Development Tool
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it I .Aw Baseball players pass the time at an Orange County Gas Station , circa 1939. Not Just Fun and Games Anymore: Pro Sports as an Economic Development Tool by J. Barlow Herget and Mike McLaughlin 2 NORTH CAROLINA INSIGHT Local officials-armed with claims of impressive economic impact-are going to bat for professional sports franchises and single-shot sporting events like never before in North Carolina. Even state government has gotten into the act with the establishment of a Sports Development Office in the Department of Economic and Community Development.' But how much impact can sports really have on the economy of a commu- nity? The North Carolina Center for Public Policy Research explores this question and finds that the economic impact of a professional sports franchise or event can be very real. The NBA's Charlotte Hornets, for example, have been a boon to the City of Charlotte, providing substantial economic impact and enhancing the city's image. Minor league sports are more likely to have a minor impact, although they help round out a city's entertainment offerings. Local officials are advised to proceed with caution when negotiating leases with sports franchises or invest- ing funds for stadium construction. is The Charlotte Hornets are a National Basket- her staff were calling on the executive ball Association team and the only major league of an out-of-state company that the city professional sports franchise in the state of North Thewas mayor courting of Charlotte,to relocate Suein Myrick,North Caro- and Carolina. The team' s presence and history in lina. Boyd F. Cauble, executive assistant to the Charlotte reflect the interest in sports as a signifi- Charlotte city manager , remembered the familiar cant part of the state's overall economic develop- awkwardness at the beginning of the meeting as ment strategy. Sports-both amateur and profes- the room grew silent. sional-no longer are just fun and games but are "You know how it is when nobody really viewed as big dollars and cents for the communi- knows each other and everyone is trying to be ties that host teams and events. polite," he says. "We all had just been seated in his The search for new jobs or, in modern par- office, and there was this lull in the conversation. lance, "economic development ," has become one Before it got embarrassing, the guy we were visit- of the magic phrases of politics and politicians. ing asked us about the Hornets. `How's your new Business and political leaders have refined this basketball team doing?' he said, or something like search over the years, and have identified different that. It broke the ice, and we got on with our segments of the economy on which to focus inter- meeting." est and resources. Cauble told the story to illustrate one of the For example , travel and tourism was spot- subtle, intangible benefits that a professional lighted as a special industry to develop as far back sports franchise brings to a city. A national team as the 1940s, and a state office and advertising brings with it national recognition and can even budget were established to promote North Caro- help a city in.recruiting new business. "Even lina as a tourist destination. Today, the Division of when you're losing, it's still nice to go anywhere Travel and Tourism employs about 20 people, and in the U.S. and people will ask us how the Hor- it is reflected in convention and visitors bureaus in nets are doing." most major cities throughout the state. Division officials say travel and tourism represents the state's second largest industry, generating more than $6.9 J. Barlow Herget is a free-lance writer and a Raleigh City billion in spending each year. Council mnember. Mike McLaughlin is editor of North Carolina Insight . N.C. Center intern Richard Harrill pro- In 1979, the state identified the movie and vided research assistance for this article. television film business as a piece of economic SEPTEMBER 1992 3 development pie, and the subsequent North Caro- ample. "We've made a major commitment to lina Film Office has been successful enough to make our sports facilities top-notch in the South- earn the state the nickname "Hollywood East," east," says Dick Grubar, a Greensboro City Coun- according to Film Office director William Arnold. cil member and former collegiate basketball player In 1991, the North Carolina movie industry gener- at the University of North Carolina at Chapel Hill. ated some $202.5 million in spending, according "The economic impact has been phenomenal. With to the film office. the Chamber of Commerce, county, and city, we The latest jobs sector to attract special notice formed a sports commission, and we've hired an is that of spectator sports. In 1990, the state executive director. I think that the national and established the Sports Development Office in the regional tournaments that have come here as a Department of Economic and Community Devel- result have been immensely helpful to our hotel opment, and municipalities such as Greensboro and restaurant industry." and Charlotte began forming their own sports de- This new interest-and especially the use of velopment programs. Take Greensboro for ex- public monies-in sports development has raised A Kendall Gill takes it to the hoop for the Hornets. 