Our Ballpark and $3 Billion Extrapolations

In a Miami Today article, Michael Lewis argues that Miami-Dade Convention Development [MDCD] taxes would be better spent on upgrading existing convention facilities than being applied towards a ballpark for a MLB team. He does so under a splashy headline, ‘Building ballpark could cost county $3 billion every year.’ Given the fanfare, I was surprised that he put forth such an unsubstantiated main argument–uninterrupted investment in convention facilities are required to maintain tourism.

Some of the facts Mr. Lewis’ produces–amount of revenues derived from MDCD taxes–to make his case are mistaken. Mr Lewis is a well-respected commentator in Miami, I have no doubt it was an honest mistake, and I will show you exactly how it happened. But herein lies the beauty and utility of blogs. In a time not so long ago and not very far away, only a handful of individuals would have had access to the kind of information needed to refute a published commentator. Even then, the challenge of getting acknowledged still remained. No more.

Case in point, I read the article and wanted to dig a little deeper into his arguments. So I googled ‘Miami-Dade Convention Development Taxes 2007″ and the first 2 hits were relevant. The first one seems right, but the figures don’t match the ones quoted in the article. I try the second one, which did match the article. Which was right? Easy, the second one, the one Lewis quoted, is based on year-to-date figures [thru August] for comparison purposes. An honest mistake which really didn’t impact the argument, but still a nice reminder of the watchdog role over the media blogs can legitimately play.

I’ll cut through a lot of hokey baseball analogies–‘stadium deal is the equivalent of trading the Phillies’ starting lineup for Marlins’ mascot’–and list the arguments made by Lewis:

  1. Given the contracting economy, no time to use scarce tax revenues for MLB stadium.
  2. Economic benefits of a new stadium are exaggerated.
  3. Using the taxes for improving convention facilities is a better buy. Basing his arguments on statistics provided by the Greater Miami Convention & Visitors Bureau, he notes that the average visitor stayed 5.85 days and spent $245 daily, for a total outlay of $1,430. He then speculates that if visitors could be increased by 100,000 that would lead to $1,430,000 in additional monies spent. He further speculates that ‘spending multiples’ could double [actually closer to 210%, but we get it, he’s going for the nice round number] the economic impact of the 100,000 increase in visitors, giving him the big and round $3 Billion dollar amount he splashes on his headline.

Wow, this is going to be fun. First, let’s do some numbers:

  • If the average visitor spent $1,430 and they were taxed at a rate of 3%, then the average visitor paid $43 in MDCD Taxes.
  • Just to fill out our example, since there was $47.250 million in tax revenues in 2007, that would mean that the number of ‘average’ visitors would have totaled approximated 1.1 million in 2007.

A brief response to each point:

  1. Lewis disingenuously ignores the fact that the stadium is in fact part of a larger project–Megaplan–which includes infrastructure improvements, especially in downtown Miami. It is exactly those type of projects which governments should be engaged in during the current recession. The timing turned out to be very useful.
  2. I would not dispute his point that the economic benefits of a [any] sports franchise are exaggerated in terms of actual employment or taxes generated. But that’s the equivalent of a fan of the New York Cosmos in the 1970’s complaining about the signing of Pele, based on the fact that he was clearly past his prime. The fan would have been missing the point about what Pele would do for the entire league in terms of exposure. The fact that he actually played well was gravy.
  3. I applaud Mr Lewis’ restraint. He could have indicated that if the $3 BILLION were denied to the county for 100 years, the ballpark would cost us $300 BILLION!!! As Shakespeare once dryly never noted, you doth extrapolate too much sir!

Let me not be too coy, Lewis is full of it on point #3 and I’ll point out why. But first, here’s my main point for the stadium in terms of our community–leaving aside my selfish desires as a sports degenerate to continue having a hometown team. From reading Lewis’ article or other criticisms of the ballpark plans which focus on what the monies could be used for–important to note that they are specifically designated for ‘tourist-related facilities’–do you ever get the sense that those people understand why people visit South Florida?

I don’t. From Lewis’ article, you would think that there was a direct correlation between additional spending on convention centers and tourists. To paraphrase Malcolm Gladwell, convention facilities are like intelligence, beyond a certain competent threshold, the marginal utility of the benefits decrease significantly.

