Taggert Brooks Economics Consulting
Taggert Brooks - Economic Consulting

Stadium Memo

Below is a memo I’ve written on the stadium:

DATE: 11/07/2007

TO: Interested Parties

FROM: Taggert J. Brooks

Associate Professor of Economics

RE: Memo on Stadium Finance Request

I’m writing this in response to questions I have received regarding my letter to the La Crosse Tribune editor dated October 26th, 2007: In the letter I note that academic research by economists finds little support for the idea that stadium projects have a positive net economic impact on their communities. That is not the same thing as saying they always have a zero net economic impact, and it is not the same thing as saying all money invested in such projects has a zero rate of return.

My comments in the rest of this memo will pertain directly to the request for the county to provide $250,000 to the UWL Stadium plan.

If we consider that an alternative investment for the county might earn a 5% annual rate of return, then a one time investment of $250,000 would return $12,500 annually.

How might the new stadium project achieve this? The main return for the county will happen through increased county sales tax revenue due to attendance at stadium events and its associated tourism. In order for this return to have a positive net impact it must have a net increase in sales relative to the alternative scenario. There are many possible alternatives that could be considered.

More specifically in order to generate an additional 12,500 in sales tax revenue, there needs to be an increase in annual county wide taxable sales of $2,544,529. This represents an increase of 0.13% over sales for the entire 2006 year. It is only a 1.58% increase in the amount of sales in an average month.

One important note, there are many different things the county can do with 250,000 it is up to the elected officials to evaluate the relative merits and therefore relative returns on those alternative projects.

Below are the details of these calculations.

250,000

County Investment

5.00%

Annual Rate of Return

12,500

Dollar value of annual return

0.50%

County Sales Tax

1.75%

DOR take on county sales tax

0.4913%

Net county sales tax after DOR take

$2,544,529

Required increase in taxable sales to generate 12,500 Dollars in additional tax revenue

$1,932,219,847

December 2006 Retail Sales for Previous 12 Months

0.13%

Required increase in sales as percentage of total annual sales

$161,018,321

December 2006 Retails Sales Monthly average for prev 12 months

1.58%

Required increase in sales as percentage of total monthly sales

This position is not inconsistent with my earlier statements. I still believe the economic impact of the project will be quite small, however it need not be very large to justify (from a return on investment standpoint) the amount of money the county is being asked to commit.

I am free to answer any questions anyone might have of me. You are also free to share this memo with anyone you wish, so long as it is shared in its entirety.

Sincerely,

Taggert J. Brooks


Posted: November 10th, 2007
Categories: Stadium
Tags:
Comments: No Comments.













(C) 2009-2010 Taggert J. Brooks | Contact | About | Atom