Texas taxpayers on the hook for huge sporting events

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by BYRON HARRIS

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WFAA

Posted on June 29, 2010 at 10:50 PM

Updated Wednesday, Jun 30 at 11:24 AM

Why hold a Super Bowl in North Texas?

For the last several weeks, News 8 has been examining that question.

Supporters say one reason is the favorable publicity the region receives from the event. Another is tax revenue.

Next year’s Super Bowl at Cowboys Stadium in Arlington is supposed to generate $611 million in economic impact, and with it, tax dollars.

But a News 8 investigation shows that based on historical data from Texas, next year’s game may actually cost taxpayers more than it brings in.

The data comes from an analysis of what past mega sporting events have generated in taxes, compared with what Texas taxpayers spent to put them on. Click here for a detailed summary of how News 8 came up with the figures.

At the 2004 Super Bowl in Houston, fireworks went off, crowds came and party-goers roared. But the event didn’t generate tax money the way the game’s organizing committee said it would.

"The predicted numbers don’t match up with what we see in reality," said Craig Depken, an economist at the University of North Carolina at Charlotte. "That is a very real fact."

Depken and fellow economist Dennis Coates of the University of Maryland at Baltimore have analyzed 18 years of tax data from 23 Texas cities that hosted sporting events. What they find is a key measure of economic impact — retail sales taxes — often fall short of the rosy predictions from event organizers.

Super Bowl XXXVIII in Houston was supposed to gross $130 million. That outcome can’t be verified.

What can be verified is tax revenue, and based on numbers compiled by Depken, Coates and News 8, Texas taxpayers appear to have lost money on the contest.

In big sports events, major tax revenue comes primarily from three sources:

  • hotel rooms
  • alcohol sales
  • retail sales

Retail — comprised of taxes generated by restaurants, entertainment and merchandise — is the biggest of the three.

Depken and Coates found the 2004 Super Bowl generated $1.9 million, less than half of the $4.4 million the organizing committee’s consultant had predicted.

Texas taxpayers ponied up $8.7 million for Super Bowl XXXVIII under the state’s Major Events Trust Fund (METF), which is supposed to generate tax money by providing seed money to major events. All the money ever doled out in the six-year history of the METF has been to sports contests.

Combining Depken’s retail tax figures with documented hotel and alcohol taxes associated with the game, News 8 determined that Texans put up $8.7 million for Super Bowl XXXVIII, got back $6.5 million in real taxes, and ended up $2.2 million in the hole.

On the 2004 Major League Baseball All-Star game in Houston — using the same methodology — Texans lost nearly $2.8 million.

And on the 2006 NBA All-Star game in Houston, Texans lost $340,000.

Robert Wood, whose department dispenses METF funds at the Texas Comptroller’s office, is certain big sports events have a positive economic impact. "Any time you bring in out-of-state people into the state, you’re going to have an impact," he said.

Records obtained by News 8 show the state has granted $73 million to sporting event organizers since the beginning of 2004. Wood’s office doles out METF money under state law.

The host committees of big games, like the North Texas Super Bowl in Arlington next year, pay consultants to write studies saying how much money the events will bring in.

Then it’s up to Wood’s office to decide — based on the consultant’s study — how much money the state will donate.

No one has ever been turned down.

After the final whistle has blown, the comptroller does not check to see if the event generated the tax money the consultant said it would. “We don’t have the resources to check,” Wood said.

News 8 obtained all the consultants’ reports ever submitted to the comptroller’s office for METF money. Seven out of eight of them were written by one man: Michael Casinelli, who heads Marketing Information Masters near San Diego.

He lists his address as 3755 Avocado Blvd, Suite 442, La Mesa, California, but when we sent a camera crew to shoot footage of his office, it turned out to be a post office box.

Casinelli declined to discuss his methodology — either on-camera or over the phone.

In examining records, we found that in the case of the 2004 Super Bowl and the 2006 NBA All-Star game, the state actually gave the events more tax dollars than Casinelli’s studies had asked for.

In both of those cases, the games did not appear to generate the tax money Casinelli predicted.

“We do an analysis,” said Wood at the Comptroller’s office, “and that analysis is based on the best information we believe we have.”

The North Texas Super Bowl XLV Host Committee has another analysis.

In a speech last week in Dallas, chief financial officer Larry McCoy said the NFL has reserved more than 24,000 hotel rooms for the game. But Tony Fay — who also works for the the host committee — tempered that projection; he said the rooms had not yet been booked.

Speaking about the economic impact, McCoy said: “We expect nearly 2,000 jobs will be created in this region.”

Later, Fay backed off on that one, too. “The 2,000 jobs will be mostly temporary jobs,” he said. “That’s a number that the NFL has passed down from host committee to host committee.”

Academic economists like Craig Depken of UNC Charlotte appear to be the only ones who have worked out the hard numbers. “Hundreds of studies have found no impact,” he said.

Tickets for Super Bowl XLV will not be sold to the public. Ultimately, Texas taxpayers will donate $31 million to the event.

Based on historical data, it’s uncertain how much they’ll get back.

E-mail bharris@wfaa.com

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