LA to DNC: show me the money
8/24/2000 12:00:00 AM - Larry Elder
"If someone ever asks if we should bid for another political convention," said Jack Kyser, chief economist for the Los Angeles County Economic Development Corporation, "my answer would be 'no.' What did we gain?"
A much better question: What did Los Angeles expect? An April 1999 study by the Convention & Visitors Bureau predicted that Los Angeles stood to earn $132.5 million by attracting the Democratic National Convention. Not $125 million, nor $130 million, nor $135 million. No, $132.5 million. Boy, they've got predicting revenues down to a precise science. The expected revenues so dazzled city leaders, they ponied up an additional $4 million the DNC demanded at the last minute.
This is how the "Hire a Study to Produce Results We Want" con works. The rip-off goes especially well when politicians commission a study to "prove" the value of a sports franchise. First, city legislators claim a sports franchise means big bucks. Then they claim construction workers stand to earn money while building the stadium, with area businesses in line to reap millions of dollars, given the increased business and predicted out-of-town tourism. Why, hotels stand ready to rake in bucks, as fans come in droves to the new stadium with its luxury skyboxes and state-of-the-art amenities! All built, of course, with taxpayers' money.
Taxpayers buy into this hokum because a study "proves" the value of the "public-private partnership investment." In English, this means taxpayers help pay for a building owned by billionaires, who, in turn, pay millionaire athletes.
Here's the problem. The studies don't mean jack. Consultants base their conclusions on the so-called "multiplier effect," the assumption that a dollar spent in a local economy causes growth as the dollar's receiver then purchases other goods and services.
But economists dispute the multiplier effect. "The multiplier argument would be good if we lived in the age of the walled city," says Dr. Charles C. Euchner, a political scientist at College of the Holy Cross. "Local economies are very leaky. Money that you spend on a ticket or on a concession or something like that doesn't just circulate throughout the city. Often it gets out of the city almost instantly." Yeah, usually in the bulging pockets of owners and highly paid players, most of whom don't live in -- or spend their wealth in -- the very communities that pay them.
Furthermore, the money a family spends for tickets, parking, and a few snacks usually means there's not enough money in that family's coffers to go see "Aida" later in the week. So the same entertainment dollar merely went here instead of there. Sorta like rearranging the living room furniture, without actually buying a new sofa.
These "impact studies" assume the money generated by a sports team adds money to a locality as if it would otherwise not exist. However, economists estimate that 90 to 95 percent of sports patrons come from the local community. And these same studies often grossly overinflate the dollar value of those fans who do travel to their venues, as if they were vacationing tourists visiting DisneyWorld. The reality is that most out-of-town fans throw in a game during their already scheduled business or pleasure trips.
Bottom line, according to Mark Rosentraub, associate dean at Indiana University, who has studied the impact of professional sports on cities, "The basic rule you always start with is that building a stadium for economic development makes no sense at all." Robert A. Baade, an economist at Lake Forest College in Illinois, says, "It's a cultural thing, it's a quality of life issue. (But) to pass it off as an economic panacea is really to mislead those who are going to be financing the thing."
But what about Los Angeles and the predicted $132.5 million? Consultants based part of the expected revenues on a predicted 94,500 hotel "room nights." But according to the L.A. Convention & Visitors Bureau, delegates and others used only 77,233 rooms. And this occurred during the high-peak month of August, when out-of-towners and other summer tourists normally crowd the hotels anyway.
Some local businesses, in fear of potential vandalism, closed and boarded up their businesses. As a result, the downtown jewelry district reported self-inflicted losses of $30 million. Other merchants near the DNC convention site say police barricades put them out of business. Retailers who kept their doors open reported losses up to 70 percent in their daily revenues. A special delegates' shopping night at a local mall, ballyhooed with raffles, discounts and giveaways, drew a whopping 50 people.
"They came in for water and to use the bathroom," said Henry Fogiel, who owns downtown's Yorkshire Grill. Bummer, but maybe we can study the problem.