Despite a lengthy economic literature that has shown that sports teams contribute little to local economies, governments keep subsidizing them, even as billionaire owners get to cash in when they sell the team. Of course, sports teams bring a level of civic pride–such as when the Diamondbacks won the National League pennant in 2023 as a wildcard entry and made it to the World Series. But how many children for whom do you want to deny quality childcare in order to pay for that civic pride?

While the Diamondbacks have been subsidized since day one, playing in a ballpark that was financed by taxpayers, their future has been in doubt due to acrimonious negotiations between the Diamondbacks and Maricopa County, which owns their ballpark, related to upkeep and improvements the Diamondbacks desire.

Most recently, HB2704 has been moving through the legislature, already passing the state house. HB2704 would redirect nearly all the sales taxes (transaction privilege tax) that are generated at Chase Field for all events there (beyond just baseball games)  as well as the Diamondbacks’ payroll income taxes (as well as spouses) back into a fund that focused on upkeep and improvements to Chase Field. An amendment in the Senate Finance committee removes the estimated $3.5 million payroll state income taxes from the bill. If it becomes law, these changes would be in effect for the next 30 years. 

This analysis takes the Joint Legislative Budget Comittee’s estimate of cost as a given and contrasts that with the net benefits to the economy of having the Diamondbacks in Arizona. The analysis finds that the bill would represent a net loss of up to $11 million annually to both the state’s general fund and for local governments compared to the tax revenues that the Diamondbacks generate.

The JLBC estimates that the bill as passed by the House would annually cost the general fund $9.2 million and local governments $5.8 million, for a combined annual loss of $15 million annually in tax revenue. The question for this analysis is do the Diamondbacks return at least $15 million in tax benefits?

The bill delivers no extra revenue–as whatever the Diamondbacks bring in already exists. Rather, this analysis supposes that the Diamondbacks take their ball and find a new home if this legislation fails. If the Diamondbacks leave, then Bowl games and other events could continue at Chase Field, so those revenue streams are not interrupted and taxes generated by that activity would continue to occur.

Entertainment Spending is Limited 

On the surface, one might think, if the Diamondbacks were to leave, that all the spending at the games just disappears from the economy. However, that is faulty reasoning.

For instance, say in Tempe, which applies a tax on food, a new grocery store opened up in a neighborhood but insisted that all tax revenues that it generated go back into its private neighborhood grocery store district.  No one would be fooled, as people already buy groceries–and they would immediately recognize that just because a new grocery store opens up does not mean that people decide to buy more groceries.

Spending on entertainment is similar. Consulting firms generally provide generous interpretations of the economic impact of sports/entertainment venues, typically omitting or underestimating factors that economists consider to be significant. When the Diamondbacks came to Phoenix in 1998, entertainment expenditures did not proportionally increase just because 81 regular season baseball games occurred. Focusing on the expenditures of locals living within an economic area, shows a remarkable level of consistency. An evaluation of a possible new arena in Virginia Beach by Johnson Consulting, for instance, provided income and demographic information as well as entertainment expenditures by locals across a number of comparison metropolitan areas. As can be seen below, if we take the entertainment expenditures divided by an approximation of total household income, the entertainment portion stays remarkably consistent–even though some locations have NBA teams, and others have Major League Baseball and NFL Football, and others have none of these.

Source: Johnson consulting presentation (approx household income and portion entertainment derived from their table)

Day Trips

Fans do make intentional day trips to Diamondback games–and that is a net benefit to Phoenix. However, if overall entertainment spending is limited, then those day trips would simply go somewhere else in the absence of the Diamondbacks. Hence, Phoenix would suffer a day trip loss, but the entire state would not, as those day trips would simply go elsewhere in the state. 

Intentional Visitors vs. Casual Visitors

From Economic Calculator Toolkit, Eventhosts.org

While the interest in economic impact is on visitors, differentiating an intentional from a casual visitor is important. A tourist who is already on a visit to Phoenix to see friends or relatives who decides to go to a baseball game, is likely substituting that activity for something else. Sometimes studies make obvious errors such as including 42,000 visitors who attended Super Bowl festivities but did not attend the game as part of the Super Bowl’s impact in the Phoenix area in 2023. That many people traveling to Phoenix just for the festivities (and lots of locals leave due to crowds) seems unlikely. More probably these were tourists already here who chose to attend festivities instead of something else. 

