California Travel Impacts by County, p

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1 California Travel Impacts by County, p April 2016 A Joint Marketing Venture of Visit California and the Governor s Office of Business Development (GO-Biz)

2 PREPARED BY Dean Runyan Associates, Inc. 833 SW 11 th Avenue, Suite 920 Portland, Oregon , Fax: for Visit California 555 Capitol Avenue, Suite 1100 Sacramento, CA STATE OF CALIFORNIA Edmund G. Brown, Jr., Governor GOVERNOR S OFFICE OF BUSINESS DEVELOPMENT (GO-BIZ) Mike Rossi, Senior Advisor for Jobs and Business Development, Office of the Governor VISIT CALIFORNIA Caroline Beteta, President & CEO Lynn Carpenter, Vice President of Marketing Dan Mishell, Research Director

3 EXECUTIVE SUMMARY This report provides detailed statewide, regional and county travel impact estimates for California from 1991 to The estimates for 2015 are preliminary. The report also provides an analysis of travel-generated tax revenue and transient occupancy tax receipts for jurisdictions through the 2015 fiscal year. CONTINUAL GROWTH OF THECALIFORNIA TRAVEL INDUSTRY The California travel industry expanded for the sixth consecutive year following the recession. All visitation and economic impact estimates increased for the year. Spending. Total direct travel spending in California was $122.5 billion in 2015 (preliminary). This represents a 3.4 percent increase over 2014 in current dollars and a 4.9 percent increase in real (inflation-adjusted) dollars. The inflation-adjusted increase was greater because of the decline in motor fuel prices. Employment. Direct travel generated employment was 1,064,000 in 2015, a 3.7 percent increase over Travel-generated employment has increased by 4.0 percent per year since Tax Revenues. Travel-generated local tax revenue was $4.6 billion in The 7.8 percent annual increase was driven by lodging sales. State tax revenue increased by 1.1 percent for the year to $5.3 billion. Travel-generated state and local tax revenue represent 4.2 percent of all California state and local tax revenue, equivalent to $750 per resident household. Visitation. Room demand increased by 3.3 percent in Visitor arrivals on domestic flights (34.4 million in 2015) increased by 5.4 percent. 2 Overnight person-trips increased by 2.1 percent. 3 Origin. Six out of ten dollars spent at California visitor destinations were attributable to residents of other states and countries. However, the recent decline in the value of other currencies in relation to the dollar has reduced the growth of spending by international visitors. Secondary Impacts. The re-spending of travel industry income by businesses and employees produces secondary effects. In 2015, these secondary impacts were 727,100 jobs with earnings of $41.9 billion. Total (direct and secondary) employment was 1.8 million jobs with earnings of $83.2 billion. Gross Domestic Product. The GDP of the California travel industry was $62.3 billion in This represents about two and one-half percent of the total GDP of the state. 1 STR, Inc. 2 Department of Transportation Origin and Destination Survey. 3 Dean Runyan Associates. DEAN RUNYAN ASSOCIATES

4 County Total Employment TAX REVENUE IMPACTS OF THE CALIFORNIA TRAVEL INDUSTRY The California travel industry contributes more tax revenue to state and local governments than would be expected based on the size of the industry. Whereas the gross domestic product and employee earnings represent about two and one-half percent of the state economy, the travel industry generated 4.2 percent of tax revenue in the 2015 fiscal year. Not only are most travel industry goods and services taxed at the point of sale, but a large share of these commodities (lodging and motor fuel) are taxed at rates that are greater than the general sales tax. Furthermore, a large share of these taxes is not borne by California residents. Production & Import Taxes as a Percent of Gross Domestic Product 4 Information Construction Health Care Manufacturing Retail trade Travel All Industries 0% 5% 10% 15% 20% 25% Percent of Gross Domestic Product THE TRAVEL INDUSTRY BENEFITS ALL REGIONS OF CALIFORNIA Although most travel spending and related economic impacts occur within California s primary metropolitan areas, the travel industry is important throughout California. In general, the counties with less total employment have a bigger share of travel-generated employment. Travel-Generated Employment as a Percent of Total Employment 18 Lowest 31 to to to Highest 0% 5% 10% 15% Travel-Generated Employment 4 Most of the taxes paid by business firms to local, state and federal governments are included except income taxes. This includes property taxes, licenses and fees and the sales and excise taxes collected from consumers. See page 17 of full report. DEAN RUNYAN ASSOCIATES

5 TABLE OF CONTENTS List of Tables and Figures ii Preface iii I U.S. Travel 1 II State Travel Impacts 5 Impacts of Travel in California: A Summary 6 Recent Travel Trends in California 7 Origin 9 Gross Domestic Product of California Travel Industry 10 Direct, Secondary and Total Impacts 11 III State and Local Government Revenue 17 Industry Gross Domestic Product and Taxes 17 California Tax Structure 18 Travel Industry Tax Revenue 19 Summary 20 IV Regional Travel Impacts 25 V County Travel Impacts 41 VI Transient Occupancy Tax Receipts 117 Appendices 137 A 2015 Travel Impact Estimates 139 B Key Terms and Definitions 143 C Regional Travel Impact Model 144 D Travel Industry Accounts 145 E California Earnings & Employment by Industry Sector 156 F Industry Groups 157 DEAN RUNYAN ASSOCIATES PAGE I

