U.S. World Cup bid: Md.'s recipe for economic disaster

September 08, 2010|By Dennis Coates

This week, officials of FIFA, the world soccer federation, are visiting the U.S. to examine America's bid to host the 2018 or 2022 World Cup, with Baltimore remaining as one of the potential host cities. Baltimore has much to offer the international soccer community between world class medical facilities, a beautiful stadium that has successfully hosted two international soccer matches, and close proximity to several major airports and highways. The U.S. Bid Committee has touted the tournament as a major money-maker for the U.S. economy, predicting a financial benefit of up to $5 billion for the country and up to $600 million for the host cities. Such a needed boost to the American and Baltimore economies sounds too good to be true. Sadly, it is.

In July I released a report, "World Cup Economics: What Americans Need to Know About a U.S. World Cup Bid," which reviewed our knowledge on the economics of sports mega-events. The most relevant finding: organizers for the 1994 U.S. World Cup claimed that the U.S. would see a positive impact of $4 billion, yet post-Cup analysis by economists showed a startling return to reality: a $9 billion loss. Nearby Washington, D.C., a 1994 host city, was estimated to have lost up to $792 million in reduced income that year!

If World Cup bidding was a transparent, accountable process, such a wildly optimistic estimate and its effect on taxpayers would be considered malfeasance. But to paraphrase Yogi Berra, its déjà vu all over again. Today's U.S. Bid Committee, led by sports, entertainment and political luminaries, may be dragging Baltimore and the U.S. into another financial debacle at a time when we can least afford it.

The evidence does not just implicate the 1994 US World Cup. My review showed that there were serious issues with the economic expectations for mega-events such as the 2006 Germany World Cup, the 1992 Barcelona Olympics and, I suspect, the 2010 South Africa World Cup. The 1974 Montreal Olympics created a debt that took 30 years to pay off. Those are just a few of the mega-events that were over-sold but which severely under-performed on the economic side of the equation.

Perhaps overly-cautious from 1994's large gap between economic expectations and reality, or aware of the angry anti-tax mood sweeping the country today, the U.S. Bid Committee has refused to share its economic impact statement for the 2018/2022 Cup, while still claiming that the U.S. will benefit to the tune of $5 billion at no cost to taxpayers. There has been little public pressure to have these estimates made public or justified. Indeed, none of the temporary euphoria America felt watching South Africa's World Cup this summer has translated into curiosity about our own country's bid. Billions of dollars that could be better spent on jobs, education, infrastructure or tax relief are on the line. We need to wake up.

Marylanders should demand the Bid Committee defend its claim that no taxpayer money will be spent on the 2018/2022 World Cup. The committee can begin by making public its economic impact statement. The next step is to explain how the claim of no taxpayer money squares with the report that Chicago withdrew as a host city candidate because it was unwilling to make financial guarantees that could have reached $10 million. Finally, Marylanders should demand to know what the state and city governments have pledged to provide in money and services to support the bid. The Bid Committee should prove no taxpayer money will be used. Simply asserting it repeatedly is not enough.

Ultimately, Marylanders must decide: can we afford to host the World Cup? Here in Maryland we have had state employees furloughed for three years in a row. State agencies have had their budgets cut mid year. Baltimore City has closed fire stations and imposed an unpopular tax on bottled drinks to close its budget deficit. Public swimming pools stayed open this summer only after private benefactors donated the necessary money. In these circumstances, can we really afford to guarantee millions of dollars of public money will go to putting on a soccer game?

I am not personally opposed to a second U.S. World Cup; when I take off my economist's hat, I am a sports fan. I watched many of the games from South Africa and even attended the match between Manchester City and Inter Milan at M&T Bank Stadium this summer. But I am strongly opposed to buying into unfounded economic optimism and secretive bidding processes at a time when 10 percent of the American work force is out of work and the economic well-being of our country is in doubt. We need to have a serious discussion about our finances, the costs of the World Cup, and whether this is the best use of our scarce resources before the 2018 and 2022 World Cups are awarded this December.

Dennis Coates is a professor at the University of Maryland-Baltimore County, and is the past president of the North American Association of Sports Economists. His e-mail is denniscoates.worldcupbid@gmail.com.

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