Economic Impact Analysis for Proposed Multi Purpose Event Facility at the Washington County Fair Complex

Transcription

1 Economic Impact Analysis for Proposed Multi Purpose Event Facility at the Washington County Fair Complex January 23, 2013 Prepared for the County of Washington, Oregon

2 January 23, 2013 Mr. Rob Massar Assistant County Administrator r Washington County 155 N. First Avenue, Suite 300 Hillsboro, Oregon Dear Mr. Massar: Markin Consulting is pleased to submit our Economic Impact Analysiss for Proposed Multi Purpose Event Facility at the Washington County Fair Complex, datedd January 23, Our report details the approach, methodologies and results of estimating the economicc and fiscal benefits to the Washington County area from the year round operations of the proposed Multi Purpose Event Facility and of potential new year round events and activities. The findings and assumptions contained in this report reflect analysess of secondary sources of information and data, including data obtained from the Washington County Visitors Association, Metropolitan Exposition and Recreation Commission andd previous impact studies conducted by Markin Consulting, as well as management at the Washington County Fair Complex. We used sources that we deemed to be reliable but cannot guarantee their accuracy. We have no obligation, unless subsequently engaged, to update our report or revise the information contained therein to reflect events and transactions occurring after the date of this report. The accompanying report is restricted to internal planning use by Washington County and may not be relied upon or referred to by any third party for any purpose ncluding financing. Our analysis does not constitute an examination, compilationn or agreed upon procedures in accordance with the standards established by the American Institute of Certified Public Accountants. We have appreciated working with Washington County on this important analysis. Sincerely Rod Markin, President 120 Woodland Pond Park th Place N. Maple Grove, MN Phone Fax

3 TABLE OF CONTENTS WASHINGTON COUNTY FAIR COMPLEX ECONOMIC IMPACT ANALYSIS TABLE OF CONTENTS Executive Summary... 1 Total Estimated Impacts of Operations and Events... 1 Estimated Fiscal Impacts... 1 Approach and Methodology... 2 Operating and Event Impacts... 4 Operating Impact... 4 Promoter and Participant Expenditures... 4 Total Estimated Impacts of Operations and Events... 7 Estimated Fiscal Impacts... 7 Exhibits Exhibit A Exhibit B RIMS II Description RIMS II Multipliers Used in Economic Impact Analysis Tables Table 1 Summary of Potential Event Impact Data Table 2 Daily Spending of Consumer Show Expenditures Table 3 Daily Spending of Non Local Consumer/Public Show Attendees Table 4 Daily Spending of Trade and Industry Show Attendees, Association and Exhibitors Table 5 Daily Spending of Animal Show Participants Table 6 Daily Spending of Mid to Large Business Meeting Attendees Table 7 Initial Direct Expenditures by Industry Type Table 8 Potential Economic Impacts of Operations and Events MARKIN CONSULTING i

4 EXECUTIVE SUMMARY EXECUTIVE SUMMARY Markin Consulting was engaged to prepare estimates the economic impacts to the Washington County area related to the operation of the proposed Multi Purpose Event Facility at the Washington County Fair Complex, including potential events held at the proposed facility, as presented in the September 2012 Market Demand Assessment, Facility Recommendations and Financial Analysis Report for Proposed Multi Purpose Event Facility (the Feasibility Report). This section presents a summary of the estimated range of potential impacts related to the operation and potential events for the proposed Multi Purpose Event Facility. TOTAL ESTIMATED IMPACTS OF OPERATIONS AND EVENTS The table below presents the total estimated annual impacts associated with operating the Recommended Facilities and potential events held at the proposed facility. The total annual impacts of both operating and hosting new events at the proposed Multi Purpose Event Facility are estimated to range between $9.6 million and $11.7 million, supporting between 79 and 98 full time jobs. Washington County Fair Complex Potential Economic Impacts of Operations and Events Impact Type Range of Impacts Output Impacts Operations $1,656,000 to $2,024,000 Events 7,941,000 to 9,705,000 Total expenditure impacts $9,597,000 to $11,729,000 Earnings Impacts (1) Operations $281,000 to $343,000 Events 1,682,000 to 2,056,000 Total earnings impacts $1,963,000 to $2,399,000 Employment Impacts Operations 6 jobs to 8 jobs Events 73 jobs to 90 jobs Total employment impacts 79 jobs to 98 jobs (1) Represents salaries and wages ESTIMATED FISCAL IMPACTS The primary fiscal impacts associated with the proposed Multi Purpose Event Facility are transient room taxes. Expenditures made by out of town visitors for lodging provide incremental benefits to the Washington County area. Washington County lodging properties assess a 10 percent transient lodging tax, of which the Oregon State Tourism Office receives 1 percent and the remaining 9 percent goes to Washington County. Based on the initial direct expenditures for lodging, the estimated fiscal impacts associated with potential events held at the proposed Multi Purpose Event Facility could range between $167,000 and $205,000 per year. Markin Consulting 1

