Sunday, April 1, 2012

Overblown Bradley Center Impacts

The Metropolitan Milwaukee Association of Commerce (MMAC) has released their Bradley Center economic impact study. They were planning to show a large economic impact due to the Bradley Center. Lo and behold, that's what they manufactured found.

I've been writing about Bradley Center subsidization and it's overblown economic impacts since 2009.
Even Don Walker, of the Journal Sentinel, wonders how Bradley Center officials and boosters can have it both ways - the arena is uncompetitive and doesn't generate sufficient revenues, yet it is also is a huge economic driver for the region.

Much of the other reporting regarding the Bradley Center report has simply stated the report's numbers and accepted them without any analysis or questions asked. Boosterism marches on. The growth machine lumbers on.

The usual story-line is being presented. Many of the same characters and boosters of the Miller Park swindle are involved in securing public money to build a new private basketball stadium. Many of the same mantras and "benefits" are blathered about and claimed whether the project is a stadium, a convention center, an industrial park, a research park, and a host of other supposed economic "game changers" and "engines."

These money losers - stadiums, convention centers, etc. - always have boosters and proponents pushing for the use of public dollars to fund such private playgrounds. In such instances, these normally government-averse, anti-tax crusaders, become big government supporters and partners. Suddenly government spending is a good thing that will create jobs and be an economic catalyst for the region. Or so the well-worn story goes. In the majority of cases, the reality is just the opposite.

From the report:
The gross dollar impact of the Bradley Center on the Metro Milwaukee area totals $204.5 million, with 2,350 jobs supported, generating $73.1 million in annual payroll. The MMAC estimates the yearly direct revenue generated by the Bradley Center at $95.8 million. 
 Many of these direct dollars spent as part of Bradley Center events are re-spent in the local economy supporting more localized economic activities (indirect impacts) and producing an even greater total impact on the metro region – the so called multiplier effect. 
Through a review of Bradley Center ticket sales, the MMAC estimates that approximately 70% of its attendees are local in origin (from the metro area). Conversely, 30% are estimated to come from outside the four-county metro Milwaukee area and with it new spending into the metro area. This gives an approximate estimate of base economic activity generated by the Bradley Center’s presence, or net new dollars pulled into the metro area. 
The MMAC estimates annual new spending generated directly by the Bradley Center by non-local sources at $41.6 million. For the metro area analysis, a 70% local – 30% non-local split was used in evaluating net new output resulting from Bradley Center activity. However, for Milwaukee County, a review of ticket sales figures suggest that a 50% local (from Milwaukee County) – 50% non-local split is more appropriate. Because of this split, a larger share of the direct money spent is new to Milwaukee County.

The bottom line impact for Milwaukee County is a gross economic output measure of $180.3 million, including both direct and indirect impacts. More critically, net new impacts or new money brought into Milwaukee County totaled $106 million (direct and indirect), with a job impact of 1,063, payroll of $29.5 million and new state and local tax revenue of $10.8 million. 
The economic attractiveness of a metro area is in part determined by the variety of choices that residents have in the region in which they live. Among the 50 largest metro areas in the U.S., metro Milwaukee ranks No. 1 in major league seat availability per-capita. In addition, metro Milwaukee ranks fifth highest in the number of performing arts companies per-capita among 21 benchmark metro areas. The opportunity to choose among a variety of activities has value, not only economic development value but real dollar value. While it is beyond the scope of this white paper, there is a tangible value afforded in having the choice of going to a Milwaukee Bucks game or a Milwaukee Symphony Orchestra performance vs. a movie at the local theater. A significant group of residents will choose major league entertainment over other options, everything else equal; thus, there is value to that choice.
Let's start with the assumptions - 50 percent of attendees at events at the Bradley Center are non-locals (from outside Milwaukee County). The actual impact of any entity is it's ability to draw in customers who would not have otherwise been spending money in the area. People coming in from Madison or up from Chicago doesn't quite qualify. If they would have spent money at home, but instead spend it at a Bucks game, there is no growth for the region. There is merely a realignment of spending. Which is why the majority of sport stadiums are economic losers - the majority of people that attend events are from the city or the region. When this is the case, growth does not occur. To qualify 'outside Milwaukee County' as not being local inflates the supposed outside dollar amount coming in - the actual growth and impact is overstated.

As the UWM-Center for Economic Development notes in a study of another one of the Milwaukee development community's white elephants (PabstCity), "No venue in Milwaukee draws anything close to 30 percent of its visitors from outside the region. The Calatrava, with all its national and international publicity and iconic status, draws substantially less than 30% of its visitors from outside Milwaukee. Events such as the Wisconsin State Fair and Summerfest draw close to that figure, but these are once a year “special events,” with state-wide and civic participation and sponsorship."

MMAC uses multipliers provided by the U.S Bureau of Economic Analysis "to account for the full impact of an economic stimulus. The initial impact (direct) is the output created initially by this stimulus. To the extent that these dollars are re-spent and re-circulated through the local economy, they end up having a multiplied effect. If you account for subsequent rounds of spending, you would reach the total multiplied effect of this stimulus."

Suddenly the lobbying arm of metro Milwaukee commerce believes in Keynesian multipliers? Conservatives, generally, believe for every dollar the government spends, spending elsewhere in the economy falls by the same amount. Thus, government spending negates any multiplier effect in the economy, according to conservatives. I guess when they need a certain outcome (the Bradley Center has a huge economic impact), their economic principles are a bit more flexible. [But, if the multiplier effect is real, what's their excuse against more stimulus to get the economy back near full employment?]

The report also notes that entertainment variety, for an area, is attractive to residents. There is an implicit assumption that such arena events are the primary entertainment options for the majority of people. This idea isn't quantified. It is merely stated to be accepted. How many of the attendees at events are repeats? Many sporting events, the theater, or the orchestra are attended by many of the same patrons during the year. To extrapolate that this benefits a majority of citizens, or is even important to the majority of an area's citizens is quite a stretch. 

If private organizations want public money - which is the reason the "economic impact" studies are trotted out - maybe they should at the least have to assure that the jobs being subsidized will be living-wage jobs. Sadly, most of these jobs are seasonal, low-wage jobs. Public dollars should not be used to subsidize low-wage, seasonal employment. Yet another reason more "investment" in arenas like the Bradley Center are usually economic losers. And, if these projects were such no-brainers and sure-fire success stories, why would the private sector need a public partner?

There is a large body of studies (see my previous writings on the subject for examples, linked above) showing stadiums are not economic catalysts. This research, for most cities, has found the same results for decades. Regardless of the conclusions of the 6-page MMAC "study," stadiums do not have a serious economic impact for the majority of cities. To claim the Bradley Center is any different is bogus.

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