Study: NBA arenas just as lousy for local economies as other sports venues

fieldofschemes-BurnsRatnerfieldofschemes.com (Aug. 9, 2012) – If you’re behind on your reading of The Journal of Urban Affairs like me, you may not have yet seen George Washington University grad student Geoffrey Propheter’s February study of the economic impacts of basketball arenas. Fortunately, Atlantic Cities has noticed (though apparently not that the study is six months old), and has a substantial report on Propheter’s findings.

Arenas, as Atlantic Cities’ Richard Florida notes, are likely to provide the best economic bang for the buck of sports facilities, given that they come with slightly cheaper price tags than stadiums and can operate 200-plus days a year, what with concerts and the like. Propheter ran “a series of multivariate analyses” of income in cities with new NBA arenas — a la Robert Baade’s classic studies of cities with new buildings in all four major sports — and, Florida writes, came to the conclusion that there was “no statistically significant association between having an NBA arena or an NBA franchise and MSA regional personal income.”

Propheter did note that a handful of cities (Atlanta, Boston, Chicago, Denver, Indianapolis, and Oklahoma City) appeared to see income gains, but this was likely the result of “income transfers from the suburban area around the central city” — i.e., the same money was being spent in the region, it was just being spent downtown instead of at the local Olive Garden. Basketball-only cities with new arenas since 1995 — that’d be Portland, San Antonio, Orlando, and Memphis if I’m counting right — also saw a positive impact, presumably again because the NBA was the only thing that was going to bring people downtown. But since the overall effect was pretty much zero, this means that other cities actually saw income decline with new arenas, which is less promising.

If all this sounds like I’m going entirely by the Atlantic Cities report and not Propheter’s original, you’re right — my subscription to The Journal of Urban Affairs must have, um, lapsed. Once I track down the study itself, I’ll post any additional interesting findings.

UPDATE: I now have Propheter’s paper, and it looks very solid — it even includes a time variable to avoid attributing too much economic impact to the honeymoon effect that ramps up interest in new sports venues for the first few years. It also compensates for regional economic strength — one of Propheter’s key arguments is that cities aren’t economically successful because they have new arenas, they’re attracting new arenas because they’re economically successful — and finds:

Finally, Model 6 examines the most recent set of arenas completed during 2001–2009. After controlling for economic strength, the impact of an arena is negative and is significant at the 96% level; each facility is associated with a real per capita income decline of $2,430. … Contrary to previous research, then, newer and more expensive facilities with greater amenities do not boost regional economic development.

There are enough variables at play here that it’s probably unfair to say, “Build an NBA arena and your per-capita income will fall by $2,430.” But it’s certainly further evidence that if there’s any net gain to cities from building sports venues, you have to squint awfully hard to see it.

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