Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, July 13, 1994 TAG: 9407220045
SECTION: EDITORIAL PAGE: A11 EDITION: METRO
SOURCE: AARON SMITH
DATELINE: LENGTH: Long
An example is the $623,991 computed by the city to be the economic impact for its football stadium in 1991. This was computed by adding 1991 gate receipts from high-school football games ($179,051) and Lions Club concession sales ($52,060). This direct-spending total was multiplied by 1.7 to compute an indirect-spending total of $392,880. Adding the direct and indirect spending resulted in the $623,991 figure.
But Salem was not the sole beneficiary of the stimulus. Almost half the gate receipts went to the High School Regional Council and to the Virginia High School League. Any economic impact generated by the stadium in 1991 benefited the entire commonwealth, and not just Salem.
Nor can anyone seriously say that Salem Stadium football attendees dipped into their savings to attend high-school football games. If they had not purchased tickets and concessions, the disposable income would have been spent somewhere in Virginia on shoes, meals, movie tickets, etc. The direct spending at the Salem Stadium in 1991 was merely redistributed disposable income. The net economic impact was zero.
Now, what about the report of ``projected economic contribution of professional baseball for the year ended Dec. 31, 1993 and projected economic contributions of professional baseball resulting from the construction of a new baseball facility,'' prepared at a cost to Salem's citizens of about $7,500 by the accounting firm that has been utilized by the Salem City Council for many years?
The report correctly states that ``total sales is not an accurate measure of economic impact since double counting of input purchase is usually reflected in total revenues'' and that ``a better measure of economic impact is the baseball organization's contribution to value added.'' Value-added contributions include only products and services produced locally.
Because professional baseball revenues in Salem are mostly a redistribution of existing disposable income, with very little net economic impact in itself, the major components of value-added contributions are personal income, interest income or returns to capital, land, rents and indirect taxes. Personal income is basically the gross income of those employed by or because of the Salem Buccaneers baseball club.
If personal income is the same as the total labor expense incurred, the direct value-added contribution by professional baseball from personal income in 1993 was $187,700. The total direct value-added contributions for 1993, as stated in the report, was $248,460. The report also states that the equivalent of 11 full-time employees were employed at the Salem professional baseball team in 1993.
According to the report, the total indirect value-added contributions were $735,500, or 2.96 times the total direct value-added contributions. The report further states that these indirect contributions resulted in the creation of 29.27 additional full-time job equivalents.
Indirect value-added contributions are legitimate. However, the indirect value-added contributions in the report appear exaggerated.
For example, the 11 relatively low-paid 1993 professional baseball full-time-equivalent employees (the average hourly rate for the 100 baseball part-time employees was $4.50 and the total payroll for both the part-time and six full-time employees was $187,700) are said to have generated a whopping total of 29.27 full-time job equivalents.
Accompanying a 50 percent increase in attendance at a new baseball stadium, according to the report, would be an increase of 47 percent over 1993, to 16.21, in the estimated number of full-time-equivalent baseball employees. However, the increase in direct value-added contributions from the 16.21 employees is stated as a dramatic 118 percent, to $541,735. Interestingly, indirect value-added contributions would increase only 22 percent, to $899,300. It still appears that the estimated increase in direct value-added contributions is exaggerated for a new baseball stadium.
Finally, consider the economic contribution of a large-scale special event (for example, a week-long collegiate baseball tournament) as estimated in the report. For each special-event attendee, the report uses the exaggerated average rate of spending per day of $112 from the Convention and Visitors Bureau of the Roanoke Valley. That may be accurate for a business person on an expense account, but it is too much for a person attending a week-long collegiate baseball tournament. It is very doubtful a week-long special event will have the stated total value-added contributions of $190,371 and will add the equivalent of 8.21 full-time equivalent employees to the Roanoke Valley economy.
Before the report, the annual economic impact for professional baseball in Salem most often stated was $2.6 million. Refreshingly, the report estimates the 1993 economic impact to have been a more realistic $983,960. However, even this more realistic estimate is, at least to some extent, an obvious exaggeration.
If Salem approves a new baseball stadium, there may be intangible benefits, but the expected ``payback period'' will be significantly longer than publicized because of the exaggerated economic impact, which is typically the case for sports and recreation facilities in Salem. A ``no'' vote will almost certainly result in a renovated Municipal Field (an alternative that even Buccaneers owner Kelvin Bowles privately admits is feasible) that will be less costly and take fewer years of perceived economic benefit to the Roanoke Valley to pay for itself.
Aaron Smith of Salem is a loss-control consultant for a local insurance company.
by CNB