Off the Kuff Rotating Header Image

Run those numbers by me again

El Gato has a long and detailed post about Comptroller Strayhorn’s recent announcement that the state of Texas will kick back $8.7 million to the city of Houston, the Super Bowl Host Committee, and Harris County to help defray expenses from Super Bowl XXXVIII. That represents the anticipated extra sales tax revenue that the Super Bowl is going to generate.

“Approximately 104,000 happy visitors will take back warm memories of Texas–after they leave quite a few dollars here,” Strayhorn said. “Texas will be a winner, no matter who wins the big game.”

Senate Bill 275, passed by the 78th Legislature, requires the Comptroller to forecast revenue gains from increased collections from sales, motor vehicle, hotel occupancy and alcohol taxes in the market area of a major sporting event. The law is being used for the first time with Super Bowl XXXVIII, scheduled for Sunday, Feb. 1, 2004, at Reliant Stadium in Houston. Based on a formula in S.B. 275, a portion of the expected tax revenue increase will be placed in a new “Other Events Trust Fund” to help defray expenses related to the Super Bowl.

Strayhorn estimates visitors will spend an average of $373 per day for 4.3 days, leaving $165.5 million in the Houston area. Her estimate includes lodging ($68.8 million), bars and restaurants ($26.8 million), entertainment ($15.3 million), transportation ($13.7 million) and merchandise and other retail sales ($41 million).

In addition, the Houston Super Bowl Host Committee will spend $10.1 million dollars preparing Reliant Stadium and other facilities, media and team hotels, transportation, security and law enforcement, deploying 10,000 volunteers and hosting nearly 4,000 members of the world media.

In arriving at these figures, Comptroller Strayhorn makes an assumption, discussed by El Gato, that each dollar spent by visitors will be multiplied – a waiter who earns more tip money will spend more money himself, that sort of thing. I’ll get to that in a minute, but I’m still wrapping my brain around the $373 per day that she thinks each visitor will drop into our collective coffers. Even the high end hotels that I’ve checked (JW Marriott, Four Seasons, Omni) have rooms that go for $160 – $220 per day, meaning there’s a lot of money left for food, rental cars, and entertainment even before you consider that many if not most of those hotel rooms will have two or more occupants. I know Super Bowl Weekend is a big party and all, and I know I’m an incorrigible cheapskate, but $373 per person per day sounds awfully extravagant.

(On a side note, the Planning Committee will no doubt be pleased to hear that none of the three hotels I mentioned above have any vacancies for the period of January 30 – February 2. I checked room rates for the week of December 29 – January 2 instead.)

There are two other things that stand out to me. One is that multiplier which I mentioned before. The value that the state is using is causing various respectable economists to choke with laughter.

“You probably will not find an academic economist who isn’t critical of these numbers” from the state, the NFL and the host committees, said Dennis Coates, a University of Maryland sports economist. “You will only find a comptroller or paid consultant coming up with those numbers.”

Several sports economists have told the Houston Chronicle that the Super Bowl will have a $20 million to $50 million economic benefit for the Houston region. One economist has said it will have no effect on taxable sales at all.

[…]

The comptroller’s office relied in many instances on a multiplier of 2.3 to calculate indirect spending and total spending — meaning direct spending was more than doubled in their estimates.

Tamara Plaut, senior economist in the comptroller’s office, called that multiplier “pretty conservative.” It was derived from economic models used by the state of Texas, she said.

But Coates, the University of Maryland economist, said of the 2.3 multiplier: “Oh, my God, I think that’s outrageous. That’s absolutely ludicrous. That’s way too high.”

He agreed with Stanford sports economist Roger Noll that a multiplier of about 1.2 ought to be used — meaning that direct spending increases indirect spending very little.

Philip Porter, a sports economist at the University of South Florida and director of the school’s Center for Economic Policy Analysis, said the multiplier is way too high and the NFL, the host committees and now the comptroller’s office are using economic models designed to overstate the economic impact of the Super Bowl.

“I can guarantee you that there won’t be any $8.7 million increase in state taxes due to the Super Bowl,” Porter said.

James LeBas, chief revenue estimator for the comptroller’s office, said, “Reasonable minds will differ. I welcome diversity of opinion.”

Much as I’m rooting for Strayhorn to make life hell for Governor Perry over the next three years, I’ll be blunt here: She’s on crack, and her extensive track record of overly optimistic revenue projections does not instill any confidence in me. I guarantee you that someone is going to make her eat these numbers in 2006 regardless of what office she’s running for.

The other thing I don’t quite understand is why Strayhorn is making a big deal out of this at all. Senate Bill 275, the vehicle that allows for giving front money to Super Bowl committees, was designed to give power to the Governor’s office. From the press release on SB 275:

Senate Bill 275 renames the Texas Department of Economic Development as the Texas Economic Development and Tourism Office and makes it a division of the Governors Office with an executive director appointed by the governor.

You remember the Governor’s office, right? The one currently occupied by Rick Perry, the one that everyone and his mama thinks Strayhorn wants to be in? Who do you think’s going to claim credit for that $8.7 million – or, alternately, if it’s shown to be an egregious overbid, who’s going to point the finger for the bad math? Maybe Strayhorn thinks she’s a sufficiently better politician than Perry to outmaneuver him on this. I think she’s handing him a club and taping a “Hit me!” sign to her back.

I agree with El Gato here – this smells like a bad gamble to me, and I want to know how it turns out. And isn’t it awfully convenient how there’s always money for this sort of thing? At least we know where our priorities are.

Related Posts:

  • No Related Posts

4 Comments

  1. William Hughes says:

    If you allow for the rooms that will have multiple occupants, $373 per room sounds like a reasonable per-day average rather than $373 per person at the high end hotels. All the Motel 6 visitors will probably not be eating at the top restaurants in town, so $373 per person is definitely out there.

    As for the multiplier factor, there’s no way each dollar spent is going to end up as $2.30 in revenue down the line.

    If I’m not mistaken, Reliant Stadium holds considerably less than 104,000, therefore, the number of visitors can’t be that high now, could it?

  2. If I’m not mistaken, Reliant Stadium holds considerably less than 104,000, therefore, the number of visitors can’t be that high now, could it?

    69,500, according to its ownself, though the Chron article mentioned an extra 2200 temporary seats. I’m sure there’ll be some number of people travelling with non-game-attenders, but yeah, that sounds high, too.

  3. kodi says:

    Wow.

    Last night, I saw a piece on the nightly news about how Dallas is trying to keep the Texas/OU game, and they had someone saying that it brings in between $20 million and $200 million. I didn’t think even the $20 million was believable at the time. I guess they’re using a double-digit multiplier?

  4. […] Really? Looking back in my archives, Super Bowl XXXVIII here in Houston was projected to draw 104,000 visitors. I know JerryWorld is big, but it doesn’t hold that many people. Who are all these people […]