Economic Impact Analysis of the Christiansburg Aquatic Center

Dr. Jim Pease (Professor, Agricultural and Applied Economics), Dr. Scott Greiner (Professor, Animal and Poultry Sciences),  Nick Peavy (Senior, Department of Agricultural and Applied Economics), Kyle Ewing , Taylor Delnicki (Senior, Department of Animal and Poultry Sciences), and Ashley Pickett (Senior, Department of Agricultural and Applied Economics)

Introduction

Owned and managed by the Town of Christiansburg, the Christiansburg Aquatic Center (CAC) is a public-private partnership between the Town and the Virginia Tech Swimming and Diving program. Its mission is simply, “…to operate a public aquatic facility to increase health, water safety, and the aquatic education of Christiansburg citizens and aquatic organizations.” (Christiansburg Aquatic Center). But what an understatement! The 64,000 square foot facility contains 3 pools, multi-purpose rooms, locker and changing rooms, and more. In 2009-2010, the $19 million facility opened to the public and became the new home for the Virginia Tech swimming and diving teams. Aquatics News & Review, an online magazine for aquatic facility design professionals, lauded construction of the CAC as “a world-class competition venue, as well as an aquatic treasure that [will] serve residents of the region.” For collegiate competition, the facility ranks as one of the best in the Atlantic Coast Conference (ACC) and drew conference-wide recognition in the winter of 2012 by hosting the ACC Championships. During 2011-12, the Hokies and CAC served as hosts for a total of eight intercollegiate meets in what is said to be one of the fastest pools on the East Coast. In addition to collegiate, club and high school competitions, the CAC serves as a recreational facility for citizens, offering classes, fitness rooms, a therapy pool and leisure swimming.

The facility is heavily used by collegiate, H2Okie Aquatics (USA Swimming club team) and Christiansburg High School swimming/diving as well as by local leisure swimmers. The CAC’s operational funding is primarily derived from VT long-term contributions (as agreed in the initial partnership), aquatic competitive fees, and daily admissions. Any shortfall above these revenue sources falls on the Town of Christiansburg budget. According to the 2014 Town budget, the local government expended just over $2 million supporting the CAC. Some citizens consider that the Town has committed not only to repayment of the bonds to finance a portion of the CAC construction, but also to a recurrent operating shortfall that places a strain on the local tax base.

A team of students from the Kohl Centre program at Virginia Tech was invited to analyze economic impacts of the CAC, in particular to examine local business sales and resulting tax revenues generated by CAC activities. In consultation with CAC staff, it was decided to examine sales of goods and services of persons or businesses benefitting from CAC activities, including both from direct expenditures (primarily employees and local suppliers) as well as sales of food and lodging by out-of-region visitors attending swim meets. Intangible benefits to citizens and taxpayers include recreation and health maintenance opportunities, but were not studied in this analysis.

Methods

The economic analysis software IMPLAN (IMpact analysis for PLANning) was chosen to model CAC economic and fiscal impacts. IMPLAN is a Multi-regional Input-Output model which can be used to estimate inter-related economic impacts of businesses and institutions within a specific region, in this case, Montgomery County. An input-output model…

“is an accounting of transactions among industries, governments, households, and imports and exports. These types of models help us to track the flow of resources and commodities into and out of industrial production. They help us to identify the value and the extent of linkages among firms and industries in our study territory. When one firm makes a purchase of an input from another in a region, there is a linkage. The stronger the linkages, the more important the two (or more) industries are to each other and to the regional economy.” (Swenson 2002, p.1).

These linkages are called “multipliers,” and in an input-output model are constant and linear. IMPLAN datasets contain business and public sector data obtained from national and state economic sources, and are updated annually. National economic data and other data sources are used to provide customizable detail of value added, final demand and employment by broad institutional types, such as Governments and Households, and 517 private industry sectors. If a new business were to begin operations in a study region, its purchases of locally-produced goods and services would “multiply” throughout the region, causing additional purchases of goods and services by suppliers and by local employees of those suppliers. One limitation of IMPLAN analysis is that the economic impacts generally cannot be disaggregated below the county level. Tax impacts can be estimated for Montgomery County, but do not apply specifically to the Town of Christiansburg. However, local tax rates will be applied to certain types of sales (lodging and dining) in order to provide estimates of tax impacts.