A lot of money is spent on advertising to promote tourism. No matter how good the ad campaign, they can’t approach what we get when–for example this past Sunday’s Dolphin’s game–announcers gush over the weather as a particularly beautiful image of our town fills the screen. I was going to say you can’t buy that kind of exposure, but we can. But it’s a front-end buy. The exposure ad buy is the ballpark. The Dolphins, Heat, Hurricanes and Marlins give us the kind of exposure that makes competing tourist markets teal with envy and inserts a subliminal bomb inside of head of tourists which goes off when they approach travel agents or log into Expedia. As such, we can not disentangle the overall lure of Miami from the aura of being a major league city, one of less than 30 nationwide.

You know how many people hear sports scores every day. The kind of people who want to get away to fun places on vacation. The kind of people who call up their organizations and say, ‘I don’t give a bleep about how nice the San Antonio convention facilities are, if you schedule this year’s convention somewhere other than Vegas or South Beach, I’m sure my kid’s gonna have a recital that weekend.’ Nobody stares off in the middle of the day fantasizing about upgraded convention facilities. The idea that a city with a tourism based economy should sacrifice the opportunity to have a MLB team because it’s other tourist facilities would rather not share tax revenues [shocking I know], seems to be short-sighted in the extreme.

Getting back to the horrors which will occur if we don’t spend another year’s worth of MDCD taxes on non-ballpark tourist facilities. A few questions which Mr Lewis fails to address in his article; Hasn’t money already been flowing into the those very facilities year in and year out? Why weren’t those upgrades noted made last year or the year before, or the year before that? Can the logic of ‘spending multiples’ be brought into a budget line item? Is there an identifiable or finite amount of spending required for ‘state of the art’ convention facilities? What studies or examples did Mr Lewis rely upon to believe that an additional year of undiluted MDCD tax revenues spent on existing convention facilities would cause tourism to increase by 10%?

Ballpark critics would do well to come with better arguments, lest they resemble Aesop’s [not Hee-Seop’s] classic tale.

Article referenced copied in full at end of post.

Building ballpark could cost county $3 billion every year

By Michael Lewis

Stadium talks between governments and the Florida Marlins are in extra innings. Contract deadlines have passed. Now dealings come up against a recession unanticipated during ballpark euphoria.

When tax revenue seemed endless, using a half billion dollars to help a team owner boost profits was rationalized as the price for keeping us Major League. But now, with taxes constricted and needs soaring, governments must exercise greater care with scarce resources.

Key criteria must be how spending can add jobs, buttress the economy and prepare us to overcome the doldrums. Under such criteria, baseball ranks dead last.

Set aside a deal Miami and Miami-Dade County have outlined with the Marlins that’s equivalent to trading the world champion Philadelphia Phillies’ starting lineup for Billy, the Marlins’ mascot.

The only defense of this well-documented giveaway is to claim it would give the community a huge economic boost even while it enriches Jeffrey Loria and his unnamed Marlins partners.

Unfortunately, it wouldn’t give any such jolt. Worse, it would rob us of alternate uses of funds to leverage our way out of the economic vice that’s squeezing us.

Baseball fans love trade talk and statistics. They’ll debate recent Marlins trades of two stars for a man with exactly 169 Major League at bats, a .240 batting average and no home runs, and their closing pitcher for a low-level minor leaguer who weighs 275 pounds. Net gain to the Marlins: dumping three large salaries and adding about $8 million to the bottom line.

Similarly, tradeoffs and statistics dominate the economics of community resources.

Building a stadium for $515 million, garages for $94 million to $156 million (depending on whom you believe) and infrastructure at untold costs (because nobody has totaled them) could yield four short-run public benefits.

One: construction jobs. They are vital, but any construction spending would create them. Costs per job would be similar.

Two: stadium jobs. They are also real, but they’re just shifted. They guy selling you a hot dog at Dolphin Stadium would either move to the new ballpark or lose his role to some new vendor. Shifting jobs is no gain.

Three: sales of tickets, advertising, sponsorships, concessions, parking and more. All those benefits would flow to Jeffrey Loria and Co. But again, the ones the Marlins don’t get today would just shift from the account of H. Wayne Huizenga, Dolphin Stadium owner. Shifting dollars is no gain.

Benefit Four is all a stadium could really boast: luring cash-spending visitors. That’s the only rationale for using Convention Development Tax receipts for the stadium and garages, because those funds by law must be used to spur visitor spending.

