Stadium developers across the nation routinely hire private consultants to conduct economic impact studies, which invariably promise that a new stadium will be a bounty of riches for the community.
Similarly, the Tripp Umbach report commissioned by Northwestern University, forecasts that the new Ryan Field will bring impressive economic benefits for Evanston and tax revenue for city coffers.
Unfortunately, these studies are often cloaked in secrecy, do not share the basis for their projections, and are not vetted by independent experts. Almost always, these reports conclude that:
- Building new stadiums create local jobs in construction and engineering.
- People who attend events will produce new spending power within the community, which will expand local employment.
- New stadiums attract tourism to the city, further increasing local spending and jobs for the community.
- The new spending will have a “multiplier effect,” where the increased local income will trigger more spending and job creation.
- All of this spending will create tax revenue to bolster city coffers.
It turns out that many nationally recognized, independent economists have exhaustively analyzed these studies for decades – primarily because billionaires routinely pressure politicians into approving tax dollars to subsidize dazzling new stadiums.
It has become common practice to use taxpayer dollars to demolish old stadiums and replace them with extravagant entertainment palaces featuring impressive architecture, luxury private suites, club boxes, in-stadium restaurants, catering and boutique concessions.
While it is true that Northwestern will not request tax dollars for the new Ryan Field, many of the claims listed above (also touted in the Tripp Umbach report) are relevant for Evanston.
Do new stadiums create jobs? Do new stadiums spur local economic development? Do new stadiums increase local tax revenue? To answer these questions, I began reading studies published by independent sports economists. Here is what I learned:
Robert Baade, a well-respected sports economist from Lake Forest College, conducted the first influential groundbreaking study of sports stadiums, examining the economic impact in 30 cities that built new facilities.
In 27 of those cities, he found no significant boost. In the other three, the impact appeared to be negative. Since then, study after study (more than 130) by leading economists, have produced similar findings.
These include studies by Allen Sanderson (University of Chicago), Andrew Zimbalist (Smith College), Roger Knoll (Stanford University), Brad Humphries (West Virginia University), Dennis Coates (University of Maryland), Christopher Briem (University of Pittsburgh) and Michael Leeds (Temple University).
After decades of research, there is universal agreement among them that sports stadiums don’t do much to boost a local economy, even in cities and neighborhoods that have not used tax revenue to fund developments.
The conclusions are remarkably consistent. All agree that new stadiums don’t create jobs, don’t spur local development, and don’t increase tax revenues – even when hosting mega-events.
They state that stadiums have a dismal track record of producing such benefits. Pretty much any study done by anyone anywhere that is credible and independent finds that new stadiums have next to no impact on the local economy. Here are more of their findings.
- Net employment effects of stadiums are limited to a few specific narrow sectors, nearby restaurants and bars within a mile of venues. Other nearby businesses suffer economic losses. They often close on event days because their customers can’t find parking and stay away. Also, spectators have no interest in visiting a ballet school, insurance agent, veterinarian, guitar store, florist, optician, health food store, needlecraft hobby store, Pilates studio — on Central Street.
- While stadium construction does create jobs, it is a short-term benefit and only if the stadium is built under agreements that guarantee the hiring of local companies and workers. Once a stadium is built the number of full-time jobs is reduced and replaced with primarily lower wage, part-time, seasonal jobs. Most income is overwhelmingly concentrated and pocketed by the owner and top personnel.
- Sports venues do attract out-of-town fans who patronize local hotels and restaurants, but the jobs created and tax revenue generated rarely come close to the rosy projections.
- The “multiplier effects” are very low or non-existent when compared to a city’s truly important economic drivers. For example, Michael Leeds, the Temple University economist, found little to no ripple effect when he assessed the impact of sports stadiums in Chicago, home to five major league franchises (Cubs, White Sox, Bears, Blackhawks and Bulls). He found that the income generated by those teams had a combined impact on the city’s economy of less than 1%.
- The “novelty effect” of a new facility generates initial interest, but in the long run, does not contribute much to revenues. It wears off quickly. For example, the relatively new PNC Park in Pittsburgh ranks as the best, most family-friendly baseball stadium in the country because of its location, views of the skyline and river, timeless design and clear angles of the field from every seat. Yet, attendance consistently ranks 26-28th of 30 Major League Baseball teams. Sometimes the stadium is almost entirely empty.
- Private studies almost always overstate the impact because they confuse gross and net economic effects. Most spending inside the stadium is a substitute for other local recreational and leisure spending, such as movies and restaurants. Spending on tickets and concessions comes largely from spectators who were already spending their income somewhere else locally. It’s not new spending. It’s the same spending reallocated to a different location, in this case, Northwestern’s coffers. Similarly, most tax collections inside a stadium are substitutes. As other entertainment businesses decline, tax collections from them fall.
Bottom line…Evanston residents and politicians should be highly skeptical of the enticing projections in the Tripp Umbach report.
Independent economists warn that everyone should cast a gimlet eye toward numbers put forth by self-funded studies promising a rosy local economic impact.
Invested parties are always anxious to show economic benefits, but the evidence from over 130 academic studies indicates that sports stadiums are notorious for over-promising and under-delivering positive economic impacts for the surrounding community.
Virtually every independent sports economist casts doubts, some going so far as to say developer-sponsored economic impact studies should not be viewed credibly by anyone.
In fact, privately funded studies are widely viewed by experts as self-serving shiny public relations documents disguised as economic impact studies.
Northwestern is attempting to dazzle residents, businesses and politicians with the same song and dance despite overwhelming evidence to the contrary. We are being fed the same seducing Kool-Aid. A determined Northwestern will likely say that this project will be different…the immaculate deception is underway in Evanston.
7th Ward Resident
On behalf of the Most Livable City Association