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Professional sports, Hurricane Katrina, and the Economic redevelopment of new Orleans.
Article Type:
Professional sports (United States)
Professional sports (Economic aspects)
Professional sports (Political aspects)
Economic recovery (Evaluation)
Post-disaster reconstruction (Economic aspects)
Post-disaster reconstruction (Political aspects)
Baade, Robert A.
Matheson, Victor A.
Pub Date:
Name: Contemporary Economic Policy Publisher: Western Economic Association International Audience: Academic; Trade Format: Magazine/Journal Subject: Business; Economics Copyright: COPYRIGHT 2007 Western Economic Association International ISSN: 1074-3529
Date: Oct, 2007 Source Volume: 25 Source Issue: 4
Event Name: Hurricane Katrina, 2005
Product Code: 7941000 Professional Sports NAICS Code: 711211 Sports Teams and Clubs SIC Code: 7941 Sports clubs, managers, & promoters
Geographic Scope: United States Geographic Name: New Orleans, Louisiana; New Orleans, Louisiana Geographic Code: 1USA United States

Accession Number:
Full Text:
Hurricane Katrina devastated the city of New Orleans in late August 2005, resulting in damage to much of the city's sports infrastructure and the departure of both of New Orleans' major-league professional sports teams, the National Football League Saints and the National Basketball Association Hornets. What should the city provide in the way of financial accommodation to encourage them to return? This paper suggests that post-Katrina New Orleans will have a difficult time retaining their franchises over the long run and in attempting to do so may hinder the redevelopment of the city. Furthermore, the very incentives designed to attract teams in the first place leave cities vulnerable to their departure in times of crisis. Finally, playing host to professional sports and mega-events does have symbolic significance, but it is arguable that this is an amenity the city cannot currently afford. (JEL H25, H71, H40, L83, Q54)


Hurricane Katrina devastated New Orleans physically and economically after making landfall on August 29, 2005. Full recovery, which generally follows natural catastrophes in the United States given the inflow of funds for reconstruction, seems less certain in the Crescent City. Citizens and businesses that left New Orleans following the storm have exhibited a reluctance to return. The city's professional sports teams are included among those enterprises that departed New Orleans in the wake of Hurricane Katrina. The National Football League (NFL) Saints played home games in three different cities (San Antonio, Baton Rouge, and New York City) during 2005. The National Basketball Association (NBA) Hornets took up residence in Oklahoma City for 35 of their 41 home games during the 2005-2006 season, returning to Louisiana (although playing in Baton Rouge and not New Orleans) for a largely symbolic six games. The Arena Football League's Voodoo abandoned their entire 2006 schedule. The University of New Orleans and Tulane, both National Collegiate Athletic Association (NCAA) Division 1 schools, either canceled entire seasons for individual sports or played "barnstorming" seasons with no home games.

What is the future of professional and spectator sports in New Orleans and what roles do sports play in the economic redevelopment of the city? The purpose of this paper is to analyze the extent to which the City of New Orleans should direct its redevelopment dollars toward its sports infrastructure. Has New Orleans benefited economically from its role as host to major professional sports teams and a disproportionate number of mega-sports events given its size and demographics? Do commercial sports enable a rebuilding of New Orleans' storm-ravaged infrastructure or does it force civic trade-offs made even more painful by the storm?

Independent scholarship in general has not supported the thesis that professional sports induce significant increases in economic activity for host cities. New Orleans, however, may be different. The city is smaller and less affluent than other host cities in general, and it may be that the frequency with which large sports events are hosted by New Orleans makes the area an exception to the experience of most cities with regard to sports and economic development. The gravity of the city's economic situation in the wake of Katrina necessitates an individual and more complete appraisal as strategies for economic redevelopment are explored. Answers to the questions raised in this introduction require a review of, among other things, New Orleans' place in the national sports landscape, the extent of the damage Katrina wrought, the amount of redevelopment money the city must commit, and the evidence with regard to the impact sports has on host city economies, with special attention to the circumstances that surround New Orleans in its rebuilding period.


While New Orleans hosts major-league franchises in both the NFL and the NBA, with a pre-Hurricane metropolitan area population of less than 1.5 million residents, the city was already a small market for any of the major sports leagues in the United States. As shown in Table 1, New Orleans is the 41st largest metropolitan area in the United States by population and is the 36th largest city out of the 40 hosting a team from one of the five large professional sports leagues. Furthermore, five cities in the country without any major sports franchises, Las Vegas, Virginia Beach/Norfolk, Providence, Greensboro, and Austin, are all larger than New Orleans. Another nine larger cities are without an NBA team, including several with strong ambitions to attract a franchise such as Kansas City and St. Louis. Fourteen cities without an NFL franchise have larger population bases than New Orleans, including Los Angeles, the nation's second largest market, and football hungry San Antonio, which played host to the New Orleans Saints for three of their "home" games during the 2005 season. Not only is New Orleans small but it is also relatively poor ranking 45th in per capita personal income among the cities listed in Table 1 and 36th out of the 40 cities with major professional sports franchises.

Another problem for New Orleans is its business climate, as corporations play a major role in keeping a team financially competitive. It is one thing to provide highly profitable luxury seating; it is another to fill those seats. The city is home to just two Fortune 500 companies: Entergy, ranked 218th, and Freeport McMoRan Copper and Gold, ranked 480th, and there is, therefore, not the market for loges and club seats that can be found in the other NBA and NFL cities with which New Orleans competes (Corbett, 2006). One writer somewhat whimsically stated the NFL financial equation in the following way: The competition to host a professional sports team is often as fierce as the competition among athletes on game day, and the lack of population base and both personal and corporate wealth places New Orleans at a considerable disadvantage in supporting and, therefore, retaining either the Saints or the Hornets. Prior to Hurricane Katrina, in fact, New Orleans appeared to be on the verge of losing their NFL franchise. Tom Benson, the owner of the Saints, had reportedly rejected the state's final offer to keep the Saints in New Orleans in late April of 2005. The state's offer included not only public financing of over 75% of a proposed $174 million Super-dome renovation but also direct cash payments to the Saints totaling $64 million through 2008 and $9.5 million per year after the completion of the renovations to the Superdome in 2008 (Martell, 2005). The state's offer to the Saints, including the annual cash subsidy, would have placed the team in the top half of the financial standings in the NFL.

