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What are the Buffalo Bills and a new stadium worth? Why the economics are hard to calculate

What are the Buffalo Bills and a new stadium worth? Why the economics are hard to calculate

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Constructing a new National Football League venue is an iconic undertaking – especially in Western New York, where the Buffalo Bills’ proposed $1.4 billion stadium would be one of the largest projects in the region’s history.

But what is an NFL stadium and team worth to a municipality and a state? That’s a question the Bills are attempting to answer as part of their negotiating strategy with Erie County and New York State. Pegula Sports and Entertainment, the management company that oversees the holdings of Bills owners Terry and Kim Pegula, commissioned an economic impact study that analyzed all of its holdings in Buffalo and Rochester.

The top-level results of that study, which were shared with The Buffalo News, indicate the construction of a new stadium would expand the team's economic impact and create more jobs. But those findings are positioned against years of studies nationally that suggest NFL stadiums “create an economic black hole,” as Stanford economist Roger Noll told The News, and evidence that the high spending associated with football teams rarely accelerates – and may even slightly decelerate – the economy.

If a region builds a new stadium, Noll believes the project should be viewed in context.

“This is sort of like a city deciding to have a nice city park or a nice library, and all kinds of other cultural events that don't pay for themselves – a ballet, or a symphony orchestra,” he said. “These are amenities that make life better. If you're willing to pay the price, then there's nothing wrong with saying, ‘OK, we'll subsidize it, we'll do it’ – knowing full well that's what we're doing.”

As in any field, respected experts can analyze data using different methods and models that produce results open for interpretation. That is true here, too, and it’s important to note that the Pegulas’ economic impact study has not been widely distributed – and thus, not widely analyzed by independent parties. While The Buffalo News was provided a summary of the report and was privy to supporting materials, the complete document – 160 pages in total – was not released. 

Here’s an overview of the Pegula study findings and how to interpret the results:

• The report estimates that a new venue, which the Bills want to build in Orchard Park across the street from Highmark Stadium, would generate an estimated average of $793 million annually for Erie County and Buffalo economy over the next 30 years, according to the report, which was conducted by the sports consultancy CAA ICON and reviewed by the University at Buffalo’s Regional Institute. That includes factors such as employment, income and spending. The construction project itself is projected to have a $2 billion economic impact in New York.

• The Bills have an estimated impact of $361 million annually in Buffalo and Erie County, and $380 million in New York, the study claims. Those figures were reached by analyzing spending, employment and, in the case of the state, income taxes.

• In 2019, the Bills’ payroll was nearly $259 million, “generating almost $20 million in (state) income tax,” according to the summary. Pegula Sports’ overall payroll – which includes the Buffalo Sabres – was approximately $427 million, which resulted in a tax withholding estimated to be around $29 million. That is money paid directly into state – albeit not local – coffers, and is certain to increase in coming years as the NFL’s television revenues rise, and with it, the salary cap.

• The summary also addressed jobs created by the Bills’ current economic activity and projected the hiring that would result from the building of a new stadium. Among them: The Bills’ existing activity creates 2,060 jobs in Western New York and 2,280 jobs statewide, the study claims. The construction of a new stadium would generate as many as three times that number of jobs locally, and up to six times the number statewide, according to the summary document, which did not describe the range of positions or pay level. But a Pegula spokesman told The News that the jobs would come in sectors including construction, consumer, manufacturing, supply chain, transportation and professional services.

The report, which also details significant charitable and community impacts by both the Bills and the Sabres, illustrates a positive picture of the Pegulas’ impact on Western New York. From a negotiating standpoint, that’s important for the Bills owners as they push for a public-private partnership on a new stadium that will almost certainly be weighted toward government contribution.

“The results weren’t surprising because the Bills are so ingrained in the Western New York community,” said Ron Raccuia, Pegula Sports’ executive vice president and lead negotiator. “Not just from a fandom standpoint, but from a business standpoint.”

Why national studies question economic impact of NFL stadiums

Economic impact reports are developed using a complex set of calculations. Economists consider factors including how the dollars associated with new projects will accelerate the economy, even at a hyper-local level, and how that initial flow of dollars will likely create new spending. Those direct and indirect impacts also lead to something that economists call “inducted impact” – the potential for an ongoing change in the way people spend.

The numbers were calculated using both new dollars spent (“direct spending,” in economist terms) and the likely re-spending of some of those dollars (“indirect spending”). It also incorporates goods and services produced, employment levels and income and taxes generated from those jobs.

Since the Pegula financial impact study is not public, outside experts cannot yet respond to its specifics. But The News interviewed two notable sports economists – Noll, of Stanford; and Andrew Zimbalist, a professor at Smith College – who pointed to the results of multiple scholarly, independent studies that suggest football stadiums generally don’t deliver a positive economic impact.

Noll noted that NFL stadiums are used “maybe a dozen or 15 times a year,” which means “it can’t possibly be the centerpiece of a broader economic development.” Indoor arenas, like those used for basketball and hockey, tend to have more economic impact, Noll said. They are smaller, have more flexible space, and can be booked for events year-round. But an NFL stadium, he said, “doesn’t draw enough traffic to attract other businesses for the vast majority of days of the year.”

