Scathing Baylor Study Reveals Cheap Magic Tricks In State Fair Data
Most of the so-called "Economic Impact Analyses" used to justify putting tax money into private projects are rabbit-from-the-hat parlor tricks.
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Yesterday afternoon Baylor University released a study of Fair Park and the State Fair of Texas that is a searing indictment not only of the fair and the city’s park department but of the basic integrity of Dallas city management.
The State Fair, backed up by city staff and the city manager, has been telling people for years that its annual attendance is north of 3 million visitors. The Baylor report estimates true attendance for the fair at 1.7 million visitors or less.
In arguing that taxpayers should invest more money in the park and the fair, the fair and City Hall have been telling the public that the State Fair alone contributes $608 million a year to the local economy. The Baylor report puts the fair’s contribution at $30.9 million—about five percent of the amount claimed by the fair.
For an academic study, the Baylor report, authored by Tom Kelly, director of the Baylor Center for Business and Economic Research, and Bennet Hickok, is scathing in its language, especially when speaking of claims that the fair and City Hall have made in recent years for the fair and the park’s “economic impact:”
In fact the State Fair has not provided supporting evidence for any of its claims nor has it released a single economic impact study. The estimates themselves vary so widely that future city planning based on them would be both difficult and unwise.
The study says the fair’s attendance claims are totally unsupported and probably wildly inflated:
No reliable data confirm State Fair attendance is 3 million as published. Available evidence indicates attendance, not counting employees or football games, is between 1.5- 1.7 million.
One of the measurements that indicate the claimed attendance figures are way off, the study says, is hotel occupancy during the fair. State and national norms predict how many additional hotel rooms should be occupied if attendance is 3 million with 15 percent of that attendance coming from outside Dallas County, as the fair and the city have claimed:
Increases in hotel occupancy during the State Fair are so negligible that even a conservative estimate of 1.9 million State Fair visitors appears to be high. When compared to these figures, the current attendance claims by the State Fair are impossible to defend.
The report even suggests the possibility that the true economic impact of the fair on the local economy may be negative – that it takes more money out of the economy than it puts in. That happens to be the effect that Fair Park has on the land around it all year round, even when the fair is not in residence.
Large urban parks are supposed to exercise what the real estate industry calls a “park premium.” That is, land near the park should be worth more than what land farther away. When the Baylor study looked at the Fair Park park premium, it found that it was negative. For all the talk of Fair Park being locked inside a difficult area, the study found that land close to Fair Park is worth less than land farther out into the surrounding neighborhoods. The difficult neighbor, it seems, is Fair Park.
But the real bottom line in the study is more about City Hall than Fair Park or the Fair:
Here is perhaps our most important conclusion. If previous assessments of fair Park’s economic impact have caused officials to think that the status quo is working well, then the City of Dallas is misinformed.
The Baylor study is appearing after we have earned that city staff has been attempting to shut down or head off other serious academic studies of the economic impact of the fair and Fair Park. Steve Thompson at The Dallas Morning News did a great story last week on the inability or refusal, take your pick, of the State Fair of Texas to provide comprehensive attendance figures. The State Fair, main tenant of the 277-acre Fair Park one mile east of downtown, is at the center of a debate on reviving the park.
Down toward the bottom of Thompson’s story, he mentioned that the University of Dallas MBA program had offered to do a serious economic impact study of the fair and Fair Park, but Park Department officials had turned them away. Park Director Willis Winters told Thompson in an email that he didn’t want a study done in which there might be “apples to oranges comparisons” with a study Winters has commissioned from a private consultant.
Thompson quotes John Crompton, a professor at Texas A&M and an expert on parks and recreation, who sort of explains in a few phrases what’s wrong with the kind of studies people tend to buy from consultants. Crompton is also cited in the Baylor study as one of the nation's most credible experts on economic impact studies for fairs and recreational assets but also on the "shenanigans," as Crompton calls them, of consultants seeking to make those impacts look better than they are. I called Crompton yesterday and asked for a little more detail.
He said one of the most common tricks used in so-called economic impact studies is the lumping together of money spent by local people – the people who already live within the impact area – with money spent by outsiders, as if it were all one big plus for the local economy. But only the money from the outsiders is a true plus.
“Clearly (the local) people are spending money at the State Fair that they would have spent elsewhere in the city of Dallas,” he said, by way of example.
So, in other words, the dollar that I spend at the fair may impact the fair positively, but it comes out of the pocket of some other local merchant. And in fact, lumping my money in with the money spent by an outsider is even worse, because of something called the “multiplier effect.” That’s the amount of economic activity created by my spent dollar as it passes from hand to hand after I spend it.
Crompton points out that the dollar I spend with a local merchant has a higher multiplier effect locally than the dollar I pay to some carnie who’s headed off to Louisiana as soon as the fair ends.
“Generally speaking, you are going to find that the retail multiplier is higher than the multiplier that goes into the State Fair. So in that situation you also have to apply the multiplier on the negative side that didn’t get spent in retail.”
Get it? If the consultant is going to get all multiplier about it and start telling us that the money spent at the fair just multiplies and multiplies like rabbits after we spend it, then the same consultant should apply an even higher multiplier to the money that local merchants didn’t get because we didn’t spend those dollars with them.
“You will find that actually if there was no state fair they (local consumers) would have ended up spending that money in the local community and more of it would have stayed in place than leaked out,” he said.
