Sports Economist Says Indianapolis is Big Loser Financially From Hosting Super Bowl

Super Bowl is to be held at Lucas Oil Stadium

Phil Porter, an economist for the University of South Florida, has studied the impact of several super Bowls on local economies.  In an email forwarded to me and published with Prof. Porter's permission, this is what he says of Indianapolis' Super Bowl:

"Given that the gifts are from government revenue and that it takes $100m of taxable spending to make $7m of government revenue, the estimated $50m that Indianapolis will pay directly or sacrifice in taxes will require more than $700m in taxable sales impact to replace.  Since the impact is never more than a $20-30m in taxable sales, this is a big loser."

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Here are some excerpts about the financial impact of the Super Bowl from a 2006 Wall Street Journal article, republished by the Sports Economist.  The full WSJ article is available by subscription only. 

“The NFL says $300 million, but I’d say it’s closer to $50 million,” says Allen Sanderson, a University of Chicago economist.

...Tell that (Super Bowls generate “tremendous value” to host cities – PM) to Phil Porter, a University of South Florida economist who has looked at the economic impact of six Super Bowls. He found that Miami-area hotel rates and occupancy levels increased only 4.4% for Super Bowl XXIX compared with the same period in the prior and following years. Similarly, he found that Super Bowl XXXIII, also in Miami, had no more than a $37 million impact on the South Florida economy. Economists Robert Baade of Lake Forest College and Victor Matheson of Williams College pegged it at $21 million to $32 million, about one-tenth of the NFL’s claims.

… But the key figure, Prof. Porter and others argue, is taxes collected, not taxable sales. With a 7% tax rate, the gross economic impact of Super Bowl XXXIX comes to about $3 million. Factor in that it costs about $15 million in infrastructure improvements, security, overtime for police, fire and EMS personnel, and the economists claim that hosting the Super Bowl actually cost Jacksonville about $12 million.

...  “Most economic impact studies implicitly assume the hotel occupancy would have been zero without the event,” says University of Texas economists Craig Depken and Dennis Wilson, who looked at the 2004 Super Bowl in Houston. 

“The athletes, the chain hotels and restaurants receive money from the Super Bowl and take the money out of the area,” notes King Banaian, economics chairman at St. Cloud State University in Minnesota. “This reduces the impact on the local economy.”

“They swipe the credit card in Detroit, but that’s about all Detroit will see of that money,” says Prof. Porter. Furthermore, he argues that higher hotel rates and occupancy have more of an impact on hotel investors in Riyadh than on taxpayers in Detroit. 

… Even if a Detroit Super Bowl does draw more new money, the economic impact is still likely to be minimal, says Prof. Sanderson of the University of Chicago. “With league-wide revenue sharing and other external commitments, most of the game-related money will leave Detroit faster than the corporate jets on Super Bowl night. The one thing that remains will be the costs.”