5 APPROACH AND METHODOLOGY APPROACH AND METHODOLOGY This section of this report presents the approach and methodology used to develop estimates of the potential economic impacts of operating the Recommended Facilities and expenditures made by event promoters, exhibitors and non local attendees/participants who participate in year round events held at the Recommended Facilities at the Washington County Fair Complex. Economic impacts are generally described as the amount of expenditures that occur in a defined geographic area, including subsequent re spending of the initial expenditures. These impacts are referred to as expenditure impacts. A portion of the expenditure impacts is paid to local residents in the form of salaries and wages, referred to as earnings impacts. Similarly, the amount of earnings paid from the expenditures represent jobs to local residents the number of jobs referred to as employment impacts. Lastly, certain expenditures made in the local economy by out of area visitors, as well as the operation itself, generate benefits in the form of state and local taxes referred to as fiscal impacts. Expenditure Impacts The expenditure impacts consist of expenditures by non local event participants and event producers and exhibitors. These expenditures represent those made for business services, lodging, food and beverage, retail purchases, transportation, entertainment and other expenditures. Expenditures of patrons living within the impact area are not included because those expenditures merely reflect a redistribution of expenditures within the impact area, and they do not represent incremental impacts. The industry approach used to estimate the economic and fiscal impacts of the Recommended Facilities, as an employer, business and attractor, uses generally accepted economic principles. Fundamentally, these expenditures generate impacts through the following: Direct Impacts are those changes in the flow of dollars and employment in the local economy that result directly from incremental spending by the facility s non local attendees/participants and event producers and exhibitors on such items as lodging, retail, meals, business services and the like, as well as impacts from. Indirect and Induced Impacts are created by (1) investment or spending of WCFC s and local business suppliers whose goods and services are used in its project, process or service and (2) household income changes (created by direct and indirect effects on wages and employment) lead to further spending throughout city, county and regional economies. Indirect impacts (expenditures, earnings and employment) are quantified through an economic phenomenon known as the multiplier. The multiplier concept, based on the input/output economic theory, recognizes that there is a continued flow of money within and outside of a given area. Money is spent in successive rounds within a community, thus creating an economic impact in excess of the original direct expenditures. Markin Consulting 2

