The St. Louis Cardinals have reached the World Series and one might think this would give the local economy a lift. Technically it will, but the overall impact is relatively small.

There is no denying that local businesses see revenues increase (and local/state sales tax receipts increase) with more people consuming goods and services in the downtown area before, during, and after a World Series game is played.  However, the influx of spending is simply a transfer of consumption from surrounding counties to the city of St. Louis – people would have spent those dollars one way or another be it at a movie, mall or grocery store.  In addition, the uptick consumption may be borrowing from the future  - spending $1,000 to take a family of four to the World Series may result in holding off on a big purchase two months from now.

Visiting national media and fans of the Texas Rangers bring true new consumption to the city, but the total impact on the economy is still minimal.  The 2009 All-Star game likely had a larger impact on St. Louis given the greater proportion of non-local visitors attending the game.  Even more beneficial to the city would be hosting a Super Bowl (remember this when our stadium lease comes up in 2014 and the Rams threaten to move to LA).  With a Super Bowl, most people attending the game are not locals; plus national and global media representatives stay in the city for a full week leading up to the game – that brings a lot of new revenue to restaurants, hotels, and retail stores.

While the World Series (or any big sporting event) increases spending downtown, the surge is temporary and doesn’t create permanent jobs.  It does, however, provide additional hours for those currently employed, which could be viewed as a positive effect.

Other minor benefits from the World Series have to do with income taxes.  Players from both teams pay local and state income taxes on the salary they earn while playing games in St. Louis, thus the additional games being played in St. Louis for the playoffs and World Series bring in more tax revenue.  Another tax-related argument is that the additional profits earned by St. Louis Cardinals in the playoffs will be taxed at the state level, which is better than having people buy goods or services from companies that won’t pay local taxes on their profits.  Again, these additional tax revenues are miniscule in the grand scheme of things.

Given that the Cardinals used many of the suspect arguments above when requesting state and local funding for the new Busch Stadium, you may be asking yourself:  Why did taxpayers pay for a new stadium if there is no substantial economic benefit?

Well, the economic benefit is the fact that the team can be considered a public good.  A public good, in the economic sense of the word, is non-rival (an additional person’s use doesn’t prevent the total amount of the good available for consumption) and non-excludable (any person can consume the good).  The most common example in economics of a public good is defense spending – we all benefit from having the Army keep our homeland safe and we pay for this through taxes.

When a sports team wants to build a new stadium, they seek public funding and threaten to move the team if they don’t receive it.  This is how the owner capitalizes on the fans that don’t attend games or spend money on team merchandise, but still follow games on TV, the radio, or the newspaper.  And those that don’t consider themselves fans still benefit from using the team as small-talk conversation in order to connect with co-workers, business contacts, or clients, especially when the team is on a championship run.

Having a local sports franchise also gives the city an identity.  It’s easier to convince corporations to move operations to a city that is home to major sport franchises.  Sports franchises also tend to make big charitable contributions to their home city.  Moreover, a sports franchise creates jobs.  If a franchise packs up and leaves, not only do fans lose “their” team, but the local economy is ultimately affected as well.

This is why taxpayers paid for the Cardinals to build a new stadium.  This will be why the Rams will threaten to move to LA unless we provide them with better facilities (and even that may not keep them from heading out west).

The World Series berth will certainly give the city a little national exposure, but is more likely to affect Albert Pujols’ contract decision than the local economy.

Thanks for reading and Go Cards!

Peter Lazaroff

St. Louis, MO

www.acrinv.com