Instead of fans, the NFL seeks corporations... While the NBA and Major League Baseball have guaranteed contracts for their players, the NFL with its exorbitant TV rights deals and corporate backing has practically given their owners guaranteed dollars...

The way business is done now is the owner convinces his buddies who own the largest business in their respective cities to buy majority (sic) of the season tickets and luxury boxes. The result: a term exclusive to the NFL, the guaranteed sellout. Saints owner Tom Benson can't do that in New Orleans because there are no major corporations other than Entergy to back him. (Stewart, 2005)

The fact that Benson would reject such an offer, which included a direct cash subsidy to the team, speaks volumes about the financial realities of the NFL and the inordinate transfer of business risk from teams to their host cities. While the state struggled to meet its contractual cash payments to the team in the wake of reduced tax revenues following the terrorist attacks of September 11, 2001, the only significant financial risk facing Tom Benson was the $81 million he would have been required to pay (representing the subsidies that the Saints have received since 2001) if he broke his Superdome contract, which he could have done following the 2006 season (Konigsmark, 2005). That risk pales in comparison to the $1 billion written offer Benson claims to have received for the team in 2005, a 1,400 percent increase over the $70 million price Benson paid for the Saints in 1985 (Robinson, 2005). The lucrative offer Benson received for the team reflects at least in part the money-making potential of NFL teams, which is explained in large part by the subsidies cities extend to attract a supply of teams that is limited by the NFL and its owners.

While recognizing 'New Orleans' shortcomings as it relates to its ability to host professional sports, on the other side of the coin, the city caters to the tourist trade to an extent that distinguishes itself from almost every other American city. The infrastructure that New Orleans has created arguably provides a comparative advantage in hosting events to include commercial sports over most cities in the United States. The city's performance in attracting outside events supports the idea that it has exercised its comparative advantage. Even though New Orleans is a relatively small city, it ranked fifth in the United States in the number of conventions hosted (Tennes-sean News Services, 2005). Prior to the storm, New Orleans annually attracted more than 10 million visitors who spent in excess of $5 billion per year according to the New Orleans Metropolitan and Tourism Bureau.

The information recorded in Table 2 in a general sense indicates the extent to which New Orleans is geared to tourism. The fraction of the New Orleans economy that was accounted for by "Accommodation and Food Service" (North American Industrial Classification System [NAICS] 72) in 2004 indicated that New Orleans had a significantly larger tourist component than did the United States overall and three other southern cities in the United States that hosted NBA and NFL teams. It is noteworthy that the tourist sector in New Orleans--measured by employees and payroll in NAICS 72-is more than 25% larger than that of Miami, which is generally regarded as the most tourist-based economy among the comparison group.

Commercial sport, of course, is one important aspect of the tourist/leisure industry, and it could play a role in the economic revitaliza-tion of New Orleans. Since opening in 1975, the Superdome has hosted numerous sporting events of national significance including the NFL's Super Bowl in 1978, 1981, 1986, 1990, 1997, and 2002, and the National Intercollegiate Athletic Association Men's Basket ball Final Four in 1982, 1987, 1993, and 2003. Furthermore, the Superdome annually hosts the Sugar Bowl, one of college football's top postseason matches and a game which has determined college football's national cham pion nine times since 1975.

Replacing the infrastructure for professional sports and mega-sports events is economically justified if the benefits provided by the facilities exceed the costs incurred in the reconstruction. Both costs and benefits have to be measured over time since the facilities provide a stream of benefits as well as generating costs associated with operations and maintenance. Comprehensive economic analysis would include not only the explicit bene fits but also the implicit benefits and costs, which are difficult not only to measure but in many cases to identify.

Data do exist for New Orleans for the number of establishments, annual payroll, and number of employees for a variety of entertainment-related industries defined according to the NAICS, and these data are recorded in Table 3.

All data point to the fact that the economic activity accounted for through the "Arts, Entertainment, and Recreation" industry (NAICS71)for New Orleans is absolutely small but large when compared to the United States overall. Census data, thus, support the idea that New Orleans is a tourist-based economy that exhibits an arts-entertainment-recreation industry that is larger than that characterizing the United States as a whole.

The contribution of "Spectator Sports" (NAICS 7112), however, is less than 1% by any of the measures identified in Table 3. Despite the high salaries paid professional athletes, the spectator sports industry typically accounts for less than 1% of a city's payroll, and, by that measure, the industry is not economically vital to cities in the United States, including New Orleans.

Numerous studies of both professional sports franchises and stadiums as well as of mega-events, furthermore, lend support to the notion that sports have little impact on local economies. Analyses of the Super Bowl (Baade and Matheson, 2006; Porter, 1999) NCAA Final Four (Baade and Matheson, 2004b), and mega-events in general (Baade, Baumann, and Matheson, 2007a; Coates and Humphreys, 2002), for example, have all concluded that these big sporting events have no statistically significant impact on any number of economic variables such as employment, per capita income, metropolitan area-wide gross domestic product, or taxable sales. Most recently, Coates and Depken (2006) indicated ambivalence about the economic contribution of sports mega-events. Coates and Depken concluded, "The upshot is, therefore, that these mega-events are not necessarily the economic windfall that their proponents portray them to be." Stadiums and professional franchises (Baade, Baumann, and Matheson, 2007a; Baade and Dye, 1990; Coates and Humphreys, 1999) similarly show little in the way of economic benefits for host cities.

Given the economically tenuous state of professional sports in New Orleans prior to Hurricane Katrina, it is difficult to imagine that a disaster of its magnitude would improve prospects for the industry in the city. The next section of the paper summarizes the extent of the damage, with a particular emphasis on the demographic changes that may be sufficiently long lived to adversely influence the prospects for supporting professional sports in New Orleans in the long term.


Hurricane Katrina, which swept into New Orleans and the Gulf Coast on August 29, 2005, caused far and away the largest damages in real dollar terms of any hurricane in U.S. history, with uninsured losses topping $100 billion (Bloomberg News, 2005) and insured losses estimated at $34.4 billion (Powell, 2005). Its final death toll of over 1,400 also places it among the worst natural disasters ever suffered by the United States. New Orleans was particularly hard hit by the storm, as floodwaters remained for weeks after Katrina while levees were repaired. Rebuilding the city is an epic undertaking unmatched in scope and expense in recent U.S. history.

