If you’re a city looking to bring some fancy new thing to town — like, say, a Major League Soccer franchise — there’s basically one way to make money.
You’ve got to bring in new dollars. New spending, by people who otherwise wouldn’t be here.
I’d be happy to see the Columbus Crew SC come to Austin. My family and I would go to some games, and in time my husband might go all in on face paint. But the money we’d spend on tickets and nachos is money we otherwise would have spent dining out or going to the movies. Since we already live here, we wouldn’t be generating new sales tax revenue for the city or pumping new money into the local economy. We’d just be spending our old dollars in a new place.
Only a fraction of the visitors to a stadium at McKalla Place, if such a thing is built, would be out-of-towners dropping new dollars on tickets, meals and maybe a night or two at a hotel. But they’re an important X-factor in whether this deal makes financial sense for the city.
So, it’s a problem if the financial impact of these out-of-towners is overestimated. And that’s what a couple of sports economists I’ve talked to see with this deal.
The city of Austin hired consultant Brailsford & Dunlavey this spring to run the numbers on a potential MLS stadium. Among many things, those projections assumed 10 percent of the people coming to soccer matches and other stadium events would stay overnight at a hotel.
That was a nonstarter for Stanford University economist Roger Noll, who co-wrote the book “Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums.”
“For stadiums as a whole, the fraction of people coming from outside the metro area is about 3 percent,” Noll told me. “Occasionally, it gets as high as 5 percent, but never as high as 10 percent. Even Anaheim stadium, which is across the street from Disneyland, doesn’t get as high as 10 percent.”
Part of the reason, he notes, is that the big five pro sports leagues have some 150 teams between them, scattered all across the country. With the exception of events like the Super Bowl, he said, people rarely travel far to see a game.
I reached out to Brailsford & Dunlavey, which fielded my questions through a city spokeswoman, and the firm said the 10 percent assumption was “based on its professional experience with other major stadium projects.” They did not specify which ones when I asked.
At 10 percent, the overnight visitors were projected to contribute $322,000 a year in hotel taxes — not a major sum, but that becomes even smaller ($96,600-$161,000) if overnight guests account for only 3 to 5 percent of the stadium visitors.
Smith College economist Andrew Zimbalist, who co-authored “Sports, Jobs, and Taxes” with Noll, said a different number caught his eye.
Brailsford & Dunlavey assumes half of the stadium visitors will be city residents, people like me bringing only old money to the table. In calculating the estimated $25.6 million a year in economic impact the stadium would bring the city, the consultant is mainly looking at the 10 percent of overnight guests and the remaining 40 percent of the fans, visitors who aren’t staying in a hotel but are considered “out of market.”
These “out of market” people include some Travis County residents just outside the city limits, in places like Pflugerville and Bee Cave, as well as folks just across the county line, in places like Cedar Park and Round Rock. Brailsford & Dunlavey assumes all of these “out of market” people are bringing entirely new dollars to Austin, which strikes Zimbalist as unlikely.
“Presumably, people living in a suburb are making the choice they want to live near a major city, an entertainment-oriented city, and they have certain amount of money in their budget to spend there,” Zimbalist said. If they come to Austin for a soccer game instead of live music or barbecue, he said, “it’s not new money being spent.”
Brailsford & Dunlavey figures that people spend most of their money close to home, in their suburban communities, because that’s most convenient. In reality, I suspect the “out of market” folks would probably bring a mix of old and new dollars. I bet many of them already come to Austin for some events, but not for all of their entertainment needs.
Brailsford & Dunlavey, through the city spokeswoman, acknowledged the projections aren’t a perfect science. They said other projections may serve as a “counterbalance” by underestimating other sources of spending.
For instance, the consultant assumes overnight guests will stay only one night in a hotel, but some may stay longer. The firm also assumes city residents like me wouldn’t contribute a dime of new money, but if I go to the soccer stadium instead of heading out of town for a Round Rock Express game, that would be new money to Austin.
Austin is crunching and weighing all kinds of numbers as Precourt Sports Ventures, which owns the Columbus Crew SC, pushes for a commitment soon on soccer stadium negotiations. Precourt is asking for virtually free use of city-owned land at McKalla Place, where it would build a stadium that would pay no property taxes.
Make no mistake: Very real money is on the line.
While it’s tempting to stack up the numbers in cost and benefit columns, it’s not that simple. Projections are packed with assumptions that make the figures more of an educated guess than a crystal ball.
Numbers are important. But not all numbers count the same.
Coming Saturday: Who would fill the jobs a soccer stadium would bring?
Coming Sunday: The editorial board weighs whether this is a good deal for taxpayers.