I think we should talk about the Super Bowl and its economic impact, generally as well as it’s more specific impact for individual Minnesota businesses. I’m an economic impact skeptic –with apologies to Governor Dayton, Marilyn Carlson-Nelson, and Harvey McKay. I think it’s an economic rip-off that will net us little after costs, including the incredible opportunity cost of throwing a half billion at US Bank to keep the Vikings and line the pockets of the Wilfs, about whose financial statements a New Jersey state judge once remarked that “I do not believe I have seen one single financial statement that is true and accurate.” (https://www.minnpost.com/political-agenda/2013/08/dayton-deeply-concerned-about-wilfs-legal-problems-new-jersey)
But I promise not to get that feisty in my commentary. I’m a polite Minnesotan. And we’ve spent the money, so we might as well get the most out of it. And maybe some specific Minnesota businesses (other than the Vikings) are net beneficiaries. So here we go with a prospective blog entry to preface tomorrow’s segment.
Today’s edition of Business by Carlson will be broadcast from the Mall of America –Hugedale. I get to chat with Dave Lee, Mike Lynch and the Morning News crew from “Radio Row” on the north side of Hugedale’s Level 3. Come on by as shopping, fun or just curiosity move you. We’ll be talking about the broad economic and more specific business impact of the biggest single sporting event in the galaxy…or at least that’s how it seems in the past few days.
Let’s think about the broader economic impact of the Super Bowl for the host cities, Minneapolis-St. Paul, and the broader state economy. Every serious analysis of the direct, indirect and derivative (induced) economic impact yields a positive net effect for Minneapolis-St. Paul, the host cities. The question then is how much of a net positive impact the Super Bowl confers on the City of (currently frozen) Lakes. Here is where we can get into a fantasy world promoted by the NFL and its big suppliers, and fellow-travelers. On the high end nearing fantasy is a 2015 estimate by Rockport Analytics, a consulting firm located in West Chester, Pennsylvania. Rockport estimated that “MSP will realize a net new contribution to the regional economy of $343
million, during which over 5,000 jobs will be supported at an array of local businesses paying wages of $242 million.” Here is where you can read that for yourself (look at slide 8): http://kstp.com/kstpImages/repository/cs/files/Minneapolis-St%20Paul%20Econ%20Impact%20of%20SB%20LII%20Presentation.pdf. I’m not an expert on economic modelling, but I know enough to know that model estimates are only as good as the assumptions going into the model. So without going too much into the weeds, let’s just take the last part of Rockport’s conclusion, that $242 million of that net impact relates to wages paid for 5,000 jobs. Doing a simple division gets me to an individual job paying an average of almost $50,000 in wages. Now, I’m sure that some of those 5,000 jobs began before this last week or month or year, but let’s also admit that many –no most– of those jobs are in the last week, month or year. $50,000? Really? I think only in the fantasy world of the NFL.
I look more to the academic research on economic impact. Victor Matheson, is an economist at the College of Holy Cross in Worcester, Massachusetts. He does careful empirical research on net economic impact effects for sports generally and for the Super Bowl more specifically. Here is where you can learn more about Matheson and his research: https://www.holycross.edu/academics/programs/economics-and-accounting/faculty/victor-a-matheson. I’m proud to say that his PhD is from the University of Minnesota. Matheson’s research generally indicates that estimates of economic impact for Super Bowl host cities are amped up beyond any reasonable range –on the order of one tenth or even less than estimates that come from the NFL and its fellow travelers. Here is a great summary of his work on this topic as well as work by other academic researchers: https://crossworks.holycross.edu/cgi/viewcontent.cgi?article=1028&context=econ_working_papers. The over-estimates can be attributed in large part to a couple of factors: 1) many estimates of economic impact are gross, not net; and 2) overly-optimistic or just fantasy-based assumptions going into net economic impact models. My view is that the Rockport analysis is the product of (2) and then only the product of over optimism. But both (1) and (2) show up in other so-called studies. And less-than-careful journalists, host-city committees, even mayors and governors can be taken in by both. Matheson makes the point in his analysis that most studies underplay or ignore at least three “cost” factors that need to be deducted from those gross benefits: substitution effects; crowding out effects, and leakage effects. Substitution effects mean that some of the money spent is merely moved from some other time (later this May) or place (in Rochester) rather than truly new and additional. We know that many companies have moved up the time and moved the place of advertising and promotion. Crowding out effects are captured in that great Yogi Berra quote that “nobody goes there anymore. It’s too crowded.” That’s going to be the case for many Twin Cities businesses that will reduce operations or close up due to traffic or other inconveniences caused by the Super Bowl. And then there’s leakage. The NFL and it’s various national suppliers have swept into town and will take their (fair) share of sales and will then fly off next week. That’s transient economic activity going to a transient firm. That’s leakage. We can debate how much substitution, crowding out, and leakage are at work here in the Twin Cities. But that debate will take place at a range of numbers in the tens or hundreds of millions of dollars.