6 LIST OF TABLES AND FIGURES U.S. Travel Annual Direct Travel Spending in U.S., p 2 Spending by Foreign and Resident Travelers in U.S. 2 Foreign Share of U.S. Internal Travel 3 Overseas Arrivals 3 Relative Value of Selected Foreign Currencies compared to U.S. Dollar 3 U.S. Travel Industry Employment 4 Components of US Travel Industry Employment 4 State Travel Impacts California Direct Travel Impacts, p (summary) 7 California Travel Spending in Current and Real Dollars 8 Domestic Air Passenger Visitor Arrivals at California Airports 8 Overnight Person-Trips 8 International Visitor Spending 9 Visitor Spending by Origin, 2015p 9 Overseas Arrivals at California Ports of Entry 9 Travel Spending and GDP of California Travel Industry, 2015p 10 Total Employment and Earnings, 2015p 11 Direct and Secondary Employment, 2015p Travel Impacts, p (detail) State and Local Government Revenue Production and Import Taxes as a Percent of Gross Domestic Product 17 California State and Local Government Tax Revenues 18 California Travel Industry State and Local Government Tax Revenues 19 California State and Local Tax Revenues 20 Local and State Travel-Generated Tax Revenue per Household by County Total and Visitor-Generated Taxable Sales by County Regional Travel Impacts Summary Tables Detailed Tables County Travel Impacts Summary Tables Total and Travel-Generated Employment and Earnings Detailed Tables Transient Occupancy Tax Receipts California TOT Receipts, Fiscal Years 117 TOT Receipts by County, Fiscal Years TOT Receipts by Jurisdiction, Fiscal Years PAGE II DEAN RUNYAN ASSOCIATES

7 PREFACE The purpose of this study is to document the economic significance of the travel industry in California from 1992 through These findings show the level of travel spending by those traveling to and through the state, and the impact this spending has on the economy in terms of earnings, employment and tax revenue. This study was prepared for Visit California. Special thanks are due to Dan Mishell, Research Director, Research, for his support and assistance. Dean Runyan Associates, Inc. 833 SW 11th Ave., Suite 920 Portland, OR (503) DEAN RUNYAN ASSOCIATES PAGE III

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9 I. U.S. TRAVEL DEAN RUNYAN ASSOCIATES PAGE 1

10 Output (Year 2000 = 100) Output (Billions) The national level data in this section focuses on visitor spending trends in current and real dollars, resident and foreign visitor spending in the U.S., and trends in travel-generated employment. The following two graphs are derived from the Bureau of Economic Analysis Travel and Tourism Satellite Accounts. 1 Both graphs show direct tourism output for the United States spending by resident and foreign visitors. The 2015 values are preliminary. Annual Direct Travel Spending in U.S., p $1, $900 $800 $700 $600 $500 $ Current Real p Spending by Foreign* and Resident Travelers in U.S. (Current Dollars; Year 2000=100) Foreign Resident p *Note: Foreign visitor spending does not include expenditures on health and educational services or expenditures by short term seasonal workers. Spending by resident and foreign visitors was $909 billion in 2015 in current dollars. This reflects virtually no increase over 2014, largely due to lower prices for motor fuel. When adjusted for changes in prices (real dollars), spending increased by 4.4 percent from 2014 to 2015 compared to a 3.1 for the preceding year. The bottom chart compares the change in current dollar spending by resident and foreign visitors since In 2015, the increase in spending by resident visitors (1.4 percent) exceeded the increase in foreign visitor spending (-2.2 percent). This is the second consecutive year that resident spending growth was greater than foreign. 1 See PAGE 2 DEAN RUNYAN ASSOCIATES

11 The top left chart shows that the foreign share of U.S. internal travel has declined over the past two years because of the lower rate of growth of foreign visitor spending (shown in preceding chart). 2 However, as the graph on the right indicates, overseas arrivals to the U.S. have been increasing, at least through June of Much of the explanation for the declining foreign share of internal travel in the U.S. is due to the increasing value of U.S. currency (see bottom left chart). As the value of foreign currencies fall relative to the U.S. dollar, foreign visitors have less money to spend on U.S. goods and services. Foreign Share of U.S. Internal Travel Spending Overseas Arrivals (Millions) July-June FY 17% 16% 15% 14% 13% 12% 11% 10% 9% 8% p Other Latin America Europe Asia Relative Value of Selected Foreign Currencies compared to U.S. Dollar Monthly Averages, 2014 through 2015 China Japan Canada Euro 75 Jan 14 Jan 15 Dec 15 Sources: Foreign Share of U.S Internal Travel: Bureau of Economic Analysis Travel & Tourism Satellite Accounts and International Transactions. Overseas Arrivals: Office of Travel and Tourism Industries, U.S. Department of Commerce. Note: Arrivals for 2014 and 2015 are somewhat greater than preceding years due to a change in processing methodology. Relative Value of Selected Foreign Currencies: USForex, Inc. ( 2 Internal travel does not include spending on international airfares to U.S carriers. DEAN RUNYAN ASSOCIATES PAGE 3

