The Value of the Indianapolis Colts To Indiana Residents and Their Willingness To Pay For A New Stadium

Transcription

1 The Value of the Indianapolis Colts To Indiana Residents and Their Willingness To Pay For A New Stadium Mark S. Rosentraub, Ph. D. David Swindell, Ph. D. March

2 Executive Summary In anticipation of efforts to determine statewide support for the construction of a new stadium, the Indianapolis Colts commissioned a research study to understand some of the following issues related to the value of the team in Indiana. How much are intangible benefits of pride, identity, and excitement related to the Colts worth to Hoosiers? More importantly, how much money are Hoosiers willing to pay to ensure that the intangible benefits produced by the Indianapolis Colts are retained for decades to come? Do Hoosiers who live outside of Indianapolis believe the Colts create intangible benefits for them? Are Hoosiers who live outside metropolitan Indianapolis interested in paying to keep the Colts in Indiana? Methodology Mark Rosentraub, Ph.D., Dean of the Maxine Goodman Levin College of Urban Affairs at Cleveland State University, and David Swindell, Ph.D., associate professor and director of the master s of public administration program at the University of North Carolina at Charlotte, directed the study. Stone Research of Indianapolis was used to gather the data. A telephone survey of 850 randomly selected households from four different areas of the state was performed in January 2005 to collect the needed responses. The four areas were: (1) Central Indiana (from Richmond to Terre Haute, north to Muncie, Kokomo and Lafayette and south to Columbus and Monroe County); (2) Northeast Indiana (Fort Wayne metropolitan region); (3) Southwest Indiana (Evansville metropolitan region), and (4) Southeast Indiana (New Albany metropolitan area). The survey included questions designed to understand the financial value of the intangible benefits received and the amount of money people would spend to keep the Colts in Indiana. 2

3 Key Findings (1) The annual value of the intangible benefits of the Indianapolis Colts to Indiana residents is $83.9 million. (2) Indiana residents are willing to pay $66.3 million each year to ensure that the intangible benefits of the Indianapolis Colts are retained and continue to be available to Indiana households. (3) The intangible benefits of the Indianapolis Colts are a good buy for Indiana residents. (4) Indiana residents believe the Indianapolis Colts make a critical contribution to the state s identity. (5) The Indianapolis Colts increase the pride Indiana residents have in living in the state. (6) Human resource directors from Indianapolis largest employers consider the Colts an important recruitment tool. (7) Hoosiers living outside of the Indianapolis metropolitan area place a substantial value on the intangible benefits of the Colts. (8) A substantial number of Hoosiers living outside of the Indianapolis metropolitan area are willing to pay to ensure that the Colts remain in Indiana. (9) Hoosiers support a variety of sources as preferred financing mechanisms for a new sports facility. 3

4 1. The annual value of the intangible benefits of the Indianapolis Colts to Indiana residents is $83.9 million. The questionnaire used in the telephone survey asked each respondent to rank the intangible benefits of the Colts and then to place a monetary value on the worth of these benefits to them. Projecting these responses to the state s population of households in the areas surveyed yields the annual figure of $83.9 million. For respondents who indicated the value of the team s intangible benefits was worth less than $4 a month, the analysis assigned a value of $0 in the projection. Thus, the $83.9 million projection is a conservative estimate of the value of the intangible benefits. For more than a majority of the respondents, the value of the intangible benefits of the Colts is at least $48 per year. For more than 40 percent of the respondents, the intangible benefits of the Colts exceed $84 each year. One in five Hoosiers surveyed placed the value of the Colts to them and Indiana at $180 per year or more. The Annual Value of the Pride and Intangible Benefits of the Indianapolis Colts for Indiana Households* Do you think the value of the Colts being in Indiana is worth $7 per month to you? If yes, Do think the value would be worth $15 per month to you? If no to $7 per month, Do you think the value would be worth $4 per month to you? Value of Pride and Intangible Benefits Percentage of Respondents Noting This Value Level Projected Number of Indiana Households Total Projected Value $4-$7/Month ($48-$84/Year) $7-$15/Month ($84-$180/Year) $15+/Month ($180+/Year) ,535 $8,233, ,569 $25,331, ,435 $50,298,300 Total ,539 $83,863,776 * Using the lowest value in each category yields a conservative estimate of the value for each group. In keeping with this approach, there is no entry for the lowest value group ($0-$4/Month), though there are undoubtedly some in that category who do value the intangible benefits more than $0. Thus, the final estimate here is the low-end estimate of the value respondents ascribe to the civic pride benefits associated with being home to the Colts. 4

5 The following chart displays these results as a proportion of the state s population by the value placed on Indianapolis Colts by Hoosiers. Monthly Value of the Intangible Benefits of the Colts Presence in Indiana $ % $ % $ % $ % 5