6 APPROACH AND METHODOLOGY The output multiplier represents the total dollar change in output (total expenditures) that occurs for each additional dollar of output (direct expenditures). The output multiplier includes the initial direct expenditure to which the multiplier is applied, except for the household multiplier (salaries and wages). For example, an output multiplier of 1.50 for hotels and lodging places means that for each $1.00 spent for lodging, an additional $0.50 is spent by the lodging establishment and supporting industries (wages, goods and services, capital improvements). The $1.00 is the direct impact, the $0.50 is the indirect/induced impacts and $1.50 is the total economic impact. Earnings Impacts A part of the initial expenditures and resulting indirect impacts result in the payment of salaries and wages to local residents. As an example, a portion of the initial expenditures of non local participants and event producers for lodging, meals and other will be paid to workers in the hotel, restaurant, retail and other industries in the form of earnings. In addition, as a result of the expenditures of operating the facilities, a portion of those expenditures will result in earnings to persons employed by utility companies, insurance companies and other businesses. An earnings multiplier that is applied to the initial impacts to estimate the amount of the initial and indirect impacts that is paid out in earnings to local residents. The earnings multiplier represents the estimated total (direct and indirect) salaries and wages that result from each additional dollar of direct expenditure. Assuming an earnings multiplier of.5042 for lodging places, for every dollar spent by tourists for lodging, just over 56 cents is paid to regional households in earnings. These earnings are paid to employees of the hotel (direct) and to employees of businesses and industries that support the lodging industry (indirect). Employment Impacts In the case of the Recommended Facilities, there will be jobs in the local community that are supported from the initial expenditures of non local participants and event producers. These impacts are expressed in terms of the number of jobs supported. The employment multiplier represents the number of jobs that regional industries provide, both directly and indirectly, for each $1 million of output (direct expenditures) of a given industry. Continuing the hotel example, if the employment multiplier for lodging is 15.1, then for every $1 million dollars spent by patrons for lodging,15.1 jobs are required both at the lodging facility and at industries supporting the hotel such as the utility company, telephone company, laundries, delivery services, and others. Fiscal Impacts Expenditures made by non local participants and event producers of the relocated Recommended Facilities for lodging generate local transient room taxes referred to as fiscal impacts. Markin Consulting 3

7 OPERATING AND EVENT IMPACTS OPERATING AND EVENT IMPACTS Operating Impacts The economic impacts associated with the Recommended Facilities will result from its operations and expenditures of non local participants and event producers. To estimate the initial expenditures of the operations of the Recommended Facilities, we used the projected low and high scenario operating expenses of the Recommended Facilities as presented in the September 2012 Market Demand Assessment, Facility Recommendations and Financial Analysis Report for Proposed Multi Purpose Event Facility (the Feasibility Report) (shown on page 47) and made adjustments based on estimates by management for estimated operating expenditures that would be made to non local suppliers of goods and services. The resulting local incremental expenditures of the proposed Expo Center were applied to the appropriate RIMS II multipliers and added to the estimated revenues, salaries and number of jobs related to operating the Recommended Facilities in the average scenario. Promoter and Participant Expenditures Based on the potential events presented on pages of the Feasibility Report, the table below presents a summary of the potential events for the proposed Multi Purpose Event Facility that would have economic impacts to Washington County. Table 1 Washington County Fair Complex Summary of Potential Event Impact Data Number of Event Ave. Total Non Local Non Local Total # of Total # of Event Type Events Days Attendance Attendance Attendees Attendance Exhibitors Exhibitor Days New Consumer/Public Shows Arts and Crafts Show ,000 3, % Business Expo ,500 2, % Bridal Fair ,000 2, % Electronics Show ,500 3, % ,500 Health & Fitness ,000 2, % Travel & Recreation ,500 1, % Baby & Tot Show ,000 2, % Home Show ,000 16, % 1, ,229 Lawn and Garden Show ,000 6, % Pet Expo ,000 5, % ,071 Other Consumer Shows ,000 3, % ,050 Scrapbooking Show ,500 3, % ,743 Seasonal Shows ,500 6, % , ,500 5,650 4,571 15,560 Trade and Industry Shows , % 4,800 N/A N/A Animal Shows New Animal Shows % 480 N/A N/A Meetings/Seminars Mid Large Sized , % 5,333 N/A N/A Markin Consulting 4

