Is the economic impact of LeBron James' return to Cleveland more than a feeling
CLEVELAND, Ohio Call it the LeBron James Effect.
Or, if you prefer, LeConomics. They're the economic ripples James creates throughout the community simply by playing basketball in Cleveland.
At The Q, where James has the Cavaliers looking like a legitimate contender to win the franchise's first NBA title, ticket sales are up. That means beer sales are up. Food sales, T shirt sales, and parking revenue all up.
The bars downtown, especially the ones the closest to The Q in the Gateway District, are having their best winter since, well, since James last played in Cleveland four years ago.
Bar owners are reporting revenue increases on game nights of between 30 and 200 percent from last season. And they're keeping their bartenders and waitresses on payroll instead of laying them off until summer.
Cuyahoga County's sales tax receipts were up roughly 10 percent in November and December from the same time a year ago. Same for the hotel motel tax.
Cleveland is back on the NBA map which spans the globe with about 30 national TV games. Nike, Sprite, and other corporate sponsors have poured millions into promoting James, and by proxy northeast Ohio.
But with LeConomics comes a more complex truth: The actual, direct financial impact James is making on Northeast Ohio is measured, and is almost certainly less (likely far less) than the $500 million predicted in the euphoria immediately following his July 11 announcement that he was coming home.
This isn't bad news, or evidence of any failure on the part of James or the Cavs, or the region's business community. Rather, it's a reality check: There's only so much money one athlete or one sports franchise can bring to a region.
"The $500 nike water shoes million number, I agree, is outlandish," said LeRoy Brooks, an emeritus professor of finance at John Carroll University. "But there is a positive economic impact, a net, material impact."
View full sizePanini's in downtown Cleveland displays banners supporting the Cleveland Cavaliers. Last season, the team averaged 17,330 fans per game, with five sellouts. This season the Cavs will sell out The Q for each of their 41 home gamesJoshua Gunter, Northeast Ohio Media Group
Brooks was one of the original sources of the $500 million impact figure. Another was then Cuyahoga County Executive Ed FitzGerald, a Democrat who was also running for governor at the time and looking for ways to break into the positive news cycle of James' return.
FitzGerald said James alone would generate $50 million yearly for the region and his administration said the post James Cavaliers would generate $500 million.
For Brooks' part, he said $500 million was only his first estimate, made in haste at the demand of reporters while he was away from his spreadsheets to attend the birth of his grandson. His more recent estimates include a low end of $162 million, which he concedes could also be high.
A spokeswoman for new Cuyahoga Executive Armond Budish said the county is waiting for nike shoes black and white more data, including the revenues brought in by a nearly certain Cavs playoff run.
"It's still too early to assess the total economic impact of LeBron James' return home, but we expect it will show a positive improvement," said Emily Lundgard, a Budish spokeswoman who previously worked for FitzGerald.
For instance, a 2010 study by The Plain Dealer and economists showed James played a "key role" in $200 million in downtown spending annually, including $150 million during the playoffs.
To get to $500 million, assumptions were made that every dollar spent in the region was tied to James. Additionally, both Brooks and FitzGerald's administration predicted various boosts in tax revenue, jobs, and spending.
But their estimates didn't account for where the money would come from ignoring a basic economic principle. To have a net positive impact on the regional economy, James would need to generate dollars that otherwise would not have been spent at all in Northeast Ohio.
"The people come to the games, but where do they live? If they live in Strongsville, then what we're seeing is a shifting of entertainment bucks," said Edward "Ned" Hill, an economist at Cleveland State University. "If it's coming from way outside the region, then it's new spending.
"But that's not what we're seeing. We're seeing more people in the bars and restaurants downtown, and probably less so at the movies or at restaurants in Strongsville or Avon."
Illustrating Hill's point in dollars and cents, Cuyahoga County enjoyed an increase in sales tax revenues of roughly $1.55 million in each of the first two months of the NBA regular season, for an approximate 10 percent increase.
But statewide, the average increase in November (the last month for which data for all 88 counties is available) was 11 percent.
"Even if there are marked changes in sales tax revenue, they are probably due to the fact that the overall economy improved in 2014," said Joel Elvery, an economist with the Federal Reserve in Cleveland.
When FitzGerald's administration released it's $500 million estimate in July, it assumed the creation of 550 jobs related to James.
In November and December, the Cleveland Elyria Mentor region (as counted by the federal government) added a total of 1,600 jobs. But the region also lost 900 hotel and restaurant jobs the kind of jobs most easily associated with added entertainment value downtown.
Cuyahoga County's hotel motel tax collections jumped by $28,000 in November and $368,000 in December. Also, according to STR, which tracks hotel occupancy globally, the increase in demand for hotel rooms in Cleveland (8.6 percent) was higher than the national nike outlet store average of 5.8 percent.
But James likely had little to do with this. According to the Cavaliers, about 40 percent of the people who come to The Q reside in Cuyahoga County, and a large majority lives in Northeast Ohio.
"There's no math out there that he brought $500 million into the region or that he's going to," said Gbenga Ajilore, an economics professor at the University of Toledo who teaches a course on economics in sports.