In his work in this field, Crompton lays out lots of other tricks every bit as bald as these, most of them based on double-counting. People who were coming to town anyway, people who were already visiting, people who wound up visiting but for unrelated reasons: All of these people are counted by the consultants as having come to town for the sole and express purpose of attending the said project.
How, you might ask, can people get away with pumping out this kind of fraudulent document year after year without some fear of one day being held responsible? What happens when the money doesn’t multiply and the taxpayers don’t get rich? Were these not promises or at least serious public representations? These studies don’t all come from some guy on a bench at the bus station. Some of them are done by major accounting firms.
Counting the money is not apples and oranges. Counting the money is counting the money.
Shieldforyoureyes Dave Fischer via Wikipedia
Ah, well that’s maybe the best part. The fine print. First of all, Crompton reminds us, the people who do the studies are hired and paid by the people who want the public to believe the studies. In the second place and often as part of their agreement with the client, they utilize only data provided to them by the client. No fair going out and hunting for data that might conflict with the information the client provides: Only the in-house data goes into the report.
Then if it’s some high-profile, white-shoe outfit like PricewaterhouseCoopers (PWC) doing the work, they use the fact that it’s not their own data to absolve themselves of all responsibility for anything and everything they said in their report.
That’s where the fine print at the end comes in. Crompton provides a fine-print stipulation he found at the bottom of an economic impact analysis done by PWC:
“We have not audited or verified any information provided to us and as such will take no responsibility for the accuracy of the information which was provided by third parties … Some assumptions inevitably will not materialize and unanticipated events and circumstances may occur; therefore actual results achieved during the analysis period may vary from those described in the report, and the variations may be material.”
Oh is that all? Try to imagine taking your seat on an airplane and finding that little ditty signed by the airline and tacked to the seat-back in front of you. Or you’re about to undergo surgery, and they tell you you have to sign something like that about the doctor. Well, maybe forget that one about the doctor, because I think they do make you sign something to the effect of, “I promise not to be resentful, even if the doctor takes out a gun and shoots me.”
Two differences, however, between that and this. First, if you don’t do what the doctor says, you maybe die. He or she has pretty good leverage. Nobody’s going to die if the taxpayers decline to give X-many million dollars to the state fair.
Secondly, tax money is public. It’s between us and our elected officials. We have a right to expect … no, we have a right to TELL our elected officials not to lie to us, ever, about anything, especially about the damn money.
Maybe I have made it sound here as if Prof. Crompton is the enemy and nemesis of all economic impact consultants. But he doesn’t really sound like their nemesis. In fact, he says, “You’re talking to somebody who made his living as a consultant before he came into academia. I had my own consulting business in England before I came out here.”
He does know, however, based on his prior experience, what the realities are: “You only get hired as consultant if you give the client what they want. What you do in economic impact studies, if you’re a consultant, is you say to the client, ‘What number would you like? OK.'”
He says it’s a mistake, in fact, to expect an objective opinion from an economic impact consultant. That’s not what they’re hired for.
“The consultant is really in a position analogous to lawyers in a court case,” Crompton says. “The consultant’s job is to make the client look as good as they can. It’s not to give you an even, balanced perspective and disinterested view.”
Why is any of this important? The mayor is asking the City Council to sign off on a radical new formula for the governance of Fair Park, basically turning it over to a private entity that will operate without any direct public control but will be funded with hundreds of millions of dollars in public money over time.
But this entire saga is important for a much larger reason as we contemplate Dallas City Hall. Obviously the academics know what fee-based consultant studies of economic impacts really are. They are sales pitches, promotional pieces, advertising. Crompton doesn't blame the consultants for churning them out. He did it himself when he was in their business. The fact that the reports are phony is not the real issue here.
The real issue is that our city staff, paid with our tax dollars, present these phony—baloney documents to us as if they are serious studies; they ask us to invest hundreds of millions of our tax dollars on the basis of them; and now we know they work actively to keep us from seeing honest studies.
Postscript: This morning I received a message by email from Prof. Crompton, after he had an opportunity to read the Baylor study. It deals in part with an issue he and I discussed but I did not include in the piece above — what he calls "abuse of multipliers." In particular, Crompton says consultants mislead the pubic by using "output multipliers" — multipliers based on, for example, the total amount I, as a visiting tourist from Philadelphia, pay a Dallas merchant for a camera. My $100 for the camera is not new money for the Dallas economy if the merchant paid a wholesaler in Kansas $60 for the camera. The "new" money to Dallas — what is called an "income multiplier" — is the $40 profit the Dallas merchant makes, not the total $100 sales price.
Um ... maybe I better let him 'splain it:
The take home message from the folks who did the Baylor report is that the Fair Park estimates published to this point are simply wild guesses devoid of any meaningful data and manipulated to generate a large number. In short, they are exemplars of the "Political Shenanigans" which I have written about.
The Baylor folks are actually way too generous in their narrative and their conclusions in that they focus on Output multipliers. If you read their Appendix tables you will see they have calculated Income multipliers also, but not used them in their narrative. I do not understand why they have done this, since it is Income multipliers that should be of concern to policy makers. I.e. Their concern should not be on Output i.e.how much money circulates through the economy, but rather on how much of this new money ends up in the pockets of area residents which is what Income multipliers measure. Consultants and advocates never use income multipliers because as you will note from the tables they are much lower than output multipliers, but they are the relevant numbers to policy makers.
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