Principal input data sources included the FY 2013 and 2014 CAC financial reports and tabulated results of a 2014 on-site survey conducted by the Kohl Center student team. All financial impacts are reported in 2014 dollars unless otherwise noted.

Specifically, there were 2 parts of the economic impact to be estimated: 1) the county indirect and induced effects of goods and services purchases made by the Center, and 2) the county direct, indirect and induced effects of new demand coming from out-of-county patrons of swimming and diving meets. The latter will be referred to as “Meals&Lodging,” while the former will be referred to as “CAC Expenditures.” While meals and lodging spending of out-of-county patrons have been estimated through a survey, no attempt has been made to estimate automobile local expenses for those visitors (e.g. fuel, repairs) or other purchases of goods or services (ie. shopping).

Before proceeding to describe the analysis, it is helpful to examine a few terms of Input/Output models and Regional Impact Analysis. The following provides a good explanation of impact analysis results and their use.

Direct effects (emphasis added) refer to the operational characteristics of the firms or institutions that we are studying directly. Indirect effects measure the value of additional economic demands that the direct firms or institutions place on supplying industries in the region. When firms conduct business or public entities provide public goods, they must make many direct purchases from suppliers in the area. Induced effects accrue when workers in the direct and indirect industries spend their earnings on goods and services in the region. Induced effects can also be called household effects. Total economic effects are the sum of direct, indirect, and induced effects. They are all of the transactions attributable, either directly or indirectly, to the activities that we are measuring.” (Swenson 2002, p. 3)

In addition, the term “multiplier” refers to overall economic change as a result of a unit change in the direct effects (e.g. sales, labor income). In Swenson’s words, “…multipliers help us to anticipate the potential change in the regional economy attributable to a change in direct activity in a particular industry.” (Swenson 2002, p. 1)

Data Collection

CAC Expenditures

This aspect of data collection was straightforward, involving discussions with CAC administration and analysis of financial reports and other descriptive information. The CAC’s CY (calendar year) 2013 summary expenditures were as follows:

Table 1. CAC Estimated 2013 Calendar Year Revenues and Expenses1
CY2013 (est.)
Revenues
VT Contribution $250,000
Aquatic Fees, sales & admissions $587,525
Total $837,525
Expenses
Salaries & Benefits $1,224,606
Utilities $304,830
Building Maintenance & Service Contacts $130,750
Other Goods & Services $308,704
Total $1,968,891
Net Operating Deficit -$1,131,366
1 Calendar year revenues and expenses were interpolated from reported fiscal year 2013 and 2014 data.

As part of the agreement that formed the partnership, the Virginia Tech swimming and diving program contributes $250,000 per year to the CAC. Aquatic fees, sales and admissions (including fees for club, high school and intercollegiate meets) brought in $587,525 in 2013, bringing total revenues to $837,525. The CAC administration employs 13 full-time and 95 part-time employees, and as can be seen above, pays over $1.2 million per year in salaries, wages, and benefits. Other very large expenditures are made for utilities (electricity and fuel), and Building Maintenance and Equipment/Facility Service Contracts. In total, CAC expenses are more than double revenues at $1,968,891 in 2013, triggering expenditures from county coffers of $1,131,366 to cover the net deficit. However, analysis will show that the total Montgomery County economic impact extends well beyond the recorded revenues and expenditures of the CAC.

Meals and Lodging

The CAC hosts many high school, club, and intercollegiate swimming meets for which it collects fees. According to CAC administration, 19 meets were hosted during the “swim meet year” of October 2013 – July 2014 for a total of 8,257 swimmers. Based on interviews described below, an estimated 6,592 swimmers and attending individuals were from outside Montgomery County.

Members of the study team developed a survey questionnaire to estimate lodging and meals expenditures by swimmers and their attending groups (usually families). The survey information summarized in Table 2 was collected from a sample of attendees at two H2Okie Club events.

