Why LeBron James' alleged $500 million impact on the Cleveland economy is mostly bunk

LeBron JamesAP/Bill KostrounLeBron has ditched his signature chalk toss.

After originally estimating that LeBron James’ return to Cleveland would bring an annual $US500 million boost to the local economy, one economist is now calling that number “outlandish” while others explain why the true impact is likely much less.

Shortly after James signed with the Cavaliers and decided to return to Cleveland, economist LeRoy Brooks outlined for Time.com how the NBA star could help generate $US495 million in additional revenue for the area. The Cuyahoga County Fiscal Office reached a similar estimate of a $US500 million a year impact on the Cleveland economy.

While attendance at Cavs games is up more than 3,000 fans per game, another economist explained for Cleveland.com how the earlier estimates ignored one important point and why the overall impact of LeBron’s presence is misleading.

Edward “Ned” Hill, an economist at Cleveland State University said the original estimates ignored where the money was coming from. If it is not coming from outside the Cleveland area, it is not a boost to the economy and is rather just a shift in entertainment spending. That is, people might be spending more on Cavs games and at restaurants and bars near the arena, but they are probably also spending less on movies and other forms of entertainment.

Brooks did concede that the $US500 million estimate was “outlandish” telling Cleveland.com it was just a first estimate made in haste.

This doesn’t mean the return of LeBron won’t have a positive impact. There are signs that James’ presence has helped the Cleveland economy.

Bar owners near the arena have seen a 30-200% increase in revenue on game nights. Bartenders and waitresses that would normally be laid off until the summer are being kept on the payroll. In addition, demand for local hotel rooms are up 8.6% from the same period last year compared to the national average increase of 5.8%.

But at the same time, Cleveland.com reports that sales taxes in Cuyahoga County are only up 10% from the same point last year, an increase that is actually below the Ohio state average of 11%, suggesting any increase is just due to a healthier economy overall.

The true impact of James on the local economy won’t be known for some time and is almost certainly dependent on a deep run in the NBA playoffs. One study conducted in 2010 showed that $US150 million of the $US200 million in local spending tied to LeBron and the Cavaliers came during the playoffs.

Whatever the real impact ends up being, most agree it will be far less than $US500 million.

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