Tag: Economic Impact

Value of Recreation Facilities to a Community

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Recreation facilities may add direct economic value or indirect benefits to a community. This post will focus on the latter realizing that city leaders may be focused on their direct economic value.

The term “recreation facilities” may include sports fields, gymnasiums or indoor facilities, parks, or open space. Recreation facilities may impact a community in the following ways:
• Recreation facilities can serve as a gathering spot for locals of all ages. This in turn will increase pride in the area and make the community more cohesive.
• They can be a tool for economic development that helps with the retention and attraction of businesses and talented individuals.
• Parks and facilities may serve as a tourist attraction. The ski areas in Colorado are a prime example. The impact of visitors to these facilities could be measured by their spending at hotels, restaurants, gasoline stations, and retail stores.
• Tournaments, special activities, or ongoing programs may attract visitors from outside the local area.
• A strong recreation facility may benefit local retailers who sell sporting goods equipment.
• Recreation facilities may also drive the formation of spinoff recreation businesses that complement programs at the facility.
• Special events or activities may draw media coverage for the facility and the community. For example, Farmington, New Mexico claims to be the amateur baseball capital because it has hosted Connie Mack and Babe Ruth tournaments since 1965.
• Recreation facilities with active programs increase the health of the local community. Boulder, Colorado is considered a recreation Mecca and one of the healthiest cities in the country.
• Some recreation facilities have staff who publish periodic health and fitness press releases in the local media to promote a healthy and active community.
• Studies have shown that quality recreation facilities increase the value of neighboring property. For example, homes surrounding a golf course may have greater property value than those several blocks away.
• Strong recreation facilities and programs keep residents in the area who might otherwise travel outside the community for goods and services. In turn, this reduces sales leakage to neighboring communities.
• Direct facility use, which includes providing activities for adolescents, will keep them active and may reduce the chances of them getting in trouble.
• Facilities that are part of a complex that includes parks and/or open space may mitigate air pollution. Some complexes are designed to assist with storm water retention or to address other environmental issues.
• Public recreation facilities often provide reasonably priced access to recreation facilities because they are supported by tax dollars.
Quite often these factors are more important to community leaders than the profit or loss of operating a recreation facility.

Many of the above factors were identified in the reports, The Economic Benefits of Denver’s Park and Recreation System by the Trust for Public Land and Measuring the Economic Impact of Park and Recreation Services, by John L. Crompton.

recreation facilities
Recreation facilities can add value to a community in many ways.

 

Economic Impact of Public Parks and Recreation Facilities

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As the public has called for increased accountability from public officials, there has been an increased need for economists to conduct economic impact analyses to justify the feasibility of renovating or building new parks and recreation facilities. Three types of studies are listed below:

• The most common type of study would measure the “sales” or gross output of a recreation facility. These studies always produce positive numbers. The gross impact simply measures the general magnitude of the impact. For example, the study will determine if the impact is in the range of $10 million, $50 million, or $100 million a year.

• If facilities are intended to attract tourists or visitors, the study may measure only the amount of “new” money brought into the community as a result of the facility and its programs. The impact of visitors would be measured by their spending at hotels, restaurants, gasoline stations, and retail stores. And the spending of locals is not counted – it is not an infusion of money from outside the area, rather it is money just re-circulating within the local economy.

• In some cases economic impact studies measure the net benefit of the facilities, or the gross impact less costs associated with the facility. Frequently, analyses for public facilities are negative. This is to be expected because public facilities have an obligation to provide lower cost/no cost services to their citizens because they are funded by tax dollars. In other words, it is not possible for them to “show a profit.”

In all three cases, it will be useful to complete the study then look at benefits of the parks and recreation facilities that extend beyond the impact analyses.

Quite often recreation centers are the hub of a larger complex that may include sports fields, parks, or open space. The following factors are ways a recreation center/complex can benefit a community. A portion of this list was taken from the reports, The Economic Benefits of Denver’s Park and Recreation System by the Trust for Public Land and Measuring the Economic Impact of Park and Recreation Services, by John L. Crompton.