12 Employment inthousands The following two graphs show employment trends since The first graph shows that travel-generated employment has increased at a steady rate since Travel industry employment has now recovered to the level immediately preceding the recession, although it is still below its peak earlier in that decade. Part of the reason for this is shown in the second graph. Leisure and hospitality employment was 3.8 million in 2015 or 67 percent of total travel industry employment, compared to 3.6 million in 2000 or 61 percent of the total. Most of this growth was due to food services employment. However, employment in transportation and other industries declined over the same period from 2.3 million to 1.8 million, mostly due to decreased employment in the airline and related transportation industries. U.S. Travel Industry Employment p Source: Bureau of Economic Analysis Travel & Tourism Satellite Accounts. Components of U.S. Travel Industry Employment % Leisure & Hosp. Transport & Other 67 % Source: See above graph. Leisure & hospitality includes accommodations, food services, and arts, entertainment & recreation. Transportation and other includes retail and all other industries p PAGE 4 DEAN RUNYAN ASSOCIATES

13 II. STATE TRAVEL IMPACTS DEAN RUNYAN ASSOCIATES PAGE 5

14 The multi-billion dollar travel industry in California is a vital part of the state and local economies. The industry is represented primarily by retail and service firms, including lodging establishments, restaurants, retail stores, gasoline service stations, and other types of businesses that sell their products and services to travelers. The money that visitors spend on various goods and services while in California produces business receipts at these firms, which in turn employ California residents and pay their wages and salaries. State and local government units benefit from travel as well. The state government collects taxes on the gross receipts of businesses operating in the state, as well as sales and use taxes levied on the sale of goods and services to travelers. Local governments also collect sales and use taxes generated from traveler purchases. IMPACTS OF TRAVEL IN CALIFORNIA: A SUMMARY Total direct travel spending in California was $122.5 billion in 2015 (preliminary). This represents a 3.4 percent increase over 2014 in current dollars and a 4.9 percent increase in real (inflation-adjusted) dollars. The inflation-adjusted increase was greater because of the decline in motor fuel prices. Direct travel generated employment was 1,064,000 in 2015, a 3.7 percent increase over Travel-generated employment has increased by 4.0 percent per year since Travel-generated local tax revenue was $4.6 billion in The 7.8 percent annual increase was driven by lodging sales. State tax revenue increased by 1.1 percent for the year to $5.3 billion. 1 Visitor arrivals on domestic flights (34.4 million in 2015) increased by 5.4 percent. 2 Overnight person-trips increased by 2.1 percent. 3 Overnight person-trips have increased by 2.0 percent per year since The Gross Domestic Product (GDP) of the California travel industry was $62.3 billion in This represents about two and one-half percent of the total GDP of the state. The re-spending of travel industry income by businesses and employees produces secondary effects. In 2015, these secondary impacts were 727,100 jobs with earnings of $41.9 billion. Total (direct and secondary) employment was 1.8 million jobs with earnings of $83.2 billion. 1 The rate of increase for the state was affected by a reduction in the state motor fuel tax rate. 2 Department of Transportation Origin and Destination survey. Estimates by Dean Runyan Associates. 3 Estimates by Dean Runyan Associates. PAGE 6 DEAN RUNYAN ASSOCIATES

15 RECENT TRAVEL TRENDS IN CALIFORNIA California Direct Travel Impacts, p Annual % Chg p 14-15p 00-15p Spending ($Billions) Total % 2.8% Other % 1.0% Visitor % 3.0% Non-transportation % 2.8% Transportation % 3.7% Earnings ($Billions) Earnings % 3.6% Employment (Thousands) Employment ,026 1, % 1.1% Tax Revenue ($Billions) Total % 3.8% Local % 4.3% Visitor % 4.2% Business or Employee % 4.4% State % 3.1% Visitor % 3.0% Business or Employee % 3.6% Federal % 3.9% Other spending includes resident air travel, travel arrangement and reservation services, and convention and trade show organizers. Non-transportation visitor spending includes accommodations, food services, retail, food stores, and arts, entertainment & recreation. Visitor transportation spending includes private auto, auto rental, other local ground transportation and one-way airfares. Earnings include wages & salaries, earned benefits and proprietor income. Employment includes all full- and part-time employment of payroll employees and proprietors. Local tax revenue includes transient occupancy taxes, sales taxes and airport passenger facility charges paid by visitors, and the property tax payments and sales tax payments attributable to the travel industry income of employees and businesses. State tax revenue includes sales tax payments and motor fuel tax payments of visitors, and the income tax payments and sales tax payments attributable to the travel industry income of employees and businesses. Federal tax revenue includes motor fuel excise taxes and airline ticket taxes, and the payroll and income taxes attributable to the travel industry income of employees and businesses. DEAN RUNYAN ASSOCIATES PAGE 7

16 Year 2000 = 100 Millions Billions $130 $120 $110 $100 $90 $80 California Travel Spending in Current & Real Dollars Real Current Inflation-adjusted (real dollar) travel spending increased by 4.9 percent from 2014 to 2015 (preliminary), following a 3.6 percent increase the preceding year (see top graph, left). Motor fuel prices declined by 15 percent. $70 $ p Domestic Air Passenger Visitor Arrivals at California Airports Sources: Real dollar travel spending was adjusted with a composite of price indices for the West Urban CPI, California room rates reported by STR, Inc., California gasoline prices reported by the Energy Information Administration, and airfares to California airports reported by the U.S. Department of Transportation Origin and Destination survey p Overnight Person-Trips to California p Visitor air travel on domestic flights to California destinations (34.4 million) increased by 5.4 percent in Sources: Dean Runyan Associates, Inc. and Bureau of Transportation Statistics (U.S. Dept. of Transportation). Note: These estimates are for visitor arrivals only. They do not include return travel of California residents or connecting flights normally reported in air passenger statistics. Overnight person-trips increased by 2.1 percent from 2014 to Overnight person-trips have increased by 2.0 percent per year since Source: Dean Runyan Associates. PAGE 8 DEAN RUNYAN ASSOCIATES

