The Economic Impact Of Sports Tournaments And Events - city survey

Parks & Recreation, Sept, 1999 by John L. Crompton

Last year, the National Recreation and Park Association solicited cities to participate in a study detailing the economic impact of sports tournaments, festivals, and spectator events organized or facilitated by park and recreation agencies. The goal of the study was to collect reasonably accurate data from a substantial number of events, and to estimate the economic impact of these events, hopefully free from the errors and abuses found in most economic-impact studies. It was anticipated that these results would reveal consistent patterns and parameters that could be used to estimate economic impact in communities that did not lend themselves to the collection and analysis of empirical data.

Seven cities -- Boise, Idaho; College Station, Texas; Des Moines, Iowa; Everett, Wash.; Grand Rapids and Lansing, Mich.; and Scottsdale, Ariz. -- volunteered to participate in the study. All were reasonably diverse in size and geographical location. During the year, the economic impact of 30 events in these seven cities was estimated.

The Rationale for Economic-Impact Studies

When the park and recreation department in City A reported the financial consequences of organizing and hosting a national softball championship tournament, it revealed a loss of $9,375. When City A's convention and visitors bureau reported the consequences of hosting the same event, it showed a gain of $525,000. It is obvious which agency was likely to be viewed more positively by elected officials and taxpayers. Why did the two agencies report such disparate data from the same event? The two agencies used different approaches for demonstrating accountability for their public funds.

Park and recreation agencies have traditionally provided financial reports, while the tourism field has proffered economic reports. Thus, the two agencies have occupied very different positions in the eyes of public officials. By using economic reports, many convention and visitor bureaus have convinced elected officials and decision-makers that they are central contributors to their community's economic health. In contrast, because they rely upon financial reports, park and recreation agencies have not typically been successful in creating a similar niche for themselves.

Fig. 1 provides the rationale behind park and recreation agencies developing economic balance sheets to supplement financial information. Residents of a community "give" funds to their city council in the form of taxes. The city council uses a proportion of these funds to subsidize production of an event or development of a facility. The facility or event attracts nonresident visitors who spend money in the local community both inside and outside of the events and facilities they visit. This new outside money creates income and jobs for community residents, thus completing the cycle. When community residents provide the initial funds, they receive a return on their investment in the form of new jobs and more household income.

[Fig. 1 ILLUSTRATION OMITTED]

A park and recreation agency's traditional financial balance sheet assumes that the cycle shown in Fig. 1 starts and ends with city council, not residents. This is narrow and misleading because it includes only the taxes and revenue that accrue to local government from the event or facility. Such a narrow definition suggests that concern should be focused on income accruing to the council from lease fees, admission revenue, increased sales-tax revenue, and other sources. However, this approach is flawed conceptually because the money invested belongs to the city's residents, not the council. Although it is efficient for residents' investment to be funneled through the council, the return is what is important, not the proportion that filters back to the council. The purpose of economic-impact studies is to measure the economic return to residents.

Table 1 illustrates the differences between the financial and economic approaches. According to the park and recreation department's financial balance sheet, the tournament was a $9,375 disappointment. However, if the agency had used an economic balance sheet -- as tourism agencies do -- it would have shown a net return of $273,000, $511,000, or $150,000, depending upon whether economic impact was reported in terms of direct expenditures, sales impact, or impact on personal incomes. (These figures were calculated by subtracting the $14,000 net cost to taxpayers from the gross amount of hosting the event.)

Table 1. Amateur Softball's Economic and Financial Returns

Context

All 37 teams that qualified for the tournament were from
outside the local area. The average number of players per
team was 15. Some players brought family and friends with
them, so the average size of the contingent associated with
each team, including the players, was 21. Because it was an
elimination tournament, the length of time that the teams
stayed in the community varied from two to six nights.

Economic Return

A survey of the players revealed the following:

Total expenditures in the local area by players and   $287,000
their family and friends

An input-output model that calculated multipliers
concluded the following:

Total economic impact on sales                        $525,000

Total economic impact on personal income              $164,000

Financial Return

Income to the city parks and recreation department      $4,625
from entry fees

Costs incurred by the department, including            $14,000
manpower, to host the event

Net financial loss to the city                          $9,375

Payback Period

The cost of constructing the softball complex was almost $2
million. Based on economic return to residents in terms of
personal income, the capital cost of the complex would be
repaid after 14 similar tournaments.