BHI numbers again fall short of a sum

11 August 2004

The Beacon Hill Institute is at it again, pushing out bad numbers while scoring front-page stories. In a just-released study, it says the Democratic National Convention netted a mere $15 million for Boston's economy - a claim rejected by Mayor Thomas Menino.

Both of the city's daily newspapers gave the story big play: "DNC a total waste," read the Herald; "DNC benefit negligible," said the Globe.

One has to wonder whether this latest effort is soon headed for the same dustbin as the institute's previous reports, which variously pegged the economic effect of the DNC at a gain of $121.8 million to a loss of $12.8 million. Moreover, even a casual reading of this week's study suggests it's deeply flawed. Here's why.

On the plus side, the Beacon Hill Institute adds up various benefits from the DNC, such as spending by delegates, to arrive at $156.6 million (no doubt the Boston Redevelopment Authority, which expects to have its own study out in late September, will conclude the benefits were even greater).

Still, assume the institute is correct. Sounds like the convention was a winner, right?

Wrong. From the benefits side, one has to subtract the negatives - the economic costs of holding the convention. For example, the U.S. Gymnastics Qualifying Event originally planned for this summer would have generated $15 million. But the gymnasts went elsewhere and so the institute - correctly - reduced convention benefits by that amount.

Three other subtractions the Beacon Hill Institute makes are far more questionable, however. Because the convention was in town, it assumes tourists who otherwise would have visited stayed away, for a total loss of $22 million. But is that what really happened? Or did tourists time-shift, simply moving their vacations from July to, say, August? Greg Perkins, interim head of research for the BRA, expects that's likely to happen.

Similarly, BHI subtracts $7.5 million because commuters avoided coming into the city. Had they been here, the institute argues, they would have spent about $10 a day (on lunch and the like). They didn't, and so that's a dead loss.

Really? Those commuters still ate, after all, just not in Boston. That may have hurt city businesses, but those elsewhere likely did better - and the right way to evaluate the economic effects of any large-scale event such as the convention is on a regional basis.

The most dubious claim in the institute's analysis, however, has to do with SailBoston, another forgone event that BHI says would have generated at least $95.6 million. The BRA's Perkins flatly denies that's true.

The institute bases its analysis on a successful SailBoston event held in July 2000, a nine-day, 120-ship extravaganza. But the event planned for this year was much smaller: five days and between 10 and 19 ships.

So what's that worth? Just prior to SailBoston 2000, the BRA had projected it would produce benefits of $89 million. Perkins, who headed that study, says that in retrospect his estimate, if anything, was too high. Moreover, he says that a 2004 event would have generated at most $20 million.

The effect of these differing figures is dramatic. If the BRA is right, and even if one still gives full credence to all of BHI's other numbers, the economic benefit from the DNC was $90 million, not $15 million.

There are two points out of this that bear consideration. One has to do with the credibility of the Beacon Hill Institute. As I have written before, much of the institute's output, on topics ranging from tax policy to wind power to the convention, has seemed to me sloppy and bullheaded, done with an attitude that cares more about media impact than accuracy. This latest study is no exception.

More importantly, the BHI study appears to lead to the conclusion that the convention itself was a mistake and that, as a matter of policy, Boston should shy away from holding similar events.

To the contrary. The institute (like almost everyone else, for that matter) makes the common error of focusing on quantifiable, near-term economic effects. The $15 million (or $90 million) allegedly produced by the DNC is, in the scheme of things, trivial. Boston itself has a $60 billion economy. No matter whose numbers you use, the DNC is just noise compared to that.

The right measure should be the long-term effect of a convention or any other large-scale event. By opening itself to the world, by making the city and region attractive, accessible and well-known, Boston solidifies and enhances its reputation as one of the nation's economic and cultural centers. That in turn generates jobs, population growth, tourism and business development. And that's why, for all their faults, the convention and other large-scale events are not only worthwhile, but make continued sense.

Only next time, let's not use the FleetCenter.