NRPA Measuring Impact of Park & Rec

Measuring the Economic Impact of Park and Recreation Services www.NRPA.org National Recreation and Park Association © 2010 All Rights Reserved 50 assumptions which make it likely that this number is optimistic (Exhibit 4-6). The media, general public, city council, and other relevant publics are unlikely to be aware of the underlying assumptions, subtleties, and potential error sources associated with economic impact studies. The lack of sophistication and the apparent objectivity conveyed by the numbers make it tempting for advocates to act unethically. Clearly, there is an ethical conundrum. Acting ethically when others do not, could critically damage the event’s standing. If the correct $16 million figure for city X is presented, the festival’s economic contribu- tion is likely to appear relatively insignificant compared to other events that announce the equivalent of the $321 million figure as their estimated economic impact. The relatively small impact of the festival is likely to translate into commensurately less political and resource support for it from decision makers, and perhaps, ultimately, even withdrawal of appropriations for it. Acting ethically when others do not could critically dam- age the festival’s standing. Alternatively, some may rationalize that it is equitable to use the same set of measures to compare the economic contributions of events, even though the results of all of them are grossly misleading. If such a position is accepted, then abuses incorporated into one economic impact analysis become contagious. When precedent has been established in one study, others are likely to feel compelled to knowingly per- petuate the abuse by incorporating the misleading procedures into their own analyses. If they fail to do so, then the economic impact attributed to their event or facility is perceived to be lower than that reported by others and thus less worthy of public investment. To resolve this ethical conundrum, it is recommended that all three measures—personal income, sales, and jobs—be reported so like measures can be compared to like, but that the limitations of the sales and jobs measures be emphasized. Exhibit 4-9 offers a suggested general template. Exhibit 4-9 A Suggested Template for Discussing Economic Impact Multipliers There is frequently confusion and misunderstanding in interpreting multipliers. It has become commonplace for tourism, economic development, and other agencies to report economic impact in terms of sales generated. In our view, this is of no value to elected officials or residents. It is used because it generates the highest economic impact number; but residents have no interest in sales generated, they are primarily interested in how it impacts them in terms of personal income. The jobs’ economic impact data often are similarly mischievously interpreted. For example, consider a jobs multiplier associated with a particular event which indicates that as a result of the event (say) 5.7 jobs were generated. This outcome, however, is improbable. Local businesses are unlikely to hire additional full-time employees in response to additional demands created by a short-term event because the extra business demand will last only for a few days. In these situations, the number of employees is not likely to increase. Rather, it is the number of hours that existing employees work that is likely to increase. Existing employees are likely to be requested to work overtime or to be released from other duties to accommodate this tem- porary peak demand. At best, only a few short-term additional employees may be hired for the duration of the event. Hence, it is improbable that anything like 5.7 jobs will be created. This figure of 5.7 is further misleading because in calculating it, the input-output model assumes (1) there was no spare capacity to absorb the extra services and products purchased with this inflow of new funds, and (2) that no out-of-town residents took any new jobs that did emerge. In fact, the existing staff at hotels, restaurants, retail establishments, and so forth is likely to have spare capacity to handle these visitors. If they do not, then it is likely that managers will reorganize shift schedules or pay overtime. The most useful economic impact indicator is that which measures the event’s contribution to the personal incomes of residents. Indeed, it was demonstrated in Exhibit 1-1 that this is the primary rationale for undertaking economic impact stud- ies. However, personal income is rarely used because it is generally about three times smaller than the sales impact. Never- theless, it is the indicator that is likely to be most meaningful to residents and to elected officials for informing their policy decisions.