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'Gates' gravy: a typical case of dubious city math

According to Mayor Michael Bloomberg, "The Gates" was

not just a happening (no question), and not just art (if you say so), but an

economic boon. Last week, the mayor announced that "The Gates" "generated an

estimated $254 million in economic activity" in the city.

The eerily specific "estimate" (not $250 million, not even $255 million)

was reported as fact. But a look at the way the number was derived shows it to

be dubious.

The accounting may not be a big deal - "The Gates" was a lark, and it cost

the city practically nothing - but the city's estimate of its economic impact

is an example of the kind of civic economics that is often used to justify

projects that cost hundreds of millions (like the West Side stadium) or

billions (like the Olympics). So it's worth giving the numbers a closer look.

The city was actually conservative in running the numbers, says Michael

Sherman, a spokesman for the New York City Economic Development Corp. The city

estimates that 2.5 million people visited Central Park to take a gander at "The

Gates." It concedes that 1 million of those were New Yorkers but says that 1.5

million came from out of town. That 60 percent were out-of-towners strikes me

as a suspiciously high ratio, but let's work with it.

The city scores credibility points by conceding that more than half the

non-local visitors were from nearby suburbs, who would have come in to

Manhattan anyway. All told, it counts 620,000 visitors actually attracted to

the city by the saffron extravaganza.

But here's the problem: The city has lots of tourists all the time, so how

do we know who came because of what Christo and Jeanne-Claude wrought? Well,

the city says that last year, midtown Manhattan hotels were 74 percent

occupied; this year, they were 87 percent booked. Hotels from The

Waldorf-Astoria to the Amsterdam Inn shared the bounty.

In its press release, the city says: "The data translates to an increase in

revenue of over $2 million or 18 percent." Sherman says they meant to say $2

million per day, which would mean $32 million over the 16 days of "The Gates'"

run. The assumption is that the entire increase was "Gates"-driven.

But how do they get from $32 million to $254 million? First of all, the

city doesn't claim $254 million in direct benefits. It says visitors spent $150

million, and that people they spent it on spent more in turn - the carriage

driver who had a good day in tips spends that money going out to dinner. This

is what economists call a multiplier effect, and it's all fair enough.

The larger question is: If visitors spent just $32 million extra on hotels,

would they really spend another $118 million on everything else? That seems

unlikely: New York is expensive but not that expensive.

Aside from the hotels, the city's numbers are anecdotal. Coupled with the

claim that three out of five Gates viewers traveled from outside the

metropolitan area, $254 million seems a substantial overstatement. I'm guessing

here, but so is the mayor.

Even if the city did overestimate the economic impact of the "The Gates,"

it's fair to say that the project had some real economic impact and that New

Yorkers should be grateful. Whatever "The Gates" added to the city's economy

was gravy. This is not the case for massive civic projects like stadiums and

convention centers or the Olympics. If some Christoesque benefactor offered to

build a stadium on his dime, there would be little debate. The problem comes

when taxpayers are asked to pay all or part of the bill.

In the case of Christo, at least the economic impact was assessed after the

fact. For longer-range projects, the economic impact generally is assessed

years in advance, which is even harder to do accurately. The inexactness is

made worse by the fact that the projectors are often the same people who will

benefit from the project.

In recent years, a number of cities have built or expanded convention halls

that have stayed fairly empty, although in each case the projections had shown

great profits. "The Gates" was a gift, and it would be churlish to look

Christo and Jeanne-Claude in the mouth. But the problems of assessing the

economic impact of even a temporary exhibit like "The Gates" show that it's

wise to look twice at expensive designs promising vague but grand returns.