Why Do Cities Spend to Attract Sports Events?

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Photo Courtesy of the Associated Press
Miami, Florida. Photo Courtesy of the Associated Press

With Miami, Florida set to host Super Bowl 54 in 2020, the city has been asked to fund $20 million in security, infrastructure, and related expenses.  Similar bidding and expense processes occur when it comes to Olympic and World Cup bidding and preparation.  The argument goes, it takes money (spending) to make money. 

Cities look at three things when they bid and win a major sports event that includes entertainment activities and media opportunities. 

1. Tourism

A national and international event or series of events like the Super Bowl, World Cup, or Olympics brings tourism.  Fans, families, and business people alike who look to experience the event and spend money doing it.  Hotels, food, the event itself, etc.  Cities often have taxes placed on hotels and rental cars to offset the costs.  The thinking being that the tourists should pay for the benefit of visiting the host city.  This is the most upfront and consistent form of revenue for cities hosting sporting events. 

2. Development

A second host city benefit is development.  Development of land and infrastructure.  The point here is that the host city needs to prepare the city for the incoming tourists and the event itself.  The most prepared cities have good infrastructure with little need for added development beyond what had been originally planned.  The roads, public, and private transportation options help move people and things for the event.  Here, the city is spending money to develop something that will be used by tourists and hopefully by its residents and more tourists beyond the scheduled event(s).  Where cities get into trouble is when they spend too much in development.  Another downside is where the finished development is not used beyond the event(s). 

3. Relevancy

Likely unquantifiable, this is where cities get a morale boost and possibly more events to host down the road based on reputation and success.  Fans love the experience and overall the prospect and actuality of hosting a major sports event does bring notoriety and historical bragging rights.  Whether that leads to financial gain is another story. 

In a fascinating way, leverage in negotiations is very important.  From the league or event organization side, the leverage is that they have the option to host in different cities so cities have to fight and that generally means the highest bidder (the city willing to spend the most through development, etc.) wins.  From the city side, they have less leverage because they do not have the option to host an event that only occurs once per year in one city (unless they want to wait until the next year and they must still go through the bidding and negotiation process).  Therefore, cities must be disciplined in how and where they bid and if they win, how and where they spend taxpayer dollars.

If negotiating for a city, asking for a part of the television dollars and licensing fees for partnering with the city at least in the event logo would be a start.    

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