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Inside Charlotte’s All-Star Bid

Dec 21, 2013; Charlotte, NC, USA; Charlotte Bobcats owner Michael Jordan unveils the new Charlotte Hornets logo at halftime during the game against the Utah Jazz at Time Warner Cable Arena. Mandatory Credit: Sam Sharpe-USA TODAY Sports
Dec 21, 2013; Charlotte, NC, USA; Charlotte Bobcats owner Michael Jordan unveils the new Charlotte Hornets logo at halftime during the game against the Utah Jazz at Time Warner Cable Arena. Mandatory Credit: Sam Sharpe-USA TODAY Sports

After a few lonely, unsuccessful seasons in Charlotte, the Hornets, formerly known as the Bobcats, appear to be on the upswing. Things could not have gotten much worse for the franchise but fans finally have reasons for hope.

The team won 43 games last season behind free agent acquisition Al Jefferson and found a defensive identity through first year head coach Steve Clifford. Although they were only able to come within 10 points once in their first round series against the Miami Heat, the team showed the league that they are no longer a complete laughingstock.

There’s been a bit of buzz (pun intended, I’ll show myself out) around the franchise lately; they changed their name to the Charlotte Hornets and also signed free agent Lance Stephenson. In a move to bring some extra attention to the franchise and the city, the Hornets have also submitted a bid to host the All-Star festivities in either 2017 or 2018.

The 2015 and 2016 All-Star Games are scheduled for two much larger markets: Toronto and New York City. While the combined populations of these two cities approach 11 million, Charlotte hovers around 800,000. Charlotte is just the 24th biggest market in the United States and the 16th largest city in America.

Comparatively, Charlotte is small. Knowing this, does it make sense financially for them to host an All-Star weekend?

The financial benefits of hosting a large sporting event are significant. Everyone attending needs to spend money to get there, in the form of a train, plane, bus, etc. Oftentimes, fans will also rent a car for the weekend. Local hotels will be packed as will the restaurants and bars.

And of course as everyone is blowing their paycheck, Uncle Sam and local governments each get their cut in the form of sales taxes. So, not only are local businesses benefiting from increased sales but the local government gets a little bump in tax revenue. In 2012, the added tax revenue amounted to $2.4 million.

This season it is possible that this kind of spending could increase as the league has extended the All-Star break to eight days. That shift may give attendees more of an excuse to hang around and spend money, although I imagine most fans will head home as soon as the festivities are over.

A study surrounding the 2012 NBA All-Star Game estimated that the host city, Orlando, experienced a $95 million “economic impact.” $2.4 million of this $95 million came in the form of tax revenues but more importantly, what the heck does “economic impact” mean?

Economic impact aims to measure the “new” money pumped into an economy over a period of time. In the context of an All-Star Game, it measures all the money that would not have entered the local economy if the event were held elsewhere.

About $56 million of this $95 million was direct spending, meaning that if Orlando were not the host, the money never would have been spent. The remainder was indirect spending, which is essentially when money spent directly is then spent again.

While Orlando may be viewed as a better tourist location, Charlotte could certainly approach a similar number. People love the NBA and fans will want to enjoy the experience regardless of where it’s held.

Then there are the positive externalities.

If the Hornets successfully host All-Star weekend, it could leave a lasting impression on those who visited. With a positive memory of the city in mind, it is reasonable to assume that these visitors would be more likely to return to Charlotte for personal reasons and then pump more money into the local economy. This is very hypothetical and difficult to measure but certainly a legitimate consideration.

So, maybe bandwagon fan and Toronto “global ambassador” Drake has such a great time courtside and at the after party that he tweets about how much he loves Charlotte. Maybe a few more of his fans see him having so much fun and eventually decide to see what Charlotte’s all about. It’s all very abstract but hey, it’s a factor.

Of course, there are costs. This is a big event and of course the NBA would like for the host to have the proper arena to impress the guests. This translates into potential upgrade costs; in Charlotte, it looks like these costs could be $43 million. Tax revenues would fund part of this, although the Hornets would also have to pay up as well.

This is not necessarily a bad thing. Sure, costs seem bad but wherever there is spending, there also has to be income somewhere else. Someone has to work on the arena and these upgrade costs would create construction jobs that generate income for some Charlotte residents. In addition, many of these upgrades continue to have usefulness for the city in terms of future events.

There is also the cost of making a bad impression. Instead of telling the world about how much fun he’s having in Charlotte, maybe Drake has a less than desirable time at the clubs and expresses his disappointment about the city. If he’s not alone in sharing this sentiment, is the average fan less likely to try out Charlotte? Maybe.

As you can see, the costs and benefits of hosting the All-Star festivities can be tough to measure. My opinion on a relatively small city like Charlotte placing a bid-why not? It’ll bring attention to the city and the franchise, and provides an opportunity to impress. At the very least, it gives local businesses a boost, even if it ends up being a temporary one.

It’s not New York or Toronto, but good for Charlotte for placing a bid.

Mark Evans

Mark is an accountant for PwC and a sad Boston Celtics fan. You can follow/tweet at him @JrMarkyMark

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