THE STATE COMPTROLLER’S ECONOMIC IMPACT STATEMENT:
THE BUFFALO SABRES AND WESTERN NEW YORK


The Buffalo Sabres have played in Buffalo for 33 years and, in return for public investment in a new stadium, made a commitment to remain in the area until 2022. Despite changes in population and earnings, the team has maintained a loyal following and continues to make important contributions to the local economy.

Importance of the Buffalo Sabres to the Area Economy

In a typical season, the Buffalo Sabres contribute $65 million per year towards the local economy. With an average per game attendance of 17,500 over the last two years, gate receipts have totaled $31 million per year, and concessions have accounted for $8.6 million per year. Revenue from the sale of television rights and advertising account for approximately $4 million in additional direct income per year. This provides a total of $43.6 million per year in direct team revenues, not including post-season play.

In addition to the economic benefits derived from direct team revenues, there is an indirect impact on the economy from complementary spending, such as in local bars and restaurants on game nights, from visiting teams and fans staying in local hotels, and from spending on the part of Sabres’ employees. To account for these additional benefits to the local economy, we have included a conservative multiplier of 1.5. This brings the total of the direct and indirect impact per season to $65 million.

When the team makes the playoffs, as they have in 25 of their last 33 seasons in Buffalo, the economic benefits to the region are even higher. Playoff games bring increased attendance, and increased ticket prices, producing an average of $1.4 million in direct team revenues per game. With a multiplier of 1.5, this brings the average amount of revenue derived per playoff game to $2 million. In the 2000-2001 season the Sabres played 13 playoff games, of which seven were home games. The amount of revenue produced during the playoffs was $14 million. If the Sabres had made the Stanley Cup Finals, the anticipated revenue would have been more than $20 million.

This season, average attendance is down by 4,000 fans per game because of the team’s financial problems, uncertainty of where they will be next year and poor record. As a result, the team’s economic impact to the Buffalo region has been reduced by at least $15 million. This reduction does not include revenue associated with making the playoffs.

It is expected that if the team’s management issues are resolved, and the Sabres’ performance improves, the economic impact will return to the $65 million level for the regular season, with additional benefits during the playoffs.


Economic Impact of Buffalo Sabres on Local Economy

  Average Prior Two Seasons
Each Playoff Game
Number of Home Games 41 1
Average Attendance per Game 17,500 18,700
Gate Receipts $31.0 million $1.1 million
Concessions, etc $8.6 million $0.3 million
Media and Advertising $4 million Included in regular season
Team Revenues
$43.6 million $1.4 million
Multiplier 1.5 1.5
Direct & Indirect Impact
$65.0 million $2.0 million

Notes:
Average attendance reported by ESPN for the prior two seasons; playoff attendance based on seating capacity at the HSBC Arena. The Sabres last participated in post-season play during the 2000-2001 season, when 7 playoff home games were played.

Based on seating capacity at the HSBC Arena, average ticket prices of $43 were used for regular season games and $60 for post-season games. Concession and other revenues (which includes such items as sponsorships and advertising in the arena) averaged $12 per spectator during the regular season and $15 during the post-season.

Media revenues based upon a report in The Sports Journal.

Direct team revenues have a multiplier effect on the economy as the team and its employees spend their revenues. A nationwide multiplier of 1.85 for the indirect effect of professional sports has been derived from an input-output model produced by the U.S. Department of Commerce, Bureau of Economic Analysis. However, as this multiplier covers all sports, the higher spending involved in professional baseball, football, and basketball skews it. Thus for a more conservative impact, we have lowered the multiplier to 1.5 and had it include complementary spending, which covers such items as sales at local shops and sports bars, parking in the vicinity of the arena, and hotels rooms taken by visiting fans.

Sources: National Hockey League, ESPN, The Sports Journal, U.S. Department of Commerce

Buffalo Sabres and Tourism

According to Buffalo’s Convention and Visitor’s Bureau, Erie County serves as a tourist destination to approximately 14 million visitors per year, and employs 45,000 residents in its travel and tourism industry. During a year in which this industry was in a steep decline nationally, the Buffalo Niagara region held its own. Professional sports play an important role in the tourism industry – attracting visitors and encouraging spending in local establishments. In metropolitan areas across the country, investments are made in sporting facilities as part of economic development agendas intended to create destination cities for tourists.

Statewide efforts to boost the tourism industry further are ongoing. A study commissioned by the New York State Hospitality and Tourism Association showed that every state dollar spent to promote tourism produced $2.50 in state tax revenue alone. In an effort to encourage this kind of investment and development, a number of projects are underway. The Empire State Development Corporation just committed $250,000 to promote summer events in Buffalo, hoping to build on a successful summer promotion in 1999 centered around an exhibition of mpressionist paintings that drew tens of thousands of visitors and had an estimated impact of $11.3 million on the local economy. The State has promised $10 million towards the creation of the “Niagara Experience Center,” which will include an IMAX style theatre, interactive high-tech exhibits, a café, and an amphitheater to host lectures and seminars. The State is also contributing $45,000 towards a study of how to maximize the tourism potential of the Aquarium of Niagara.

