The Phoenix Valley was packed with visitors for Super Bowl LVII, but does a packed city equal extra economic activity? Janaé Bradford interviews Kelly Phillips Erb, an expert on tax law who has written for and been interviewed by a variety of media outlets. She is currently a tax contributor for Forbes and a Tax Counsel for White & Williams, LLP.
Phillips Erb breaks down how local taxpayers contribute to big sporting events but may not be seeing the dividends they were promised. From tax offsets and exemptions, there are a lot of ways that sporting leagues negotiate with local districts before awarding an Olympic, World Cup, or Super Bowl bid.
To keep up with Phillips Erb’s work, visit taxgirl.com and read her recent work for Forbes titled ‘The Super Bowl doesn’t always produce super-sized revenues for local taxpayers.’
JANAÉ BRADFORD: Hello everyone. My name is Janaé Bradford and I am a graduate assistant here at the Reynolds Center for Business Journalism. The Valley was booked and busy for the Waste Management Phoenix Open and Super Bowl LVII in the same weekend. Thousands were in town for all the hype. But, sometimes there’s some downfalls with the amount of activity surrounding the events. That’s what led me to The Tax Girl. Kelly Phillips Erb is the senior editor at Forbes and co-founder of the Erb Law Firm, P.C. Forbes published one of her stories during that weekend called, “The Super Bowl Doesn’t Always Produce Super-Sized Revenues For Local Taxpayers.” During our conversation, she broke down how money works surrounding hosting one of the biggest sporting events of the year.
KELLY PHILLIPS ERB: So on its face, you might assume that I wanted to cover the story because it’s the Eagles, and the Eagles, my Philadelphia Eagles were in the Super Bowl. But, I’ve actually been covering these kind of events for awhile because I’m really fascinated in the idea of building infrastructure, and who pays for it and who gets what out of it, and how much do taxpayers contribute and how do public partnerships work, and it’s something that has fascinated me for a while. I think the first story that I really wrote on it where people cared about it, they cared enough to start writing and some of them not so happily — was when Minnesota was seeking funding for its stadium and there was a lot of talk about who was going to pay for that. And then subsequently, a lot of the World Cup bids, the Olympics, those kinds of events, I’ve been following because they raised similar questions, you know who pays for it? Where does the money go? Does it do any good?
BRADFORD: The 2022 World Cup was unique with how much money, time and labor Qatar put in to make it happen. The FIFA bid packet contains the financial requirements for hosting, and it’s very similar to what the NFL Super Bowl packet looks like. For every journalist, controversy should spark curiosity, considering how Qatar was even chosen to host the game. This led Philips Erb to compare tax systems for international sports federations and the NFL.
PHILLIPS ERB: They asked for similar things. They say to the bid cities that host cities, we would like for you not to charge tax on certain items, whether it’s tickets to events, merchandise, food, whatever is in their bid packet, don’t charge us tax. And in the case of the NFL, there’s a little clause that says you know, if we do get charged tax, so if you can’t wrangle it from your state or your city, if we ended up getting charged tax, you’re going to offset that for us right so that we don’t actually have to pay tax. And also sometimes, for example, World Cup and the Olympics, they often also get income tax exemptions because there are certain taxes that might be imposed. And very famously, actually, I believe it was the games leading up to the Olympics. Usain Bolt said that he would not go to London to participate in the pre-activities because of the tax situation in Great Britain. He did not want it to impact his income outside of Great Britain and they have a territorial tax system; it’s a little different from us. We have a global tax system worldwide, but he didn’t want to have to pay more tax than he needed to. And there are exemptions again, typically for the Olympics, but not always for the events that kind of come before those.
BRADFORD: Although these events have similar, yet different, rules. One thing that isn’t uncommon is remodeling a city or country for a football game. One of those projects was the host of Super Bowl LVII: State Farm stadium in Glendale, Arizona built in 2006. Phillips Erb’s Super Bowl piece in Forbes quoted Glendale mayor Jerry Weiers, saying the city spent $3.4 million hosting the games in 2008 and earned only $1.2 million in direct spending taxes. This kind of financial impact will vary by city based on their tax laws and experience hosting large events, and doing this is a hefty task.
PHILLIPS ERB: So, there were seven stadiums that were built from 2006 to 2017 and the cost to build all seven of those was $8 billion. By 2019, each of them had hosted at least one Super Bowl. On average, they found that locals contributed $250 million, you know, to the construction of each of those stadiums. So when you think about it, it depends, is $250 million the same impact in Phoenix as it is in New York, right? I mean, so that’s where those kinds of equations you have to think about. If, for example, Phoenix had yet another Super Bowl, at some point, it would probably be more financially beneficial because you’ve already paid for the stuff, right, and you kind of got a handle on how it works. When you’re doing something for the very first time, for example, if you say, and we’ll use the World Cup as an example, because that they absolutely did this. In the last World Cup, they will build a stadium specifically for that purpose, right? They’re gonna build hotels specifically for that purpose.
BRADFORD: The Super Bowl is the NFL’s moneymaker for a reason and always in the top Nielsen ratings for live viewership. If a team is involved in the big game, there’s a cost simply from its fans gathering in massive crowds in the streets, flipping over cars, and climbing streetlights.
