This week, I broke the story revealing that the province spent $600,000 on the Paul McCartney concert. The provincial expenditure is in addition to $150,000 spent by the city of Halifax, and brings the total taxpayer bill to $750,000.
Some readers might read more into my story than I intended. I am not against Common concerts. At least, not necessarily. Truly, even now I’m ambivalent on the issue: if the people of Halifax, or Nova Scotia, decide to collectively spend tax dollars on bringing Paul McCartney, or anyone else, to town, simply because they want to have fun, well, who am I to argue? But, I don’t think the people can decide such a thing without first having all the information available to them, and first of all: how much will it cost? Without that bit of info, they’d be making an uninformed decision.
As usual, for me it comes down to secrecy: if a government expenditure is worth making, then it should be defendable in public. But as we’ve seen, the provincial government decided it didn’t want to publicize its $600,000 contribution; I can only conclude that government officials felt it was indefensible.
Regardless, after the fact there have been all sorts of justification and arguments made in favour of the McCartney expenditures. For example, as reported in the Chronicle-Herald:
Harold MacKay, president of Power Promotional, said his company’s analysis shows that the McCartney show generated about $2.8 million in HST revenue and that show, combined with one a week later featuring Kiss, generated about $24 million for local businesses.
Likewise, Liberal MLA Andrew Younger emailed me with a similar argument:
I did some quick math and by my math the province made a profit on McCartney
For example, say 50,000 tickets at $100. I actually think more were sold and at a higher average price but anyhow.
The provincial HST revenue on those tickets is $400,000. That does not include HST revenue on liquor, merchandise, staging/equipment rentals etc.
Thus when all is considered it appears even conservatively the province would have at least broken even.
I would argue that these various arguments are actually a diversionary tactic: they serve to take our eyes of the ball of secret government expenditures—of knowledge kept from the citizenry—and to get bogged down in arguments about HST and the rest. So, I’m tempted not to address them at all.
However, the economic arguments to justify-after-the-fact hit on another bugaboo of mine: bullshit economic impact calculations. So, keeping in mind that the primary issue with the McCartney expenditures is secrecy, not the economics behind them, let’s nonetheless tease out those arguments a bit.
First of all, there are several moving balls here: the actual number of concert attendees, the money they spent and the HST collected from that money. (As we’ll see, even these moving balls are distractions.)
MacKay disputes my source’s contention that only 26,000 tickets were sold for the McCartney concert, but I trust the figure. I hope to soon get into the issue in a bit more detail, but suffice it to say that it’s obvious that a threshold ticket sales level wasn’t met, and neither MacKay nor Trade Centre Limited will provide actual numbers (more secrecy!), so why shouldn’t I trust my source’s figures? If there were more than 26,000 tickets sold, then MacKay and TCL should provide documentation for a higher figure.
Yesterday, Beverly Miller, a long-time opponent of Common concerts, sent me a 2007 letter she had received from Barb Stegemann, who was then TCL’s communications person. I’ve uploaded the entire letter, here.
The letter concerns the Rolling Stones concert. Stegemann helpfully provided exact ticket sales numbers, the first I’ve seen, and supposed related expenditures:
[T]he attendance expenditures were calculated at 39,875 attendees spending $135.24 each based on an average expenditure survey done exclusively for that event which amounts to $5,257,455.00 in addition to the Event Expenditures of $599,451, the amount is $5,856,906.00.
I say “supposed” in part because Stegemann’s math is wrong: 39,875 people spending $135.24 bring a total of $5,392,695, not the lower figure of $5,257,455 Stegemann provided. I also have no idea what methodology TCL used for surveying concert-goers, but If TCL couldn’t get simple multiplication right, why should we expect they could get any other aspect of their economic impact analysis right?
[It’s entirely an aside, but TCL’s survey of downtown businesses is also interesting: apparently fully half of them lost sales due the Stones show, while another 27 percent saw no change in sales, and yet 69 percent of them of think it’s a good idea to have more big concerts on the Common.]
