Government contributions to the funding of major league facilities ipso facto recognize that some portion of the benefits accruing from such facilities accrue to the public in general, rather than being captured exclusively by the franchise owner. The challenge for facility advocates is to demonstrate the return on investment to the taxpayer. This has been elusive. The canard that substantial returns accrue from the direct economic impact of visitors to games has been discredited. A taxonomy of four alternate sources of spillover benefits that are most frequently cited is proposed: increased community visibility; enhanced community image; stimulation of other development; and psychic income. Justifications using to the first three of these alternates are conceptualized as focusing on external audiences, with the intent of encouraging their investment of resources in the community. In some contexts, some economic benefits may accrue from these sources, but in most cases they cannot be demonstrated to be sufficient to justify the taxpayers’ investment. It is argued that psychic income, which focuses internally on the benefits received by existing residents in the community, is likely to be key to justifying public subsidy of major league facilities. It is suggested that the contingency valuation method is an appropriate approach for measuring the psychic income provided by a professional sport franchise.
John L. Crompton
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.
Sarah Nicholls and John L. Crompton
A large proportion of golf courses currently under construction are part of larger real-estate projects. The objective of this study was to identify the magnitude of the increase in property prices created by the golf course in one such amenity. A hedonic analysis was undertaken using a sample of 305 sales transactions in a golf course subdivision in College Station, Texas. For comparative purposes, the assessed valuations of these properties were used as an alternative dependent variable. The premiums on lots adjacent to the golf course were $61,074 and $45,759, based on sales prices and assessed valuations, respectively. These premiums represented 25.8% of the average sales price of the homes, and 19.2% of the average assessed value. Prices and assessed values were also found to decline significantly with distance to the country club (by $8–10 per foot from the entrance).
John L. Crompton and Dennis R. Howard
Economic impact studies are frequently commissioned to justify investments in sport projects. However, decisions also should include a consideration of a project’s costs since it is the net return on investment that should drive decisions. Whenever taxpayer funds are expended on a sports project there is an opportunity cost. Three types of opportunity cost are discussed. Explicit costs are those for which a government entity “writes a check.” They are comprised of event costs, land and infrastructure costs, and operations and maintenance costs. Implicit costs are those which remain “hidden” from most taxpayers: foregone property taxes, strategic underestimation of capital costs, displacement costs, and an inequitable nexus between payers and beneficiaries. External costs are those incurred by taxpayers beyond the boundaries of a local jurisdiction.
John L. Crompton, Dennis R. Howard and Turgut var
This paper identifies the pervasiveness, magnitude, and trends of public investment in major league sports facilities and describes the forces that typically direct and dictate the debate. In 2003 dollars, the total investment in facilities currently being used by franchises in the four major leagues in North America is almost $24 billion, of which over $15 billion was contributed by public entities. Four eras of funding these facilities are identified and described: the Gestation Era 1961-1969; the Public Subsidy Era 1970-1984; the Transitional (Public-Private Partnership) Era 1985-1994; and the Fully-Loaded (Private-Public Partnership) Era post 1994. There is a consistent trend of private contributions increasing across these eras, but public sector contributions remain substantial. The final section of the paper discusses the four primary sources of momentum undergirding this public investment: owner leverage, the community power structure, the stimulus of increasing costs, and the competitive balance rationale.