The cost of reconstructing New Orleans itself has been placed at more than $100 billion (Ten-nesscan News Services, 2005). Approximately 80% of New Orleans' 188,000 occupied housing units were severely damaged by the storm. Furthermore, more than half of the city's 100,000 owner-occupied homes were built before 1950, and their repair and replacement will require expensive modifications to meet modern building codes designed to prevent future hurri-cane damage (Tennessean News Services, 2005).

The damage to middle-class neighborhoods has substantial implications for the redevelopment effort both as it relates to production and consumption. Without a middle class, New Orleans will not have the workers it needs to run the economy that existed prior to Katrina, and the spending necessary to restore the economy to pre-hurricane levels will be deficient. Katrina devastated the housing stock, schools, and other infrastructure vital to normal life for all socioeconomic classes.

The extent of the damage to the social infrastructure must also be carefully assessed since the return of middle-class workers and consumers is essential to the revitalization of the New Orleans economy. Even before Katrina, by nearly every measure of economic development, New Orleans lagged behind other large American cities. Labor force participation rates and employment-to-population ratios in New Orleans averaged 5%-10% below national levels for most demographic groups (Gabe et al., 2005). Hurricane-damaged areas in Louisiana had poverty rates above the national average (21.4"/) vs. 12.4%), and New Orleans residents were less likely (55% vs. 66%) to live in owner-occupied housing than residents of other large cities (Gabe et al., 2005). Finally, the educational attainment of younger adults (age 18 34) in storm-damaged areas is generally below that for the rest of the nation. For example, 22.9% of young adults in hurricane-damaged areas had not completed a high school degree compared with 20.6% nationwide, while only 22.5% had completed a college degree compared with 29.3% nationwide (Gabe et al., 2005).

These figures have several implications for the likelihood that people displaced will return. First, Katrina hit the economically disadvantaged hardest. Statistics indicate that other places in the nation to which they have relocated will improve their opportunities for employment. Second, significant portions of the middle class were displaced in the storm-ravaged area; 47.4% of those displaced had education equivalent to some college or above (Gabe et al., 2005). Third, 45% of those displaced did not live in homes that they owned, indicating that a significant portion of the people displaced by Hurricane Katrina have weak financial ties to the communities they abandoned. A significant permanent displacement of the population affected by the storm will undermine or may substantially alter the sociodemographic character of neighborhoods mostly adversely affected by the storm. It should also be noted that virtually entire neighborhoods and parishes were wiped out by the storm, and devastation of that magnitude may well negate any pull that community loyalty and ties may exert in bringing people back. It has been estimated, for example, that Orleans Parish and St. Bernard Parish lost 65.9% and 89.8%, respectively, of their populations over the period October 2005 to January 2006 (Greater New Orleans Community Data Center, 2005). Even if people were inclined to return, the infrastructure necessary to rebuild and sustain people has been eliminated. Government programs, furthermore, have been unable to compensate for lost private infrastructure to this point.

It is also important to note that the Super-dome itself, which served an ill-fated role as a center for 30,000 refugees who were unable to escape the city prior to the storm, suffered extensive damage due to Katrina as did other sports facilities throughout the city.


The New Orleans economy served the nation as a tourist center and transportation hub for water transport in particular as previously noted, and therefore, any economic redevelopment effort should focus on those industries, an opinion endorsed by members of an ad hoc committee of urban experts assembled under the auspices of the Urban Land Institute. The information in Table 4, to be specific, indicates that in July 2005, 32.9% of the labor force in New Orleans was employed in the "Trade and Transportation" and "Leisure and Hospitality" sectors. The numbers recorded in Table 4 indicate several things worthy of note as it relates to characterizing the New Orleans economy pre-and post-Katrina. First, the transportation/trade and leisure/hospitality industries, the cornerstones of the New Orleans economy, are recovering, albeit slowly. The numbers employed in trade and leisure as of December 2006 remain down by 25.2% and 31.8%, respectively, but are up from the July 2006 employment figures by modest amounts.

Second, the unemployment rate in New Orleans as of December 2006 is below that for the United States. Prior to Katrina, the unemployment rate in New Orleans was above the rate for the country. The smaller labor force in New Orleans following Katrina, of course, obscures developments with respect to the unemployment rate, but the workers who remained in or returned to New Orleans are able to find work.

Third, all relevant statistics in Table 4 point to a contraction of the leisure industry following Hurricane Katrina. There continues to be fewer people flying into New Orleans in comparison to pre-Katrina levels and a smaller number of establishments to accommodate them. Nearly 1 yr after Katrina, the number of retail food establishments was 44% of the level prior to the storm and the number of hotels open remains below the pre-Katrina level.

Fourth, the government sector has expanded relative to the private sector, and the federal government's presence, while absolutely and relatively small, is approximately one-third larger as measured in terms of the percentage of labor force employed by the federal government in December 2006 than it was pre-Katrina.

It cannot be predicted at this juncture if and when New Orleans will return to those population and economic activity levels that existed prior to the storm. There is compelling scholarship by Davis and Weinstein (2002) to suggest that population and economic activity across cities and regions within a country are not random occurrences but rather reflect "locational fundamentals,'" for example, location on a coast or significant river (physical geography), and economies of scale emanating from "economic clustering." The Davis and Weinstein study is based on 8,000 yr of data on Japanese regions, and Japan's population is far more homogenous than that characterizing the United States. The population of New Orleans is particularly diverse.

Other scholarship supports the importance of locational fundamentals in explaining developments relating to population movements following catastrophic events. Evidence following the Chicago Fire of 1871 indicates that the city's recovery from that event depended on location fundamentals specific to neighborhoods (Macaulay, 2007). More recently, economic recovery from the 1992 Rodney King riots in Los Angeles was notably slow as compared to Miami's experience following the devastation of Hurricane Andrew in the same year (Baade, Baumann, and Matheson, 2007b; Baade and Matheson, 2004a). Taken together, these findings suggest that heterogeneity as it relates in part to ethnicity, shared values and culture, income and wealth, and education can retard redevelopment and efforts to resettle. Many New Orleans' neighborhoods where redevelopment has been slow to occur exhibit marked variation in these characteristics and relatively low rates of home ownership as previously mentioned.