17 Millions Billions of Real 2015 US$ International Share ORIGIN $26 $24 $22 $20 $18 $16 $14 $12 International Visitor Spending Amounts in Real 2015$ Spend Share p 24% 22% 20% 18% 16% 14% 12% 10% As with the U.S., the share of international travel spending in California has leveled off in recent years. This is due in large part to the declining value of the U.S. dollar. (See page 3.) Sources: Dean Runyan Associates, Inc., International Trade Administration (U.S. Department of Commerce) and Bureau of Economic Analysis (U.S. Department of Commerce). Visitor Spending by Origin, 2015p Other US $ % Int'l. $ % California $ % In 2015, about six out of every ten dollars spent at California visitor destinatons were attributable to residents of other states and countries. Sources: TNS Travels America visitor survey and sources cited for preceding graph. Overseas Arrivals at California Ports of Entry July June FY Visitor arrivals at California Ports of Entry increased by 13.9 percent for the year ending in June Note: 2015 calendar year data was not available when this report was prepared. Sources: Office of Immigration Statistics (U.S. Department of Homeland Security). California total is sum of LA and SF Ports of Entry. DEAN RUNYAN ASSOCIATES PAGE 9

18 Billions GROSS DOMESTIC PRODUCT OF CALIFORNIA TRAVEL INDUSTRY Gross Domestic Product (GDP, also referred to as value-added) is a measure of economic activity that reflects the market value of the labor and capital used to produce goods and services. The GDP for a particular industry within a state excludes the intermediate inputs purchased by businesses from other firms in the production process. It includes payments to individuals in the form of earnings, indirect business taxes to government, and other payments to individuals and corporations. 4 The relationship between travel spending and the GDP of the California travel industry is shown below. 5 California travel industry GDP of $62.3 billion represents approximately two and one-half percent of total California GDP. Travel Spending and Gross Domestic Product of California Travel Industry, 2015p ($ Billions) $140 $120 $100 $80 $60.2 $60.2 Intermed. Inputs $21.1 Other Value-Added $41.3 Earnings $60 $40 $20 $0 $21.1 $21.1 $41.3 $41.3 Spending ($122.6) GDP ($62.3) The above estimates represent only the direct impacts of travel spending. A portion of the inputs purchased by travel businesses in California will be delivered by other California firms that are not strictly part of the travel industry. Restaurants, for example, will purchase agricultural products from other California businesses. These inputs are sometimes referred to as indirect effects. 4 Indirect business taxes are primarily excise taxes, often paid by consumers as a sales tax. Income taxes are not included. Other payments include retained earnings, dividends, interest and rent payments. 5 The travel industry is actually a combination of parts of other industries including lodging, food services, recreation businesses, retail businesses and transportation. PAGE 10 DEAN RUNYAN ASSOCIATES

19 DIRECT, SECONDARY AND TOTAL IMPACTS Travel spending in California brings money into many communities in the form of business receipts. Portions of these receipts are spent within the state for labor and supplies. Employees, in turn, spend a portion of their earnings on goods and services in the state. This re-spending of travel-related revenues creates indirect and induced impacts. To summarize: Direct impacts represent the employment and earnings attributable to travel expenditures made directly by travelers at businesses throughout the state. Indirect impacts represent the employment and earnings associated with industries that supply goods and services to the direct businesses (i.e., those that receive money directly from travelers throughout the state). Induced impacts represent the employment and earnings that result from purchases for food, housing, transportation, recreation, and other goods and services made by travel industry employees, and the employees of the indirectly affected industries. Total Employment and Earnings Generated by Travel Spending in California, 2015p Employment (Thousands) Earnings (Billions) Indirect 243 Induced Induced 484 $26.8 Direct $41.3 Direct 1,064 Indirect $15.1 Note: Indirect and induced impacts estimated by Dean Runyan Associates with an IMPLAN model (IMPLAN Group, LLC.). Total employment was 1,791,000. The employment multiplier for 2015 is 1.68 (1,790/1,064). Total earnings were $83.2 billion. The earnings multiplier is 2.01 (($83.2/$41.3). DEAN RUNYAN ASSOCIATES PAGE 11

20 The impacts in this section are presented in terms of the employment and earnings of eleven major industry groups. These industry groups are similar, but not identical to the business service (or commodity) categories presented elsewhere in this report. (The specific industries that comprise these major groups are listed in Appendix D.) Direct travel impacts, such as those discussed in the first part of this section and the regional and county impacts presented elsewhere in this report are found in the following industry groups: Accommodations & Food Services Arts, Entertainment and Recreation Trade Transportation As is indicated in the following tables and graphs, the total direct employment and earnings of these four industry groups is identical to the total direct employment and earnings shown in the first part of this section. The only difference is that these industry groups represent industry groupings (firms) rather than commodity or business service groupings. The indirect and induced impacts of travel spending are found in all thirteen industry groupings shown in the following tables and graphs. To summarize the primary secondary impacts: Professional and Business Services (140,900 jobs and $9.3 billion earnings). A variety of administrative services (e.g., accounting and advertising) are utilized by travel businesses (indirect effect). Employees of these firms also purchase professional services (induced effect). Education and Health Services (103,600 jobs and $6.4 billion earnings). The secondary effects are primarily induced, such as employees of travel-related businesses use of medical services Financial Activities (84,800 jobs and $4.8 billion earnings). Both businesses and individuals make use of banking and insurance institutions. Other Services (52,200 jobs and $2.4 billion earnings). Employees of travel-related businesses purchase services from various providers, such as dry cleaners and repair shops. It should be emphasized that the estimates of indirect and induced impacts reported here apply to the entire state of California and do not necessarily reflect economic patterns for individual counties, regions or sub-regions within the state. While total economic impacts can be calculated on a county or regional level, such a detailed analysis is not included in this study. In general, geographic areas with lower levels of aggregate economic activity will have smaller secondary impacts within those same geographic boundaries. PAGE 12 DEAN RUNYAN ASSOCIATES

