SPORTS ECONOMICS - As the proposal was being made public from the Anschutz Entertainment Group to build a football stadium in downtown Los Angeles, those who study the industry knew the first reality stadium building – just as the sun will always rise in the east, stadium developers will always overstate the project’s economic benefits and underestimate its costs.
So once enough politicians have been sucked into the deal by the glitz and glamor of professional football, and scant objective analysis, it’s too late for them to change course when facts become known. It’s like a Roach Motel. You can get in, but you can’t get out.
Last week LA Times writer Hugo Martin wrote about the possible economic impacts to downtown if the NBA season were to be canceled. (Link)
The article quoted John Blank, an economist for the Los Angeles County Economic Development Corporation, as saying that a strike would hit nearby restaurants and taxicabs drivers most heavily. “The effect on hotels,” he added, “probably wouldn't be as significant unless the NBA cancels playoff games, which typically draw more out-of-town visitors who tend to spend more than local fans.”
This is important because during the sales pitches to the City Council, AEG said or strongly suggested that two or three hotel builders would be adding 2,000 or 3,000 rooms if only the stadium were to become a reality.
It never made sense to me that the decision of whether or not to invest billions of dollars in new hotels would hinge on a stadium that, in a good year, would host 15-20 days of events. And remember that those who attend football games don’t stay in hotels.
So now we have the county’s most authoritative economic booster outfit telling us that cancellation of 82 regular season Lakers and Clippers games, plus all their pre-season games, won’t affect the hotels much.
I’m not an economist, but the numbers aren’t working for me.
In two previous columns I wrote about how the most successful Super Bowls end up producing only about one-tenth the economic benefits promised by promoters, and how nearly every Olympic Games has created debt and no long-term economic benefits for the host city.
Stadium builders also like lure supporters by holding out the possibility that their facility could host a World Cup tournament.
Like the Olympic Games, it would seem on its face to be an event that would benefit the host country and cities selected to stage the games.
Last December, England was favored to win the bidding for the 2018 tournament. Amid charges of corruption and bribery, the Brits got just two of the 22 votes in the first round and were knocked out. The United States competed for the 2018 event, and ended up finishing a weak second to Qatar.
In the end, losing was probably the best thing that could have happened to both countries.
Dennis Coates is a professor of economics at the University of Maryland, and past president of the North American Association of Sports Economics. Those who profit from the World Cup don’t pay him to conduct studies.
In short, Coates said that he and other independent economists have not been able to find evidence that shows anything more than a slight economic benefit from hosting Olympic Games and World Cups.
South Africa was the last country to host the World Cup. As usual, the proponents estimated the cost to host the event at a decent $944 million. In the end, as is par for the course, the bill had skyrocketed to $4.3 billion.
The country’s finance minister said the culprit was cost escalations. But certainly, one would reasonably hope, bidding countries would account for this possibility.
Coates tried to analyze the bid submitted by the United States, but the bid books are private.
However, he knew that the consultants for the United States’ winning bid in 1994 estimated the economic gain at $4 billion. After the independent economists finished their work, they reported that the average host city experienced a reduction in income by $712 million, with Los Angeles losing a higher than average amount.
In total, U.S. cities with World Cup venues lost $9.26 billion.
Next: How you can help ensure that Los Angeles doesn’t stumble its way into spending scarce public money to enrich a few.
(Greg Nelson participated in the birth and development of the LA Neighborhood Council system and served as the General Manager of the Department of Neighborhood Empowerment. He also served as Chief of Staff for former City Councilman Joel Wachs. Nelson now provides news and issues analysis to CityWatch. He can be reached at: [email protected] .) –cw
Tags: Los Angeles, Anschutz Entertainment Group, AEG, NBA, NBA season, John Blank, City Council, Lakers, Clippers, World Cup, Olympic Games, Super Bowls
CityWatch
Vol 9 Issue 93
Pub: Nov 22, 2011
