puffed up more than you think. The code words "economic impact" are used instead of "increased income". The proponents take whatever increased income they might estimate, and multiply it by an "economic multiplier", say multiplied by 4.

    This is a fantasy created from double-counting various flows of money, starting with the increased income in hotels and restaurants. Then, they count the purchases made by the hotels and restaurants, and the higher salary volume of the employees, and then their purchases. All of this adds in the Keynesian fashion to "money flow" and "economic impact".

    Say a visitor pays $150 to a hotel, which in turn pays for electricity and labor, and those employees pay for food and rent. The proponents count that as $450 in "economic impact" by counting the cash flow three times. The true impact is $150 in increased income. The hotel organizes the work provided by utilities and employees. The guest pays $150 for that work, which finds its way in subdivided bits to possibly hundreds of people supplying labor, goods, and services. It is an error to count the $150, then also count the amounts when they are distributed to the people providing hotel services.

    This same fantasy supports the idea that our government increases the wealth of our society when it borrows and spends. There is no wealth multiplier from the flow of money. If there were, we would all be living in Aruba by now as a result of huge government borrowing and spending.

    If there were a multiplier such as the (supposedly mild) 1.5 multiplier claimed by Team Obama, then we could Counterfeit Our Way to Wealth.

    Econ 201: The Myth of the Economic Multiplier
    Government spending doesn't multiply anything. It takes resources from taxpayers and applies them to government projects. You get a bridge or some paperwork, that is it.

  • Larry Sheldon

    Here it is the NCAA for a week.

    And a lovely old baseball park went to the scrap yard.

  • mesocyclone

    But what do we do about it?

    It seems to be a classic special interest problem, with an added issue of competition between localities giving a buyer's advantage to the sports teams.

  • Mark

    The answer to this is that there are real tangible benefits to communities from these activities and that they should invest accordingly. The problem with the argument of stadium and other massive infrastructure proponents is that the "real" benefits are about 1/20th of what they claim, and with this appropriate investment there is no way possible to build the types of lavish facilities that team owners and their upscale fans expect. For example, in Minnesota, I estimate that the value to the state and local governments of the Minnesota Vikings is about $10-20 million per year. So, this could justify a $100-200 million government investment in a football stadium. But, the owners do not want $200 million, they want $1 billion and all of the upfront money paid by the public (the owners contribution is actually paid for by naming rights and seat licensing fees generated by the stadium).

  • http://www.facebook.com/matthew.slyfield Matthew Slyfield

    Just say no.

  • sch

    We are not in your league at all, but locals got hot and bothered about dragging the semipro team back from a fancy stadium built south of town in a bustling and exploding commercial/
    residential community 12-14 yrs ago. So they conjured up $40M (latest estimates now $65M) and the stadium is under construction. Stadium holds 8500 but somehow parking for
    250 cars was felt to be sufficient in the initial plans. Much scrambling to clean egg off face and now they plan to utilize hospital parking garages which are 4-8 city blocks away from the
    park. Financing arranged by diversion of city lodging taxes on hotel rooms so indirectly out of town visitors do pay sort of for the facility. Meanwhile a '20s baseball stadium slowly
    rots away on the west side of town, despite being gussied up a few years ago for a nostalgia baseball film about negro league ball.

  • agassiz830

    Even worse than sports stadium is the exact same behaviors carried out for convention centers.

  • Micha_Elyi

    Damn, you gotta lotta relatives.

  • perlhaqr

    I'm sure I would, if I had a trillion dollars...