The Bills and PSE haven’t yet unveiled many specifics about a vision for the new stadium, but acknowledge that year-round usage is vital.

“Exciting new uses and options will be the reality with a stadium that has more modern and efficient infrastructure and operational capacity,” said Jim Wilkinson, spokesman for PSE. “The outdoor and indoor spaces of the stadium will be used as often as possible, and will bring more concerts and staged events, business meetings, high school and college sports, and other large and small community gatherings and events.”

Will there be ancillary development?

A yet-to-be answered question is whether a new stadium will incorporate – or allow for – ancillary development. Highmark Stadium is nearly 50 years old, and outside of the Pegulas’ own investments in facilities, has created little to no outside development.

John Cimperman, founder of Barnstorm Sports + Entertainment, an East Aurora-based marketing and consulting agency, is hoping development is “discussed as part of the overall plan” for a new stadium.

Cimperman, who also owns 42 North Brewing Co. in East Aurora, is a former marketing executive with National Basketball Association and National Hockey League teams and helped open arena complexes in Philadelphia, Cleveland and Los Angeles. He was director of marketing for the NBA’s Cavaliers during the planning of the Gateway District in Cleveland, which has six hotels and dozens of restaurants and stores within walking distance of the baseball stadium and basketball arena. Cimperman was also with the NHL’s Los Angeles Kings during the development of L.A. Live, the entertainment district surrounding downtown’s Staples Center. Both were transformational projects in those cities.

“Stadiums and arenas are the hub, the catalyst,” said Cimperman, pointing to Patriot Place, a mixed-use development around Gillette Stadium in Foxborough, Mass., and the Green Bay Packers’ Titletown entertainment district in Wisconsin as NFL examples.

“It’s the development all around (a stadium) that we also need to talk about,” Cimperman said. “Is the development around them a big parking lot? Or is the development around them some other venues that can also attract people and create jobs?”

How NFL dollars circulate could affect impact on WNY

Development could be a way of addressing, at least in part, a common issue that economists find with NFL teams: the direction in which the dollars flow. It’s unquestionable that NFL franchises generate a significant movement of money. The NFL itself is a $16 billion entity in pre-Covid times, and even last year in the throes of the pandemic, saw $12 billion in revenues. But the presence of an NFL team in a city doesn’t necessarily mean that places becomes richer – at least not dollar for dollar. Noll points out that multiple studies show NFL teams actually cause a “slight increase in unemployment” because money used to buy football tickets isn’t being spent elsewhere.

A key to understanding economic impact is looking at the circulation of dollars. When money is spent on a football team, Noll said, it benefits an organization with a relatively small number of employees, who are highly paid, often live elsewhere, and thus are less likely to recirculate that money in the team’s home region. “They generate less of a multiplier effect than people who earn ordinary income,” Noll said.

Zimbalist, the sports economist who is a professor at Smith College, notes that spending a few hundred dollars at “a nice restaurant in Buffalo” likely has more impact than spending that same money at a Bills game. “That money would go to the waiters and cooks and the proprietor of the restaurant,” he said. “It's much more likely it would stay in Buffalo and get recirculated and re-spent in Buffalo. So that's on the other side of the equation here. This is not an all-things-benefit Buffalo situation.”

Though there’s no agreement yet on how much the Bills, NFL, county and state would contribute to the cost of a new stadium, it’s conceivable that an amount in the range of $1 billion could come from government coffers. While that “is a lot of money anywhere,” said former Lt. Gov. Robert Duffy, who was closely involved in negotiations a decade ago for the current lease, "it is manageable."

With bonding and other financing tools available, Duffy said, and the ability to spread out costs over time, “it will not bankrupt the state or county or team. But it’s going to be substantial investments on all sides to get this done.”

Beyond dollars, team's branding intertwined with region's image

The hard-dollar economic yield from that can be debated depending on how it is calculated, but the impact – which extend beyond numbers – is clear. From workplace pools and fantasy football to at-home tailgates and Bills spirit wear days in offices and schools, the team’s branding is intertwined with the image of the region.

“Some of our busiest days of the entire year in our Buffalo Division are game days,” said Mike Keating, senior vice president in charge of Wegmans’ Buffalo Division, likely capturing the experience of other grocers, as well as bars and restaurants.

The core benefit may be simply keeping the Buffalo Bills in Western New York through a lease that could potentially span 30 years. Buffalo is the second-smallest market in the NFL, and there are several larger markets – Austin/San Antonio and Portland, among others – that could support a team should any Bills owner decide to move.

“This has to be a long-term agreement,” said Duffy, who is now president and CEO of the Greater Rochester Chamber of Commerce. “This is a commitment the state, county and team are making, and it puts to rest the concerns about the team leaving.”


The Buffalo News: Good Morning, Buffalo

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The Pegulas have formed a tight group that is privy to the lease negotiations, opting to leave most of their executives free to focus on running the day-to-day operations of their football team and other entities.

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