Table 2. Average Swim Meet Results by Swimmers and Patrons
Survey Variable Results
Number of interviews 85
Non-local visitors (%) 84.7%
Persons/group(including swimmer) 2.9
Hotel rooms/group 1.2
Nights lodging/group 1.7
Hotel expense/group $178
Meals expense/group $106
Total expense/group per meet $284
Total expense/person per meet $99

These parameter estimates were extrapolated to swimming meets hosted in 2013-2014. It is estimated that a total of 15,895 swim meet patrons rented 13,463 night’s lodging, or approximately $1.24 million in lodging expenditures for out-of-county visitors, generating local Transient Occupancy Taxes of $111,668. It is also estimated that the food expenditures in Montgomery County associated with swimming and diving meets equaled $1.09 million, and the local Meals Tax from food totaled $50,444.

It should be noted that these are conservative estimates of expenditures and local taxes directly generated by lodging and meals. The H2Okie meets may not be representative of other meet types, such as high school or intercollegiate meets. There are undoubtedly additional sales of goods and services generated from indirect and induced effects, discussed below in the Impact Analysis.

Impact Analysis Results and Discussion

The CAC expenditures and extrapolated survey expenses for lodging and meals were entered into the IMPLAN dataset for Montgomery County. Tables 3 and 4 below summarize the employment, labor income and output/sales impacts of CAC expenditures and visitor lodging and dining for swimming and diving meets.

Table 3. Direct, Indirect, and Induced Output/Sales Impacts of CAC Expenditures and Meet Lodging/Dining1
CAC Expenditures Meals & Lodging Total Impact
Direct $1,426,715 $3,887,986 $5,314,701
Indirect $39,200 $738,336 $777,536
Induced $472,268 $553,215 $1,025,483
Totals $1,938,183 $5,179,537 $7,117,720
1 All impacts in 2014 dollars.

Table 4 indicates that 89 jobs in Montgomery County can be attributed to the CAC through direct, indirect, and induced impacts, generating $2.760 million in county wages, salaries and benefits. Value Added totaling $4.501 million is the best measure of the CAC contribution to the regional and state economy.

Table 4. Impact Summary by Impact Type
Impact Type Employment Labor Income Total Value Added Output
Direct Effect 73 $2,214,463 $3,400,876 $5,314,701
Indirect Effect 7 $245,357 $460,055 $777,536
Induced Effect 9 $300,046 $639,880 $1,025,483
Total Effect 89 $2,759,867 $4,500,811 $7,117,720

The total sales/output impact of CAC expenditures is $1.938 million, which represents wages, salaries and benefits of employees and purchases of locally produced goods and services from local businesses and their suppliers and purchases of locally produced goods and services by employees of CAC and local businesses. Of the total impact, $1.426 million is the direct expenditure of the CAC that does not “leak” to the outside economy (outside Montgomery County), but stimulates further rounds of economic activity within the county equal to $0.511 million. The Meals&Lodging sales/output impact on the Montgomery County economy totals $5.179 million. In addition to the direct sales of meals and lodging as estimated from the survey, the indirect and induced impacts of swim meets generate an additional $1.29 million of expenses for locally produced goods and services.

In total, the county direct and multiplier effects of CAC purchases and lodging/dining expenses of swim meet visitors is $7.118 million, a portion of which generates local and state taxes that could be considered as partially offsetting the annual $1.131 operating deficit. However, only lodging and meals taxes can be directly estimated, totaling $162,112.

It should be reiterated that the impact analysis does not attempt to quantify some very important benefits of the CAC. In particular, there are considerable benefits beyond the CAC use for other competitive meets. The Leisure Pool and Warm Water Therapy Pool are extensively used by the public and for swimming classes, the multipurpose rooms are used by government and local groups, and the fitness room and exercise pool contribute to the health maintenance of many local citizens.

References

IMPLAN Group, LLC, IMPLAN System (data and software),16740 Birkdale Commons Parkway, Suite 206, Huntersville, NC 28078, www.IMPLAN.com.

Swenson, Dave (2002). “An Introduction to Economic Impact Assessment.” Unpublished monograph. Department of Economics, Iowa State University. Accessed November 10, 2014 from http://georgiastats.uga.edu/c4710/IOtext.pdf .

 

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