Economists wage statistical war in Oklahoma-owned Sonics trial

Journal Record, The (Oklahoma City), Jun 20, 2008 by John Parker

The experts couldn't disagree more about the SuperSonics' economic impact on Seattle. It's either nothing or $187.8 million a year.

The attempt to pin down those dollar figures dominated testimony Thursday in the federal court battle between the city of Seattle and the Oklahoma City-based owners of the money-losing franchise. The city of Seattle also rested its case, allowing the Sonics to bring their witnesses.

The NBA has given approval for the Sonics to move to Oklahoma City, but Seattle is asking U.S. District Judge Marsha Pechman to enforce provisions of a KeyArena lease that would keep the team there for two more years. Team owners argue that contract law allows them to pay the city for the remaining years and leave.

The economic impact figures are in play because Seattle's attorneys say the Sonics' value to the city goes beyond a lease payout. Losing the team would greatly harm the city's economy, they allege.

The city's expert, Lon Hatamiya, estimated the franchise's economic impact on Seattle and nearby Snohomish County was $187.8 million a year. He has a master's degree from UCLA in business administration and has testified in several trials about the economic impacts of incoming Wal-Marts to cities.

The team also generates 1,200 to 1,300 other full- and part-time jobs related to supplying the arena, business sponsorships, increased restaurant business and other factors, he said.

If the team leaves, that economic bonus "may go away," he testified. "There's no certainty that that money will continue to be spent here. ... Much of that impact would shift to Oklahoma City."

In cross-examination, Hatamiya told Sonics attorney Paul Taylor that his model assumes that if the Sonics leave, Seattle-area Sonics ticket buyers would instead save much of that money and not spend it on other sports, such as the NFL Seattle Seahawks or Major League Baseball's Seattle Mariners.

The Sonics' expert, Brad Humphreys, is an economics professor at the University of Alberta in Edmonton, Canada, who said he has researched every case in the last 40 years in which an NBA, NFL or MLB team left a U.S. city.

He said team departures have no significant or detectable economic impact on cities. He later testified that a professional team's arrival to a new city will have negligible, or even negative, effects on a local economy.

The Sonics franchise is an entertainment company that competes for individuals' discretionary entertainment spending, he testified. The amount of entertainment spending in a local economy is a set amount that can be spent on a variety of options, he said.

"When a team leaves, they don't take that consumer spending with them," he said.

Earlier in the trial, Seattle's attorneys brought up the discrepancy between the Sonics' expert and the team owners' actions. Lead team owner Clay Bennett, when seeking public assistance for the move, previously told the Oklahoma Legislature that the team would post a $180 million economic impact in Oklahoma.

Humphreys assailed the methodology of Hatamiya's economic study, which used a revenue input/output model and multipliers to determine how new investment dollars, such as the payroll of an NBA franchise, percolate in a local economy.

Economics journals that use peer review to set the highest standard for accuracy have consistently rejected revenue input- output modeling, he said.

"There's an unusual amount of consensus among economists on this issue," Humphreys said.

In other testimony, Mitchell Ziets, president of MZ Sports, a New Jersey sports investment bank, said teams in lame duck status, as the Sonics could be in if they are forced to play, lose money even if they are having winning seasons.

The city argues that the Sonics are responsible for any Seattle financial losses because the owners chose to move instead of honoring the lease.

Ziets also conducted a study for the NBA in which he concluded that the Sonics would score profits of about $858,000 in the 2008- 09 season and about $657,000 the following year if they played in a renovated KeyArena.

As part of Bennett's contractual effort to seek a solution for one year for the team to stay in Seattle, the city offered the team a $300 million arena renovation plan, which the NBA had approved. Bennett testified that he never considered that offer because it was an unacceptable option for staying in Seattle.

Alexie: I want two more years of the great gods

SEATTLE - The most colorful witness so far in the battle in Seattle over the Supersonics' future took the stand Thursday, expounding on how NBA players are "barely wearing any clothes" and are modern "Greek gods."

Sherman Alexie, an accomplished Seattle-based author, humorist and national journalist, gushed about being a penultimate Sonics fan and the glory of the game. So much so that the Sonics' attorneys won several objections that he was rambling off and not directly answering questions posed to him on the stand.

The 12-year Sonics season-ticket holder described how he grew up in eastern Washington, bonding with his father through playing and watching basketball.