Parks and recreation facilities can impact a community in the following way:
• They can be a tool for economic development that draws individual talent to the area. Centers may be a draw that helps with the retention and attraction of businesses.
• Recreation facilities can serve as a gathering spot for locals of all ages. This in turn will increase pride in the town and make the community more cohesive.
• Many park and recreation employees work on a part-time basis for a variety of reasons. For example, a facility may only employ 15 FTE workers, but it may have a payroll of 50 part-time workers.
• A stronger recreation facility may benefit local retailers who sell sporting goods equipment. It may also result in the formation of spinoff recreation businesses that complement programs at the facility.
• Parks and facilities may serve as a tourism attraction. In the case of many facilities, the parks and facilities are not the primary draw, but tourists may have a better experience in the area by having access to quality recreation facility.
• Tournaments, special activities, or ongoing programs may attract out of town visitors.
• Special events or activities may draw media coverage for the facility and the community.
• Recreation facilities with active programs increase the health of the local community.
• Some recreation facilities have staff members who publish periodic health and fitness press releases in the local media to promote a healthy and active community.
• Studies have shown that quality recreation facilities increase the value of neighboring property.
• Strong recreation facilities and programs keep residents in town who might otherwise travel outside the community. In turn this reduces sales leakage to neighboring communities.
• Direct facility use, which includes providing activities for adolescents, will keep them active and may reduce the chances of them getting in trouble.
• Facilities that are part of a complex that includes parks and/or open space may mitigate air pollution. Some complexes are designed to assist with storm water retention or to address other environmental issues.
• Public recreation facilities often provide reasonably priced access to recreation facilities because they are supported by tax dollars.

The bottom line is that the value of a facility extends beyond the economic activity associated with its construction, operation, and maintenance. To understand the full benefits of a park or recreation facility, it is imperative to look at the numbers and beyond them as well.

Colorado Crossroads – Girls’ Sports Impact the Colorado Economy

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One of Colorado’s top sporting events does not include the Broncos, Rockies, Nuggets, or other professional athletes. Instead it is an event that spans nine days and involves about 12,000 middle school and high school girls competing for slots in the USA Volleyball Girls’ Nationals.

This year the Colorado Crossroads was held March 2-4 and 8-10 at the Colorado Convention Center.  A few key facts about the event are listed below.
• The tournament started in 1985 and is one of nine national qualifiers.
•It has grown from 100 teams to over 1,200 teams.
• The first weekend featured team play in the 16, 17, and 18 year-old divisions.  Just under 6,000 players competed on 651 teams.
• The second weekend play was held for 12, 13, 14, 15 year-old divisions.  About 5,500 players represented 594 teams.
• A total 41 of teams in the various age brackets qualified for Nationals in Dallas.
• Nearly 167,000 people visited Denver because of the event.
• Seventy percent of the participants are from out-of-state.
• The caliber of play at Crossroads attracted 292 college scouts from 44 states registered to attend the event.
• The event is played on 88  courts. Players compete in pool play the first two days of the event. A single elimination tournament rounds out play on the final day.
• This year, the Convention and Visitors Bureau’s economic impact model, provided by the Destination Marketing Association International showed that the 2013 event was worth about $26 million to the Denver economy. Tournament directors believe this is a conservative estimate.

In addition, there are many intangible benefits associated with the event. It promotes the value of physical activity for young women. As well, it showcases Colorado’s active lifestyle and demonstrates  the state is a wonderful place to live, work, and play.

 

USA Pro Challenge 2012 Promotes Colorado’s Active Lifestyle

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In mid-October, USA Pro Challenge officials released the economic impact study for the 2012 Professional Cycling Race. Essentially, the results are comparable to last year – a lot of people watched the race and “new” money was spent in the state as a result of the event. The “measured” economic impacts were just shy of $100 million.

Intangible Benefits
Of the various contributions to Colorado, the intangible benefits resonate with more people.
• Colorado has a tradition of bicycle racing that dates back to the Red Zinger Classic. Like its predecessor, the Pro Challenge is an event that reflects the outdoor, fitness-minded personality of the state.
• There were 31 hours of race coverage on NBC and NBC Sports Network in the U.S. As well, participants came from 25 states and the race received coverage in 175 countries. The mountain communities of Colorado present the state in a favorable light.