PHILLIPS ERB: So, for example, in my piece, I also mentioned that when Philadelphia won the Super Bowl, they had a Super Bowl parade. The parade alone, like the preparations and the cost to the city was an insane amount of money. Even though we didn’t host the Super Bowl, it still was over $2 million, what the city had to pay to host and when you think about that, it’s the same kinds of things as you’re going to see when hosting the Super Bowl. It is government employees that have to work overtime, including specifically police officers, first responders, sanitation workers, so folks are getting paid more money to do a bigger job, right? Because, and that might also mean hiring more people, temporary workers to help them because you’re gonna have more people in the space than you would have before. There’s a lot of preparation work that has to go into it. I know, you mentioned earlier that you saw some of the prep in Phoenix, but there’s a lot of advertising and getting ready for things that may or may not be paid for by outside sources, they may be paid for by the city. So you know, in terms of economic impact, some of it is the deal that the city makes, right? Like if you make a better deal, maybe you don’t pay as much. But often, with the bid books, the chance for you to make a better deal is often limited, right? Because they’re gonna tell you what they want.
BRADFORD: Not only will the NFL tell you what it wants, but some people might give the Super Bowl full credit for the influx of traffic in the Valley. But every situation is different, depending on if the host city has enough resources and space to have a 73,000 person event. Phoenix is always a hot spot for traveling during the winter, because they don’t have one. So, they don’t have the problem of building a one-time use infrastructure. And to be fair, thinking about what would happen if the Super Bowl never came to Glendale should be considered when analyzing finances during that time of year.
PHILLIPS ERB: And it’s the idea that you can look at this number in a bubble, right and say, ‘look at all of these dollars that came in during this specific period of time’, it’s all the Super Bowl. But you also have to think about how people would spend their money if the Super Bowl wasn’t there, tourists would still be coming. Would there be, you know, the additional 70 or so and you have to think about how many of those folks are actually were subsidized because they’re an NFL or media or whatever so that 73 isn’t a total picture of paying people. But if you think about, you know, would this money had been spent otherwise, would we have still gotten these tax dollars? Most people have a finite amount of dollars that they intend to spend on entertainment, and travel, and when they decide that they’re gonna do a big event, whether it’s the Super Bowl or World Cup or something else, they don’t add to that pile. They don’t say “Okay, I was going to spend $1,000 this year, but now that it’s the Super Bowl, I’m gonna still spend the thousand but then I’m gonna go to the Super Bowl.” They just swap those out. And so, a real-life example in my life is that my girls wanted to see Taylor Swift in concert. Those tickets were not cheap. That was not something that we decided was the bonus for them, right? They swapped that out with something else that they couldn’t get that year.
BRADFORD: If extra spending outside of a typical household budget happens, it had to have been done by someone in a higher tax bracket who might have a “connect” or even access to the stadium. But, that’s because everything is connected: sports, business, wealth and power. That’s what creates the demand for the Super Bowl so strong from all angles.
PHILLIPS ERB: There’s this other thing where, you know, people like being proud of where they live, they like showing off where they live, they want I mean, you can see that with the Olympic opening ceremonies, for example, right? Like, it’s an opportunity for you to show your culture to the world. And so people, you know, that’s a big deal. Like we’re gonna show you what our traditional dress is, we’re going to talk about our heritage, we’re going to talk about the things that we really love about where we are.
BRADFORD: And the NFL did just that, including indigenous Arizona artist La Morena’s artwork on the Super Bowl tickets and murals throughout the city. She was the first Chicana to design art for the big game. Of course, the artist deserved her career milestone, but we can’t forget that the NFL is a business that thrives off the anticipation leading up to the game, which means more money.
PHILLIPS ERB: It’s a PR campaign in that regard, like look at all the things that we’re doing that great. Exactly. And you see the same kinds of things in the cities with the Super Bowl, you come look at our city, see why we’re awesome. And again, kind of the ripple effect from that is that they, they hope you’ll stay, they hope you’ll come back.
BRADFORD: Some people assume that when big events come in town, there’s plenty of opportunities for everyone. But it’s not that simple. The excuse of this idea is called a ripple effect, which is long term financial growth because of nearby events, like the Super Bowl.
PHILLIPS ERB: And there was a study actually from one of the previous Super Bowls in Phoenix where they estimated that this ripple effect was quite large. However, there was also a council woman who said she never heard of a business getting started in Phoenix because, or Glendale, because of the Super Bowl. So you know there’s a little bit of an opportunity cost is the argument. And then the ripple effect is what are all the good things that happened because we did this thing.
BRADFORD: Some of the decorations at Hance Park are still up, but the mass of posters downtown are disappearing daily. I’m glad to say I survived the busy sports weekend and I learned so much about how finances contributed to the Super Bowl work now, especially since the game was just miles from my house. I wonder what it’ll be like when the March Madness Final Four is here next year. But until then, that concludes this one. That was Kelly Phillips Erb, a Forbes tax writer and entrepreneur. To find her work. Go to taxgirl.com to listen to her podcast and read her articles. Thank you everyone for tuning in yet again. From Downtown Phoenix. I’m Janae Bradford with the Reynolds Center.