Like economic impact bullshitters everywhere, TCL evidently used a “multiplier”— a figure picked out of thin air that is supposed to represent the number of times any given dollar recirculates in the local economy. MacKay, in any event, claimed that the McCartney and the KISS shows jointly “generated about $24 million for local businesses.” MacKay isn’t saying how many people actually attended either show, so it’s impossible to know, but it looks like the multiplier is about 3. That’s actually pretty low as these things go—economic forecasters often pull the number 7 out of thin air as a multiplier.
But anyway, $5.39 million, or $5.26 million or $24 million—how could anyone argue that this is a bad thing? Isn’t that $5.29 million, or $5.26 million, or $24 million, that wouldn’t have been spent otherwise?
I’m hoping that Coast readers can see the problem here directly.
The argument supposes that the Canadian mint fired up the presses and printed up $5.39 or $5.26 or $24 million in special Halifax Rolling Stones bills, distributed exclusively for concert-goers, for free.
But of course, what really happened is that people with limited resources made budget choices: they spent (supposedly) $135.24 on Stones-day expenditures instead of spending $135.24 on baby formula, or Farmers’ Market goodies, or crack, or credit card debt. In other words, the money was just shuffled around differently. We can’t really know the economic impact of the concert unless we also consider the economic multiplier of spending money on baby formula, Farmers’ Market goodies, crack and credit card debt. Quite possibly, the multiplier for baby formula and crack is larger than the 3 multiplier for Common concerts.
And the same goes for HST collections: that $135.24 would’ve been somewhere. I suppose you could argue baby formula and crack sales aren’t taxed, but certainly the baby formula and crack dealers eventually get around to spending their sales money on taxed items.
There were of course people who came from out of town and spent money in Halifax instead of buying baby formula or crack in Sydney, or wherever, but I’ve seen no reliable figures for how many such people came to town, so it’s impossible to calculate the full effect. It’s also possible that some number of people left town because they didn’t want to deal with the Stones crowds— and they in turn spent their Halifax baby formula money on Saint John crack. Who knows?
Still, however nonsensical they are, TCL obviously runs such calculations and keeps economic impact reports locked up in a vault somewhere in the Argyle Street headquarters. So, I asked Stegemann’s replacement, Fiona Kirkpatrick Parsons, for the figures on the Paul McCartney show. Her response:
What you’re asking me to share with you is actually proprietary information; it would most certainly be a breach of our contract with the promoter to disclose any ticket sales numbers — not only for this concert, but virtually all events for which we sell tickets. This is the norm with these types of contractual agreements in the events business.
TCL did conduct an economic impact study of the Paul McCartney concert last summer–using generally-accepted, current industry practices–and that concert generated an estimated $8 million in direct expenditures.
So did Stegemann violate TCL policy? Kirkpatrick Parsons isn’t saying. Regardless, we’re supposed to take the “$8 million in direct sales” as gospel truth, and I guess, ignore the baby formula and crack-buying displacement effect I outlined above.
Bottom line: between the secrecy, the bullshit assumptions going into these calculations and the ignoring the baby formula/crack dispacements, the economic impact reports are worse than meaningless: they’re insulting.
I’d be happier if Common concert supporters simply said they want to see Paul McCartney, or whoever, and they want the taxpayers to foot some of the bill, and to tell us the true costs upfront.
Related Stories
Common concert promoter goes out of business
This article appears in Apr 15-21, 2010.
Couple of other points:
1) you can’t count the HST twice. It is an input output value added tax, whatever is spent on running the event is in fact deducted from what is collected from the patrons. The difference is what is paid by the promoter to the government. So the MOST that the government gets is what is collected off of tickets. THe expenses don’t matter at all.
2) the feds did not contribute to the event, so really you are looking at the 8% provincial component, not the 13% total tax, in terms of “getting money back.”
3) Direct sales? They also need to deduct the money leaving the country with the artists. At least $3.5 million went to McCartney. Again, the Feds took 15% in income tax, but the province did not.
4) While total ticket sales are not available, there is nothing against industry practice to release , oh, the percentage of sales to people using credit cards from outside HRM, and outside NS. How many advance tickets were sold, percentage wise, to people who would not have spent the money here anyway?
