The return of LeBron James to the Cleveland Cavaliers has obviously created a great deal of excitement in Ohio. Beyond the various obvious fact that the Cavs stand to improve considerably and likely contend for titles for at least the next couple seasons, there's a sense that LeBron's homecoming could help build greater civic pride. Cleveland doesn't just stand to have a better basketball team — it could be a city where the most talented people genuinely want to be.
The return of the star forward to his hometown Cleveland Cavaliers will have a $500 million a year impact on the local economy, with a boost from additional ticket sales and other spending, County Executive Ed FitzGerald said today. The 2016 Republican National Convention in the city will bring an additional one-time windfall of $200 million, he said.
“It generates real money for the local economy,” FitzGerald, a Democrat running for governor this year, said in an interview after a press conference in Cleveland. [...]
Based on calculations by the Cuyahoga County Fiscal Office, James’s return will increase the benefit from Cavs games alone to about $268 million. Average attendance increased from about 12,000 before James joined the team to about 20,500 during his final season, the county said. Although attendance has slipped, officials expect sold out games next season with James on the court.
Other spending increases will come at restaurants, convention business and hotels, FitzGerald said. Anticipated benefits include a $34 million increase in annual spending by fans at games to $170 million a year plus 500 additional jobs supported by the Cavaliers, the county said.
There's good reason to believe that LeBron will bring a considerable benefit to the Cavs' bottom line, if only because they're virtually guaranteed to play several home playoff games with the most talented player in the sport on the roster. Additionally, the franchise could raise ticket costs to among the most expensive in the NBA, a massive boost from the prices since James left Cleveland in 2010. Yes, most of the $500 million cited by FitzGerald figures to affect the bottom line of a single business — the Cavs — but it stands to reason that more interest in the team will lead to greater profits for surrounding businesses and the city via taxes.
Of course, that doesn't mean these estimates are entirely accurate or that we should herald the Cavs' basketball fortune as an overwhelming positive for Cleveland's economy. For one thing, FitzGerald — really any civic official, not just the guy running for statewide office — has good reason to present the city as in as strong financial health as possible. For instance, the estimate of the benefit of the 2016 Republican National Convention depends on interesting accounting logic. According to Diana Lind of Next City, the 2012 RNC in Tampa was said to have brought $214 million, but that figure depends on counting $125.3 million in telecommunications and utility improvements as related specifically to this event when they probably would have happened regardless, although perhaps on a different schedule. In fact, studies of the 2004 Democratic and Republican conventions shows that economic benefits were relatively minor compared to initial claims, to the point where it would seem prudent to consider any early estimate an exaggeration just because the math eventually adjusts for it anyway. The reason for these optimistic figures, naturally, is that the cities have to pay for the right to host the events. Cleveland must put $68 million into escrow for the right to welcome Republicans in 2016 — though they also receive federal benefits for holding the event — and it's always good to convince citizens that it's worth the investment.
The city didn't have to pay anyone for the right to welcome LeBron back into its loving arms, but Cleveland does gain when the Cavaliers sell more tickets. Niquette explains further in his Bloomberg article:
There will even be a boost to debt-service payments because revenue from an admissions tax is used to help support about $9 million a year for the $120 million in bonds that the county issued in 1992 to build what is now Quicken Loans Arena where the team plays, said Nathan Kelly, county deputy chief of staff for economic development.
The county expects a $3.5 million increase in admissions tax to put toward debt service -- making up for a similar sum that the county had to cover from its general fund after James left and attendance fell, Kelly said.
Essentially, the return of LeBron helps Cleveland because it makes it easier to cover the initial cost of Quicken Loans Arena, which first opened its doors 20 years ago. The economic benefits of new sports stadiums are almost always oversold and in many cases prove to be financial debacles. While that doesn't meant they're always bad ideas — sports teams can bring widespread social benefits outside of their economic impact — it does suggest that city officials feel a need to justify initial payments whenever possible.
To be clear, none of these points guarantee that FitzGerald's estimates will be incorrect — it's just wise not to treat them as fact. Cleveland has many reasons to feel great pride over LeBron's latest decision. It's just that feeling joy on and around the court doesn't necessarily translate to economic benefits for all. To adjust a common cliche, a city's business and pleasure often don't mix.
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