So it is in luring visitors that we’ll play the tradeoff and statistical game that baseball fans like me love. And those Convention Development Taxes could be spent far, far more effectively to boost our economy than by building a ballpark.

Convention Development Taxes here last year generated $33.6 million, all earmarked to aid the visitor industry. It is through bonding future collections that the county and city would generate cash for a stadium and garages.

Because this area has been booming, governments have relied on those taxes expanding forever. Last year collections were up 9.3%, the year before 8.9% and before that 17.9% following 18.1%.

But days of straight-up growth may not last. The first eight months of 2008 collections rose just 2% — and that was before the economy crumbled. We can’t bet on bigger forever, even with a Sept. 1 projection of 43 tax-generating hotels with 9,975 rooms scheduled to open in Miami-Dade.

Suppose that instead of baseball those taxes were traded to the visitor industry, where they belong. For just one example, put some into expanding and upgrading the Miami Beach Convention Center and suddenly we get a far bigger bang for far fewer bucks.

Like a stadium, hundreds of thousands of area residents use that center every year. But unlike a stadium, it also has a broad reach elsewhere.

That convention center competes nationally for meetings that attract both businesses and consumers. To compete in the future, however, it needs a ballroom that could serve banquets, better parking and high-tech electronic and audio-visual capabilities. A study soon will detail those needs.

Orlando and other communities have captured the biggest meetings. But, combined with Miami-Dade’s other advantages, an upgraded center still could lure hundreds of thousands more visitors a year. That’s statistically a far better use of the taxes than baseball.

By the numbers: The Marlins this year averaged 16,888 ticket sales a game (far fewer actually attended). That’s lowest in baseball by more than 3,000.

The Marlins play 81 games here a year. At most 1% of all Major League Baseball fans visit an area primarily to see a game, so the Marlins lured at most 13,689 out-of-town visitors this year. Compare that with Art Basel at the convention center, which in just three days next month will draw 10,000.

Even if the Marlins were to get the 37,000-seat stadium they seek, however, and even if they could sell every seat instead of the 45.9% they do now (worst in baseball), they’d lure just 29,970 out-of-town visitors a year.

Meetings and conventions, however, now attract hundreds of thousands a year more than that, and they face no ceiling other than community capacity. Adding 9,975 hotel rooms plus filling all present rooms would add far more. Hotels in Miami Beach, where 40.9% of all visitors stay, used only 76.9% of capacity in 2007, so growth can be huge. With billions invested in the new hotels, they deserve community support from a convention center enhancement.

The Greater Miami Convention & Visitors Bureau lent staffing last year to 421 meetings and conventions that had 243,000 attendees — and, unlike baseball, which lasts six months, they came here year-round.

That doesn’t include the large meetings that didn’t need bureau aid. Think of 8,500 people due in January at the Jewelers International Showcase, or 20,000 from around the hemisphere in February for the Printing Association of Florida, or 5,000 in April for the International and American Association of Dental Research. The list runs on.

With better facilities, we’d lure far more conventions bringing big spenders. Without upgrades, we could lose some of what we have.

And those meetings are vital to every county resident. Last year, according to the convention bureau, an average overnight visitor spent $244.54 daily, stayed 5.85 days and spent $1,430.56 while here, not including air fare. And he or she didn’t come alone: parties averaged 2.09 persons.

Add 100,000 visitors annually at an upgraded convention center and we add $1.43 billion in outside spending in restaurants, hotels, taxis, stores and more. Most workers in those industries live in Miami, Hialeah and throughout this county, so visitor spending in Miami Beach benefits all.

And each visitor dollar multiplies as it’s spent again, perhaps doubling. So we could easily add $3 billion a year spending impact by upgrading our convention center — or lose $3 billion of current impact by building a ballpark instead.

We could get that $3 billion annual bang for our buck for a $100 million one-time upgrade. Who’d want to trade that impact for spending half a billion dollars on a stadium to add just 16,000 out-of-town baseball fans per year?

These are days for smart spending to target economic growth. A ballpark just shifts dollars from H. Wayne Huizenga to Jeffrey Loria. A convention center upgrade brings billions a year to our community. The choice is obvious. A stadium strikes out.

About Jorge Costales

- Cuban Exile [veni] - Raised in Miami [vidi] - American Citizen [vici]
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