Posts tagged ‘Tax Facts’

I Was Right -- Superbowl Economic Contribution Numbers Completely Bogus

In this post, I called bullsh*t on this economic contribution number:

A study released today by the Arizona Super Bowl Host Committee
estimates professional football's championship game at University of
Phoenix Stadium in Glendale generated an economic impact of $500.6
million for the state.

I used some quick reality checks to show that the likelihood that this was a truly incremental economic contribution number was zero.  Now, Arizona has released its February sales tax numbers (the data I suggested was the best way to try to do this analysis).  As I suspected the numbers are not even close.  Let's start with this report from the Arizona Republic:

Sales-tax collections at hotels and motels showed the strongest gains
among tourism-related businesses as thousands of out-of-town visitors
booked rooms for the National Football League's Feb. 3 championship
game at University of Phoenix Stadium in Glendale.

The Arizona Department of Revenue said February sales-tax collections
jumped 12.4 percent at hotels and motels. It was the lodging industry's
best showing, as measured by sales-tax collections, since January 2007.


Bars and restaurants also rebounded from two consecutive monthly declines to post a 4 percent gain in tax collections.

Despite the improved showing in those tourism-related categories,
the state's overall collections continued a downward trend, punctuated
by slumping retail sales and the real-estate industry's decline.
Arizona's total tax collections for the month checked in at $444.1
million, a decline of nearly 1.2 percent from the month before.

Well, that sure doesn't sound like $500 millions worth.  Let's look at the hotel number.  From this Arizona DOR source document (Feb 2008 Tax Facts), the taxable hotel/motel sales in February were about $215 million.  A 12.4% jump, if you attributed it all to the Superbowl, would thus be $27 million.  Similarly, a 4% jump in restaurant would be $33 million.  As I predicted, these don't even add up to $50 million and it is unlikely all of this is due to the Superbowl. 

[The above is still substantially correct.  What follows is corrected in the update] But wait, there's more!  I then I started looking closer at the February tax report.  I don't know what copy the reporter was using [probably one "specially annotated" by the Sports Authority], but my copy shows hotel/motel revenues in Arizona going down by 9% in February 2008 vs. Feb 2007.  It shows restaurants and bars going down by 2%. I checked the Feb 2007 report, just to make sure, and sure enough the 2007 numbers were much higher, despite one more day in February in 2008!  One can find ZERO incremental impact from the Superbowl.

Now these are statewide numbers, and it is possible the author of the article mixed in Maricopa County numbers and that is where the increases were seen.  If true, though, this means the dollar increase was much less, because we are using a smaller base (ie just one county, though a very large one).  And it means that the County numbers may be misleading, because the Phoenix area just cannibalized sales from the rest of Arizona, which was way down.  Either way, it means the $500 million number the Republic keeps pushing is total BS  (incredibly, the author reprints the $500 million number in his article, as if it were consistent with the sales tax data he is quoting.)

Update:  OK, I was right and wrong.  Apparently, when the state of Arizona says "February 2008 Taxable Sales" they mean Taxable sales on reports that they receive in February.  Because reports come in after the tax month is closed, by February 2008 taxable sales they actually mean sales that occurred in January, 2008.  Many apologies to Arizona Republic writer Ken Alltucker who was kind enough to set me straight.  The Arizona DOR report for March 2008 sales, which we now know is actually February 2008 sales, has not been posted online but I am willing to take his word on it.  This is not the first time, alas, that I have been fooled by the fact that the government uses cash rather than accrual accounting.

The wasted effort I expended on the February report which is actually January is not wasted:  From it, we do know that from studying what is actually the sales for January, the Superbowl had no discernible effect on hotel or restaurant revenues in the weeks leading up to the game, since these numbers were down substantially.  I am sure that you will find a few people singing the praises of the Superbowl.  I have not doubt that a few exclusive Scottsdale clubs benefited from having a series of celebrity parties during the run-up to the Superbowl, but overall the impact is low for exactly the reason I already stated:  Superbowl week, due to the nice weather and the Phoenix Open golf tournament, is already a big one for Phoenix area hotels and restaurants.

The point still stands.  I got diverted off on the report discrepancy, but using what I now understand to be correct numbers in the article shows that the ASU B-school study seems to have exaggerated the Superbowl's financial impact by as much as an order of magnitude.

So maybe in the future I will show more respect for reporters who make dumb numerical errors.  Or maybe I won't, since I don't get paid to do this nor do I have 2 or 3 layers of editors looking over my shoulder.