NRPA Measuring Impact of Park & Rec

37 Measuring the Economic Impact of Park and Recreation Services www.NRPA.org National Recreation and Park Association © 2010 All Rights Reserved Chapter 4 Use and Abuse of Multipliers There is widespread recognition among elected officials and park and recreation professionals that when visitors inject new money into a local community it spreads through its economy like ripples in a pool after a stone has been thrown into it. The concept of the new money being spent and respent, so its initial impact is multiplied, is easy to grasp. However, the operationalization of multipliers is complex and rela- tively few elected officials or park and recreation professionals have an understanding of the nuances and limitations of multipliers. This has resulted in gross abuses in their calculation, presentation, and interpretation. Given the complexities associated with multipliers, the wisest course of action for park and recreation professionals is to focus their economic impact efforts on obtaining a good estimate of visitor spending or of direct effects and not attempt to use multipliers. This will remove the high probability that the multipliers applied to the spending data will be flawed. If multipliers are used, then park and recreation professionals could adopt one of two options. The preferred option is to seek out techni- cal assistance from experts who understand the nuances of multipliers. If this is not possible, the following guidelines are for making “best guesstimates”: To derive direct effect, multiply total visitor spending by .8. For sales multipliers, use 1.2 for small rural areas, 1.4 for larger rural areas, 1.5 for moderate size communities, and 1.7 for state or metro area analyses. To convert to full-time equivalent jobs and to income, national tourism average ratios for direct effects could be used (i.e., 20 jobs per $1 million in sales or 16 jobs per $1 million of visitor spending). The income ratio is approximately 35% relative to sales and 28% relative to spending. These ratios are averages. They will vary by sector, and job ratios are higher in rural areas and smaller in large metro regions (Stynes, 2010). Notwithstanding this advice, for a variety of reasons there will be occasions when it will not be fol- lowed. Further, there will be times when elected officials and professionals will receive studies done by others who include multipliers that they will be required to evaluate. Hence, this chapter is intended to facilitate a better understanding of them. The Multiplier Concept The multiplier concept recognizes that when visitors to a facility or event spend money in a commu- nity, their initial direct expenditure stimulates economic activity and creates additional business turnover, personal income, employment, and government revenue in the host community. The concept is based on recognition that the industries that constitute an economy are interdependent. That is, each business will purchase goods and services produced by other establishments within the local economy. Thus, expendi- tures by visitors from outside the local economy will affect not only the business at which the initial expen- diture is made, but also the suppliers of that business, the suppliers’ suppliers, and so on. Multipliers are derived from input-output tables that disaggregate an economy into industrial sectors and examine the flows of goods and services among them. The IMPLAN input-output model, which is perhaps the most widely used and is described later in this chapter, has 440 industrial sectors. In essence, an input-output model is an elaborate accounting system that keeps track of the transactions and flows of new money throughout an economy. The process enables a separate multiplier to be applied for each of the industrial sectors affected by the initial direct expenditure.