The economic impact of the Toronto Blue Jays in Dunedin – an analysis of the claims made

In arguing for the recently unveiled “Toronto Blue Jays project“, Dunedin city staff and city commissioners have pointed to the 2016 economic impact analysis (EIA) as support for spending $65 million of public funds on this project. However, the company selected to perform the EIA was not chosen based on a history of accuracy – it was chosen for strategic reasons aimed at securing state and county funding.

Professor Roger D. Blair, Chairman of the Department of Economics at the University of Florida, flatly told DunedinReporter.Com (DR) that “no serious studies show that municipal spending on pro sport stadiums pays off.” Blair said that decision makers “often have made up their minds to go forward, and don’t want to hear something that is inconsistent with the information they already have.” More of Dr. Blair’s comments later.

This is the second article in a series on the “Toronto Blue Jays project”, and the city’s desire to spend $65 million in public funds on it.

“We wanted to provide a reputable source for what we present”, Dunedin mayor Julie Bujalski told DR. “So we used the same company that was used by the governor for the 2009 spring training study.”

Bujalski was referring to a 2009 Economic Impact Analysis  (henceforth “EIA”) performed by The Bonn Marketing and Research Group in Tallahassee. That EIA considered the 2009 spring training season in Florida and claimed an economic impact of $752 million dollars Florida-wide. The EIA further claimed that spring training “supported or created 9,205 part-time and full-time jobs”, this without converting the jobs to FTE (Full-Time Equivalent) jobs.

FSU professor Mark Bonn, author of the economic impact analysis that the city relies on
FSU professor Mark Bonn, President of The Bonn Marketing and Research Group

We had some questions for Bonn Marketing about their work. DR wrote Mark Bonn, President of Bonn Marketing, and then called to insure that Bonn had received our e-mail. A man answered our call with a simple “hello” and no company name. The phone number we called is the cell phone number given on Mark Bonn’s resumé, which in turn is the same number given on the cover of the 2009 EIA and later documents.

The man who answered at Bonn Marketing said he was a “research associate”, but would not give his name. However, he said that Dr. Bonn would be busy all day giving lectures.

The address that Bonn Marketing gave on the 2009 EIA (and also in official state records) is the homesteaded address of Florida State University professor Mark Bonn. Bonn Marketing appears to have no website. It is this media-shy company with a low public profile, and apparently with a home office, that the City of Dunedin relies on for its economic impact analysis of the $81 million Toronto Blue Jays project.

We will publish Bonn Marketing’s response to our questions should we receive one.

Brian London, the person who presented the 2016 EIA to the city commission when the plan was unveiled on September 26, started his presentation by saying “I am an economist with Bonn Marketing”. However, London’s own LinkedIn profile does not list employment by or affiliation with Bonn Marketing. Instead, that profile says London is the “CEO at London’s Tourism Publications”, a Jacksonville corporation formed in 2010. The corporation’s website lists no phone number, and DR was unable to find a phone number for London.

One the questions we had for Bonn or London was why $5 million of “media exposure” was included as an “economic contributor” on page 10 of the 2016 EIA that was presented to the city commission. No jobs are created and no money is spent in creating this “media exposure” for Dunedin and Florida, so it seems that this should not be included in the tally. Also, the sole purpose of the “media exposure” is to generate economic impact. It isn’t the economic impact itself.

DR also had questions about the so called Impact Analysis for Planning (IMPLAN) model used in all of Bonn Marketing’s EIA:s. Indiana University economist Donald Coffin is highly critical of IMPLAN, calling it “a model designed to generate large impact numbers to please a client who wants to lobby someone.”

Professor Donald Coffin
Donald Coffin, Ph.D., professor at the Indiana University Northwest, Division of Business and Economics

Coffin says that “the single most disturbing aspect of the IMPLAN model for local economic analysis is the wildly unreasonable values they have for multiplier effects.” Coffin contrasts the multiplier effect values used by IMPLAN with e.g. those used in the “Regional Input-Output Modeling System” (RIMS) mode used by the Bureau of Economic Analysis’ (a federal agency).

Blair’s colleague Mark Rush performed work in which he took regional multipliers from RIMS and lowered them to account for the facts that ‘leakage’ out of a state economy is greater than a regional economy. For an EIA involving a county economy, they have to be reduced even further.

The size of the so-called “multiplier effect” is crucial, as it can account for most of the economic impact. Get it wrong, and the claimed “economic impact” will be wrong, too.

Blair uses the same economic multipliers that the federal government uses. The multipliers that Blair uses range from 1.2 to 1.8 depending on what the money is spent on, and these are lower than those in the 2016 EIA presented to the city. Lower multipliers mean a lower predicted economic impact.

Coffin is not alone in questioning the accuracy of IMPLAN . The Illinois Public Health Institute wrote a report called “Critical Analysis of Economic Impact Methodologies”. The report’s “Conclusions” section began with these words:

“The limitations and costs of performing comprehensive economic modeling, and the lack of transparency inherent in software-generated calculations, suggest that alternative approaches that are more easy to measure, comprehend, and communicate will be highly valuable to the economic impact discussion.”

Others have pointed out other potential problems with IMPLAN: in a 2010 research paper examining the use of IMPLAN as used in New Mexico, researchers found “errors in sampling and analysis” and “misrepresentation of these issues”. Just this year, another research paper published in the journal “Tourism Economics” found that “IMPLAN estimated larger multiplier effects” than the more recent Economic Modeling Specialist International (EMSI) model.

implan_screenshot
Above: screenshot from the front page of the IMPLAN website at implan.com

One criticism of the IMPLAN approach is that “anyone with a computer can generate an EIA”. Surprisingly, the maker of the IMPLAN software readily admits so on the front page of their website. IMPLAN says that “now anyone can calculate economic impacts”, and says so in all capital letters.

