Market Power

Musings by an academic economist on the power of markets and the power over markets.

Saturday, February 26, 2005

Vikings Training Camp

Each August, the Minnesota Vikings hold their training camp on my campus. Last year, the Vikings ownership shopped training camp around in an attempt to get public funds to help cover the costs of training camp. Several cities from around the region set bids, but it came down to Sioux Falls, SD and Mankato. For awhile, it seemed Mankato would lose the camp to Sioux Falls. What happened? From an October 16th St. Paul Pioneer Press article:

The Vikings were strongly considering a more favorable bid from Sioux Falls, S.D., but they heeded the warning of Minnesota Gov. Tim Pawlenty, who told owner Red McCombs last October that the team's chances of securing a new stadium would be hurt if they took training camp out of the state.
Fast forward to October, 2004. The Vikings higher-ups were pleased enough with what they got out of Mankato that they committed to 3 more years. Mankato officials are also pleased. From the same article:

Mankato stepped up and covered the Vikings' estimated expense of $500,000, and Mankato agreed to help the team generate other revenue streams. That decision paid off, said Paul Wilke, president of the Greater Mankato Training Camp LLC.

He said a study showed that the economic impact in Mankato jumped from $3.2 million last year to about $5 million this year, and attendance increased from 30,000 to 71,000. Wilke added that the response from his community has been overwhelmingly positive.

"This is the best training camp we've ever had," said Wilke, general manager of the River Hills Mall in Mankato. "We've built a strong relationship with the Vikings. We're very excited about having three more years, and hopefully longer."

But yesterday's Mankato Free Press had this to say (paid subscription req'd):
Officials with the Greater Mankato Training Camp LLC, which owes Minnesota State University $50,000 in rent payments for last year's training camp, met privately with Gov. Tim Pawlenty Thursday to discuss some of the financial challenges the group is facing in hosting the Vikings each summer.
and this:
But the local organization still owes $50,500 of the $103,500 in rent it had agreed to pay MSU for the use of its facilities for the 2004 training camp. The contract between the LLC and MSU called for the full rent to be paid within 60 days after camp closed Aug. 19. The group said this is the last bill to be paid.
First off, why do the Mankato Training Camp folks have to ask the state for the cash? Attendance at last year's camp was higher than the previous summer. One of the reasons attendance at the camp increased was that the Chiefs and the Vikes scrimmaged at the Vikes' camp last summer. The summer before, the Vikes scrimmaged at the Chiefs training camp. I made several trips to my office during training camp and walked through some of the parking lots used by fans. Other than the Vikes-Chiefs scrimmage, I didn't see many out-of state license plates at the camp. Why, then, would the state want to buck up and help out if the training camp simply redistributes spending within the state.

Secondly, if this is such a boon to the local economy, why can't the Mankato Training Camp folks generate the private revenue to cover their costs? If this is the best training camp they've ever had and if the "economic impact" was truly $5 million, why couldn't they cover their rental payments with MSU on time?

Perhaps the training camp is not lucrative enough. A sponsorship for the training camp cost $25,000 last year. If a business did not think it would receive at least $25,000 additional profits as a result of the camp, then it would have no incentive to buy a sponsorship.

There is a potential free rider problem. The owners and employees of local bars, restaurants, and hotels are the primary beneficiaries of this local "economic impact". If Jake's Pizza (on the Minnesota State campus) thinks that (for example) the downtown bars and restaurants will kick in the requisite funds, then its owner doesn't need to. If all local businesses think like this, then it will be tough to come up with the cash. In such a case, if public funds are to be sought, the proper government to see for help is the local government.

So why do the training camp officials need government help? Probably because the public benefits of training camp aren't as lucrative as they are hyped up to be.