tag: North Carolina Land Use Litigator: Denver By 6 and $722,000,000.00: Devil Resides In the Methods of Calculation of Promised Economic Impact

Friday, January 31, 2014, 9:33 AM

Denver By 6 and $722,000,000.00: Devil Resides In the Methods of Calculation of Promised Economic Impact

It's Super Bowl weekend.  Seattle and Denver, laid back versus buttoned down, offense versus defense, Peyton's businesslike old guard versus Carroll's "wheeee! it's fun!" new way.  Oh, and the game is taking place in New Jers- uh, New York City-ish.  Call it whatever you want, but don't call it boring.

We can talk and talk and talk about the actual game, but what interests us most is the economic impact of "The Game".  This interests us because the means by which the economic impact of anything is measured is always a secret sauce -- a new factory, for example.  Though, critically, North Carolina is known for its transparency on the "front end" of such things.

The NFL promises hundreds of millions of dollars in economic impact to a Super Bowl's host city.  In 1999, in a study published jointly by the NFL and the Sport Management Research Institute -- yes, published by the NFL, itself -- it was stated that Super Bowl XXXIII (Elway's final game, a 34-19 win over former head coach Dan Reeves's Falcons) -- injected $393,000,000.00 into the South Florida economy.

But, are these numbers correct?  Well, more accurately, are these numbers "honest"?  There is no way to measure total economic impact accurately, which makes the final number presented as much marketing as math.  "Mayor, is there any way we can add another $45 million if it's sunny on the day of the game?  I mean, people like it sunny, and someone probably bought sunglasses as a result; you know, multiplied by the 225,000 people we anticipate to descend on Our City."

But what we can do is discern the methods of calculation to determine how comfortable we are with the promised impacts.  For example, the method of measuring impact in Jacksonville needs to differ from that in NYC; we don't have the information handy, but we'd venture that the hotel room vacancy rates in a "non-game" January in Jacksonville are significantly higher than the vacancy rates in a "non-game" NYC, which means the assumptions must differ.  In an accessible and interesting enough study, two academics (Matheson of Williams College and Baade of Lake Forest College) review the methods employed in various studies of economic impact to determine the more realistic, the more economically sound methods for predicting or speaking in hindsight about economic impacts of a Super Bowl.  The conclusion of the paper, generally, is that most studies --  and certainly the NFL -- overstates the economic impact on the host city of The Game.

So, what does this mean for us?  When presenting a development project, where incentives or other promises are "on the line" or otherwise contingent, make sure the methodology employed in communicating with the local government, the business, the public is sound, fair, understood, agreed upon and caveated.  It's difficult to predict outcomes but it is possible to control the means by which those outcomes were promised and a manner in which disagreements can be corralled.  Transparency will continue to be the grease for public and private collaboration in North Carolina.

Enjoy the game.  We'll take the Broncos, and we'll give the Seahawks $722,000,000.00.  Wait, I mean we'll give the Seahawks the 2.5.  
"New York Welcomes You to New Jersey."

Mike Thelen practices in Womble, Carlyle's Real Estate Litigation and Land Use practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.  Follow the North Carolina Land Use Litigator on Twitter at @nclanduselaw and "like" us on Facebook here.

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