21 Direct and Secondary Employment Generated by Travel Spending in California, 2015p Accomm. & Food Serv. Arts, Ent., & Rec. Trade Prof. & Bus. Services Transport Educ. & Health Services Financial Activities Other Services Manuf. & Utilities Information Public Administration Construction Nat. Resources Direct Secondary Direct and Secondary Employment (000) Direct and Secondary Earnings Generated by Travel Spending in California, 2015p Accomm. & Food Serv. Arts, Ent., & Rec. Trade Prof. & Bus. Services Transport Educ. & Health Services Financial Activities Other Services Manuf. & Utilities Information Public Administration Construction Nat. Resources Direct Secondary Direct and Secondary Earnings ($Billion) See page 11 for definition of secondary employment. See table notes on page 14 and Appendix D for definitions of industry groups. The data represented by these graphs are shown in the following tables. DEAN RUNYAN ASSOCIATES PAGE 13

22 Direct and Secondary Employment Generated by Travel Spending in California, 2015p (thousand jobs) Secondary Grand Industry Group Direct Indirect Induced Total Total Accommodation & Food Services Arts, Entertainment & Recreation Retail Trade Professional & Business Services Transportation Education & Health Services Financial Activities Other Services Manufacturing & Utilities Construction Information Public Administration Natural Resources & Mining All Industries 1, ,790.7 Direct and Secondary Earnings Generated by Travel Spending in California, 2015p ($Millions) Secondary Grand Industry Group Direct Indirect Induced Total Total Accommodation & Food Services 20, ,650 2,260 23,120 Arts, Entertainment & Recreation 9,810 1, ,750 11,550 Professional & Business Services 1,820 5,440 3,840 9,280 11,100 Retail Trade 3, ,570 5,240 8,280 Transportation 5,770 1, ,910 7,670 Education & Health Services 70 6,300 6,360 6,360 Financial Activities 1,690 3,140 4,820 4,820 Manufacturing & Utilities 1,130 1,360 2,490 2,490 Information 1, ,440 2,440 Other Services 620 1,750 2,370 2,370 Construction ,300 1,300 Public Administration ,180 1,180 Natural Resources & Mining All Industries 41,290 15,130 26,750 41,880 83,170 Source: Dean Runyan Associates and Implan Group, LLC. See page 11 for definitions of types of secondary employment. These industry groups are not equivalent to the categories used in the direct impact tables used in this report. See Appendix D. Details may not add to totals due to rounding. Detailed direct travel impacts for 1992 through 2015p follow. PAGE 14 DEAN RUNYAN ASSOCIATES

23 California Travel Impacts, Total Direct Travel Spending ($Billion) Destination Spending Other Travel* Total Direct Spending Visitor Spending by Type of Traveler Accommodation ($Billion) Hotel, Motel Private Home Campground Vacation Home Day Travel Destination Spending Visitor Spending by Commodity Purchased ($Billion) Accommodations Food Service Food Stores Local Tran. & Gas Arts, Ent. & Rec Retail Sales Visitor Air Tran Destination Spending Industry Earnings Generated by Travel Spending ($Billion) Accom. & Food Serv Arts, Ent. & Rec Retail** Ground Tran Visitor Air Tran Other Travel* Total Direct Earnings Industry Employment Generated by Travel Spending (Thousand Jobs) Accom. & Food Serv Arts, Ent. & Rec Retail** Ground Tran Visitor Air Tran Other Travel* Total Direct Employment Government Revenue Generated by Travel Spending ($Billion) Local Tax Receipts Visitor Business or Employee State Tax Receipts Visitor Business or Employee Federal Tax Receipts Details may not add to totals due to rounding. *Other Travel includes resident air travel, travel arrangement & reservation services, and convention & trade show organizers. **Retail includes gasoline. See table notes on page 7 for definition of taxes. DEAN RUNYAN ASSOCIATES PAGE 15

24 p Total Direct Travel Spending ($Billion) Destination Spending Other Travel* Total Direct Spending Visitor Spending by Type of Traveler Accommodation ($Billion) Hotel, Motel Private Home Campground Vacation Home Day Travel Destination Spending Visitor Spending by Commodity Purchased ($Billion) Accommodations Food Service Food Stores Local Tran. & Gas Arts, Ent. & Rec Retail Sales Visitor Air Tran Destination Spending Industry Earnings Generated by Travel Spending ($Billion) Accom. & Food Serv Arts, Ent. & Rec Retail** Ground Tran Visitor Air Tran Other Travel* Total Direct Earnings Industry Employment Generated by Travel Spending (Thousand Jobs) Accom. & Food Serv Arts, Ent. & Rec Retail** Ground Tran Visitor Air Tran Other Travel* Total Direct Employment ,026 1,064 Government Revenue Generated by Travel Spending ($Billion) Local Tax Receipts Visitor Business or Employee State Tax Receipts Visitor Business or Employee Federal Tax Receipts Details may not add to totals due to rounding. California Travel Impacts, p *Other Travel includes resident air travel, travel arrangement & reservation services, and convention & trade show organizers. **Retail includes gasoline. See table notes on page 7 for definition of taxes. PAGE 16 DEAN RUNYAN ASSOCIATES