4 NORTH CAROLINA INSIGHT to Racers and dignitaries gather at the starting line of the original Charlotte Motor Speedway , a wooden racetrack that opened in 1924. questions: How can the economic impact of such tomobiles by Buick and sold later by local activities be measured? Are there benefits over dealerships. That amount doesn't include the mul- and above new jobs? What are the drawbacks? tiplier effect of the number of times a dollar turns Finally, what is the role of public money in sports over in a community. A conservative multiplier ventures? figure is 2.5 times, and if you use that figure, then the total impact of that one event in the local economies was over $80 million."3 Economic Impact Economists acknowledge that applying a mul- e appearance of consultants is one sure sign tiplier to actual spending is an inexact science. 1 of a successful economic development trend. John Connaughton, an economist at the University One of the veteran consultants in North Carolina is of North Carolina at Charlotte, has estimated the Hill Carrow, president of Carrow Sports and Mar- impact of the Hornets on the Charlotte area keting Company of Raleigh. Carrow is a nation- economy, as well as the potential impact of a ally ranked amateur swimmer and an attorney who National Football League franchise. Connaughton helped organize and direct the 1987 U.S. Olympic says a rough rule of thumb is to figure $2 in Festival in Raleigh. The two-week festival was economic impact for every $1 in actual spending. centered in the Triangle cities of Raleigh, Durham, "You've got to be real careful about whether you're and Chapel Hill, but events were staged in cities as recycling dollars that already exist or bringing far away as Greensboro. new dollars in," says Connaughton. In a good year, the Olympic Festival breaks Connaughton says he sometimes sees projec- even, but the 1987 festival ended with a $1.7 tions of economic impacts of $6 and $7 for every million surplus and produced a publicity bonanza dollar spent. These estimates, he says, are vastly for the Triangle area.' This triumph accelerated inflated. "Where there is a judgment to be made," local and statewide interest in sports as an eco- says Connaughton, "I err on the conservative side." nomic development issue, and Carrow subsequently In general, estimates of tremendous economic wrote the business plan for the state Sports Devel- impact should be interpreted cautiously. The stud- opment Office. ies these estimates are based on typically are com- "First Union Bank did a study after the 1987 missioned by supporters of a franchise or event. festival," Carrow says, "and the study showed that They typically include rosy assumptions about there was $41 million spent in conjunction with how much money will be spent on concessions, that event. That includes money spent on tickets, meals at off-site restaurants, gasoline or other trans- sponsorships, hotel rooms, even purchases of au- portation, motel rooms, retail shopping, and so on. SEPTEMBER 1992 5 All of these hypothetical expenditures are added individual economic situations because of that ac- up and doubled, tripled, or even quadrupled to tivity?" come up with an impressive sounding but entirely Charlotte City Council member Don Reid hypothetical economic impact. questions the value of economic impact estimates These studies generally do not point out some prepared by paid consultants for facilities like of the disadvantages of investing in sports fran- coliseums and convention centers. "Here is what I chises-that building stadiums and providing in- think happens," says Reid. "The bureaucrats want frastructure usually requires investment of public more and more `things and functions ' to be in funds; that public funds committed to sports de- charge of . They know that no one , that is before I velopment may be diverted from other more im- came along , is going to go back and check on the portant public purposes; and that teams can lose justification they used to sell a project . Therefore, money and move or even go out of business, leav- they employ the consultant to prepare the justifica- ing a community holding the bag with an under- tion and the consultant prepares whatever the bu- used and expensive stadium. reaucrats want. Am I too cynical?" Geraldine Sumter, a Charlotte lawyer and a Still, figures showing exponential economic member of the Charlotte Coliseum, Auditorium, impact for sports development cause salivation and Convention Center Authority, says she has among business and political leaders.