8 OPERATING AND EVENT IMPACTS Consumer and Public Shows There are three components of expenditures for consumer shows event promoters, non local exhibitors and non local attendees. Expenditure estimates for these three components are based on data devised from surveys of consumer show promoters, exhibitors and attendees of other studies for comparable events and facilities. Of the 18 potential new consumer and public shows, it is assumed that for 15 of the shows event promoters would spend approximately three (Home Shows and Lawn and Garden Show), it is assumed that the event promoters would spend approximately $80,000 on local business services to stage and advertize the event. The tables on the right present the average daily expenditures of non local exhibitors and attendees of consumer and public shows used in the impact analysis. Trade and Industry Shows Daily Spending of Table 2 Consumer Show Exhibitors Expenditure Type Amount Lodging $30 Meals 21 Transportation 19 Entertainment 11 Materials/Supplies 3 Retail 3 Other 1 $88 Table 3 Daily Spending of Non Local Consumer/Public Show Attendees Expenditure Amount Hotel/Motel $27 Meals 20 Transport 15 Retail 16 Entertainment 3 $81 To estimate the initial expenditures of out of town attendees and event promoters of trade shows that could be attracted to the use the proposed Multi Purpose Event Facility, we utilized data prepared by the International Association of Conventions and Visitors Bureau Foundation ExPact. ExPact provides expenditure estimates, based on market size, of attendees to conferences and trade shows, as well as the expenditures of the convention organizer and trade show exhibitors. The table below shows the ExPact expenditures for trade shows in small markets the size of Washington County (adjusted for lodging rates)that were used to estimate the initial direct expenditures associated with the potential trade and industry shows. Table 4 Daily Spending of Trade and Industry Attendees, Association and Exhibitors Expenditure Type Amount Lodging $90 Hotel Food and Beverage 26 Other Food and Beverage 50 Tours/Sightseeing 6 Recreation 2 Sporting Events 1 Retail Stores 29 Local transportation 8 Auto Rental 7 Gasoline, Tolls 10 Other 1 Low Impact 20 $230 Associaton Expenditures 22 Exhibitor Expenditures 53 $305 Source: IACVB Foundation Markin Consulting 5

9 OPERATING AND EVENT IMPACTS Animal Shows The estimated impacts associated with non local participants in new animal shows are based on survey results of participants of regional dog shows conducted in previous studies. The table on the right shows the daily spending assumption for animal show participants. Table 5 Daily Spending of Animal Show Participants Expenditure Amount Hotel/Motel $32 Meals 21 Transport 24 Retail 14 Materials 4 Entertainment 2 $97 Meetings The mid to large size meetings, per the Feasibility Report, are events expected to be staged by the local major employer that involve a large majority of out of town attendees. For purposes of the impact analysis, similar to trade and industry shows, the estimated daily expenditures of the non local attendees of these meetings are based on the ExPart data, adjusted for local lodging rates, as presented in the table to the right. Promoter and Participant Initial Expenditures Table 6 Daily Spending of Mid to Large Business Meeting Attendees Expenditure Type Amount Lodging $90 Hotel Food and Beverage 26 Other Food and Beverage 50 Tours/Sightseeing 6 Recreation 2 Sporting Events 1 Retail Stores 29 Local transportation 8 Auto Rental 7 Gasoline, Tolls 10 Other 1 $230 The total annual initial expenditures that would be made by event promoters and non local participants in consumer shows, trade and industry shows, meetings and animal shows are estimated at about $5.7 million and would be spent in the following industries: Table 7 Washington County Fair Complex Initial Direct Expenditures by Industry Type Industry Type Initial Expenditure Lodging $1,859,000 Meals 1,457,000 Transportation 830,000 Retail 734,000 Business Services 503,000 Entertainment 324,000 Total $5,707,000 Markin Consulting 6

10 OPERATING AND EVENT IMPACTS TOTAL ESTIMATED IMPACTS OF OPERATIONS AND EVENTS Using the RIMS II multipliers developed by the US Bureau of Economic Analysis (see Exhibits A and B), we applied appropriate multipliers to the estimated initial expenditures, by type of expenditures, for all categories discussed above, as well as to the projected operating impacts of the proposed Multi Purpose Event Facility. The table below presents the total estimated annual impacts associated with operating the Recommended Facilities and potential events held at the proposed facility. As shown in the table, the total annual impacts of operating and hosting new events at the proposed Multi Purpose Event Facility are estimated to range between $9.6 million and $11.7 million, supporting between 79 and 98 full time jobs. Table 8 Washington County Fair Complex Potential Economic Impacts of Operations and Events Impact Type Range of Impacts Output Impacts Operations $1,656,000 to $2,024,000 Events 7,941,000 to 9,705,000 Total expenditure impacts $9,597,000 to $11,729,000 Earnings Impacts (1) Operations $281,000 to $343,000 Events 1,682,000 to 2,056,000 Total earnings impacts $1,963,000 to $2,399,000 Employment Impacts Operations 6 jobs to 8 jobs Events 73 jobs to 90 jobs Total employment impacts 79 jobs to 98 jobs (1) Represents salaries and wages ESTIMATED FISCAL IMPACTS The primary fiscal impacts associated with the proposed Multi Purpose Event Facility are transient room taxes. Expenditures made by out of town visitors for lodging provide incremental benefits to the Washington County area. Washington County lodging properties assess a 10 percent transient lodging tax, of which the Oregon State Tourism Office receives 1 percent and the remaining 9 percent goes to Washington County. Based on the initial direct expenditures for lodging, the estimated fiscal impacts associated with potential events held at the proposed Multi Purpose Event Facility could range between $167,000 and $205,000 per year. Markin Consulting 7

