NRPA Measuring Impact of Park & Rec

43 Measuring the Economic Impact of Park and Recreation Services www.NRPA.org National Recreation and Park Association © 2010 All Rights Reserved The Influence of a Community’s Size and Business Structure on Multipliers The magnitude of a multiplier is likely to be substantially influenced by the structure of the host community. Structure refers to the degree that businesses, where visitors spend their money, engage in trade with other businesses within the impact area of interest, rather than with enterprises outside the defined geographical area. Communities near major trading centers where the trading centers are located outside the local economy have smaller multipliers due to leakage than do similar communities that contain their own major trading centers. As a general rule, a smaller community tends not to have the business interdependencies within an economy that facilitate retention of monies spent during the first round of expenditures. Hence, much of the expenditure would be respent outside the local region leading to a relatively low local economic multiplier. Conventional wisdom posits that the larger the defined area’s economic base, the smaller the leakage that is likely to occur and the larger is likely to be the value added from the original expenditures. In Exhibit 4-4 , the multiplier for the city is likely to be smaller than that for the county, which will probably be smaller than that for the region, which in turn will be smaller than the multiplier for a statewide economy. The magnitude of economic impact is strongly influenced by two factors that tend to be countervailing forces: the extent of leakage and the number of non-residents participating. Leakage is likely to be smaller, and hence the multiplier larger, as size of the geographical area increases. However, as geographi- cal area size increases, the proportion of visitors who come from outside an area is likely to decrease. A small city event is likely to attract a large proportion of its visitors (say 90%) from outside its boundaries, but it will have large leakage and a small income multiplier (say .2). In contrast, if the economic impact of that event on the state’s economy is measured, then it is likely that the proportion of visitors attracted to it from outside the state is low (say 5%), but leakage will be small yielding a higher income multiplier (say .8). Visiting vendors to an event may provide competition with local businesses and generate leakage. The notion of leakage makes it possible for a special event to result in a negative economic impact on a Exhibit 4-4 Size of Multiplieris Likely to Reflect Size of Geographic Area