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Thursday, May 24, 2007

On the 2011 Super Bowl in Arlington

I was travelling on Tuesday when the big announcement was made in Nashville at the NFL owners meeting that Arlington, and the Dallas-Fort Worth Metroplex in general, had been awarded the 2011 Super Bowl. The game will be played in the new Cowboys stadium which is currently being constructed, funded in part by $325 million in Arlington-only sales tax contributions.

I have long railed against the stadium and its predicted impacts on the local Arlington economy. I also admit that I hope I am wrong about my predictions. I hope the city of Arlington is able to take the Cowboys stadium and make something happen. In many ways the city needs a revitalization and perhaps the stadium will prove to be just that.

Needless to say, I missed a number of media inquiries about the potential impact of the event on the local economy of Arlington. There have been predictions of from $100m to $400m for Arlington. I doubt that will be the case, after all the Arlington economy is only $4b and if there was a 10% increase in economic activity, which would be across the board - not just in the hospitality sector - in the week leading up to the Super Bowl it would make Arlington an impossible place to live and shop.

Here was my response via e-mail to the following media inquiry: "Craig,
Have you looked at possible economic impact of Super Bowl 2011 in Arlington? I was curious to see what you might have to say. I have seen estimates ranging from 160 million to 400 million."

Any pre-event analysis is suspect at best. Economic impact studies are renown for assumptions that lead to inflated pre-event predictions. Most academic analyses put the *net* impact of the Super Bowl in the range of $30 to $50 million. This is because, although there are people who come to the host city to spend money during the event, there are local citizens who "skedaddle" or go elsewhere to spend money and others who "hunker down" and choose not to spend/shop as much as they would if the event was not occurring.

Recent research by myself and Dennis Coates at the University of Maryland - Baltimore County, in which we analyze monthly sales tax revenues remitted from Austin to 20 Texas cities that hosted large sporting events from 1990 through 2006, suggests that in the City of Houston (proper) the Super Bowl contributed $30 million in net taxable sales. There was arguably an impact on the other cities in the Houston area, although we did not estimate that effect in our first study (available at www.uta.edu/depken/P/megaevents.pdf). Something like this would pertain to the Metroplex. Arlington would only be one of any number of cities in which people would spend money in the days leading up to the Super Bowl and it is entirely possible that Arlington would not be the city in which the most money was spent.

I would also caution that an economic impact study should not include the price of the tickets as those dollars go to the NFL teams and players.

Without seeing a specific economic impact report, I suspect that $200m might be a reasonable estiamte of the new spending that woudl occur in the entire Metroplex. However, evidence from previous Super Bowls suggests that the net impact to the city of Arlington's economy would be considerably less than, say, $200m. Even if the estimate of $400m applied to the entire Metroplex, it would only constitute about 0.2% of the approximate $180b Metroplex economy. While any individual would love a small percentage of the predicted value, it is a very small, one time infusion to the local economy and not one that would be expected to permanently alter the economy of Arlington or the Metroplex.

Nevertheless, given that Arlington will contribute at least $325m towards stadium construction costs, and service debt over thirty years with approximately $300m in interest payments, landing a Super Bowl is much more desirable than not landing one (as the folks in Indianapolis are likely realizing).

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