Most Active Stories
- City Visions: Can Bay Area Catholics and Archbishop Cordileone Find Common Ground?
- Enrollment now open for the 2015-2016 KALW News Audio Academy
- $5,400 for a piece of cardboard? The allure of 'Magic: The Gathering'
- Your Call: How bad is California’s drought?
- The Spiritual Edge: Afro-Cuban movement with meaning
Seven important numbers from the final America’s Cup Economic Impact Report
Several years ago, the Bay Area Council Economic Institute conducted a study on the expected economic impact of the 34th America’s Cup, if San Francisco were to host the event. Past experiences from previous America’s Cup tournaments in Auckland, New Zealand and Valencia, Spain provided an early rough estimate of what might be expected. It was a lot of money: about $1.4 billion dollars in economic impact.
Fast forward about three years. It’s September 25th and Team Oracle USA executes one of the most exciting comebacks in international sports, flying across the finish line and winning a three month long competition. As a result, team owner Larry Ellison is invited to host the next Cup in San Francisco.
It’s now three months after the race, a few days before Mayor Ed Lee’s December 22nd deadline to submit a proposal to the city to host the next Cup, and the Bay Area Council Economic Institute has just released a draft report with preliminary numbers revealing the ultimate expenditures, costs, and economic impacts of hosting the 2013 America’s Cup.
The Economic Institute is still processing revisions from the San Francisco city controller, and a final draft with a complete analysis will be presented before the New Year. The numbers shown below, however, are not expected to change significantly.
$325 million in expenditures
Researchers at the Institute came up with this figure by analyzing the spending activity of a diverse range of people and organizations in the San Francisco economy during the three months the Cup was held, as well as the previous preparatory months. Using different economic models, they broke down spending into ten different categories. Key sources of revenue were from:
The City of San Francisco – With its contract, the city committed to a variety of improvements and investments around the waterfront venues, including a new cruise terminal on Pier 27.
The Cup syndicates, or teams, which came from around the world and set up base on vacant piers – The report did not include spending from Team Artemis, whose base was on Alameda Island.
“They bring not just the people who sail the boats but all of their support staff: engineers, designers, and their families who stayed and lived and spent money in the Bay Area for about two years,” says Tracey Grose, vice president of the Bay Area Council Economic Institute.
The spectators who came to experience the races – Grose says that most people surveyed visited the event site up to six times during a visit to San Francisco. To avoid overestimating, she said they only counted each person as one visit. And they did not count residents of San Francisco, and severely discounted effects of visitors from other parts of the Bay. The Live Nation Concert Series also brought in visitors who may not have watched the sailboat races but came to San Francisco to see acts including Sting, the Steve Miller Band, Weezer, and the Jonas Brothers.
The America’s Cup Event Authority and related staff – This category includes the people who set everything up, staffed the media centers, and debated the rules and regulations. Sponsors and volunteers also contributed to expenditures. Volunteers were primarily local, but there were many who came from around the world, Grose says. Media outlets from all over the world also set up shop for an extended amount of time.
“They’re paying rent, buying food, going out and spending money,” says Grose.
The super yachts – The huge luxury boats that docked near the pavillion also contributed to expenditures. “They’re spending money here on provisions, hosting fundraisers, and parties,” Grose says.
$364 million in total economic impact
Economic impact takes the different types of expenditures into account, but also adds on a “trickle down effect,” Grose says. “When you look at economic impact, you don’t look at just that one transaction of say, buying a sandwich. Ripple effects include the bread baker, the sausage maker, and how families of those workers spend the money they earn from event-related revenues.” Basically, this number includes the additional economic activity that would not have taken place without the Cup. This figure increases to more than $550 million if the long-planned construction of a new cruise ship terminal, which the America’s Cup served as a catalyst to finally get built, is factored in.
$20.7 million out of San Francisco funds
This number does not include over $180 million spent on fixing up the piers, and long-planned improvements around the waterfront, including expected construction of a new cruise ship terminal. Private fundraising from the America’s Cup Organizing Committee was initially supposed to help the city with costs of up to $32 million, but the group only reimbursed the city just over $8 million.
1,175 new jobs
Over a thousand new full-time, temporary jobs were directly generated as a result of the Cup and related activities. If you include the construction of the new cruise terminal, that number rises to over 2,300.
Before the Cup events began, over two million spectators were anticipated. However, the number of challengers dropped from 12 to four, and an accident in the summer of 2013 destroyed the Swedish Artemis boat and killed a crew member, preventing the team from participating in much of the round robin phase of the Louis Vuitton Cup. Many of the races took place with only one one boat and no opponent. Because of the reduced number of competitors, the event drew just over 500,000 visitors – barely a quarter of the projected number. This figure was gathered from surveys conducted by the controller’s office at the three Cup locations along the waterfront, and combined with data from BART, the SFMTA, and hotels.
“We looked to see if there were any recognizable increases of uses over the event period,” says Grose. Over three months of sailing, an estimated 700,000 people visited the waterfront, with the majority of visitors flocking to the final races. Still, their activity benefited hundreds of large and small business, generating significant tax revenue.
$5,793,484 in tax revenue
All of this Cup related economic activity had a large impact on tax revenue. After gathering data on typical spending patterns in sporting events (from case study type interviews with families, hotel owners, and public transit, along with previous data from other America’s Cup events), the Economic Institute needed to come up with a concrete number of people to use the models on. Grose says that during the three months of races, researchers from the San Francisco controller’s office were constantly surveying people around the pavilions. They were asked to complete questionnaires that asked them detailed questions on how long they were staying in the city, how much money they expected to spend, if they were renting cars or taking public transit, and how many people were traveling with them.
“We actually made a very conservative estimate. We did not count San Francisco residents, and we discounted the spending estimates of people who were from around the Bay Area,” Grose says.
Hotel taxes (which are about 14 percent in San Francisco) came in at about $2.35 million. Grose says it could have been more, since hotels are usually booked full in San Francisco in late summer, regardless of the Cup, which forced a lot of spectators to book rooms outside of the city. Payroll, retail, and parking also contributed to tax revenue. This money will go into San Francisco’s general fund. Tax revenue increases to $6.6 million if you include the cruise terminal construction.
$5.5 million short
San Francisco spend $20.7 million on the America’s Cup, according to recent figures from Mayor Lee’s office. About $8.6 million was reimbursed by the America’s Cup Organizing Committee. After subtracting $6.6 million in tax revenues (including revenue from the terminal construction), the city still comes out about $5.5 million in the red.
Grose says this number is a small sacrifice in return for over $300 million in economic impact, but Supervisor John Avalos is quoted in the San Francisco Chronicle as saying the money would have been better spent improving outlying neighborhoods.
Looking forward, Grose believes that a second America’s Cup in San Francisco has the potential to be more successful and generate greater economic impact.
“There are far fewer unknowns related to the technology, and where the racecourse will be, and a lot of the infrastructure investments are already made,” she says. “It’s safe to say that if there were an America’s Cup event here next time, many more teams would participate. And that seems to be the major driver for spectator numbers and thus spending.”