David Martin over at The Pitch has a great piece about how the positive economic impacts of a Chiefs training camp in St. Joseph have failed to materialize. Residents were promised millions of dollars of revenue in return for taxpayer subsidies. Build it, they were told, and they will come.

They didn’t come. The expected money has not poured into St. Joseph, in part because the calculations used to make the promise to St. Joseph residents were flawed. Martin writes:

The convention bureau arrived at the $6.3 million economic-impact estimate by multiplying 40,000 (the number of fans who attended training camp, according to Missouri Western) by $158. The dollar figure was the average amount of money that surveyed visitors said they’d spent.

That, anyway, is how the convention bureau understood the math. But H2R [Market Research] officials, when asked about the visitor profile, told The Pitch that the average spending was per party, not per person.

The St. Joseph case is not isolated. Calculating economic impact for projects and events is fraught with errors and often with glaring flaws in the premise. Two years ago we wrote that the promised economic impact of hosting the Republican convention in Kansas City was likely overstated. In short, the number crunchers often base their estimates on the assumption that without the event in question, there would be no economic activity at all—that if we didn’t host the Republican Convention, the hotels and restaurants would be left empty. It’s not just projections for events that rely on such flawed reasoning; from stadiums to film tax credits, economic impact studies often miss the mark.

Sometimes the truth can only be known in retrospect, when we look back and compare promises to results, as Martin did in his piece. But by then the public’s money has already been invested and possibly lost. With this in mind, the public and policymakers alike should be more skeptical of economic impact claims.

The post Economic Impact Fallacies appeared first on Show-Me Institute.

The Cleveland metro area – roughly defined by STR, a hospitality research firm, as Cuyahoga, Lorain, Lake, Geauga, Medina and Ashtabula counties – is home to nearly 22,000 hotel rooms, up about 4 percent from two years ago. In downtown Cleveland, the increase in room inventory is even more dramatic: up 16 percent since late 2012, to 3,945 rooms, according to STR.

Cleveland, which is considered a lower-tier market for conventions than Kansas City, has the same number of rooms in the downtown area. The Kansas City region has many more hotel rooms than Cleveland. Cleveland won the GOP convention likely due to other important political considerations that have nothing to do with the specifics of convention bids, including hotel room count. Keep this in mind next time you hear someone claim that Kansas City needs to spend tens of millions of dollars on a convention hotel.

The post We Didn’t Lose the GOP Convention Because of Hotel Rooms appeared first on Show-Me Institute.

• Strongly agree — 26 percent
• Agree — 9 percent
• Disagree — 14 percent
• Absolutely not — 51 percent

That’s a pretty strong vote of 65 percent opposition to the idea. Readers offered several dozen comments.

We at Show-Me had some immediate comments too. The least of which not being that you’d certainly have to work at the Star to be surprised by this result. Kansas City has had ruinous results in building big projects like this. For example:

• The Power & Light District remains a drain on city resources, having never lived up to the promises made by boosters.
• The Citadel Plaza project was never even built, yet it cost the city millions.
• The city got itself into a horrible bind by taking on huge responsibilities with Kemper Arena and then not meeting them.
• The city spent money studying a proposed streetcar expansion before voters had a chance to voice their views. They rejected it.
• The city spent hundreds of thousands pitching itself for the Republican Convention even though the economic impacts claimed by supporters were specious.
• The city proposed a $1.2 billion new airport terminal based on at least one false premise.

Furthermore, just as mega-events such as Republican Conventions and Super Bowls fail to generate economic benefits, stadiums and arenas fail as well. (Read here for studies by The Brookings Institution and The Atlantic.) Kansas City voters are wary of such promises, and they are either defeating such efforts as translational medicine taxes and streetcars or are demanding sign-off on efforts to build new airport terminals. Why this well-founded skepticism is surprising to anyone is itself a surprise. The city should focus on delivering basic and necessary services and leave the economic speculation to others.

The post Star Survey Results Actually No Surprise at All appeared first on Show-Me Institute.

All that said, there actually is a lot to like in these vetoes. For example, the governor vetoed more than $7 million in funds for biodiesel incentives. The state should be eliminating these types of incentives and it is a good thing that Gov. Nixon is cutting back on them. The governor also is vetoing $2 million in funding for the Rolling Stock Tax Credit. The Show-Me Institute has published numerous writings about the desirability on cutting back on these types of tax credits. It is good to see Gov. Nixon trying to do so.

Gov. Nixon’s vetoes could go further. For example, he withheld $5 million from efforts trying to lure the Republican National Convention to Kansas City. There has been a lot said about using government money to try to lure big events, but in this case, the money isn’t necessary because the Republican National Committee has already narrowed its search down to Cleveland and Dallas. Gov. Nixon should have simply vetoed this specific appropriation.

