Measuring Economic Impact: Movies vs Soccer

Some economic incentives the state of Utah offers are as perverse as they are difficult to quantify in regards to their effectiveness. Others are clearly good incentives, because they can be measured. Let's compare the Utah Film Commission with the Real Salt Lake soccer deal.

There are two ways to provide economic incentives. The first way is to offer them at the back end of the deal. This is what the Utah Film Commission is doing, and it is reaping huge dividends. The second way is to give away the farm and then hope that economic dividends will be seen far in the future. It helps to offer platitudes for the duration of your hopefulness.

The first incentive provides a way for measurement of its benefits. The advocates of the second one hope you don't notice that theirs doesn't.

The Utah Film Commission offers rebates to successful film companies following the filming of their show.

Utah began offering post-production performance incentives three years ago with the Motion Picture Incentive Fund (MPIF). Once a television show, movie or commercial shoot is completed, the production company can apply for a 10 percent rebate on the amount of money it can prove it spent while in Utah.

"For every dollar that goes out from the incentive fund, just under $15 come into the state of Utah," Schain explains. "That's a return on investment of 15-to-one. That's why 44 states offer an incentives. They offer it because of the enormous economic impact a film brings to their state."

The Utah State legislature and the Real Soccer deal? Well, they just give away $35 million of someone else's money and then say, "Trust me! It'll reap huge economic rewards!"

Comments

  1. You make a completely valid point about incentives, and the Film comission is a shining example. This however does not mean the RSL/stadium agreement can be boiled down to simply "Trust me! It'll reap huge economic rewards!"

    RSL has in fact "proved" its contribution to the Utah economy. During it's first two years RSL has brought two international events to Utah with a combined economic impact of $28m.

    Because $20m of the $35m was already going to be spent building a parking structure in Sandy, the RSL deal amounts to an additional $15m. If RSL's econmic impact continues at 1/2 its current annual rate, the infrastracture improvments will have paid for themselves after just one year.

    There are perfectly justifiable reasons to oppose the stadium, but lack of verifiable economic impact is not one of them.

    ReplyDelete
  2. Marsz,

    Thanks for your input. I would like to study this further, and if necessary, make changes to my article. Do you have some references that I can study to better understand the potential positive economic impacts?

    ReplyDelete
  3. Frank, check out this link
    http://www.findarticles.com/p/articles/mi_qn4188/is_20060812/ai_n16652957

    Between the Real SL vs. Real Madrid game and the U.S. vs. Costa Rica - the team brought in an estimated 25-30 million in economic activity. All of this for about 7 million dollars (I get that figure from 35 million- 20 million for a parking garage that would happen regardless of the stadium, 8 million towards the land which the county will own and then leases it to Real, which leaves 7 million for infrastructure such as piping, water, etc.) That is a pretty good ROI when you think 7 million brings 30 million in economic activity in 2 years.

    I am not saying it is that clear-cut. I am also not saying that this is not advantageous for the Real, but what I am saying is that it is a GOOD public/private partnership hence the public subsidy, as has always been shown in public sports. Restaurants in the area will be visited more from people outside of the county and state (for big games like world cup qualifierrs), real estate value will increase. Don't be fooled into thinking that transient room tax can go to schools or law-enforcement-It can't. Also don't be fooled in believing that this money will come out of Utah tax payer's pockets. Essentially all it does is increase the tax that someone pays when they come in state rent a car and stay in a hotel. Visitors to Utah will not notice an extra .25 in tax to rent a car or stay in a hotel room for something that clearly has generated economic activity in utah already.

    ReplyDelete
  4. It is interesting in the article that estimates are $12.7 million was brought in from non-Utahns, so you raise a good point.

    Also, I am educated by your reminder (I hadn't really thought much about it) that the tax money used to fund this comes almost exclusively from out-of-staters (it appears that in-staters would have to pay the tax as well if they stay in a hotel)

    I am still bothered by the fact, though, that SL County did not feel it was economically viable, yet it was their tax money the state encumbered for the eventual deal.

    ReplyDelete
  5. "[Competitive sports] is a way of building up irrational attitudes of submission to authority, and group cohesion behind leadership elements -- in fact, it's training in irrational jingoism."
    --Noam Chomsky

    No wonder the State of Utah felt compelled to devote tax dollars toward erecting this new temple to obedience.

    ReplyDelete

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