Does sports-based economic development pay off?

In these posting (and elsewhere) I have made the case that tourism-based economic development is a great way to diversity the economic base and build on local amenities. However, not all tourism is positive - according to Professor Victor Matheson. In an interview with Business Week (The Final Four: Economic Air Ball?) he talks about has problems with the idea that cities who host the NCAA basketball championships gain any real benefit:

Since 1970, cities that have hosted the men's Final Four actually experienced [a slowdown in] economic growth. So the year that they host the Final Four, economic growth is actually lower in that city than in other years.

The reason:

Remember, the Final Four crowds out all kinds of other activity in a city. So while you're bringing basketball fans in town, you're reducing other business and tourist activity, and you're reducing business among people who actually live in the city. People tend to stay away from the city and stay away from the craziness.

The real trap is building a new facility for the event. Matheson is an ardent critic of any economic benefit from the "build it and they will come" strategy.

He is also skeptically of any spillover benefits:

There are certainly some nonmonetary benefits, but it's ridiculous to say hosting the Final Four has these immeasurable benefits. I certainly don't know of a business that has moved to a city because it hosted a sporting event. So if you point to the image factor, I'm not sure what you're getting for that.

And the second thing is, just because you host an event doesn't mean you'll be making a positive image. Jacksonville hosted the Super Bowl and you had a lot of people coming back saying "Hey, it's nice, but there's not much to do there." Munich with the '72 Olympics certainly didn't come out with a better image.

I agree that large events don't automatically translate into economic benefit. In part, it depends on if they are one shot or if they can be leveraged into an ongoing activity. I would also argue that bringing in a big-time sports event does not draw upon the unique local intangible assets. Nor do such events necessarily help build local assets.

Spending a lot of city money on a one-shot outsider event is probably a waste of time and resources. Using those resources to build up a cultural amenity that will bring people back over and over again makes more sense.