There was a lot to like in the governor’s vetoes. If the legislature was more disciplined, many of the vetoes would not have been necessary. Hopefully, state spending can be controlled going forward.

The post Vetoes, Vetoes, And More Vetoes appeared first on Show-Me Institute.

FOX 4 reporter Macradee Aegerter also asked about the claims of economic development that come from such conventions. I said in the interview that such claims are speculative, the bid committee often employs the economists that make the claims, and that the real impact rarely lives up to the hype. (This segment aired in the 6 p.m. version of the story, which is not yet online.) In the segment, a member of the bid committee claimed that the convention would have an economic impact of $250,000,000. That’s a quarter-billion dollars.

We don’t believe it. (Or, perhaps more delicately, we want to verify those numbers before we believe it.)

Certainly, having such a convention in Kansas City is a good thing, and not just for the money it will bring to the area. As a matter of pride, I would love to see Kansas City host again on the 40th anniversary of our last convention. But the idea that having the convention here amounts to a net gain of $250 million is absurd, and it casts a light on how calculating the economic impact of other items is the economic equivalent of alchemy.

The host committee is likely assuming that without the convention, hotel occupancy would be zero. Spending downtown would be zero. Travel in and out of Kansas City would be zero. Then it still probably over-estimates what will be spent here because of the convention. In reality, a hotel that would have had 70 percent occupancy without the convention may have 95 percent occupancy because of the convention. One can claim the difference as “economic impact” but not all of it. But we won’t know how the committee reached the quarter-billion number until it reveals how it calculated a $250,000,000 impact. (If the committee releases the estimate and it proves to be legitimate economic analysis with a multiplier effect below two, we will gladly admit we are wrong.)

As written in the Daily Beast story about the recent Super Bowl in New Jersey:

So, there’s no economically sound way to predict a Super Bowl’s impact before the event and those that try have been proven wrong again and again. But don’t expect that to stop the cheering from the few with the most to gain. When asked for a more detailed analysis of Super Bowl XLVIII, the host committee demurred, but assured in a statement, “Super Bowl XLVIII is expected to be an economic boom [sic] for the region.”

We’re not asking the committee to reveal anything legitimately embargoed about its bid. We just want to know how the committee arrived at that estimate for the impact should the convention occur in Kansas City. Certainly, Republicans would agree that the sound economic policies they advocate require sound economic assumptions — otherwise, how are they supposed to be any more responsible with taxpayer money?

The post Kansas City Republicans’ Absurd Claims appeared first on Show-Me Institute.

A 2008 study of the economic impact of political conventions found “no statistically significant evidence that these huge conventions contribute positively to a host city’s economy.” The authors point out that political conventions crowd out a great deal of day-to-day economic activity, so although hotels typically benefit from the influx of convention attendees, local shoppers avoid the area because of the crowds and stringent security. This is precisely what happened in New York City during the Republican National Convention in 2004, as reported by the New York Times:

But some businesses, particularly those around Madison Square Garden, where tight security scared off customers, said they paid a heavy price.

“We had high hopes, but there was nobody on the streets,” said Marlon St. Clair last week as he presided over uneaten platters of barbecue chicken, corn bread and ribs at Soul Fixins, a restaurant on 34th Street between Eighth and Ninth Avenues. “Usually we are packed at lunchtime. But there’s nobody here to eat.”
[…]
It was clear that parts of the city were emptier than usual, particularly Midtown. Even though the state suspended sales tax on many items of clothing for the week of the convention, popular stores like the Gap and H & M at Herald Square were deserted.

Ridership on the commuter railroads showed declines, ranging from 10 to 60 percent, and bridge and tunnel crossings plummeted as well, indicating that a goodly portion of workers simply stayed away.

If Saint Louis held the convention, it would be a tremendous inconvenience for anyone who works or shops downtown and would likely lead to a great deal of lost productivity and business from local sources.

Conventions also cost tens of millions of dollars. The parties themselves foot a great deal of the bill, and the federal government shells out huge amounts for security (the impropriety of which could be the subject for another entire blog post), but a massive amount still has to be raised locally. Organizers in Charlotte expect their costs to total more than $40 million. Organizers for the last two conventions managed to raise the funds without turning to local and state taxes, but as Mike Dino, CEO of the 2008 Denver Convention Host Committee, put it, “We worked hard, but we got lucky too.” If Charlotte does not prove as lucky, its taxpayers will most likely be left holding the bag. Saint Louisans should not envy them. As with government, so too with political conventions — less is usually more.

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