The extent of the devastation caused by Katrina coupled with the demographic character of New Orleans prior to the storm bears on the prospects that residents of the city will resettle. The likelihood that New Orleans will return to its pre-Katrina state, in turn, will affect the probability that professional sports teams will remain in the city. If the chances increase that pro-sport teams will eventually leave due to a lack of fan support, that has implications for the efficacy of substantial public investments to replace or repair the professional sports infrastructure.

Paradoxically, the extent of the devastation and the significant pressure exerted on the public sector to demonstrate its resolve and ability to help the city recover enhances the prospects that those edifices most representative of the city to the outside world will be restored. Delaney and Eckstein (2003) identified the strength of "local growth coalitions" as vital to understanding public choices regarding the construction of sports infrastructure. The public choice theory detailed by Delaney and Eckstein helps explain decision making in New Orleans with regard to the rapid reconstruction of the Superdome and the successful floating of the $294 million bond issue that financed the repair. Not only was there a strong local growth coalition following Katrina, but that local effort was bolstered by a strong national sentiment for helping New Orleans get back on its feet. Ironically, the ineptitude that government displayed arguably at all levels immediately following the storm increased the pressure on government to correct the negative perceptions about its performance. Louisiana Governor Kathleen Babineaux Blanco in announcing the bond sale remarked that, "Rebuilding and reopening the Superdome were critical steps in Louisiana's recovery from hurricanes Katrina and Rita and this bond sale made them possible." (New Orleans City Business, 2006) The Superdome as a symbol of the city's ability to survive and its struggle to recover achieved particular significance as Katrina's impact played out.

The demand for the Saints, the primary tenant of the Superdome, has been given a boost by the increase in the political demand for the Superdome. The political resistance for public subsidies to keep the Saints from marching elsewhere has eased, and the successful sale of bonds to repair and renovate the Super-dome corroborates that assertion. The NFL, furthermore, has to temper Tom Benson's desire to move the franchise to keep the League's image from being tarnished further by widely criticized franchise moves from Los Angeles to St. Louis and Oakland and from Cleveland to Baltimore. The "good-cop" role played by the NFL in keeping the Saints in New Orleans may well facilitate financial transfers to the Saints from the city. In a peculiar and perhaps perverse way, such transfers have been made easier as a consequence of the storm.

Once again, the efficacy of those transfers depends on the prospects for redevelopment in New Orleans and that depends on the city's ability to restore its place as a leading transportation and leisure center. Much of the tourism industry in New Orleans is "high ground" based in the French Quarter, the Central Business District, and the Garden District. The Urban Land Institute committee, which met on November 18, 2005, opined: The report of the Bring Back New Orleans Commission recommended that all of New Orleans not necessarily be rebuilt. If that recommendation is followed, the post-Katrina New Orleans will be smaller than it was before the storm, and that has implications for the ability (or willingness) of sports to serve as a catalyst for economic redevelopment. Even if the metropolitan area shrinks by as few as 250,000 residents, still suggesting that over 80% of the population would return to the area, New Orleans would become the second smallest "major-league" city in the country behind only Green Bay, Wisconsin, and would be smaller than such distinctly "non-major-league'" cities such as Albany, Richmond, Birmingham, and Grand Rapids, Michigan.

New Orleans should concentrate its rebuilding efforts on the sections of the city that occupy the high ground, while securing lower-lying areas for potential long-term rebirth ... it's not practical to redevelop every acre of New Orleans in the short term, considering that 300,000 residents and 160,000 jobs have been lost. It's also not socially equitable to allow residents back into neighborhoods that do not have adequate levee protection and may be toxic...(Carr, 2005)

Tourists will not likely return to a city that cannot provide essential services, and in the absence of tourists, the New Orleans economy will struggle at least for a time. One part of the blueprint for restoration of the New Orleans economy will require restoration of housing and essential services for its middle class who provide the labor and entrepreneurial talent for the tourism industry, followed by a revitalization of those businesses that cater to tourists. The extent to which professional sports and mega-events contribute to the tourist trade must be assessed in determining the fraction of scarce capital resources that should be devoted to the restoration of the infrastructure necessary to accommodate professional sports and mega-sports events.

Following Katrina, plans for completely replacing the Superdome were scuttled, but as previously mentioned, bonds were sold to renovate the Superdome. Not only these funds were used to repair the Superdome but more than $50 million was spent to update the facility with new audio and visual equipment, more luxury seating, concession stands, and wider concourses so that it would be competitive with the newer structures that exist in the NFL. While the NFL as a league pledged $20 million toward these repairs, Saints owner Tom Benson, the primary tenant of the facility, paid nothing toward its reconstruction. Louisiana had only a $500 million insurance policy on state buildings along with $100 million in flood insurance, and the Superdome was just one of the many public buildings including schools damaged by the storm, so some have questioned the priority placed on this facility (Corbett, 2006).

Given that the very small percentage of economic activity in New Orleans accounted for by the sports industry, it may not be prudent to devote a disproportionate share of scarce redevelopment funds to that sector. An even stronger argument can be made against refurbishing the Superdome to accommodate the financial needs of the NFL Saints since their owner has consistently sought economic concessions from a city and state that were financially stressed even prior to Katrina.

The economic incentive for the Saints owner to keep the team in New Orleans has been compromised by Katrina if the New Orleans economy cannot recover. Lacking the financial wherewithal to support professional sports following Katrina, it is not reasonable to expect that the team will make the financial sacrifices that are necessary as New Orleans attempts to rebuild. Furthermore, unlike the efforts made by large oil companies and small business alike to repair the capital-intensive oil refineries as well as small restaurants and shops in and around the city, there exists little motivation for the Saints to recoup their small investment in infrstructure. This points to a larger problem with the financial structure of the professional sports industry throughout the United States: the existence of substantial subsidies for infrastructure undermines the team commitment to their host cities, and absent any meaningful risk to their own capital, what incentive do teams have to stay in a city that experiences a catastrophe on the scale of Hurricane Katrina if a portion of the team's investment in infrastructure is recoverable? There is little question that in the vast majority of cases the financial risk accompanying hosting professional sports in the United States is disproportionately borne by the host community. Katrina provides striking testimony to the reality of how subsidies for sports infrastructure have contributed to that financial vulnerability.