6 2. Indiana residents are willing to pay $66.3 million each year to ensure that the intangible benefits of the Indianapolis Colts are retained and continue to be available to Indiana households. It is one thing to place a value on the intangible benefits of a civic asset. It is something else to be willing to pay higher taxes to ensure that these benefits will exist and continue to exist every year into the future. The survey asked respondents how much they would be willing to pay for a new stadium to ensure that the intangible benefits produced by the Colts continued to exist for Indiana. Again, using the most conservative estimates possible and projecting the answers to the state s population of households in the areas surveyed, residents were willing to spend $66.3 million of their money to ensure the intangible benefits produced by the Indianapolis Colts will continue to exist. A majority of respondents, 58.4 percent, would be willing to pay to keep the Colts in Indiana. Would your household be willing to pay to keep the Colts in Indiana? Not Willing To Pay To Keep The Colts 42% Willing To Pay To Keep The Colts 58% 6

7 Of those households willing to pay to keep the Colts in Indianapolis, more than onequarter would be willing to pay $160 or more a year, while more than one-third would be willing to pay between $80 and $ per year to ensure the team stays in Indiana. One-quarter of the respondents indicated their household would pay between $40 and $ How much would your household be willing to pay to keep the Colts in Indiana? $0.01 to $39.99 Per Year 13% $160 Or More Per Year 28% $40 To $79.99 Per Year 25% $80 To $ Per Year 34% 7

8 3. The intangible benefits of the Indianapolis Colts are a good buy for Indiana residents. With the value of the intangible benefits placed at $83.9 million and the amount people are willing to pay established at $66.3 million, any cost below the $66.3 million will create a positive return or consumer surplus for residents of the state. If the annual cost of a new stadium to the public sector is below $66.3 million per year, the price people are willing to spend, a good buy will exist since the benefits are valued at $83.9 million. Notes: The research employed a technique developed by economists and social scientists to measure the value people place on goods, benefits, and assets that are not usually exchanged in markets. Known as contingent valuation, economists have used this technique to assess environmental benefits and other public assets that generate substantial intangible benefits but for which no market mechanism exists to record the economic value and price people would be willing to pay for a benefit s existence. The study took two essential steps in order to implement this contingent valuation approach. First, the survey asked respondents to place a value on a non-market benefit, in this case the pride generated for them by the presence of the Colts in Indiana. That measure of pride is their estimate of the value of the intangible benefits generated by the team. Second, with the value of the pride generated by the Colts established, the survey then asked respondents how much they would be willing to pay to ensure that this level of intangible benefit continued to exist for them and Indiana. This work represents one of the most substantial research efforts to measure and quantify the intangible benefits of a professional sports team and the value of these benefits to a state s residents and businesses. In this regard, the information provided can help public leaders understand if an investment of tax dollars is warranted relative to the social significance and intangible benefits created for the state s residents and businesses. 8

9 4. Indiana residents believe the Indianapolis Colts make a critical contribution to the state s identity. Respondents noted that when they told people they were from Indiana, the Indianapolis Colts were the second most frequently mentioned asset. More than four-fifths of the respondents believed the Indianapolis Colts were important in terms of the state s identity. Residents of Central Indiana placed more importance on the Indianapolis Colts for the state s reputation than did residents in the other parts of the state where surveys were performed. Residents of Northeast Indiana were second in terms of the importance placed on the Colts for the state s reputation, and the residents of the Columbus area were similar to the residents of Central Indiana in terms of the importance they placed on the Colts for the state s reputation. There was no difference in the value placed on the Colts for the state s national image related to a respondent s age, race, sex, or income. When You Tell People You Are From Indiana, What Do They Mention To You About The State? Motor Sports 27.1% Colts 23.8% Pacers 17.2% Indiana Univ. 8.4% Purdue Univ. 4.6% Children's Museum Notre Dame Indy Zoo Ball State Art Museum Circle City Classic IN State Museum Indy Symphony Eiteljorg Museum 2.6% 1.7% 1.2% 0.6% 0.4% 0.4% 0.3% 0.1% 0.1% 0% 5% 10% 15% 20% 25% 30% 9

10 5. The Indianapolis Colts increase the pride Indiana residents have in living in the state. More than four-fifths of the respondents indicated the Colts were somewhat or very important in establishing their feelings of pride about living in Indiana. These feelings of pride were more substantial for residents of Central and Northeast Indiana and for those who lived in the Indianapolis metropolitan region. Feelings of pride were not related to a respondent s length of residence in the state, race, sex, or age. Feelings of pride, however, were more substantial in households with incomes of at least $40,000 a year. 6. Human resource directors from Indianapolis largest employers consider the Colts an important recruitment tool. The research team also surveyed 24 human resource directors from the largest employers in Central Indiana. They were asked to rank the importance of 10 different civic assets on a scale from 1 to 10 in terms of their value in attracting and retaining employees. The Colts, with a rank of 5.1, were the highest-ranked non-educational asset for recruiting new employees to Indiana. The state s universities, 6.2, and public schools, 5.9, were seen as more important, but no other civic or community asset was rated as highly as the Indianapolis Colts. The Value of Civic Assets in Recruiting New Employees and Retaining Existing Workers Children's Museum 2.9 Symphony 4.1 Motor Sports 3.9 Museums/Zoos 4.3 State Parks Indiana Pacers College Sports 5 Indianapolis Colts 5.1 Public Schools 5.9 Indiana's Universities

