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State and local officials are calling the upcoming NCAA Men’s Final Four Basketball Tournament “an economic slam dunk.” The Texas State Comptroller has predicted $53.7 million in direct economic impact and over $100 million in total economic gains to San Antonio and rest of the state from the event. Few sporting events outside of the Olympics and the Super Bowl can claim such a huge impact on a local economy. But can these numbers be trusted? Independent economists studying sporting events uniformly find that booster estimates routinely overstate the effect of these games on local economies, often by a factor of ten. A recently published study of thirty Men’s Final Fours from 1970 to 1999 by Professor Robert Baade of Lake Forest College and myself found that the average income growth in host cities during the year of the tournament was actually lower than in non-tournament years. Rather than an economic “slam dunk,” the tournament appears to be an “air ball,” with realized economic benefits missing the pre-tournament estimates by a wide margin. How is it possible that the hoards of visitors that an event of this magnitude brings in don’t wind up benefitting the local economy? First of all, the Final Four crowds out other potential visitors. Although the Final Four will undoubtedly attract 50,000 or so visitors to the city during the weekend, “most downtown San Antonio hotels are used to brisk tourist business this time of the year anyway,” according to John Solis, the special projects director for the San Antonio Convention and Visitors Bureau during the 1998 Final Four held in the city. Certainly no non-basketball fans in their right mind would venture into the craziness of San Antonio during tournament weekend, and therefore their spending is displaced by the basketball fans. Similarly, while out-of-town guests may be spending up to $13 million on merchandise during their stay (again according to the State Comptroller), the crowds and congestion of the event will serve to dissuade local residents from venturing into the downtown area for their shopping needs. The economic predictions do a good job counting up all of the activity that does occur because of the big game, but the predictions completely fail to account for activity that does not occur because of the game. Apparently the boosters can add and multiply but aren’t so good at subtracting and dividing. Furthermore, there is a real question about where all of the spending that occurs during the Final Four weekend finally ends up. Even though the local hotels are charging two or three times their normal rates for rooms during the tournament, the hotels aren’t doubling or tripling the wages of their local workers. The spending at the tournament is a windfall for shareholders back at corporate headquarters in New York City not for ordinary workers in San Antonio. Yet is the local workers whose taxes will be used to pay for the additional security and public works that hosting the tournament requires. While this doesn’t mean that the Final Four provides no benefits to the city, it poses the real question as to how much a community should be willing to pay for the “honor” of hosting the Final Four. A city that provides significant public financing for sports infrastructure in the belief that the economic benefits from hosting one or two major events such as the NCAA Final Four will justify the costs of these facilities is likely to be in for a rude awakening. With $300 million spent by the city of San Antonio over the past decade for not one but two new basketball arenas, one might well wonder if those funds could have been better spent on either government programs such as schools and parks or on lowering the overall tax burden of the city’s residents. Publicizing exaggerated and misleading economic impact estimates does a disservice to the citizens of San Antonio who may find that the spending required to attract the Final Four is an act of “March Madness” rather than a “fast break” to riches.
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