Attendance
Measuring the attendance of the Pro Challenge is difficult, to say the least.
• Race officials reported that 1+ million people attended the event both last year and this year.
• Throughout the race, the media suggested that attendance was down in some cities. They created the impression that overall attendance was less this year, but that the event was well received.

As a point of reference about 600,000 people attend 8 Denver Bronco home games, slightly more than 600,000 people visit the National Western Stock Show (NWSS), and 2.5 to 3.0 million people go to Colorado Rockies games.

Economic Impact
Economic impact analyses for events provide a general overview of economic activity in the region that is a direct result of that event. Some methodologies will present a breakdown of activity by wages and direct expenses related to the event. As well, expenditures in the region may be summarized for such things as lodging, food, or transportation.

If methodologies are similar, it is possible to compare the economic impact of multiple events. For example, the impact of the Pro Challenge is slightly less than the estimated impact of the NWSS. The impacts of the Women’s Final Four and the Crossroads Volleyball Tournament are about $20 million each. Each of these events has different levels of impact and makes distinct tangible and intangible contributions to the local economy.

Most economic impact studies do not look at the fiscal impact or the net fiscal impact of events. Those analyses are pertinent for many of the towns or regions because they compare tax revenues generated by the event to expenses of the events as a tool for determining their fiscal value to the community.

The economic impact of the Pro Challenge follows:
• The estimated economic impact to the state is $99.6 million compared to about $83.6 million last year.
• Given that attendance was similar for the two years, the increased impact is most likely a result of changes in the host towns.
• The press release stated that “Fans from outside the state and Coloradans traveling 50 miles or more to take in an event stage contributed $81.5 million on lodging, food, transportation and entertainment. The remaining economic impact came in the form of team, staff, sponsor and vendor spending, employment created by the event, and the resulting tax effects of the race.”
• The press release did not provide a breakdown of per capita spending (spending by Coloradans traveling at least 50 miles, out of state travelers, and locals).. Such an analysis may be in the full report and would help identify the true impact of the type of visitor to the tourism industry. Similarly, it would be valuable to understand the breakdown of spending by category (lodging, food, etc.)
• Since team, staff, sponsor and vendor spending and tax effects totaled about $18.1 million. It is likely that the fiscal contribution to the state, i.e. taxes paid, was a minor part of the total impact.

Other Interesting Tidbits
The research firm also collected the following snippets of information about the visitors:
• The average size of the travel parties was three people.
• While the median household income (HHI) of Colorado residents is $56,456, race spectators averaged a household income of $110,000.
• Surely, there is a typo in the above sentence. It is not appropriate to compare a median of one group to an average of another group. In most data sets the values of a median and an average are significantly different.
• It is also important to evaluate how the HHI for the spectators (median or average) compares to the HHI for non-spectators visiting the host cities. That will make it easier to differentiate whether cycling spectators have larger pocketbooks than other travelers.
• About 86% said they were very satisfied or satisfied with the race.
• More than half of spectators ride a bike for fitness and about 22% ride a bike occasionally or not at all.
• Slightly more than 93% watched part of the Tour de France on television.
• As a point of reference, the world-wide number of television viewers is 45 to 50 million. Does it make sense that about two percent of those viewers watched the Pro Cycling Challenge in person?
• About 64% of the spectators wanted to witness the elite level of competition, 45% were interested in the destination cities and 46% wanted to experience the start/finish festivals.
• About 75% of out-of-state visitors were more likely or much more likely to visit Colorado again based on their experience at the USA Pro Challenge.
• The press release stated “53% of spectators claimed they would not have traveled to Colorado at this time if it were not for the race. And with that, 75.8% stated they were very likely or likely to return to watch the race next year.”
o For these numbers to have full meaning, it is necessary to understand how many of the 1+ million spectators were local and how many were from outside the area. Presumably that information is included in the report.

Overall, these results paint a positive picture of the impact of the Pro Challenge race.