11 Exhibits

12 Exhibit A RIMS II: A Brief Description of Regional Multipliers from the Regional Input Output Modeling System Overview Effective planning for public and private sector projects and programs at the State and local levels requires a systematic analysis of the economic impacts of these projects and programs on affected regions. A systematic analysis of economic impacts, in turn, must account for the inter industry relationships within a region because these relationships largely determine how the regional economy will respond to project and program changes. Thus, regional input output (I O) multipliers, which account for inter industry relationships within regions, are useful tools for conducting regional economic impact analysis. In the mid 1970's, the Bureau of Economic Analysis (BEA) developed a method for estimating regional I O multipliers known as RIMS (Regional Industrial Multiplier System), which was based on the work of Garnick and Drake./1/ In the mid 1980's, BEA completed an enhancement of RIMS, known as RIMS II (Regional Input Output Modeling System), and published a handbook for RIMS II users./2/ In 1992, BEA published a second edition of the handbook, in which the multipliers were based on more recent data and improved methodology. Now, BEA is making available a third edition of the handbook, which provides more detail on the use of the multipliers and on the data sources and methods for estimating them. RIMS II is based on an accounting framework called an I O table, which shows, for each industry, the industrial distribution of inputs purchased and the output sold. A typical I O table in RIMS II is derived mainly from two data sources: (1) BEA's national I O table, which shows the input and output structure of more than 500 U.S. industries, and (2) BEA's four digit Standard Industrial Classification (SIC) county wage and salary data, which is used to adjust the national I O table to show a region's industrial structure and trading patterns./3/ Using RIMS II, multipliers can be estimated for any region composed of one or more counties and for any industry in the national I O table. The accessibility of the main data sources for RIMS II keeps the cost of estimating regional multipliers relatively low. Empirical tests show that estimates based on relatively expensive surveys and RIMS II based estimates are similar in magnitude. Moreover, RIMS II easily can incorporate project specific data supplied by users; such data can improve the accuracy of the multiplier estimates./4/ A 1

13 Exhibit A I O multipliers from RIMS II can be used to estimate the impacts of project and program expenditures by industry on regional output (gross receipts or sales), earnings (the sum of wages and salaries, proprietors' income, and other labor income, less employer contributions to private pension and welfare funds), and employment (number of jobs). In the public sector, Federal, State, and local planners and analysts use RIMS II to estimate regional impacts. For example, the Department of Defense uses RIMS II to estimate the regional impacts of changes in defense expenditures; and the New York State Energy Office uses RIMS II to estimate the regional impacts of energy policies, ranging from the construction of facilities to energy conservation. Private sector analysts, consultants, and economic development practitioners use RIMS II to estimate the regional impacts of a variety of projects, ranging from offshore drilling to the construction of transportation facilities. RIMS II Methodology RIMS II uses BEA's national I O table, which shows the input and output structure for approximately 500 industries. Since a particular region may not contain all the industries found at the national level, some direct input requirements cannot be supplied by that region's industries. Input requirements that are not produced in a study region are identified using BEA's four digit SIC county wage and salary data. (Currently, data for 1995 are used.) The RIMS II method for estimating regional I O multipliers can be viewed as a three step process. In the first step, the producer portion of the national I O table is made region specific by using four digit SIC location quotients (LQ's). The LQ's estimate the extent to which input requirements are supplied by firms within the region. RIMS II uses LQ's based on two types of data: BEA's personal income data, by place of residence, are used to calculate LQ's in the service industries; and BEA's wage and salary data, by place of work, are used to calculate LQ's in the nonservice industries. In the second step, the household row and the household column from the national I O table are made region specific. The household row coefficients, which are derived from the value added row of the national I O table, are adjusted to reflect regional earnings leakage resulting from individuals working in the region but residing outside the region. The household column coefficients, which are based on the personal consumption expenditure column of the national I O table, are adjusted to account for regional consumption leakage stemming from personal taxes and savings. In the last step, the Leontief inversion approach is used to estimate multipliers. This inversion approach produces output, earnings, and employment multipliers, which can be used to trace the impacts of changes in final demand on directly and indirectly affected industries. Accuracy of RIMS II Empirical tests indicate that RIMS II yields multipliers that are not substantially different in magnitude from those generated by regional I O models based on relatively expensive surveys. For example, a comparison of 224 industry specific multipliers from survey based tables for Texas, Washington, and West Virginia indicates that the RIMS II average multipliers overestimate the average multipliers from the survey based tables by approximately 5 percent. For the majority of individual industry specific multipliers, the difference between RIMS II and survey based multipliers is less than 10 percent. In addition, RIMS II and survey multipliers show statistically similar distributions of affected industries. A 2

