Mega-Sports Events as Municipal Investments: A Critique of Impact Analysis
Philip K. Porter
Faced with the tax bill for sponsoring mega-sporting events, taxpayers, at least those who are not fans, are asking why they should be forced to pay for an event that most locals do not attend. To answer this criticism, sponsors and providers of events like the Olympics, the Super Bowl, the NCAA Basketball Tournament, even Grand Prix Racing, and the PGA Golf Tour point to the indirect (spillover) benefits implicit in regional multipliers. "You may not go the event," they say, "but those who do bring hundreds of millions of dollars into the community and that, in turn, generates several times as much spending in subsequent months as those enriched in the first wave of spending spend their new-found wealth." This argument has been offered by proponents for the subsidy of mega-sporting events. 1
This chapter takes a critical look at regional impact analysis as it is applied to sporting and other entertainment events. I have chosen Super Bowls for the empirical part of the chapter because they are annual and reasonably uniform events (although the locations differ), they generate huge direct and indirect returns that after the fact can be compared to recorded activity, and there are several impact studies available for critique. The results are shocking. For each of the six events studied in three different locations, there is no measurable impact on spending associated with the event. The projected spending and spillover benefits of regional impact models never materialize.
Several sources of error have been discussed in the literature that might tend to moderate the projected impact. These include investigator bias, error in measurement, unanticipated leakages from the region, substitution in consumption, diminishing returns in production, and crowding out (capacity constraints). What we find here is that a combination of these sources, albeit in unique and unanticipated forms, combines to eliminate any measurable impacts from Super Bowl events and, it is anticipated, from other mega-sporting events as well.