25 III. STATE AND LOCAL GOVERNMENT REVENUE This section is concerned with the contribution of the California travel industry to state and local government finance. The first part of the report compares the travel industry to various other sectors of the state economy. The remainder provides an overview of state and local finance and the revenue contribution of the travel industry. INDUSTRY GROSS DOMESTIC PRODUCT AND TAXES One way to consider the tax contributions of various sectors of the economy is to express the tax payments of businesses to government as a percentage of Gross Domestic Product. The bar chart and accompanying table show these tax payments (taxes on production and imports or TOPI) for major sectors of the California economy, including travel. TOPI include most of the taxes paid by the business firm to local, state and federal governments except for income taxes. This includes property taxes, licenses and fees and the sales and excise taxes collected from consumers. It is because of these later taxes that retail trade and travel have relatively high proportions of tax payments in relation to their gross domestic products. Production & Import Taxes as a Percent of Gross Domestic Product Selected California Industry Sectors, 2014 Calendar Year Information Construction Health Care Manufacturing Retail trade Travel Sources: Bureau of Economic Analysis and Dean Runyan Associates. *TOPI denotes taxes on production and imports, less subsidies. All Industries 0% 5% 10% 15% 20% 25% Percent of Gross Domestic Product GDP *TOPI Percent Information % Construction % Health care and social assist % Manufacturing % Retail trade % Travel % All Industries 2, % DEAN RUNYAN ASSOCIATES PAGE 17

26 The remainder of this report will focus on the travel industry and the specific tax contributions made to state and local government in California. In addition to the taxes on production discussed in the previous section, the tax payments of travel industry employees derived from the income earned from travel industry businesses will be included. 1 The three primary sources of tax revenue generated by the travel industry are: Sales tax receipts generated by visitor spending. This includes local and state sales taxes, lodging taxes, and motor fuel taxes. Taxes paid by travel industry businesses attributable to travel generated business receipts (property and income taxes). Taxes paid by travel industry employees attributable to travel generated earnings (sales and property taxes). CALIFORNIA TAX STRUCTURE The pie chart below, adapted from the Bureau of the Census State and Local Government Finance and other data sources, shows the main categories of tax revenue in California. More than one-third of tax revenue is derived from the state income tax. Slightly less than one-third of all state and local tax revenue in the state is derived from sales or gross receipts taxes. About three-fourths of these sales and gross receipt taxes are collected by the state. Property taxes, paid primarily by homeowners and businesses to local governments, constitute one-fourth of all tax revenue. 2 California State and Local Government Tax Revenues Fiscal Year (Billions) Sales & Gross Receipts $ % Property $ % Income $ % License & Other $16.2 7% Sources: The fiscal year estimates of state and local tax revenues in California were prepared by Dean Runyan Associates from various sources, including the Bureau of the Census (State and Local Government Finance), the California State Board of Equalization, the California State Controller, the Bureau of Economic Analysis and a selection of annual financial reports for cities and counties. Sales and gross receipts taxes include the general sales tax and a variety of selective taxes, such as those on motor fuel and lodging. State tax receipts comprise more than 60 percent of all state and local tax receipts. 1 In effect, this means re-allocating some of the sales and excise payments made by other industries to the travel industry because the payments are ultimately made by consumers that earned their income in the travel industry. 2 Businesses pay 56 percent of all property taxes in California according the the Tax Foundation (Fiscal Fact No. 342, November 21, 2012). PAGE 18 DEAN RUNYAN ASSOCIATES

27 TRAVEL INDUSTRY TAX REVENUE The distribution of taxes generated by the travel industry for the fiscal year is shown in the following pie chart. The categories are the same as the preceding figure, with the exception that sales tax receipts are also distinguished between those that are generated by visitor spending and those that are generated by the spending of travel industry employees. California Travel Industry State and Local Government Tax Revenues Fiscal Year (Million) Property $1,100 11% PFC $150 2% Income $350 4% Employee Sales $1,320 13% Visitor Sales $6,840 70% Source: Dean Runyan Associates. Other travel-generated tax revenue includes the franchise tax and passenger facility charges for visitors who travel to California airports. Whereas slightly less than one-third of all state and local tax revenue in California was attributable to sales tax collections in the fiscal year, 83 percent of all travel industry tax revenue was attributable to sales tax receipts from visitors (70 percent) and the purchases of employees in the travel industry (13 percent). Travel industry state and local tax revenues are compared to total California state and local tax revenues in the following table. Because the travel industry generates a relatively high proportion of sales tax revenues, it is associated with proportionately more tax revenues than would be expected given the size of the industry, as measured by earnings or gross domestic product. Whereas the earnings and GDP of the travel industry are in the range of two and one-half percent of the state totals, travel industry tax revenues represent 4.2 percent of all state and local tax revenues in California. This is consistent with the initial analysis that compared different industries within the state. DEAN RUNYAN ASSOCIATES PAGE 19

