Presentation to the Las Vegas Economic Club, 23rd September

2016

Sports Franchises and Stadia:

Independent Insights to Economic
Benefits and Costs toLasVegas
Stefan Szymanski
University of Michigan

Public subsidies for major league

facilities
Table 2.2: Reported Public Cost1 by Decade, 1900 to 2010
(2010 Dollars, Millions)

1900- 1910- 1920- 1930- 19401909 1919 1929 1939 1949

All Facilities
No. of Facilities Opened
Avg. Reported Cost
Avg. Reported Public Cost
Avg. Public Share
Median Public Share
Weighted Avg. Public Share
MLB
Facilities Opened
Avg. Reported Cost

9
114
0
0%
0%
0%

11
42
0
0%
0%
0%

8
114

10
42

1
n/a

2
188

n/a

Avg. Public Share

0%

Median Public Share

Weighted Avg. Public Share

Avg. Reported Public Cost

NFL
Facilities Opened
Avg. Reported Cost
Avg. Reported Public Cost

19601969

4
73
47
50%
50%
64%

11
70
49
71%
100%
70%

3
86

12
200

188

86

0%

n/a 100%

100%

0%

0%

n/a 100%

100%

0%

0%

n/a 100%

100%

83%

5
80
50

n/a

n/a

17
9
148
98
43
79
20% 67%
0% 100%
29% 81%

19501959

10
112

5
80

86

77

1970- 1980- 1990- 20001979 1989 1999 2009

28
27
194
246
116
203
73% 89%
100% 100%
60% 83%

14
195
114
61%
90%
58%

55
265
142
54%
74%
54%

44
417
241
61%
71%
58%

7
486
189
60%
64%
39%

9
237

3
376

12
300

13
541

1
559

167

232

165

209

247

430

86%

97%

46%

70%

54%

77%

100% 100%

47%

80%

68%

77%

98%

44%

69%

46%

77%

9
194

12
234

3
179

12
295

15
550

2
888

193

226

80

225

314

225

Source:
Long,
Avg.
Public Share

J.G., 2012.Public-Private
for Major
40% 75% Partnerships
75% 100%
89% League
50% 76%Sports
58%
Facilities. Routledge.

Median Public Share

0% 100%

100%

2010

100% 100%

61%

90%

64%

40%
40%

$10.6 billion
over 20002009

The measurement of economic

costs and benefits: Method 1
Forecast
Forecast economic
economic effects:
effects:
Direct
Direct effects
effects money
money spent
spent on
on a
a project
project to
to a
a
supplier,
supplier, e.g.
e.g. payments
payments to
to construction
construction companies
companies
Indirect
Indirect effects
effects expenditures
expenditures by
by suppliers
suppliers on
on
goods
goods and
and services,
services, e.g.
e.g. equipment
equipment purchase
purchase by
by
construction
construction companies
companies
Induced
Induced effects
effects -- expenditures
expenditures by
by project
project
employees
employees on
on goods
goods and
and services
services of
of other
other
businesses
businesses
The
The indirect
indirect and
and induced
induced effects
effects produce
produce a
a
multiplier,
multiplier, which
which in
in theory
theory can
can cause
cause a
a small
small
investment
investment to
to generate
generate a
a large
large economic
economic impact
impact

The measurement of economic

costs and benefits: Method 2
See what actually happened to:

Employment
Wages
Total income
Property values
Rental values

Compared to other cities,

controlling for relevant
differences

What do we find? : Method 1

Published forecasts predict positive
effects
Studies conducted by economic
consultancies
Use costly, complex input-output models
such as IMPLAN
By definition, any expenditure produces a
positive impact
Have limited capacity to incorporate
negative feedback loops

What do we find? : Method 2

No systematic, significant impact from building sports
facilities
Main reasons
Multiplier effects are small money leaks out of the region
Facilities struggle to achieve regular use- often too big
Investment crowds out other opportunities- diversion rather
than creation

Could Vegas be different?

(+)
Hotel tax levied on visitors, not
residents- enhances local
impact

(-)
Very large subsidy for the
stadium, potential liability for
local taxes if visitor growth
does not materialize

Potentially many events that

could be accommodated in a
larger venue, without diverting
events from existing locations

No evidence of demand for

large scale events in Vegas

If Vegas grows, then new

facilities needed anyway

Could well be better

infrastructure investment e.g.
transport

Conclusion: its a speculative investment is there a compelling reason to use

public money for speculation?