Economic Impact Analysis of Sports Facilities and Events: Eleven Sources of Misapplication

TLDR

Sports events and facilities are increasingly subsidized by public funds, prompting scrutiny and a growing reliance on economic impact analyses to justify such subsidies. This paper identifies and discusses eleven major sources of inaccuracy in these economic impact analyses. The authors enumerate eleven pitfalls, including misuse of sales versus income multipliers, distorted employment multipliers, incorrect multiplier coefficients, ambiguous impacted‑area definitions, inclusion of local spectators, failure to exclude time‑switchers and casuals, use of fabricated multipliers, conflation of total and marginal benefits, confusion between turnover and multiplier, omission of opportunity costs, and exclusion of costs. The study demonstrates that numerous economic impact analyses yield inaccurate results because of these misapplications.

Abstract

Many sports events, facilities, and franchises are subsidized either directly or indirectly by investments from public sector funds. The scarcity of tax dollars has led to growing public scrutiny of their allocation; in this environment there is likely to be an increased use of economic impact analysis to support public subsidy of these events. Many of these analyses report inaccurate results. In this paper, 11 major contributors to the inaccuracy are presented and discussed. They include the following: using sales instead of household income multipliers; misrepresenting employment multipliers; using incremental instead of normal multiplier coefficients; failing to accurately define the impacted-area; including local spectators; failing to exclude “time-switchers” and “casuals;” using “fudged” multiplier coefficients; claiming total instead of marginal economic benefits; confusing turnover and multiplier; omitting opportunity costs; and measuring only benefits while omitting costs.