Cup Runneth Under: Bad News About America's Cup Forecasts

Last week, readers of the San Francisco Business Times on March 11 learned “America's Cup economic impact lowered to $780 million from $1.4 billion.” Examiner readers on March 12 saw “Cup economic benefits downsized.” For the most part, that's bad — the financial prediction of vast riches flowing into city and private coffers that was used to prod San Francisco politicians into lashing themselves to the America's Cup has been downgraded by around half a billion dollars (so far).

Yet the March 12 above-the-fold, Page One story in the Chronicle noted “Cup costs down by millions.” That's … good?

The paper of record emphasized that far less private money is apparently now required to satiate the city on the very day of a hearing called by Supervisor John Avalos to monitor fundraising. Meanwhile, the private America's Cup Organizing Committee is languishing in its attempts to “endeavor” to raise $32 million to offset city costs. It may not make for a conspiracy theory, but it's certainly convenient.

It warrants mentioning, however, that even if the ACOC fulfilled its loose obligation to raise $32 million — which it couldn't — the city still potentially stands to lose money.

That's because both the Budget Analyst's calculations and blithe statements now emanating from America's Cup organizers rely on increased tax revenue bailing out the ACOC for its anemic performance. This is a dicey proposition. Numerous economists studying the Super Bowl and other “mega-events” have been claiming for decades that predictions of enormous economic boosts are dubious and rely on flawed analyses.

In order for San Francisco to be flooded with hotel and other tax revenues, far more visitors than usual would have to flock to the city — during peak tourism months. It's difficult to say how many more folks will head to San Francisco than would have anyway. And it's even more difficult to predict how many people who would have come here will now avoid the city due to the America's Cup. As University of South Florida economics professor Philip Porter told SF Weekly with regards to the Super Bowl, to claim a windfall based on visitor numbers without factoring in those who avoid the area “is like going to the hen-house, counting all the foxes, and saying 'Look at the economic impact of all these foxes here eating!' You're not counting all the hens who are gone.”

Of course, in that scenario, the Chronicle could duly note that the city is no longer burdened by surplus hens.

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