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Win One for the Tax Man

December 20, 2013
Philadelphia sports fans love championships. We cherish those glimpses of greatness. Tug McGraw’s leap in ’80. Mo Cheeks’ dunk in ’83. Bernie Parent nailing the coffin in ’75. But Philadelphia hasn’t won a championship in five years.

Winning teams don’t just make cities money, they make cities. No one knows this better than Stephen P. Mullin, an adjunct economics professor at LeBow who has served as the budget director for the city of St. Louis and as Philadelphia’s director of finance. Mullin saw firsthand what happened when the football Cardinals left for Phoenix in 1988 (“they made Phoenix”), and he watched the spoils roll in when the baseball Cardinals secured three World Series berths in a six-year span.

“When I walk into any venue for a sports event, the first thing I do is make a rough estimate of the city’s take in terms of license fees, taxes and ticket prices,” he says. “Then I root for the home team.”

In 2012, each of Philadelphia’s Big Four home teams underperformed or got locked out — and there have been consequences.

When attendance is down, or a season cut in half, the city’s amusement tax plunges. Typically, Philadelphia collects between $60 and $70 million a year in amusement tax, Mullin says. However, it might be down $10 to $15 million this year because of the NHL lockout.

So, when the Phillies’ sellout streak ended, Philadelphia took a hit. Paid attendance peaked at almost 5,000 seats below average. The economic impact, Mullin says, can be calculated with a simple head count.

“Five thousand fewer seats sold times $3 in tax per ticket is $15,000 less in the coffers. The spending and sales taxes on the food and vendors, as well as the vendors’ income, is big: 3.1 million tickets versus 2.7 million per year is a lot of lost revenue.”

In 2010, Philadelphia’s Department of Commerce and the Philadelphia Sports Congress postulated that a Phillies World Series victory could generate more than $23 million for the local economy, including $19 million spurred directly from fans, media, sponsors and MLB affiliates.

However, hidden in these numbers is a psychological factor: We don’t pay for losers.

“Psychologically, towns with winning teams get people more active,” Mullin says. “Because of our tax structure and our venues being inside the city, our city collects a lot both directly and indirectly.

“When any city has a championship parade, there is not a more bonding event. There is an afterglow. There is a jersey on William Penn. A huge economic impact.”

On paper, Philadelphia sports have all they need to succeed: four teams housed within city limits; each venue beholden to city-direct taxes; each stadium capable of shaking Pattison Ave. from South 11th Street to Darien. But teams lose, and fans head home.

A victory parade is a different story. A championship can shake Philadelphia from the sports complex to City Hall. Imagine one million fans marching past restaurants and shops, spending money to commemorate that last drive that brought the title home.

“I want Philly sports teams to win because I want the parades,” Mullin says. “I want the direct and indirect economic effects to happen. The TV crews and the hoi polloi. That is a vibrancy that can’t be replicated.”

Broad Street is waiting for a championship, boys. Our hearts and wallets will thank you.

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