Conclusion
The USA Pro Challenge is one of many sporting events (Professional and college sports, ongoing events such as the NWSS, and other special events such as the Women’s Final Four) that contribute to the state economy and the perception that Colorado is prosperous state, with a diverse economy, and an active lifestyle.

 

Bolder Boulder – $10 Economic Impact

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The Boulder Boulder road race is not just another 10K, it is an event that many Coloradans say you have to participate in at least once in your life. In fact some have suggested that running in the race should become a requirement for residency in the city. (The anti-growth segment of Boulder would add that only those who can run at a six minute a mile pace or better should be admitted on a permanent basis.)

Since its inception in 1979, the event has become a Memorial Day tradition and is a key part of the Boulder culture and sports scene. From a business perspective it is an event that has touched a variety of sectors within the local economy.

The Daily Camera reported (May 14, 2012) that the event has about 54,000 runners and 100,000 spectators. In one weekend the event has a $10 million impact on the City of Boulder.

The DC also reports (May 22, 2012) that total expenses for the event are almost $3 million. Some of the larger and more interesting expenses associated with the event follow:
• $371,442 for race shirts and numbers.
• $173,977 for printed materials and banners.
• $160,350 for prize money for the professional runners.
• $100,279 for results, timing, and scoring.
• $81,057 for postage for entry forms, finish certificates, medals, etc.
• $69,589 for transportation, accommodations and meals for professional athletes.
• $54,819 for costs covering the floor of the stadium to protect the turf on Folsom field.
• $33,968 scaffolding in the stadiums and along the course.
• $19,960 audio and video tribute (Memorial Day).
• $15,740 portable toilets.

For additional details about the Bolder Boulder, click here.

 

Women’s Sports Touted as Contributor to Colorado Economy

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On February 17th, the Denver Post reported “Women’s sporting events to be economic blockbuster for Denver.”

In the article, which was posted in the business section, Rich Grant of Visit Denver stated, “Women’s sports are becoming a huge economic engine, and Denver is poised to be known as a major center for this.” In particular, Grant was referencing the Colorado Crossroads volleyball tournament and the NCAA Women’s Final Four.

The Colorado Crossroads tournament is one of 9 national events where teams can qualify for the USA Junior Nationals. The Post reported that it will draw 11,000 players and 33,000 spectators over a two week period in late February and early March. The projected impact is about $22 million, with most of the benefit accruing to rooms, food, taxis, rental cars, trinkets, and other souvenirs.

The tournament reportedly hosted about 100 teams ten years ago, but is expected to attract 1,100 teams from 34 states this year. This speaks to the growth in the popularity of volleyball, the increased impact of USA Volleyball, and greater interest in women’s sports.

The NCAA Women’s Final Four will be in Denver April 1-3. In addition to the three games, the playoffs are billed as a three-day party, including events at the Colorado Convention Center prior to the tournament and a concert by Jewel. The direct economic impact is expected to be about $20 million. As with the volleyball tournament, the businesses that will feel the impact are hotels, restaurants, transportation, and retailers.

There is still hotel space in Denver during the Final Four and tickets were still available at the time the article was published. The Post cited enthusiasts who projected that hotel and tickets would pickup in the weeks ahead.

The two events attract very different crowds, which speaks to the diversity of the appeal of the region. The volleyball tournament will attract families to the area, who will likely spend less per person because of budget and time constraints. The Final Four is a special activity, which will have more corporate appeal. It will attract a crowd that is more likely to have time to explore the city and spend more in the local economy on a per capita basis.

The first event portrays Colorado as a place to be for participant sports, while the latter positions Denver as a location for the country’s top sporting events. The Final Four is expected to be covered in 177 countries.

As well as discussing the impact of the Colorado Crossroads and Final Four, the Post listed the economic impact of other previous sporting events:

2012 Women’s Final Four – $20 million – projected (direct benefits only)
2012 Colorado Crossroads -$21.9 million – projected (direct benefits only)
2008 NCAA Frozen Four Men’s Hockey – $15 million (direct benefits only)
2007 Rockies World Series (Games 3 and 4) – $10 million (may include direct benefits)
2006 AFC Championships $21 million (may include indirect benefits)
2005 NBA All-Star Game – $30 million (may include indirect benefits)
2004 Mountain West Conference Men’s Basketball – $4 million (
2002 Grand Prix Denver – $30 million (may include indirect benefits)

Comparisons of these events should be made with caution. Most likely these impact studies were calculated using different models. While the major source of impact for all events is food, room, transportation, and the purchase of goods and services, different methodologies may produce results that may not be comparable.

