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 52 Chapter 5 Consideration of Costs The numbers emerging from an economic impact study represent only the gross economic benefits associated with an event. Too often, only positive economic benefits associated with visitors are reported, and costs of negative impacts borne by a community are not considered. If there is an increase in eco- nomic impact in a local economy, it is probable that there also will be an increase in costs associated with it. It has been suggested that “ignoring these costs is roughly equivalent to a certified public accountant omitting a balance sheet’s liabilities and then touting the success of the company” (LaFaive, 2009). Community stakeholders are likely to be more concerned with net, rather than gross, economic benefits. This involves identifying the costs associated with an event and deducting their economic value from the positive economic impacts shown by an analysis. Clearly, if costs exceed the benefits then, even if there is a relatively high gross economic impact, the event may not be a good investment for the community. Incorporating costs into a study changes it from an economic impact analysis to a benefit-cost analysis. In the author’s view, decision makers should be attempting to use benefit-cost analysis when evaluating alternative investments, despite the difficulties associated with deriving accurate costs. Four types of costs should be considered: (1) event costs, (2) infrastructure costs, (3) displacement costs, and (4) opportunity costs. Each is discussed in this chapter. Event Costs Most elected officials are unaware of the magnitude of investments needed to support a major event. The costs are likely to be substantial and in many cases, park and recreation departments are expected to meet those costs from revenue streams associated with the event. Exhibit 5-1 , p. 53, shows an agency’s budget for hosting a Fast Pitch Softball National Tournament. The event attracted 160 teams, who spent more than $2 million in the community during the six days of the tournament. This large economic impact means that there is considerable competition among commu- nities to host such events. The bid fees to the organizing associations who sanction the championships are substantial, as are the costs of hosting the event. Exhibit 5-1 shows the city’s total investment was close to $300,000. It also shows the revenue streams that raised over $180,000. The net investment by the city was $118,000, and it yielded more than $2 million in direct economic impact to the community. Infrastructure Costs Infrastructure costs may be both on-site and off-site. On-site costs include the cost of additional equipment or supplies, the cost of additional labor contracted by an agency to assist with an event, and cost of the time invested in the project by the agency’s existing employees. In Exhibit 5-1 for example, the costs incurred by the city parks and recreation department in hosting a softball tournament were tracked, recorded, and included in the analysis, so the economic impact net of on-site infrastructure costs could be presented. When large numbers of visitors are attracted to a community, they are likely to create extra demands on its services and inflict social costs on community residents. Off-site infrastructure costs borne by a community may include such elements as traffic congestion, road accidents, vandalism, police and fire protection, environmental degradation, garbage collection, increased prices to local residents in retail and restaurant establishments, increased costs to other businesses seeking new workers if there is a shortage of labor supply, loss of access, and disruption of residents’ lifestyles.