What matters are intentional visitors, who come precisely because, say, the Dodgers are in town. Due to the location of Phoenix, these intentional visitors are going to be overnight visitors in all likelihood. The best comparable studies were of Houston and Charlotte. The Houson one estimated hotel occupancy within five miles of the Houston central business district where its sports venues are located. Minute Maid Park, home of the Astros, was found to connect with 320 additional hotel rooms being occupied on the days of Astros games compared to days without the games. They found no significant impact for Rockets games at the Toyota Center. Texan games at NRG Stadium had about 370 additional hotel rooms. 

The Charlotte study examined a variety of sporting events for the entire Charlotte area. While baseball games were not examined, the analysis found a college bowl game led to about 2,000 additional hotel rooms booked and an NFL regular season game led to almost 1,700 additional hotel rooms occupied. Notably around 40% of these occurred in the city center, the focus of the Houston study,  in both cases. 

The Houston study covered the 2015-2018 baseball seasons when the Astros had good to excellent baseball teams and drew between 2.3 and 3 million fans. In 2017 they won the World Series and in 2018 they reached the American League Championship Series. 

Diamondbacks Only Generate $4 Million in State and Local Taxes

The Diamondbacks drew 2.3 million fans in 2024, the year after their World Series run, which was a significant increase over prior years. Thus, using 320 hotel rooms for the Diamondbacks should be seen as slightly high.  For the Diamondbacks 300 hotel rooms in central Phoenix and 750 total hotel rooms (so 300 is 40% of 750 consistent with the Charlotte study) are assumed based on these studies.  

Assuming double occupancy and that 80% of these visitors fly here and rent cars, the total annual economic impact is $37 million per year with the taxes generated annually estimated at $4 million. The full list of assumptions is below. This result includes a statewide tourism economic multiplier of 2.0, which is consistent with the economic literature on tourism multipliers for an economy similar to Arizona.

Since $4 million is less than $15 million, under the worst case scenario that the Diamondbacks leave, taxpayers would be $11 million annually better off–even if Diamondback fans would be disappointed.

The breakdown is summarized below. The revenue impacts include the city of Phoenix increasing its TPT to 2.8%, making the overall sales tax rate within the city of Phoenix 9.1%.

If the state income tax loss of $3.5 million for the Diamondbacks’ payroll is eliminated from the bill, then the loss for the bill drops to $7.5 million with the savings coming on the state end, from a loss of $8.2 million to a loss of $4.7 million.

Assumptions: (full details on calculations here)

TPT in Phoenix 9.1%  (and statewide)

700 Hotel rooms with double occupancy for 81 event nights

560 car rental days for 81 event nights @$60 per day plus fees

$100 per room outside Chase Field  spending per day subject to TPT

$50 per intentional visitor (outside of tax and fees) for one-way airline ticket based on 50% of $100 faire (plus tax and fees) returned to local economy and 80% flying 

Lodging Taxes addition 5%

Car Rental Fees 30% beyond TPT

Average Room Rate=$150 

Airport Passenger Facility Charge $4.50 for those flying

Driving (all visitors), 2 occupants per vehicle, 15 gallons,35 cents per gallon margin for retailers.

State Economic Multiplier =2

Labor Income subject to State Income Tax 85% of total increase in gross state product (matching personal income to GDP ratio) assessed at  2.3% rate to account for deductions

Corporate income subject to corporate income tax 15% of total increase in gross state product assessed at 4.9%

TPT revenue on the multiplier’s indirect and induced effects represents 1.2% of added gross output.

Dave Wells holds a Ph.D. in Political Economy and Public Policy and is frequently sought after for his policy expertise. In the economics of sports venues he  has done analyses of a proposed new arena for the Arizona Coyotes in April 2023 and has a soon to be released analysis regarding a proposed sports venue in another state. This analysis was done as a public service to help improve the discussion around Chase Field.

He can be reached at MakeDemocracyWork@gmail.com or DaveWellsPhD@gmail.com.