As Cleveland Bids Lebron James Adieu

Lebron’s return did not cause the economic rejuvenation of the city and region. And his leaving will not cause its economic collapse or ruination. Cleveland is better and stronger than that.

By Ned Hill, A One-Handed Economist, and Professor of Public Administration and City & Regional Planning at The Ohio State University’s John Glenn College of Public Affairs, powered by The MPI Group

When Lebron James returned to Cleveland from Miami, I was asked by a few reporters if the Second Coming would result in an economic windfall for Cleveland. My answer was no; this was greeted with a combination of disbelief, befuddlement, and consternation. When Lebron signed with the Los Angeles Lakers in July, my original quotes were dug up by a local sports business reporter, who called to ask about the economic losses that will be triggered by the exit of the King. Again, my answer was that there will be none.

What was I thinking?

The Second Coming of the King of Basketball had an enormous positive emotional impact on Cleveland and Northeast Ohio. He brought an NBA championship to Cleveland, caused the biggest street party in the city’s post-WWII history, and made J. R. Smith lose his shirt for a few days.  He demonstrated leadership, commitment to a superb set of public values, and dedication to excellence. And then there is his work for Akron’s kids and their education! James is the king of athletes; a class act.

Economically speaking, however, Lebron’s impact on Northeast Ohio was mainly psychic. James added to and strengthened the image and brand of Cleveland. The Cavs championship, the victory parade, and the Republican National Convention rolled into a national coming-out party that helped make Cleveland an overnight media sensation. [Even though we all know that the resurgence of the city has been a work in progress for 40 years, the rebound is very uneven, and it takes a community to rebuild a region.]

Cleveland now gets to examine the results of two natural economic experiments on the impact of the world’s best basketball player on restructuring a region’s economy: James’ second arrival and his second departure.

My take: Lebron’s return did not cause the economic rejuvenation of the city and region. And his leaving will not cause its economic collapse or ruination.  Cleveland is better and stronger than that.

Lebron’s return did result in better name recognition and visibility for the city and region, nationally and internationally.  He improved the economic development brand of the region.  However, the best that any one person can do when it comes to economic development is to get external firms, investors, and visitors to consider the region. Economic fundamentals and amenities are what ultimately brings investment.

My expectations about the financial impact on the regional economy of Lebron’s leaving are the flip side of what I thought would be the economic impact of his coming:

• The City of Cleveland will lose income tax revenue as his contract will not be replaced in full.  Losing Lebron’s contract is like losing a small company for tax purposes.
• The value of the Cavs as a business will drop a bit. But the monopoly power of one of the big three professional sports leagues to squeeze public subsidies out of local government will continue. The franchise’s value will rise and fall with the league as a whole and its television contracts.
• Downtown Cleveland and the Gateway neighborhood will lose business.

Yes, downtown bars and restaurants will lose business, but that money will flow to other restaurants, bars and entertainment venues in the region. Most of that is spending that comes from within Northeast Ohio. Those local entertainment dollars will find their way into other bars, restaurants, and entertainment activities throughout the region.

The Indians will continue to anchor downtown entertainment spending from May through late October [hopefully].  They play enough home games, the stadium is in the right place and is well integrated into the downtown neighborhood, and they are superbly managed.

The Browns cannot make up the losses for restaurants and bars in downtown Cleveland—the stadium is in the wrong place and poorly integrated into the fabric of the city, the team plays too few games, and I will not speculate on the quality of the product.

Discover the joys of Cleveland State basketball.  They are a fun team.

In short? Cleveland will stay calm and carry on.

See more of Ned’s work at his blog, A One-Handed Economist.