As mentioned above, some of the studies include direct impacts only while others include a much broader contribution to the economy (direct and indirect impact). This is like comparing apples and apple pie – they are different.

While it is important to understand the challenges in producing valid and reliable economic impact studies, the real point is that one-time special activities, such as sporting events, conventions, or film production can have a short-term positive impact on local economic activity. (This does not guarantee they have a positive fiscal impact on the economy.)

Of equal or greater importance are the intangible benefits of an event. Quite often they far exceed the economic activity. The above events have portrayed Denver in a positive light and helped mold the perception that it is a great place to live, work, and play.

 

Participant Sports in a Community – Boulder Cycling Study

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Thursday January 26 was a slow news day in Boulder.

The headlines on page 1 of the Daily Camera read, “A BIKE BIZ HUB – Survey finds $52 million impact from Boulder’s cycling-related sector”. Underneath the headline article was, “JFK hearse arrives in Longmont.” The other articles were of similar significance. Truly a slow day at the Camera.

The value of this article is that it illustrates the role of sporting activities in the economy. More importantly it shows that there are many different occupations and each makes a different contribution to our lifestyle and economic well-being. Every job is important, particularly in a down economy.

As well as being a great sport, cycling has a positive impact on the health of cyclists, unless they end up on the wrong end of a confrontation with citizens who don’t appreciate spandex wearing two-wheelers. In addition, the sport is part of Boulder’s outdoor recreation and life-style clusters.

Forty-one companies, 330 employees, and $52 million in sales. Based on its sales, the Boulder bike-biz hub is equivalent about 20 Hooters restaurants or one medium sized small business. Based on the survey results, the industry accounts for about 0.2% of the county’s employment and about 0.3% of the county’s Real GDP.

The stated impact of $52M is questionable. Sales and impact, or economic activity, measure different things. In some cases, the sales figures appear to be inflated.
• 214 rental repair employees generate $24.4 million in sales or $114,019 per worker. (This is reasonable).
• 13 manufacturing workers generate $10.4 million in sales or $800,000 per employee. (Either employment is understated or sales are overstated).
• 48 education and advocacy employees generated $7.9 million in sales or $164,583 per person. (It is surprising that education and advocacy groups would generate that amount in revenue).
• 55 miscellaneous workers brought in $9.5 million in sales or $172,727 per employee. (Without knowing the types of businesses, this seems high).
The average revenue generated per person was $158,182. Based on the above comment this seems high.

Economic activity is typically measured by wages, local purchases, and the multiplier effect. Most of the jobs associated with the cluster are lower than the average annual wages for the county. If average annual wages are $40,000 then the total is about $13 million.

Local purchases would be a subset of the sales total. If local purchases are about 1/4 of total sales then they would be about $13 million. The impact of the multiplier effect would be negligible.

This quick and dirty analysis estimates that the economic activity, or impact, of the bike-biz hub is in the range of $25-$30 million or about half of what the article stated.

The real message of the study is not in the numbers. Boulder would be an ideal hub for the cycling industry. It would be great to see more clothing, equipment, and accessory manufacturers headquartered in the county. As well, cycling events might have a positive economic impact if they attracted visitors from out of town to stay in hotels, eat in local restaurants, and buy from local stores.

If a fiscal impact analysis of the cycling industry was conducted it would likely uncover results that do not favor the sport. Sales tax revenues attributable to the cluster probably would be less than the expenses associated with the cyclist’s share of the cost to build the roads, sidewalks, and bike paths that they ride on.

Impact studies are not easy – even the best ones are subject to scrutiny. Hats off to the biz-bike hub folks for giving it their best shot. Weaknesses in the report distract from the good news in this story. Unfortunately, the report is not front page news, not even on a slow day.