While much of New Orleans' Lower 9th Ward remains a tangle of rubble and destroyed houses more than 1 yr after Katrina, the Superdome reopened for the 2006 NFL season. The restoration of the Superdome and the return of the Saints have symbolic significance, but they do not necessarily serve to indicate that New Orleans is on the road to recovery. Those residents who have returned to the city have embraced the team by purchasing a record number of season tickets for the 2006 season. The fans' response, however, failed to impress the Saints owner who noted that, "You haven't seen the total commitment yet. No National Football League team can live on tickets alone... The next big step is that the business community needs to step up." (Corbett, 2006). Limited by the small number of large corporations in the city and the redevelopment priorities faced by the city's small businesses, 40% of the Superdome's luxury suites remained unsold as of May 2006. As luxury suites are not part of the league's revenue-sharing deal, they provide significant profits to a team's owner. The fact that Tom Benson was unsatisfied with the millions spent on stadium repairs and improvements entirely paid for by others and with record season ticket purchases by local residents bodes ill for the Saints' long-term future in New Orleans. The fact that the Saints played for the National Football Conference title in January of 2007 should create excitement about the team for the near future, but the team will have to sustain success to maintain the extraordinary level of fan interest necessary in very small markets. Relatively high revenues are the key to keeping teams, and as Tom Benson noted, that requires more than ticket sales.

While the Hornets' future has received somewhat less press, in part because the team is relatively new to the city, that team's long-term future in the city appears equally shaky. The team has been officially renamed the Oklahoma City/New Orleans Hornets, and they played only six of 41 home games in New Orleans during the 2006-2007 season.

Consumer spending on major-league professional sports by local residents probably also serves to slow down the recovery of the local economy. The money spent on attending a sports event by residents of the home-team community necessarily precludes them from spending that money on other locally owned and operated entertainment. Furthermore, local expenditures on professional sports may actually reduce total spending in the economy as opposed to simply reallocating money among competing ends. Professional sports, which use national resource markets as opposed to locally owned and operated resources for alternative entertainment or recreational activities, may foster a net outflow of money. Most of the money spent on a night at a professional sports event goes to the athletes and owners of the team who may not live in the community in which they play. Siegfried and Zimbalist (2002) noted that while 93% of average employees live in the area where they work, only 29% of NBA players do the same (and the figures are likely to be similar in the NFL and other major leagues). Given the generally poor condition of the city following Katrina, it is even less likely that millionaire athletes, and those with the financial wherewithal to live elsewhere, will choose to reside in the Big Easy, and certainly owner Tom Benson, who has business interests in San Antonio, has shown little interest in spending money in the city.

Furthermore, the devastation of the middle and lower classes in New Orleans has taken away not only the customers but also the labor upon which professional sports relies. Each large event at the Superdome requires approximately 2,500 part-time workers. Unfortunately, the lack of housing in New Orleans means that the pool of part-time workers is now limited in the city. Indeed, a good fraction of the workers at the facility will very likely have to come from outside the city. The leakage of money from New Orleans through athletes repatriating their incomes to their primary residences would further be enhanced by ordinary workers doing the same, because of a lack of housing in many New Orleans neighborhoods. Post-Katrina, it is even less likely that income generated through commercial sports activities would remain in the city.

This is not to say that there are not any investments in sports infrastructure that can promote redevelopment. Tulane University, for example, engaged in a significant reconstruction program for its athletic complexes as part of its $250 million campus-wide rehabilitation effort following the hurricane (Henderson, 2006). Unlike the Saints, whose primary asset is the right to field a team and collect NFL revenues, wherever they play, Tulane's primary asset--its campus--is specific to New Orleans. Tulane is thus motivated to replace depreciated capital by investing in New Orleans. Intercollegiate sports are a recruiting tool for prospective students, a function that will remain important as the school rebuilds its student body.


Hurricane Katrina induced a massive outflow of residents and businesses from the city of New Orleans. The city's two major professional sports teams, the NFL Saints and NBA Hornets, are among the businesses that had to leave due to the extensive damage to their infrastructure. The capital costs and other financial commitments necessary to encourage the return of the Saints and the Hornets for the long term are substantial. The images of the NFL and NBA will be damaged if the Saints and Hornets do not at least make cameo appearances, but in the longer term, the teams and their leagues will demand greater revenue streams than can be generated in their current facilities even if New Orleans recovers to pre-Katrina levels.

This paper argues that it is financially ill advised in the post-Katrina world to direct substantial funds at refurbishing and upgrading the Superdome and New Orleans arena or to continue to directly subsidize the franchises specifically to make the teams financially competitive. Capital expenditures on the Superdome supplant capital expenditures on neighborhood infrastructures, public safety, schooling, and other investments required to bring the population back. While reconstruction of the Superdome is symbolic in the short run, it comes at the high cost of delaying investment in more fundamental infrastructure. Providing physical accommodation for professional sports teams does not advance the economic interests of New Orleans. Doing so merely compounds the economic problems that currently exist.

Oddly, however, one consequence of Katrina is that it may have made it politically impossible for the Saints to leave New Orleans in the short term, while at the same time requiring substantial public investment to provide accommodations for the team for what may be a short-lived stay. The opportunity cost of the funds necessary for team accommodations has never been higher, but the political demand for demonstrable recovery from Katrina and Rita includes the highly symbolic reconstruction of sports facilities. The economic system of professional sports in North America contributes to this demand, by creating a list of "me-too" cities, waiting in the wings to shower the clubs with public subsidies. The strength of these political forces is attested to by the fact that a year after the storm, a $294 million bond issue was easily assembled to refurbish the Superdome. While current and former residents of the city have struggled, the Saints have benefited from financial transfers from the government and the NFL. These transfers very likely would have been strongly contested and may not have occurred at all in the absence of the storm.

