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Denver By 6 and $722,000,000.00: Devil Resides In the Methods of Calculation of Promised Economic Impact

It's Super Bowl weekend.  Seattle and Denver, laid back versus buttoned down, offense versus defense, Peyton's businesslike old guard versus Carroll's "wheeee! it's fun!" new way.  Oh, and the game is taking place in New Jers- uh, New York City-ish.  Call it whatever you want, but don't call it boring.

We can talk and talk and talk about the actual game, but what interests us most is the economic impact of "The Game".  This interests us because the means by which the economic impact of anything is measured is always a secret sauce -- a new factory, for example.  Though, critically, North Carolina is known for its transparency on the "front end" of such things. 

The NFL promises hundreds of millions of dollars in economic impact to a Super Bowl's host city.  In 1999, in a study published jointly by the NFL and the Sport Management Research Institute -- yes, published by the NFL, itself -- it was stated that Super Bowl XXXIII (Elway's final game, a 34-19 win over former head coach Dan Reeves's Falcons) -- injected $393,000,000.00 into the South Florida economy. 

But, are these numbers correct?  Well, more accurately, are these numbers "honest"?  There is no way to measure total economic impact accurately, which makes the final number presented as much marketing as math.  "Mayor, is there any way we can add another $45 million if it's sunny on the day of the game?  I mean, people like it sunny, and someone probably bought sunglasses as a result; you know, multiplied by the 225,000 people we anticipate to descend on Our City."

But what we can do is discern the methods of calculation to determine how comfortable we are with the promised impacts.  For example, the method of measuring impact in Jacksonville needs to differ from that in NYC; we don't have the information handy, but we'd venture that the hotel room vacancy rates in a "non-game" January in Jacksonville are significantly higher than the vacancy rates in a "non-game" NYC, which means the assumptions must differ.  In an accessible and interesting enough study, two academics (Matheson of Williams College and Baade of Lake Forest College) review the methods employed in various studies of economic impact to determine the more realistic, the more economically sound methods for predicting or speaking in hindsight about economic impacts of a Super Bowl.  The conclusion of the paper, generally, is that most studies --  and certainly the NFL -- overstates the economic impact on the host city of The Game.

So, what does this mean for us?  When presenting a development project, where incentives or other promises are "on the line" or otherwise contingent, make sure the methodology employed in communicating with the local government, the business, the public is sound, fair, understood, agreed upon and caveated.  It's difficult to predict outcomes but it is possible to control the means by which those outcomes were promised and a manner in which disagreements can be corralled.  Transparency will continue to be the grease for public and private collaboration in North Carolina.

Enjoy the game.  We'll take the Broncos, and we'll give the Seahawks $722,000,000.00.  Wait, I mean we'll give the Seahawks the 2.5.   

Copyright © 2020 Womble Bond Dickinson (US) LLP All Rights Reserved.National Law Review, Volume IV, Number 31

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About this Author

Michael C Thelen, Womble Carlyle, Real Estate Litigation Attorney, Entitlement Negotiations Lawyer
Partner

Mike represents myriad clients – from Fortune 500® companies to smaller, privately-owned organizations – in cross sections of business throughout the many stages of federal and state litigation.  From his years of practice in New York and North Carolina, Mike primarily has experience in the areas of land use, local/municipal government law and real estate litigation, having handled zoning, development agreement, land use planning, eminent domain and condemnation, construction, retail and commercial landlord-tenant, partnership dissolution, state law torts, and civil fraud matters, to list...

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