A couple hundred thousand people turn out for a protest in the nation’s capital. Large-scale festivals, such as the annual LGBT Pride festivities, take over city thoroughfares. Signature sports events and playoffs fill arenas. Quadrennial presidential inaugurations are held.
The city must be rakin’ in the cash, right?
According to a recent D.C. government study, not so much.
In fact, when the extra costs associated with accommodating such events are factored in, the District may not economically benefit.
The D.C. Office of the CFO late last year conducted an analysis to quantify the fiscal yield from special events. Prior to this evaluation, there had been no local government appraisal. Instead, an assortment of fiscal policy groups and academic institutions had taken a look – producing widely variant evaluations, ranging from the spectacularly profitable to either insignificant positive or negative contributions.
The financial action is focused on sales tax revenue, which is both the benefit and measure of the economic impact of special events.
The Office of Revenue Analysis study first examined events drawing more than 250,000 people to the city, establishing that number of participant in-flow attendance as a baseline. What the report found was that the fiscal benefit accruing to the city as a result of special events and protest demonstrations was much less than some had projected and largely negligible.
Presidential Inaugurals were the most financially beneficial and, notably, appear to not be affected by the relative size of the spectator crowd that assembles on the National Mall or along the parade route. All inaugurations produce greater financial gain than any other type event, averaging a surprisingly modest accrual of $3.05 million in supplemental sales taxes for every inauguration over the past few decades. That figure increases for all inaugurals in recent years, but remains well below prevailing estimates – and by a significant amount.
Sizable special events held in D.C. contribute a tiny amount of actual direct economic benefit. The agency’s report characterizes this financial impact by saying it “is analogous to a drop in a bucket.” Even inaugurations, the biggest benefactors of the bunch, produce only 0.026% of the city’s operating budget for a year.
Examining sports playoff events with fewer attendees than the quarter-million threshold actually produced a negative estimate of net economic gain, suggesting that smaller events of all types result in similar or make, at best, a negligible financial contribution to the local economy.
Most surprising was that large political protests yield very little in the way of economic boom to local businesses or the District’s tax coffers, and less than the benefit acquired from inaugurations.
The report attributes this small economic accrual to the city from even the largest protests as a result of a “crowding-out” effect. This phenomenon takes place when hundreds of thousands of daily commuters, as well as metropolitan area residents intending to spend money in the city, do not enter the District due to workplace closings or to avoid crowds and transportation bottlenecks.
In those instances, spending by non-resident protestors – modest in amount regardless – is negated by the lack of cash being conveyed by local or area residents who would normally be spending money in the District but are dissuaded by the stress of accessibility.
Another factor is most big demonstrations consist largely of residents. Others traveling to D.C. to be a part of political marches, whether suburban or from outside the area, are in-and-out without spending much money locally.
In addition, the costs associated with hosting these events partially negates the benefit or transforms into economic loss due city costs for increased security, emergency services, streetscape cleanup and police deployment.
Although the overall economic benefit of special events, parades, festivals and political events may be small, they enrich both the city and local history in ways not measurable by coin.
It’s also a reminder of the value of local enterprise contributing to the D.C. economy every single day.