New Orleans will be rebuilt at the grassroots home by home and business by business. Locational fundamentals may well lead to the restoration of New Orleans in the long run. The rate at which the city is resettled and restored will bear on the ability of the NFL Saints and NBA Hornets to generate revenues that will encourage them to remain in the community. The Saints and the Hornets themselves have invested little in infrastructure and are motivated in large part by the size of revenue streams from future subsidies in New Orleans relative to other cities that would like to host them. The City of New Orleans, on the other hand, has invested substantially in infrastructure for the teams and, as a first step, found it necessary to invest further in that infrastructure to encourage the teams to stay. That stay will be short lived in the absence of the return of the middle class so necessary to support the team and give the city any chance to recoup its infrastructure investment. To achieve this end, the order of capital expenditures in New Orleans should be levees, housing, middle-class amenities, infrastructure for nonresident businesses, and last those industries that cater to the entertainment needs of the middle class.

Aside from serving as a symbol that the city remains vital, the role of sports in the economic recovery of the city is a dubious one. The repair of the Superdome and the New Orleans Arena is an expensive tease in that regard. Investment in sports infrastructure does little to provide what is needed for the community to recover from the storm. Sports and the hosting of mega-events may actually undermine longer term recovery through deflecting capital spending from where it is needed most and crowding out those workers and residents who are involved in the essential rebuilding process.

Sport provides a pleasant recreational amenity for many people. But research clearly demonstrates that investment in the sports sector is a minor contributor, at best, to economic development. The economy of New Orleans would be better served if sports investment took a seat on the bench, in favor of more fundamental pieces of public infrastructure.


Baade, R. A., R. Baumann, and V. Matheson. "Selling the Game: Measuring the Economic Impact of Profes- sional Sports Through Taxable Sales." Southern Economic Journal, 74. 2007a, forthcoming.

--. "Estimating the Economic Impact of Natural and Social Disasters with an Application to Hurricane Katrina." Urban Studies, 44, 2007b, forthcoming.

Baade, R. A., and R. F. Dye. "The Impact of Stadiums and Professional Sports on Metropolitan Area Development." Growth and Change, Spring 1990, 1-14.

Baade, R. A., and V. Matheson. "Race and Riots: A Note on the Economic Impact of the Rodney King Riots." Urban Studies, 41, 2004a. 2691-96.

--. "An Economic Slam Dunk or March Madness? Assessing the Economic Impact of the NCAA Basketball Tournament," in Economics of College Sports, edited by J. Fizel and R. Fort. Westport, CT: Praeger Publishers, 2004b, 111-33.

--. "Padding Required: Assessing the Economic Impact of the Super Bowl." European Sports Management Quarterly, 6, 2006, 353-74.

Bloomberg News. "Katrina Cost: $100 Billion." Chicago Tribune, 1 October 2005.

Carr, M. "Rebuilding Should Begin on High Ground, Group Says." The Times-Picayune, 19 November 2005.

Coates, D., and C. Depken. "Mega-Events: Is the Texas-Baylor Game to Waco What the Super Bowl is to Houston?" International Association of Sports Economists Working Paper Series No. 06-06, 2006.

Coates, D., and B. Humphreys. "The Growth Effects of Sports Franchises, Stadia and Arenas." Journal of Policy Analysis and Management, 14, 1999, 601-24.

--. "The Economic Impact of Post-Season Play in Professional Sports." Journal of Sports Economics, 3,2002, 291-99.

Corbett, J. "Saints' March Back to New Orleans Still Tempered by Katrina's Harsh Realities." USA Today, 2 July 2006. Accessed 15 Aug, 2007.

Davis, D., and D. Weinstein. "Bones, Bombs, and Break Points: The Geography of Economic Activity." American Economic Review, 92, 2002, 1269-89.

Delaney, K., and R. Eckstein. Public Dollars, Private Stadiums. New Brunswick, NJ: Rutgers University Press, 2003.

Gabe, T., G. Falk, M. McCarty, and V. Mason. "Hurricane Katrina: Social-Demographic Characteristics of Impacted Areas." CRS Report for Congress, 4 November 2005, 1-30.

Greater New Orleans Community Data Center. "Post-Disaster Population Estimates." Post-Katrina Estimates and Impact Data, 2007. (Accessed Mar, 2007).

Henderson, J. "A Year After Katrina: Tulane." Denver Post, 26 August 2006.

Konigsmark, A. "Superdome Major Part of New Orleans Comeback." USA Today, 29 December 2005. Accessed 15 Aug, 2007.

Macaulay, D. "The Importance of Neighborhood Ties: Relocation Decisions after the Chicago Fire of 1871," Working Paper, University of Chicago, Department of Economics, 2007.

Martell, B. "Coulon: Saints Rejected the State's 'Final and Best Offer."' USA Today, 29 April 2005. Accessed 15 Aug 2007.

"New Orleans City Staff Report." New Orleans City Business, 14 November 2006.

Porter, P. "Mega-Sports Events as Municipal Investments: A Critique of Impact Analysis," in Sports Economics: Current Research, edited by J. Fizel. E. Gustafson, and L. Hadley. Westport, CT: Praeger Press, 1999, 61-74.

Powell. E. "Survey Foresees $34.4 B in Katrina Claims." Associated Press, 4 October 2005.

Robinson, C. "Saints on the March?" 2005. Accessed 24 May 2005. Yahoo! Sports,

Siegfried, J., and A. Zimbalist. "Note on the Local Economic Impact of Sports Expenditures." Journal of Sports Economics, 3, 2002, 361-66.

Stewart, J. "Saints Leaving is Inevitable." Terrebonne Parish Courier, 15 May 2005.


NAICS: North American Industrial Classification System

NBA: National Basketball Association

NCAA: National Collegiate Athletic Association

NFL: National Football League

Tennessean News Services. "Rebuilding of New Orleans Incredibly Big, Far from Easy: Massive Job Will Take Billions of Dollars and Tons of National Resolve." Nashville Tennessean, 5 September 2005.