IMPLAN also says that their software is “Made for Everyone”, and then immediately “from novice to advanced users, we’ve got you covered.”

The GIGO principle (“Garbage In = Garbage Out”) suggests that policymakers should carefully scrutinize the data put in to the model, as well as the qualifications and track record of the person performing the EIA.

The 2009 EIA was funded by the Florida Sports Foundation (FSF), a non-profit organization that serves “as the Sports Industry Development Division of Enterprise Florida, Inc.” While FSF is not a government agency, their latest available tax return shows that they received 97% of their $3.05 million dollar annual revenue from government grants. FSF is “the official sports promotion and development organization for the State of Florida”, according to Governor Rick Scott’s website.

Therefore, the 2009 EIA which the city has relied on so heavily appears to be a case of government funding a study which perhaps unsurprisingly concluded that more government spending is beneficial. The claim may be accurate, but self-interested claims emanating from a government-funded “foundation” should receive extra scrutiny.

There is a word you won’t find at all in any of the EIA:s the city has received and reviewed. That word is”displacement”, and it is an important concept in any economic analysis. “Displacement” refers to the fact that people coming to spring training in March are displacing people who would have come for reasons other than baseball. Those people would have had their own economic impact.

Also, spending on e.g. the Blue Jays displaces spending by government on something else. And that “something else” also has an economic impact which is not accounted for in the EIA’s presented.

blair_roger-300x300
Roger Blair, Chairman of the Department of Economics at the University of Florida

“You really should only count the incremental effect”, said Roger Blair, Chairman of the Department of Economic at the University of Florida. “And no serious studies show that municipal spending on pro sport stadiums pay off.”

“I have done these kinds of studies for the PGA Tour and the Citrus Bowl, but I don’t like doing them because they are not very satisfying”, said Blair. “You end up feeling that the results might not be right.”

“If you do these on a regular basis, you will develop a reputation and get some calls”. Blair said. “People who can defend a big number are going to be more popular than those who don’t.”

Blair suggested we speak to USF professor Phil Porter, and we will for our next article. “Phil is going to tell them the truth, but many times they don’t want to hear the truth”, Blair said “They have often made up their minds to go forward, and don’t want to hear something that is inconsistent with the information they already have.”

IMPLAN was called the “the model of choice for special interests seeking public largesse” in a 2013 Carolina Journal article analyzing the impact of film industry subsidies. Film industry taxpayer subsidies, just likes taxpayer subsidies, have come under increasing scrutiny. The Florida Legislature in 2016 adjourned without a state tax incentive plan for the film and television industry, this for the fourth year in a row.

is-it-worth-it

In 2013, Bonn Marketing took the 2009 data, extracted the economic impact of just the Blue Jays and provided the city with a report. Adjusting for 14.3% higher attendance during spring training in 2013 compared to 2009 Bonn concluded that “overall direct spending” by all attendees of the Toronto Blue Jays MLB Spring Training games was over $54.4 million.”

In the 2016 presentation to the city commission, that figure had apparently risen to $70.6 million, but was now called “total economic contribution attributed to visitor spending” instead of “overall direct spending” by attendees.

Bujalski told DR that the city has not asked other economists about the validity of the IMPLAN model. It isn’t likely to do so, either, because time is apparently of the essence. “Because they are expecting many requests for the bed tax money, the county wants the applications all at the same time”, said Bujalski and indicated that the city’s application has to be in before the end of the year.

IMPLAN was originally developed by the USDA Forest Service and was “a product of the Rural Development Act of 1972”. It is now used to estimate economic impacts of everything from the Peach Bowl to Medicaid expansion in Nebraska.

Economist Thomas Malthus, who famously called economics “the dismal science”, may also have found something dismal about the wide variation in results that economic impact models produce. Even non-dismal proponents of such modeling say that “although useful, limitations of such [analysis] work should always be discussed.” Hence this article.

The Blue Jays project is $81 million in size and involves $65 million in public funds. This $65 million could be put to other uses which would also have an economic impact. Which is the best use of those public funds: funding a private pro sports business….or something else?

As always: DR reports, and the readers decide. Please like our Facebook page to learn when we publish new articles.

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2 thoughts on “The economic impact of the Toronto Blue Jays in Dunedin – an analysis of the claims made

  1. It’s great to have pro teams, but they’re ‘nice to haves’, and certainly not a necessity. Austin, Texas seems to be doing quite fine with none. A great data point relating to how unimportant they are, at least in Florida, is what happened during spring training season in Florida in 1995 – while the MLB players were still on strike. See http://www.governing.com/blogs/view/The-Economics-of-Baseballs-Spring-Training.html , which says:

    “A study by University of Akron professor John Zipp examined the amount of taxable sales in Florida communities that hosted spring training in 1995, when the baseball strike caused teams to field second-rate “replacement players” and there was a 60 percent drop in Grapefruit League attendance. If spring training had a major financial impact on those communities, they should have suffered tremendously. That didn’t happen, and in fact, their taxable sales increased. Those findings “may indicate that spring training is not the major tourist draw that many claim,” Zipp wrote in a paper published by the Brookings Institution.”

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  2. Glad to see someone is providing some media scrutiny in Dunedin. Improving municipal transparency and accountability is clearly in the public interest. Thank you.

    Like

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