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WCCO Second Look: Super Bowl Economic Impact

Examing the real financial impact on the Twin Cities and Minnesota

June 01, 2018 - 12:24 pm

Tuesday's announcement about the net economic impact of last February's Super Bowl LII might have reminded you of that very cold but also exciting week of football and related festivities in Downtown Minneapolis. 

The NFL, and many well-heeled Super Bowl fans came to the Twin Cities to experience our very cold weather.  They also experienced the warm hospitality provided by thousands of volunteers working for the organizing committee and thousands more working at the hotels where they stayed, the restaurants where they ate, and the various Super Bowl Experience venues where they visited.  Maybe even zip-lined over the Mississippi!

So what did we get out of it all economically?  We got one view in Tuesday's report released by Rockport Analytics, a consulting firm located in West Chester, Pennsylvania, and hired by the local host organizing committee to give them such estimates.  Last May, Rockport produced a report estimating that "MSP will realize a net new contribution to the regional economy of $343 million, during which over 5,000 jobs will be supported at an array of local businesses paying wages of $242 million." 

According to Paul Vaaler, Associate Professor and John and Bruce Mooty Chair in Law & Business Strategic Management & Entrepreneurship at the U of M’s Carlson School, Rockport largely patted itself on the back with a retrospective analysis claiming that the "net SLB spending was actually $370 million" with additional "ripple effect" of $108 million. 

Did Rockport underestimate the economic impact for the Twin Cities according to their report?  It was such a great deal economically that Twin Citians and greater Minnesota netted hundreds of millions of dollars, essentially covering the nearly $500 million in public money we all spent to build US Bank Stadium where the game was played?

According to Vaaler, that's what Rockport, the local host committee, Governor Dayton, and the NFL would love for you to conclude.

“It would surely be the wrong conclusion to draw.  As I have noted before in this space and on the air at WCCO Radio, economic models are only as good as their assumptions, and many of the assumptions in models Rockport used are likely off, and I mean, way off from anything reasonable”, says Vaaler.  

Vaaler points out two examples from the latest report. 

Example 1:

Rockport tells us that a few 5490 jobs were "supported" by the Super Bowl and that accounted for $273 million in wages.  A little division down with paper and pencil suggests that the Super Bowl created 5,000 new jobs paying, on average, about $50,000.  A year?  A month?  A week?  That's incredible.  And it is. 

Example 2: 

Rockport tells us that the Super Bowl generated tens of millions of dollars in economic impact derived from full hotels charging 230% of the normal rate.  As Vaaler says, “Congratulations to those hotels, many of which are named Marriott, Hyatt, and Hilton.  Of course, that money went to Marriott, Hyatt, and Hilton executives and shareholders located outside of Minnesota.  I am pretty sure that those hoteliers didn't raise the wages of their desk clerks and room cleaners by 230% during the same period.  Again, it's incredible.” 

Vaaler also told WCCO, “numbers estimated in the Rockport models need substantial adjustment onward for various factors including the revenue "leakage" effect.  Once we look harder at the assumptions in the Rockport models we'll likely find a much lower number than $370 million or more than $450 million estimated.”

A more conservative but also more tangible measure of economic impact is gleaned from review of state and local tax receipts from different activities in the Twin Cities --there really wasn't much for Greater Minnesota to tax, even though they also contributed to the US Bank stadium public "investment" earlier in the 2010s.  After adjusting for various factors including year-to-year regional economic and population growth, we'll find that the tax receipt impact was modest --in the $30-50 million range.  And other factors might contribute another $30-50 millions in truly new economic stimulus. 

So, let's call the total economic impact of the Super Bowl about $80-100 million.  Not bad...if we ignore the nearly $500 million we had to spend to build US Bank Stadium and land the Super Bowl years ago. 

Was it worth it?  Maybe the question to ask is slightly different.  Given that US Bank Stadium was built, was it worth it? 

In response, Vaaler says, “Maybe yes, because the Super Bowl probably did boost the Twin Cities economy.  It wasn't nearly as much as Rockport and their clients boast, but it was positive.  But maybe "no" because this boost came at a substantial price to taxpayers from the whole State of Minnesota, not just those of us living in Minneapolis or the Twin Cities.  Think of how $500 billion could have been used to fund pre-K education, fix bridges, and pay for tax cuts that all of us in Minnesota could benefit from directly and substantially. The whole process of spending hundreds of millions of dollars today to try and lure tens of millions of dollars in economic benefit later seems to me to be pretty risky economic policy with few broad-based potential economic benefits.  Let's celebrate the warm welcome and smooth operation of Super Bowl LII here in Minneapolis.  But then let's think hard about when and how we might do something like this again with our precious tax dollars.”