USA Today. 2005. http://www/

Baade: A. B. Dick Professor of Economics, Department of Economics and Business, Lake Forest College, Lake Forest, IL 60045. Phone (847) 735-5136, Fax (847) 735-6193, E-mail

Matheson: Assistant Professor, Department of Economics, Box 157A, College of the Holy Cross, Woreester, MA 01610. Phone (508) 793-2648, Fax (508) 793-3708, E-mail
Summary Statistics for U.S. Metropolitan Areas (2004)

City                                      Per Capita Income      Rank
New York City, New York                           43,428           4
Los Angeles, California                           33,264          30
Chicago, Illinois                                 36,935          12
San Francisco-Bay Area, California                46,926           2
Philadelphia, Pennsylvania                        38,475          10
Dallas-Fort Worth, Texas17                        35,105          17
Boston, Massachusetts                             43,664           3
Detroit. Michigan                                 35,955          15
Washington, DC                                    65,027
Miami-South Florida, Florida                      34,278          21
Houston, Texas                                    36,529          13
Atlanta, Georgia                                  33,251          31
Seattle. Washington                               40,081           6
Phoenix, Arizona                                  31,133          44
Minneapolis-St. Paul, Minnesota                   39,796           8
Cleveland, Ohio                                   33,522          28
San Diego. California                             37,965          11
St. Louis, Missouri                               34,461          19
Baltimore, Maryland                               38,813           9
Denver. Colorado                                  41,229           5
Tampa Bay, Florida                                31,677          43
Pittsburgh, Pennsylvania                          34,345          20
Sacramento, California                            33,567          27
Cincinnati, Ohio                                  34,221          22
Charlotte, North Carolina                         32,217          40
Portland, Oregon                                  33,875          26
Kansas City, Kansas                               34,207          23
Indianapolis, Indiana                             34,186          24
Orlando, Florida                                  29,256          51
Columbus, Ohio                                    33,109          32
San Antonio, Texas                                28,946          52
Milwaukee. Wisconsin                              36,062          14
Las Vegas Nevada                                  32,831          33
Virginia Beach-Norfolk, Virginia                  31,811          42
Providence, Rhode Island                          33,912          25
Salt Lake City, Utah                              29,775          48
Greensboro-Winston-Salem, North Carolina          29,658          49
Nashville. Tennessee                              34,559          18
Raleigh-Durham. North Carolina                    33,292          29
Austin. Texas                                     32,494          37
New Orleans, Louisiana                            30,693          45
Louisville. Kentucky                              32,543          35
Grand Rapids, Michigan                            29,546          50
Hartford. Connecticut                             39,918           7
Memphis, Tennessee                                32.741          34
Buffalo, New York                                 30.627          46
Jacksonville, Florida                             32.283          39
Oklahoma City, Oklahoma                           30,033          47
Greenville. South Carolina                        27,207          53
Birmingham. Alabama                            1,160,814          50
Richmond, Virginia                             1,156,849          51
Albany, New York                               1,140,770          52

Green Bay, Wisconsin                             295,049         Not

City                                      Per Capita Income ($)  Rank

New York City, New York                           43,428           4
Los Angeles, California                           33,264          30
Chicago, Illinois                                 36,935          12
San Francisco-Bay Area, California                46,926           2
Philadelphia, Pennsylvania                        38,475          10
Dallas-Fort Worth, Texas17                        35,105          17
Boston, Massachusetts                             43,664           3
Detroit. Michigan                                 35,955          15
Washington, DC                                    65,027
Miami-South Florida, Florida                      34,278          21
Houston, Texas                                    36,529          13
Atlanta, Georgia                                  33,251          31
Seattle. Washington                               40,081           6
Phoenix, Arizona                                  31,133          44
Minneapolis-St. Paul, Minnesota                   39,796           8
Cleveland, Ohio                                   33,522          28
San Diego. California                             37,965          11
St. Louis, Missouri                               34,461          19
Baltimore, Maryland                               38,813           9
Denver. Colorado                                  41,229           5
Tampa Bay, Florida                                31,677          43
Pittsburgh, Pennsylvania                          34,345          20
Sacramento, California                            33,567          27
Cincinnati, Ohio                                  34,221          22
Charlotte, North Carolina                         32,217          40
Portland, Oregon                                  33,875          26
Kansas City, Kansas                               34,207          23
Indianapolis, Indiana                             34,186          24
Orlando, Florida                                  29,256          51
Columbus, Ohio                                    33,109          32
San Antonio, Texas                                28,946          52
Milwaukee. Wisconsin                              36,062          14
Las Vegas Nevada                                  32,831          33
Virginia Beach-Norfolk, Virginia                  31,811          42
Providence, Rhode Island                          33,912          25
Salt Lake City, Utah                              29,775          48
Greensboro-Winston-Salem, North Carolina          29,658          49
Nashville. Tennessee                              34,559          18
Raleigh-Durham. North Carolina                    33,292          29
Austin. Texas                                     32,494          37
New Orleans, Louisiana                            30,693          45
Louisville. Kentucky                              32,543          35
Grand Rapids, Michigan                            29,546          50
Hartford. Connecticut                             39,918           7
Memphis, Tennessee                                32,741          34
Buffalo, New York                                 30,627          46
Jacksonville, Florida                             32,283          39
Oklahoma City, Oklahoma                           30,033          47
Greenville. South Carolina                        27,207          53
Birmingham. Alabama                               32,538          36
Richmond, Virginia                                35,422          16
Albany, New York                                  32,298          38
Green Bay, Wisconsin                              31,925          41

