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As Minnesota considers a new Vikings stadium, let’s consider the value of a team

There is much talk about how a Vikings stadium should be financed. Some think statewide taxes should be used, some advocate metro county taxes. Others, of course, say the Vikings should pay for it themselves.

There is an old rule in Congress that a bill should be analyzed under the rule of “Cui Bono.” That means “Who Benefits.”

Determining benefits has been the focus of economists for some time. When the Metrodome was built and financed, the prevailing view was that there was an economic multiplier that would produce “benefits” that were seven times the cost of the stadium, and revenues from the building were multiplied, too. Over time, however, that multiplier effect was discounted by economists who began to say that the money could be spent anywhere so that all the building did was move money around — hence, no real economic benefit.

I have had the honor of collaborating with notable sports economists and we developed a new theory that describes the benefit of providing facilities for professional sports franchises. This “Abstract Benefit Theory” focuses on the psychic benefit people enjoy because of the team’s presence.

The multiplier effect in action

For example, you credit the stadium account with a quarter each time a fan says, “Hey, weren’t the Vikes great (terrible) yesterday? They’ll beat (lose to) Detroit this week.” This is difficult to measure, and you can use a dime or a dollar as you wish; the point is there is a benefit. We can assume that all of the people who watched the game on television shared the experience with someone else. So, if half of the state watched or listened to the game, and each of them made 10 mentions of the Vikings the next week, if we use the quarter, we have raised $100 million just from water-cooler chats during the season.

University of Chicago Economist Allen Sanderson wrote about this [PDF]:

… a local sports franchise may create external benefits for local residents who never attend games. Fans may follow the team in the newspaper and watch games on television, while never attending an event. A local team provides a topic for conversation around the water cooler at work. These benefits can be of value to many local residents and may provide broad political support for a public subsidy to a team.

The psychic benefit of having the team here is very real. Let’s add $1 per person to our subsidy for that. We are now at $105 million in value per year. The psychic benefit is shown by what we wear, so for everyone who wears Vikings’ trademarked hats, jackets, T-shirts, sweatshirts, hoodies, jackets or pants, we can add another $5 million just for the billboard effect. My son wears all of these and has a flag on his car. So we have $110 million.

Now let’s take a look at the value to kids who fall asleep thinking of running like Adrian Peterson or sacking a QB like Jared Allen and have Viking portraits in their bedrooms and Viking book covers on text books. The value of this, as the ad says: Priceless. You ask a kid what their dreams are worth, multiply by the number of kids, and add that to the total.

Move over, Santa

One of the best examples of the benefit to kids is from pre Super Bowl New Orleans:

At a Christmas party, the kids are all crowded around Santa Claus … until the arrival of Gumbo, the beloved St. Bernard-costumed mascot of the Saints. The kids flock to Gumbo, and there are screams and hugs and photos and, in the madness, a few of the adults look over to see Santa, totally alone and ignored, trying to figure out what to do. Eventually, they said, he just left.

This is the impact on kids and it exists in Minnesota too. We just don’t have big St. Bernard to hug, we have a towering Viking.

This leads to the next question, what do you pay to recover a lost franchise? How do you value the lost benefits I’ve mentioned? What do you tell the kids?

When you figure that out, you will recognize that to have the Vikings as a partner, paying hundreds of millions of dollars for our stadium, is the biggest benefit. The current plans ask for $46 million to cover the state’s annual portion of the debt. The Vikings already pay the state $21 million in income and sales taxes, so for $25 million more, we benefit at least $110 million worth every year and much more when you add in the kids’ valuation.

This is about kids today and tomorrow, and for the dreams and aspirations of all Minnesotans who take comfort in having the Vikings in our state.

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Comments (1)

  1. Submitted by Brad James on 03/26/2012 - 09:23 am.

    haha

    There are plenty of things to do in this area. If the Vikes leave, the Gopher would likely rise to the prominence they enjoyed before the Vikings showed up. If the multiplier effect is really important then the Vikings can finance it privately.

    And no I will not meet the author outside a restaurant to discuss the matter.

    http://www.startribune.com/local/minneapolis/143733716.html

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