Many tourists and business people could not get hotel rooms that otherwise would have been sold and therefore the only revenue to be counted is the revenue difference from higher priced rooms sold to concert goers and the lower prices charged to other travellers. And even that is not accurate because room rates rise as sales rise. The city would have been sold out when the Stones were here because that weekend had a history of being sold out, just check with the Tourism department. The city is pretty much sold out during the period of arrival of first year university students. September is a very busy month, usually sold out in metro, because seniors & childless couple tend to travel in that month and the days are warm and the evenings pleasant. Check any hotel and you will see September is the busiest month in the year.
The analysis uses the multiplier which is basically GIGO. After paying crazy prices for rock concerts young people tend to want to pack 4 or 6 or 8 people in a room and save money for booze and the show. They don’t wander down to the restaurants because food is sold at the event and pizza is cheap and filling. One restaurant I frequent had no increase in business for the Stones concert or the McCartney concert.
In my experience the concerts at the Metro centre are a better deal for government and business because they do not require public funding, they do increase restaurant and hotel sales. The downside is quite easy. They don’t provide loads of press releases for politicians and the pols don’t get to look as though they are doing something people approve of.
Conclusion : Promoters know how to take the taxpayers for a ride and politicians are generally useless except when they front a rock concert on the Halifax Commons.
the other cost I’d like to factor in is the loss of recreation time for people wanting to use the Commons sports fields for things like soccer and (c)ultimate frisbee and baseball. Like volunteer work and caring for family and making healthy choices — these things don’t appear on any balance sheet and their value cannot be calculated and compared to the supposed value to the economy. How to put a price on the loss of active lifestyle options for those weeks? I know some people would think that’s crazy talk, but we’ve got to put a value on that sort of thing as a city. Use it or lose it. Each time they promise not to damage the field, and each time it gets damaged and recreation time in our short summers is cut down. I heard in the Herald the other day that the Commons will lose one ball diamond to accommodate infrastructure for more concerts.
“Here we are now, entertain us.”
I’ve always wondered why people weren’t getting this. Over the last few days I realize the reason is that it’s about math. Many people in our community are functionally innumerate and rather than admit they can not figure this out, they rally with anyone who says anything “number… blah…blah… economic… stats…spinoff” without questioning or even thinking. It’s a shocking revelation.
Good case in point here: Mr. Younger clearly does not know how the HST system works. First off, that HST is not ‘money from away’ it’s just us churning money from one pocket to another.
Also, yes, the promoter may well have collected $400k in HST but that would be offset by the HST service tax credits he spent on everything else. Generally speaking business only pay NET HST equal to about 15% of their net profits. It is the consumer who, without any mitigating tax credits, pays the bulk of the HST collected by the government.
Finally, even if you can’t do the math at least consider the logic. The economic world is logical. Paul McCartney doesn’t come here to give us money… he comes to take our money and any economic analysis done on this thinking over time would show that there must, by definition, be a net outflow of capital unless all involved lived and paid taxes in Nova Scotia.
This event is surely more lucrative for the Channel Islands banks where Paul keeps his money than for Nova Scotia. Maybe we should think about that line of business.
The “bad multiplication” example looks to be just a typo – ticket sales of 38,875 rather than 39,875 multiplied by $135.24 gives the correct figure as reported in the email.
A couple of other expenditures that need to be factored in here.
After the Rolling Stones concert HRM purchased protective turf covering to be used for future concerts to minimize damage to the grass. Price: $96,000.
Council also just voted in March to spend $3 million on ‘infrastructure improvements’ to the North Common mostly to facilitate mega concerts. The expenditures are supposed to be ‘phased in’ over three years but the first year it will all go to facilitate mega concerts, including installation of electrical power and a building to house it and some kind of plastic material to put under the grass in the south east corner so, to paraphrase HRM staff member, Peter Bigelow at a public meeting in January, “those big trailer trucks can drive right up on the grass”! One member of the Friends of the Halifax Common who has seen the plans estimates that of the $3 million approximately $50,000 will be spent on trees and landscaping (the kind of stuff the citizens who use the Common would benefit from) and definitely not in the first year.
Another slanted BS column by Tim.