City                                      NFL  NBA  NHL  MLB  MLS  Total

New York City, New York                    2    2    3    2     1    9
Los Angeles, California                    0    2    2    2     2    8
Chicago, Illinois                               1    1    2     1    6
San Francisco-Bay Area, California              1    1    2     0    6
Philadelphia, Pennsylvania                 1    1    1    1     0    4
Dallas-Fort Worth, Texas17                 1    1    1    1     1    5
Boston, Massachusetts                           1    1          1    5
Detroit. Michigan                               1    1          0    4
Washington, DC
Miami-South Florida, Florida               1    1    1    1     0    4
Houston, Texas                                  1    0          1    4
Atlanta, Georgia                                1    1          0    4
Seattle. Washington                             1    0          0    3
Phoenix, Arizona                                1    1          0    4
Minneapolis-St. Paul, Minnesota                 1    1          0    4
Cleveland, Ohio                            1    1    1    0     0    3
San Diego. California                      1    0    0    1     0    2
St. Louis, Missouri                        1    0    1    1     0    3
Baltimore, Maryland                        1    0    0    1     0    2
Denver. Colorado                           1    1    1    1     1    5
Tampa Bay, Florida                         1    0    1    1     0    3
Pittsburgh, Pennsylvania                   1    0    1    1     0    3
Sacramento, California                     1    1    0    0     0    1
Cincinnati, Ohio                           1    0    0    1     0
Charlotte, North Carolina                  1    1    0    0     0    2
Portland, Oregon                           1    1    0    0     0    1
Kansas City, Kansas                        1    0    0    1     1    3
Indianapolis, Indiana                      1    1    0    0     0    2
Orlando, Florida                           1    1    0    0     0    1
Columbus, Ohio                             1    0    1    0     1    2
San Antonio, Texas                         0    1    0    0     0    1
Milwaukee. Wisconsin                       0    1    0    1     0    2
Las Vegas Nevada                           0    0    0    0     0    0
Virginia Beach-Norfolk, Virginia           0    0    0    0     0    0
Providence, Rhode Island                   0    0    0    0     0    0
Salt Lake City, Utah                       0    1    0    0     1    2
Greensboro-Winston-Salem, North Carolina   0    0    0    0     0    0
Nashville. Tennessee                       1    0    1    0     0    2
Raleigh-Durham. North Carolina             0    0    1    0     0    1
Austin. Texas                              0    0    0    0     0    0
New Orleans, Louisiana                     1    1    0    0     0    2
Louisville. Kentucky                       0    0    0    0     0    0
Grand Rapids, Michigan                     0    0    0    0     0    0
Hartford. Connecticut                      0    0    0    0     0    0
Memphis, Tennessee                         0    1    0    0     0    1
Buffalo, New York                          1    0    1    0     0    2
Jacksonville, Florida                      1    0    0    0     0    1
Oklahoma City, Oklahoma                    0    0    0    0     0    0
Greenville. South Carolina                 0    0    0    0     0    0
Birmingham. Alabama                        0    0    0    0     0    0
Richmond, Virginia                         0    0    0    0     0    0
Albany, New York                           0    0    0    0     0    0
Green Bay, Wisconsin                       1    0    0    0     0    1

Notes: NHL = National Hockey League: MLB = Major League
Baseball; and MLS = Major League Soccer.


Aggregate Measures of the Fraction of the Economic Activity for Selected
Cities and the United States Represented by the "Accommodation and Food
Service Industry" (NAICS 72) for 2004


                   NAICS 72 Employees      NAICS 72 Annual
                    as a % of Total      Payroll as a % of Total
                     Area Employees           Area Payroll

United States            9.34                     3.46
New Orleans             13.46                     5.83
Atlanta                  9.22                     3.15
Houston                  9.05                     2.83
Miami                   10.56                     4.52

                    NAICS 72 Establishments as a
                   % of Total Area Establishments

United States                 1.61
New Orleans                   9.47
Atlanta                       7.38
Houston                       7.35
Miami                         5.95


Aggregate Measures of the Fraction of New Orleans Economic Activity
in Total Represented by Spectator Sports for 1997 (a)

NAICS Number
                                                  NAICS 71: Arts,
                                           Entertainment, and Recreation
                                                (United States) (b)

Industry employees/New Orleans total                4.07% (1.61%)
Annual industry payroll/New Orleans total           3.48% (1.19%)
Industry establishments/New Orleans total           1.74% (1.57%)

                                              NAICS 711: Performing
                                                  Arts, Spectator
                                           Sport, and Related Industries

Industry employees/New Orleans total                   1.16%
Annual industry payroll/New Orleans total              1.39%
Industry establishments/New Orleans total              0.94%

                                            NAICS 7112: Spectator

Industry employees/New Orleans total               0.62%
Annual industry payroll/New Orleans total          0.39%
Industry establishments/New Orleans total          0.20%

(a)Specific data for New Orleans for two-digit NAICS 71 data and
above for 1998 and beyond from the County Business Patterns Web
site are not available. Archived data for NAICS and SIC
(Standard Industrial Classification) data were used to calculate
the percentages in the table. These percentages correspond
to the higher end of the ranges identified in,pl.
If an average of the value ranges identified were used, it would
reduce the percentages and strengthen the arguments offered in the
paper's text.

(b) Comparable statistics for the United States are from the most
recent County Business Patterns data for 2004.

Source: http:/

Source: County Business Patterns.

Comparing the Pre- and Post-Katrina Economies for the New Orleans MSA


Statistic              July 2005                July 2006

MSA population         1,292,774                914,745 (a)

Unemployment rate      [Louisiana = 5.6%] New   [Louisiana = 2.9%]
                       Orleans = 5.3% (United
                       States = 4.9%)

                                                New Orleans = 4.2%
                                                (United States = 4.8%)

Labor force size       637,952                  440,521 (down 30.9% from
                                                July 2005)

Population employed    123,200                  89,700 (down 27.2%
in the transportation
and trade sector

                                                from July 2005)

Population employed    86,500                   58,500 (down 32.4% from
in the hospitality                              July 2005)
and leisure sector

Public                 100                      17
transportation: % of
the system

Number of workers      103,000 or 16.3% of the  90,500 or 20.7% of the
employed by            labor force for          labor force for
government             government at all        government at all
                       levels; 15,600 for the   levels; 13,700 for the
                       federal government or    federal government or
                       2.0%                     3.1%

Number of open         142                      116 (down 18% from July
hotels                                          2005)

Open retail food       100                      44
establishments (%)

Number of passengers   41,356                   281,015 (down 36% from
arriving at the New                             July 2005)
Orleans Airport


Statistic                        December 2006

MSA population

Unemployment rate                [Louisiana = 4.3%] New Orleans = 4.4%

                                 (United States = 4.5%)

Labor force size                 432,494 (down 32.2% from July 2005)

Population employed in the       92,100 (down 25.2% from July 2005)
transportation and trade

Population employed in the       59,000 (down 31.8% from July 2005)
hospitality and leisure sector

Public transportation: % of the  17
system operational

Number of workers employed by    91,300 or 20.4% of the labor force for
government                       government at all levels; 12,100 for
                                 the federal government or 2.7%

Number of open hotels            127 (down 11% from Jul 2005)

Open retail food establishments  Not available

Number of passengers arriving    286,018 (down 35% from July 2005)
at the New Orleans Airport

MSA. Metropolitan Statistical Area.
"January 2006 statistic. Note the metropolitan
population for New Orleans fell by 29.2% from
July 2005 to January 2006.
Source: Greater New Orleans Community Data
Center (2007), 7'lie Katrina index,
Gale Copyright:
Copyright 2007 Gale, Cengage Learning. All rights reserved.