The Buffalo Convention and Visitor’s Bureau has, over the course of the past three years, intensified its efforts to attract major amateur athletic events to the city. The region’s high-caliber sports venues have been a major selling point. One such venue is the HSBC arena, home to Buffalo’s National Hockey League team, the Sabres.

Buffalo Sabres History and Attendance

The Buffalo Sabres have been in Buffalo for the last 33 seasons, and have made the playoffs 25 times. During their first season in Buffalo (1970-71), they played in a smaller arena and average attendance was 9,721. From 1984-96, the Sabres’ attendance fluctuated with the team’s play.

In the 1996-97 season, they moved to their current home at the HSBC arena, averaging no less than 15,600 fans per game in 1997-98 and a high of 17,982 per game in 1998-99 when they went to the Stanley Cup finals and played 21 playoff games.

The HSBC arena was built at a cost of $127.5 million. The City of Buffalo contributed $10 million to development of the arena, $20 million was provided by Erie County, and $25 million by the State Urban Development Corporation. Non-relocation clauses were included in the Sabres’ lease with the HSBC Arena in return for this public investment, which commits the team to the arena and to Buffalo through 2022.

Game attendance has, until this year, averaged more than 17,500 per year, which is over 90 percent of stadium capacity. It is worth noting that attendance has remained steady throughout the 1990s, despite a drop in population and minimal income growth in the Niagara and Erie County regions. From 1990 to 2000, population declined in Western New York by 1.5 percent, and in Erie County by 1.9 percent. Buffalo itself lost 11 percent of its population. In 2001, Western New York had the second highest rate of regional job decline in the State, following weak employment growth in the 1990s. From 1994 to 2001, employment in Western New York grew by only 4.1 percent, which was less than half the overall State growth rate of 10.2 percent, and one third of the downstate rate of 12.1 percent. While income grew 5.2 percent in New York State as a whole between 1995 and 1999, it grew by only 3.5 percent in Buffalo.

Unemployment in the Buffalo-Niagara area is now on the rise. It averaged 5.4 percent in 2001, up from 5 percent in 2000. And while Western New York’s share of State employment is 7.7 percent, its share of per capita income is only 5.8 percent. In fact, Western New York’s per capita income was 75 percent of the State average in 1999.

The fact that Buffalo’s drop in population, weak employment growth in the 1990s, and current rising unemployment rates have not markedly affected attendance numbers is a testament to the importance of Sabres games to residents in Erie and Niagara counties.

This year the Sabres are one of the lowest ranked teams, and ticket sales have suffered with average game attendance this season around 13,500. Uncertainty surrounding the team’s future in the area and commitment to area fans has contributed to the sudden drop in attendance. Controversy about the team’s finances has also served as a disincentive to fans and affected attendance figures.

Team Bankruptcy and Potential Purchase

In June 2002, the Sabres’ parent company, Adelphia, filed for bankruptcy. This prompted the NHL to take control of the hockey team away from its owner, John Rigas. In January 2003, the Sabres filed for bankruptcy. Any deal reached between NHL Commissioner Gary Bettman and a prospective buyer, therefore, will have to be agreed to by Adelphia’s Creditor’s Committee.

According to Forbes magazine, the Sabres have an annual operating loss of
$11.5 million, and its “fiscal health” was ranked 29th out of 30 NHL teams. The team’s current value is estimated to be $92 million, which is a 21% drop from 2001. This drop in value is primarily due to the team’s poor performance this year.

Until recently, Mark Hamister was in negotiations with Commissioner Bettman to purchase the Sabres for approximately $65 million. The deal failed, at least in part, due to government resistance to Hamister’s request for $40 million in financial assistance. The assistance Hamister was seeking included $22 million in state loan refinancing, $10 million in capitol improvements, $7 million for a new parking ramp for the HSBC Arena, $1 million a year for arena maintenance and improvements, an additional 25 cents per seat from the HSBC Arena ticket surcharge (about $300,000 a year), and $500,000 a year in savings through release from a ground lease with the city for the arena site.

Rochester businessman Tom Golisano had put in an earlier, lower bid than Hamister’s, which was rejected. Now that Hamister’s bid has fallen through, Bettman has again approached Tom Golisano about buying the team. Golisano’s original bid involved a much smaller amount of public financing than Hamister’s bid, and it is likely that if an agreement is reached this will still hold true.