28 California State and Local Tax Revenues Fiscal Year ($Million) Travel Percent Total Generated Travel Sales & Gross Receipts $72,600 $8, % Property $55,060 $1, % License & Other $16,200 $ % Income $88,480 $ % Total $232,340 $9, % Source: Dean Runyan Associates and Bureau of the Census, State and Local Government Finance. SUMMARY This analysis of the tax revenue generated by the California travel industry can be summarized as follows: The California travel industry contributes more tax revenue to state and local governments than would be expected based on the size of the industry. Whereas the gross domestic product and employee earnings represent about two and onehalf percent of the state economy, the travel industry generated 4.2 percent of tax revenue in the 2015 fiscal year. Over eighty percent of all travel-generated tax revenue is attributable to sales and gross receipts taxes. The travel industry share of the state total is more than 11 percent. Not only are most travel industry goods and services taxed, but a large share of these commodities (lodging and motor fuel) are taxed at rates that are greater than the general sales tax. A large share of these tax revenues are borne by visitors who reside in other states and countries. The revenue contributions of California s fifty-eight counties are detailed in the following two tables. (Note. The 2014 calendar taxable sales were not yet available from the California State Board of Equalization at the time that this report was prepared.) PAGE 20 DEAN RUNYAN ASSOCIATES

29 Local and State Travel-Generated Tax Revenue per Household 2015 Calendar Year Tax Revenue (Millions) Households Tax Revenue Local State Total (thousands) per Household Alameda $152.5 $164.9 $ $540 Alpine $0.9 $0.9 $ $3,910 Amador $3.7 $6.4 $ $710 Butte $7.3 $16.7 $ $270 Calaveras $4.4 $7.6 $ $650 Colusa $1.0 $2.3 $ $460 Contra Costa $45.9 $88.5 $ $330 Del Norte $3.9 $5.7 $ $1,020 El Dorado $24.3 $31.5 $ $780 Fresno $38.8 $72.3 $ $370 Glenn $2.0 $3.1 $ $520 Humboldt $12.2 $19.1 $ $560 Imperial $10.3 $18.7 $ $570 Inyo $9.7 $8.5 $ $2,290 Kern $30.7 $74.6 $ $390 Kings $2.8 $9.3 $ $290 Lake $3.4 $7.8 $ $420 Lassen $1.7 $3.4 $ $560 Los Angeles $1,072.4 $1,097.7 $2, ,354.8 $650 Madera $8.5 $14.3 $ $510 Marin $35.5 $34.1 $ $650 Mariposa $20.3 $14.6 $ $4,720 Mendocino $15.4 $18.4 $ $970 Merced $4.7 $13.8 $ $230 Modoc $0.6 $1.3 $ $510 Mono $28.2 $18.5 $ $8,290 Monterey $108.9 $131.0 $ $1,830 Napa $61.8 $54.0 $ $2,280 Nevada $9.7 $15.3 $ $600 Sources: U.S. Bureau of the Census and Dean Runyan Associates. Households calculated from 2014 population and 2010 household size. DEAN RUNYAN ASSOCIATES PAGE 21

30 Local and State Travel-Generated Tax Revenue per Household 2015 Calendar Year Tax Revenue (Millions) Households Tax Revenue Local State Total (thousands) per Household Orange $419.9 $474.4 $ ,042.8 $860 Placer $29.6 $48.0 $ $550 Plumas $2.9 $5.0 $ $950 Riverside $204.9 $352.7 $ $760 Sacramento $99.5 $155.6 $ $470 San Benito $2.1 $5.1 $ $410 San Bernardino $114.4 $228.1 $ $540 San Diego $520.5 $653.3 $1, ,155.2 $1,020 San Francisco $691.2 $446.2 $1, $3,060 San Joaquin $17.1 $44.5 $ $270 San Luis Obispo $59.1 $73.1 $ $1,240 San Mateo $235.7 $190.1 $ $1,550 Santa Barbara $85.2 $94.0 $ $1,200 Santa Clara $199.1 $210.0 $ $630 Santa Cruz $29.6 $39.3 $ $700 Shasta $11.9 $21.1 $ $460 Sierra $0.6 $0.7 $ $1,000 Siskiyou $6.2 $9.1 $ $810 Solano $16.7 $35.4 $ $350 Sonoma $68.8 $80.7 $ $780 Stanislaus $10.5 $31.2 $ $240 Sutter $1.6 $5.1 $ $210 Tehama $3.2 $6.7 $ $420 Trinity $1.0 $2.1 $ $540 Tulare $14.0 $24.8 $ $290 Tuolumne $6.9 $9.8 $ $780 Ventura $45.6 $85.9 $ $480 Yolo $8.1 $17.4 $ $340 Yuba $1.7 $5.2 $ $270 California $4,629.1 $5,309.1 $9, ,189.2 $750 Sources: U.S. Bureau of the Census and Dean Runyan Associates. Households calculated from 2014 population and 2010 household size. PAGE 22 DEAN RUNYAN ASSOCIATES

31 Total and Visitor-Generated Taxable Sales 2013 Calendar Year (amounts in $Millions) Taxable Sales Total Visitor Percent Alameda 26,625 1, % Alpine % Amador % Butte 2, % Calaveras % Colusa % Contra Costa 14, % Del Norte % El Dorado 1, % Fresno 12, % Glenn % Humboldt 1, % Imperial 3, % Inyo % Kern 15, % Kings 1, % Lake % Lassen % Los Angeles 140,080 8, % Madera 1, % Marin 4, % Mariposa % Mendocino 1, % Merced 2, % Modoc % Mono % Monterey 5,911 1, % Napa 2, % Nevada 1, % Sources: California State Board of Equalization and Dean Runyan Associates. DEAN RUNYAN ASSOCIATES PAGE 23

