Why Super Bowls can be a super letdown economically

Promoters of giant sports events, like the Super Bowl and the Olympics, often wield economic impact forecasts as part of their arguments for convincing residents to support bringing the event to their city. Those forecasts often turn out to be far too rosy. Will that be the case once again as San Francisco plays host to Super Bowl 50?

Maybe not. According to a report released this week by PwC, Sunday's game will provide more than $220 million in economic benefits for the San Francisco Bay area. But that's a lot less than projections made in recent years regarding the National Football League's Championship Game, some of which have projected economic benefits topping $700 million.

Adam Jones, director, Sports and Tourism Sector, PwC US, noted that unlike most previous projections, the firm's forecast for this year doesn't include indirect benefits that the region will reap from the big game and focuses only on direct spending. Critics say forecasts that try to calculate indirect benefits of the Super Bowl frequently wind up inflating their projections.

Speaking of the PwC estimate, Victor Matheson, a sports economist at the College of the Holy Cross, said, "They are still high, but they aren't in the same ballpark as some of these other ridiculous numbers."

Even so, a Super Bowl's economic impact remains controversial, but organizers of Super Bowl 50 have sidestepped the issue -- at least for now -- by deciding not to make an estimate using faulty assumptions. Instead, they'll do a financial analysis after the game using data from local businesses, according to P.J. Johnston, a spokesman for the San Francisco Super Bowl 50 Host Committee.

Matheson applauded the committee's decision, arguing it represents a "significant improvement over recent practices." He added that "It's not like economists are against the Super Bowl. We're just against this claim that it's a growth engine."

Still, the committee believes the Bay Area stands to benefit from the "international television exposure for the region worth several hundred million dollars," among other things, according to Johnston.

"San Francisco will reap millions of dollars in additional direct revenue from hosting Super Bowl City, the NFL Experience and many other events throughout the city, through increased hotel tax, sales tax and direct private investment into local hotels, restaurants, bars, event spaces and small businesses," he said.

However, some local officials in San Francisco say they're getting a raw deal from the NFL because they're paying $5 million in costs associated with hosting Super Bowl festivities this week, while the league is picking up the tab for the events being hosted by Santa Clara, where Levi's Stadium -- site of Super Bowl 50 -- is located.

They've demanded that San Francisco Mayor Edwin Lee renegotiate the city's arrangement, but he has refused, according to media reports. A Lee spokesperson couldn't be reached for comment, and the NFL didn't respond to an email seeking comment.

Other recent Super Bowls in Arizona and New Jersey haven't proven to be good economic deals for their respective communities. Glendale, Arizona, lost money on the 2008 and 2015 Super Bowls. And East Rutherford, New Jersey, Mayor Jerry Cassella, whose town hosted the 2014 game, said most of the economic benefits went to neighboring New York City, where the majority of the game week festivities were held.

"We had some events in town that made a couple of bucks," he said, "but it wasn't a huge amount of money."

According to Cassella, the NFL believes communities that host the Super Bowl should feel honored: "Never mind about making money."

Super Bowl 50 is on Sunday, Feb. 7 on CBS.

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    Jonathan Berr is an award-winning journalist and podcaster based in New Jersey whose main focus is on business and economic issues.