11 7. Hoosiers living outside of the Indianapolis metropolitan area place a substantial value on the intangible benefits of the Colts. With the Colts located in Indianapolis, it was expected that residents of the metropolitan area would place a greater value on the team. However, the Colts are seen as very important and produce important intangible benefits for a large portion of Hoosiers in other areas of the state. Half of the respondents from Northeast Indiana, almost half of the respondents from Central Indiana outside of metropolitan Indianapolis (49.8 percent), and 45.3 percent of the respondents from other parts of Indiana place the value of the intangible benefits of the Colts at no less than $48 per year. In the Southeast portion of the state, 32 percent of the respondents believed the Colts were worth at least $48 a year. 8. A substantial number of Hoosiers living outside of the Indianapolis metropolitan area are willing to pay to ensure that the Colts remain in Indiana. Again, it was expected that people living closer to Indianapolis would be more willing to pay to ensure that the Colts remain in Indianapolis. However, 43 percent of the respondents from Northeast Indiana said they would be willing to spend $40 each year to ensure the Colts remained in Indiana. In Southeast Indiana, 38 percent would be willing to spend at least $40 each year, and in Southwest Indiana one-third of the respondents would be willing to spend at least $40 each year to ensure the Colts stay in the state. 11

12 9. Hoosiers support a variety of sources as preferred funding mechanisms for a new sports facility. Respondents were also asked to rate on a 1 to 10 scale the tool they would like to see used to raise the money for a new stadium. Gaming revenues received the highest support, 5.19, followed by a new tax on hotel and rental cars, 4.91, and then an increase in the sales tax, Preferred Financing Mechanism On a scale from 1 to 10, with 10 meaning this is the best way to pay for the new facility, and 1 is the worst way to pay, please tell me your preference as to how to raise the funds. (Average score for each mechanism) Hotel and Rental Car Tax 4.91 Gaming Centers 5.19 Food and Beverage Tax 2% 4.28 Increase Local Income Tax 3.43 Increase Sales Tax 1%

13 Respondents from Central Indiana and Southeast Indiana preferred gaming as the source of any public funds for a new stadium. Respondents from Northeast Indiana expressed more support for an increase in the sales tax (in Marion County or metropolitan Indianapolis) and respondents from Southwest Indiana gave the most support to an increase in hotel and car rental taxes. Preferred Financing Mechanism by Region On a scale from 1 to 10, with 10 meaning this is the best way to pay for the new facility, and 1 is the worst way to pay, please tell me your preference as to how to raise the funds. (Average score for each mechanism by sample region) Public Financing Mechanism Increase Sales Tax by 1%* Increase Local Income Tax Increase Food and Beverage Tax 2% Creation of Gaming Centers* Increase Tax on Hotel and Rental Cars** Respondents From Entire Central Northeast Southeast Southwest Sample Indiana Indiana Indiana Indiana *Differences statistically significant at the 0.05 level. **Differences statistically significant at the 0.01 level. 13

14 Researchers Notes When communities consider the merits of building a new stadium the focus is often on the economic benefits created from a team s presence or the hosting of events. These economic assessments are sometimes criticized as being overly optimistic but, more notably, may miss the most important factor in people s valuation of sports and professional teams. The excitement generated by sports and the attention it attracts have been the factors that have made teams valued community assets inexorably associated with cities and their fans. Professional sports teams are similar to other businesses in that they charge consumers to see games, but they have a unique element that makes them unlike any other enterprise or activity. Sports create a level of excitement that attracts fans and spectators and an identity unlike any other business. The Packers put Green Bay on everyone s map just like the Dodgers defined Brooklyn for several generations. When people think of New York or Boston, few separate those regions from the Yankees and Red Sox. For more than 2,000 years, this excitement and identity have made sports an important part of the social life of virtually every society. Sports create a level of interest and excitement in a city that is experienced even by those who do not attend games. Indiana residents have first-hand experience with this level of excitement and interest, which is described as the intangible or non-economic benefits of sports. Each time the Indianapolis Colts or the Indiana Pacers appear in the playoffs, a heightened level of excitement exists in many communities throughout the state. Further, the teams, as well as the Indianapolis Motor Speedway and some other arts and cultural amenities, help to define Indiana s image and attract visitors and economic activity to the state. These institutions and teams create a sense of pride in the state and contribute to the image and reputation of Indiana. Today, Indiana s professional sports teams are integral parts of the state s identity and the psyche of its residents. 14