Originally Posted by GregHenry
With little respect, none of it comes through in your posts, and it appears that you're wholly ignorant of the most basic concepts of Accounting and Economics. You say you work in litigation, so perhaps it's the case that you're in the advocacy business, not in the academically right answer business.
If you care to author a peer-reviewed paper on Indianapolis Super Bowl economics, I promise I'll find the journal.
No offense taken, because your lack of perspective is pretty clear. Re: litigation business vs. academic business. You do realize that every single expert in every single article you have cited has been in the "litigation business" as a witness, don't you? Matheson over at Holy Cross? Yup. His sports econ co-author? Yeah. Bruce Jaffee down at IU? Yes. Some even worked for clients of an old firm of mine. How crazy is that? Academically right and economic damage lit. witness aren't as different as you think. You don't advocate, by the way...that's the attorney's job.
Peer reviewed articles are great. You won't see many of them in SB studies and I wouldn't waste my time on one because there isn't much that needs to be said. Why? Because every study conducted on SBs ever credibly produced article says the same thing, in terms of direct financial impact: in the worst cases, the SB doesn't hurt an economy much. In the best case, it doesn't help much either. Unlike an Olympics, there just isn't enough of a financial bite in terms of direct costs to make it worthwhile to dwell on.
Regardless, people do make massive overstatements the positive financial impact of hosting a SB. The key to the overstatement of economic impact is determining an applicable multiplier for a one-off event such as this. If you want to understand the multiplier relationship, you can find all sorts of data readily available online. I'm not going to scan studies for you or dig through a stockpile of things. Decent stuff on RIMS from the BEA for a multitude of economic activities.
If you want I can give you something to read on tourism multipliers that is more "erudite" friendly off the net. This comes from Michigan State University dept of economics. MSU also happens to have one of the 2 best tourism and hospitality programs in the country (with Cornell), so this is particularly fitting: Multipliers
Keep in mind I showed you that the entire Super Bowl has a marginally good impact with a dinky multiplier of 1.1 (or 10% "recirculation" rate), so I was actually being kind to you there. The actual tourism multipliers are more in the range of 1.5 (see MSU study, which is actually a bit higher), which would suggest a greater economic impact.
These don't work for SB type settings, and I can explain why in a couple of steps.
1-Multipliers are best applied under fairly "normal course of business" conditions. A Super Bowl in now way resembles this. Take a hotel (multiplier of 1.5), which basically means 50% of hotel revs are captured locally and redistributed (think concierge, cleaning crews, maintenance, and local vendors getting paid and spending locally). A simple "steady state" for a hotel might be 50% occupany. To keep things simple, assume 100 rooms, 50 rented @ $2 a night. $100 in hotel revs, $50 of which is spent again locally by someone affiliated w/ the hotel (workers/contractors) or the hotel itself (via local vendors).
Now assume 100% capacity and $200 of revenue. $100 isn't spent locally, because you don't need twice as many people and vendors aren't doing 2x the work. Assume the variable work is 50% of marginal rev. That means $75 is getting redistributed on $200 per night of hotel revenue. Multiplier down to 1.375x.
Now assume a Super Bowl hotel room rate. Those rooms are going for $8/night vs. $2/night. Workers aren't getting paid more. The hotel isn't going to replace the beds quicker or furniture quicker. Maybe one or two if a rock star trashes a room. Fine. Also, maybe P Diddy is leaving some great tips, but let's ignore that too. The same $75 is getting redistributed on $800 of hotel revenue. 1.09 multiplier. Keep in mind hospitality is a high fixed cost, low variable cost industry where rates are highly adjustable. You don't see people jacking up the cost of a meal or a bottle of Coke at CVS fourfold, so restaurant, mom and pop retail, etc will be substantially higher than 1.09. So, how did I get to only 1.1?
2-Windfall profits/income don't get redistributed locally at the same rate as normal course of business profits. Imagine you're a server at a restaurant who normally pulls $600 in tips a week. You get $650 one week. What do you do with that extra $50? You spend it on a night out, a trip to the drug store, movies, etc. You spend a large share locally. Now imagine the Super Bowl is in town and you clear $2000 that week. What do you do with the extra $1400? A lot of servers will take a trip to FL or Mexico or buy in an iPad online for example. A disproportionate amount is not spent locally. Same goes for local owners of places. They might put a little extra into renovating their establishment, but more money is either getting saved or spent on luxury items that tend to suck money out of the local economy.
The point is, the multipler is greater than 1, but it's not very high. 1.1 is a swag, but it's a pretty solid one if I do say so myself. I'm actually with you there. But it still doesn't matter. Why? Because the costs of hosting aren't substantial for the SB...at least when you compare them to city operating budgets or costs of purpose building large venues for the Olympics.
-Lost worker productivity? Do you think those workers aren't making that up over the coming weeks the same way people do when they come back from Christmas and New Year's and get slammed at the office for the next 3 weeks?
-Traffic delays? That generally eats into marginal "sit on the couch and watch TV" time, not an economic activity. Kids still need to be driven to basketball games and meals still need to be cooked/purchased. Trips to Home Depot are still made--if not this week, then next. Besides, a lot of that marginal free time was spent at the Super Bowl Village, apparently.
-Corporate donors ponying up $20 to $30 million to organize? That's actually a good thing. That money was corporate gravy anyway and now it's getting spent here. Let's not be naive and kid ourselves into thinking a corp would donate money that would otherwise be re-invested at good returns into their business. It would have been spent in Naples golfing or at an overpriced retreat where a bunch of execs sit in a sweat lodge while meditating. Maybe it would be re-distributed to shareholders who don't live in Indy. Now those rich guys get to stay in town during the SB and spend money to impress their clients instead.
-Crowding effects? This is Indianapolis in February, not Miami. We're not a February convention or tourist destination.
-Locals substituting other leisure for the NFL Experience or merchandise? Small figures. Maybe a net negative impact of $1 million or so. When you add it to the increased public service costs (that you have kindly provided), but net it against 10% of $150 million + additional tax receipts from the event + indirect tax receipts from that $15 million captured and then spent locally...it's not consequential.
-Inefficiencies from the SB preparation "rush" leading companies to outsource work to other regions that otherwise would be performed here? Not particularly significant considering this has been years in the works and order books knew about this well in advance.
I've wasted a lot of time explaining this, and this is it for me: you're crying over really tiny net costs that in this particular case are likely more than offset by modest gains elsewhere. The CIB likely has to make up a shortfall of $700K. Locals spent money that would have gone to AMC for a movie, who would have also sent their money back to corporate. Some money was made from out of town guests. A lot of that made its way out of Indy quickly, but maybe 10% of it got spent (and taxed again when re-spent) here. A lot of people had fun. Some people complained. Some other stuff got built that probably would have been built regardless. The world is round. Get over it.