14 Exhibit A Advantages of RIMS II There are numerous advantages to using RIMS II. First, the accessibility of the main data sources makes it possible to estimate regional multipliers without conducting relatively expensive surveys. Second, the level of industrial detail used in RIMS II helps avoid aggregation errors, which often occur when industries are combined. Third, RIMS II multipliers can be compared across areas because they are based on a consistent set of estimating procedures nationwide. Fourth, RIMS II multipliers are updated to reflect the most recent local area wage and salary and personal income data. Applications of RIMS II RIMS II multipliers can be used in a wide variety of impact studies. For example, the U.S. Nuclear Regulatory Commission has used RIMS II multipliers in environmental impact statements required for licensing nuclear electricity generating facilities. The U.S. Department of Housing and Urban Development has used RIMS II multipliers to estimate the impacts of various types of urban redevelopment expenditures. In addition, BEA has provided RIMS II multipliers to numerous individuals and groups outside the Federal Government. RIMS II multipliers have been used to estimate the regional economic and industrial impacts of the following: opening or closing military bases, hypothetical nuclear reactor accidents, tourist expenditures, new energy facilities, energy conservation, offshore drilling, opening or closing manufacturing plants, and new airport or port facilities. 1. See Daniel H. Garnick, "Differential Regional Multiplier Models," Journal of Regional Science 10 (February 1970): 35 47; and Ronald L. Drake, "A Short Cut to Estimates of Regional Input Output Multipliers," International Regional Science Review 1 (Fall 1976): See U.S. Department of Commerce, Bureau of Economic Analysis, Regional Input Output Modeling System (RIMS II): Estimation, Evaluation, and Application of a Disaggregated Regional Impact Model (Washington, DC: U.S. Government Printing Office, 1981). Available from the National Technical Information Service, 5285 Port Royal Road, Springfield, VA 22161; order no. PB ; price $ See U.S. Department of Commerce, Bureau of Economic Analysis, The Detailed Input Output Structure of the U.S. Economy, Volume II (Washington, DC: U.S. Government Printing Office, November 1994); and U.S. Department of Commerce, Bureau of Economic Analysis, State Personal Income, (Washington, DC: U.S. Government Printing Office, June 1995). 4. See U.S. Department of Commerce, Regional Input Output Modeling System (RIMS II), chapter 5. Also see Sharon M. Brucker, Steven E. Hastings, and William R. Latham III, "The Variation of Estimated Impacts from Five Regional Input Output Models," International Regional Science Review 13 (1990): A 3

15 Exhibit B Washington County Fair Complex RIMS II Multipliers Used In Analysis RIMS II Final Demand Multiplier Category # Industry Output Earnings Employment Multipliers Used For Multi Purpose Event Facility Operations 6 Utilities Retail Other Household industry Advertising Performers Multipliers Used For Event Expenditures 28 Retail Lodging Meals Household Industry Business Services B00 Entertainment Source: Bureau of Economic Analysis, 2012 B 1