Here’s my more conservative take on how to measure the net economic impact. Minneapolis (and St. Paul) levies sales and related taxes (including one for the stadium!). Let’s get an estimate of those tax receipts for a given period and then multiply it appropriately to get a sales impact to compare with the same time last year…and control for a few other factors like general economic and population growth. Let’s talk about that quite tangible set of receipts in comparative perspective. And let’s save the “intangibles” story for another day. If the value of an occasional shot of Minneapolis from the Goodyear blimp during the game itself constitutes a “priceless” intangible advertisement for the City of Lakes, then I I’m not sure why we have an advertising industry that spends billions of dollars each year doing much more than blimp shots to promote cities, states and countries. Stick with sales receipts. I’ll bet they yield a net economic impact of somewhere around $100 million. And that’ll be ignoring the half billion dollar expenditure by Minnesota taxpayers to help build US Bank Stadium earlier this decade.
So if the net general economic impact is (much) more modest, what about the impact for individual businesses? Some will do well by the Super Bowl. Others won’t. Here’s my list of winners. In no particular ranked order, they include: ) Polaris; 2) Taylor Corporation; 3) AEG Worldwide; and 4) the University of Minnesota. My positive net economic impact assessment for Polaris is all about the weather. It’s cold and snowy and Polaris thrives on that. The Medina, Minnesota-headquartered maker of off-road recreational vehicles instantly conjures up pictures of snowy and craggy and cold. To help keep all the Super Bowl festivities safe, Polaris is providing the Super Bowl Law Enforcement Team with a fleet of Polaris Rangers. I think it’s a great multi-day advertisement for a company tailored nicely to serve Super Bowls in cold climes. And speaking of tailored, let’s also think about the Taylor Corporation owned by Minnesota’s own Glen Taylor. They include the Minnesota Timberwolves in the NBA and the Lynx in the WNBA. Both play in newly-refurbished Target Center. A successful Super Bowl hosting week, will go far to help Taylor and his teams in bids to host other big events in downtown Minneapolis at the Target Center…like an NBA or WNBA All Star Game. AEG Worldwide is the Los Angeles, California-based stadium manager for the Target Center. And the University of Minnesota? Athletic Director Mark Coyle is likely watching the Super Bowl festivities in and around the Twin Cities with thoughts about how they might translate festivities in late January into festivities for a Final Four event in March and April or a Bowl game in December or January. They could be lucrative for the University of Minnesota and the NCAA.
So that’s my take on the Super Bowl. There’s a little bit of skepticism in that take, but I like to think it’s constructive skepticism. In any case, I’ll now revert to my Minnesota roots and show I can be as “Minnesota nice” as any other resident to visitors from around our state, country, and abroad. We’ve spent the money –lots of it– and so many have worked so hard to gussy up the place. I’m ready to play host and enjoy it all. I hope you will, too. Now let’s have some fun.
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