NRPA Measuring Impact of Park & Rec

55 Measuring the Economic Impact of Park and Recreation Services www.NRPA.org National Recreation and Park Association © 2010 All Rights Reserved Any attempt to measure the benefits from particular economic activities requires some assessment of the real cost to society of devoting resources to that activity and a comparison with the benefits to be obtained from the allocation of these resources to other activities. (Archer, 1977) Conceptually, for an investment of public money to be justified, it must meet the criterion of highest and best use. That is, it should yield a return to residents that is at least equal to that which could be obtained from other ventures in which the government entity could invest. The issue of opportunity costs is the fundamental social issue associated with government investment in parks and recreation. The key question is not whether an investment in parks and recreation is likely to have a positive economic impact. Rather, it is whether more benefits would be generated from any number of alternative government or private sector expenditures. A positive economic impact does not mean that a park and recreation project or program should be supported because the opportunity cost associated with this investment may be unacceptably high. Exhibit 1-1 showed that money used to create park and recreation facilities and events has been contributed by community residents in the form of taxes. This represents an opportunity cost because residents are likely to have spent those funds in the community if the government had not taken them. In essence, the government may be perceived as spending it for them, so the net gain to the community is zero. Every dollar that local governments spend in an economy must first be taxed or borrowed. Hence, the money is merely redistributed from one group of people to another: Removing water from one end of a swimming pool and pouring it in the other end will not raise the overall water level—no matter how large the bucket. Similarly, redistributing dollars from one part of the economy to another will not expand the economy, no matter how much is transferred. (Riedl, 2010) It is tempting to believe park and recreation investment creates new income and jobs because eco- nomic impact studies report these benefits. What such studies do not report, however, is the income and jobs that would have been created elsewhere in the community with those same dollars if they had not been used for this purpose. It may be argued that when residents are taxed to support an event or facility, the negative multiplier effect of taxing residents is likely to offset any positive multiplier: Everybody who pays a dollar in taxes to support the facility must reduce his or her spending. The diminished spending goes round and round, just like the positive multiplier effect. The studies supporting [park and recreation] projects never mention that counter effect assuming that the cost of capital is free. (Keaton, 1999) In a glossy brochure publicizing the results of the economic impact of park and recreation agencies in Illinois, a prominent headline proclaims, “73 cents of every dollar spent by park and recreation agencies stays in Illinois” (Illinois Association of Park Districts, 2005). This could be interpreted to mean that if the residents of Illinois who were obligated to provide the taxes that are used to fund public park and recre- ation agencies had been permitted to keep that money and spend it themselves, and if more than 73% of their spending occurred within the state, then Illinois residents would be economically stronger if there were no park and recreation agencies! The emphasis placed on multipliers in economic impact analysis may lead the unwary to suppose that there is some unique property conferred on income and employment generation resulting from events or facilities that is not shared by other sectors of the economy. The inclusion of opportunity cost in an analy- sis recognizes that this is not the case. “It is the comparative size of the multiplier that is important, not simply the fact that a multiplier exists” (Hughes, 1982). This commentator goes on to note that the empiri- cal literature indicates a visitor expenditures multiplier “at best probably reflects an average value added compared with other sectors. References to the multiplier as a significant advantage need to be seen in this context.”