32 Total and Visitor-Generated Taxable Sales 2013 Calendar Year (amounts in $Millions) Taxable Sales Total Visitor Percent Orange 57,591 3, % Placer 7, % Plumas % Riverside 30,065 3, % Sacramento 20,097 1, % San Benito % San Bernardino 31,178 1, % San Diego 50,297 5, % San Francisco 17,094 4, % San Joaquin 9, % San Luis Obispo 5, % San Mateo 14,612 1, % Santa Barbara 6, % Santa Clara 37,622 1, % Santa Cruz 3, % Shasta 2, % Sierra % Siskiyou % Solano 6, % Sonoma 8, % Stanislaus 7, % Sutter 1, % Tehama % Trinity % Tulare 5, % Tuolumne % Ventura 12, % Yolo 3, % Yuba % California 586,477 42, % Sources: California State Board of Equalization and Dean Runyan Associates. PAGE 24 DEAN RUNYAN ASSOCIATES

33 IV. REGIONAL TRAVEL IMPACTS SHASTA CASCADE NORTH COAST SAN FRANCISCO BAY AREA HIGH SIERRA CENTRAL VALLEY CENTRAL COAST DESERTS LOS ANGELES COUNTY ORANGE COUNTY INLAND EMPIRE SAN DIEGO COUNTY DEAN RUNYAN ASSOCIATES PAGE 25

34 2015p Region Direct Travel Impacts Spending ($Million) Earnings Employment Tax Revenue ($Million) Region Total Destination ($Million) (Thousand Jobs) Local State Total North Coast 1,055 1, Shasta Cascade San Francisco Bay Area 33,278 29,103 11, ,522 1,310 2,831 Central Valley 6,623 6,102 1, Gold Country 4,562 3,856 1, High Sierra 2,781 2, Central Coast 8,078 7,752 2, Los Angeles County 25,884 21,468 9, ,072 1,098 2,170 Orange County 11,271 10,064 3, San Diego County 15,403 14,190 4, ,174 The Deserts 6,581 6,244 1, Inland Empire 6,014 5,622 1, California 122,516 * 41,292 1,064 4,630 5,310 9,939 *Sum of regional destination spending is less than state destination spending due to allocation of ground transportation. See appendix pages Sonoma county is now included in the San Francisco Bay Area. In prior reports, Sonoma county was included in the North Coast. PAGE 26 DEAN RUNYAN ASSOCIATES

35 Region Direct Travel Total Spending, p ($Million) 1992 through 2014 Ave. Annual Chg. Region p 92-15p North Coast , ,011 1, % 2.7% Shasta Cascade % 2.7% San Francisco Bay Area 12,818 13,529 15,624 17,759 22,399 18,880 20,409 23,551 25,202 25,861 28,902 32,010 33, % 4.2% Central Valley 3,105 3,295 3,491 3,740 4,330 4,428 4,931 5,675 6,049 5,892 6,440 6,567 6, % 3.3% Gold Country 2,012 2,065 2,233 2,437 3,034 3,126 3,381 3,870 3,957 3,785 4,112 4,341 4, % 3.6% High Sierra 1,272 1,373 1,405 1,555 1,755 1,900 2,089 2,234 2,268 2,317 2,510 2,630 2, % 3.5% Central Coast 3,649 3,767 4,243 4,690 5,445 5,415 5,767 6,522 6,712 6,540 7,292 7,819 8, % 3.5% Los Angeles County 6,521 11,900 13,072 14,211 17,618 16,865 19,105 21,361 22,468 21,400 23,653 25,232 25, % 6.2% Orange County 5,042 5,244 5,851 6,426 7,659 7,541 8,405 9,534 9,704 9,312 10,107 10,824 11, % 3.6% San Diego County 6,097 5,888 6,925 8,190 9,824 9,449 10,632 11,988 12,733 12,501 13,700 14,805 15, % 4.1% The Deserts 2,756 2,877 3,120 3,440 3,933 4,195 4,685 5,399 5,734 5,573 6,247 6,387 6, % 3.9% Inland Empire 2,488 2,616 2,796 3,038 3,558 3,984 4,476 5,098 5,394 5,303 5,702 5,851 6, % 3.9% California* % 4.3% *($Billions) Sonoma county is now included in the San Francisco Bay Area. In prior reports, Sonoma county was included in the North Coast. All current and previous estimates have been revised. DEAN RUNYAN ASSOCIATES PAGE 27

36 Region Direct Travel-Generated Employment, p (thousands) 1992 through 2014 Ave. Annual Chg. Region p 92-15p North Coast % 0.3% Shasta Cascade % 0.4% San Francisco Bay Area % 1.7% Central Valley % 1.1% Gold Country % 1.6% High Sierra % 1.1% Central Coast % 1.3% Los Angeles County % 4.0% Orange County % 1.5% San Diego County % 2.1% The Deserts % 1.8% Inland Empire % 2.0% California , , % 2.0% Sonoma county is now included in the San Francisco Bay Area. In prior reports, Sonoma county was included in the North Coast. All current and previous estimates have been revised. PAGE 28 DEAN RUNYAN ASSOCIATES