A Taxing Sports Equation

Categories: News

Really, by the time you get to the end of this, you'll feel much better about the Dallas Mavericks' loss last night. Really. If nothing else, you will be so confused you'll forget there even was a basketball game last night. But try.

I is not very good at the maths, so I can't say for sure whether the conclusions reached by University of Texas at Arlington sports economics prof Craig Depken and his University of Baltimore associate Dennis Coates in their new study are right; hell, I am not sure I can even tell you what they mean. (Actually, I think I can: In short, major-league sports teams are good investments for their owners, usually, but bad investments for the cities in which they play. Wait, did Sharon Boyd write this thing?) But I sense there are some interesting things to be found in their paper Mega-Events: Is the Texas-Baylor game to Waco what the Super Bowl is to Houston?, in which they analyze how much money a city makes from a sporting event. Specifically, they look at how much tax revenue a city like Dallas makes off an event like a Dallas Mavericks playoff game versus how much Prairie View makes when Prairie View State University plays Mississippi Valley State. The results are surprising. I think. Really should have paid attention during algebra.

First, to define what they call the "megaevent," which has different meanings in different places. In Dallas, a megaevent would be something like an all-star game or an NBA Finals, something spread out over several days and something "of national and international interest." In a town like Canyon, well, any ol' West Texas A&M University football game's a big deal; hence, that's a megaevent too. What that means, in short, is any regular-season Mavs or even Cowboys game doesn't merit the megaevent status; it's just a regular event (and, when the Cowboys are playing, sometimes not even that). And a home game of any kind at Southern Methodist University doesn't even register. Do they still have a football team there? But, funny thing is--and Depken and Coates found this "surprising"--regular-season college football games do make money for the cities in which the event's being played, though "unfortunately, this appears only to be true if the home team is from a lesser caliber conference" than the opponent. So, Mustangs, play the University of Texas or don't even bother showing up. In other words.


Also among the revelations:


"College football games are not the economic windfall their sponsors think they are. [And] some megaevents are associated with increased sales tax revenue. Not all megaevents are created equal, however, and the various events are associated with substantially different tax revenues. Moreover, some are linked with tax revenue reductions. Finally, regular season professional football games are far more harmful to local sales tax revenues than are college football games, even in the cities that host both."


What I think that means is: Arlington, you can have the Cowboys. Again, not quite sure.


Turns out that while you can't measure the "feelings of joy, pride and satisfaction" a town gets from big sporting events, it is fairly easy to figure out how many jobs and how much income and tax revenue they bring in if you look at things like monthly sales tax figures provided by the Texas Comptroller. That's what these guys did and found out, using the monthly Consumer Price Index and a formula that I swear looks like something hatched by a beautiful mind, that hosting things like Cowboys games actually cost a city like Irving (and Dallas) money, up to $570,000 in tax revenues or $7.8 million in "taxable activity," while a college football game actually brings in about $20,000 to $34,000 in tax revenue and almost $500,000 in taxable sales. "The result is surprising," say the profs, who conclude that college games actually bring in outsiders with money to burn while major-league sporting events draw mostly locals "who attend the game rather than do something else," like spend their money elsewhere.


"For the NFL and NBA, these results are not good. Both regular season and playoff games reduce taxable sales activity and sales tax revenues by statistically significant amounts. In fact, an NBA regular season or playoff game looks like a relative bargain. An additional regular season NBA game costs the city aout $16,000 in sales tax revenue while one more regular season NFL game reduces the sales tax revenues by $568,000. Interestingly, the disparity is much smaller when one looks at the playoff games. Still, presenting an NBA playoff game costs the city $126,000 in tax revenues and a Cowboys' home playoff game costs the city of Irving $156,000."

So, see, the Mavs' loss last night was a good thing for the city. Saved Dallas a small fortune in lost tax revenue. You say that's no consolation? We tried. --Robert Wilonsky


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