RVARC Economic Impact of the Arts and Cultural Industry in the City of Roanoke

RVARC Economic Impact of the Arts and Cultural Industry in the City of Roanoke

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Economic Impact of the
Arts and Cultural Industry
in the City of Roanoke
October 30, 2013
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The economic impact analysis provided in this report was generated
using an economic impact model (IMPLAN) calibrated for a specific study
area using standard regional data sets. The results are to be interpreted
as a best estimate of economic impact based on the assumptions and /or
data provided by the client.
The Roanoke Valley Alleghany Regional Commission does not
guarantee the accuracy of data or assumptions supplied by the client or
of any other source, nor does it advocate or guarantee the success of any
particular policy change, course of action, or any decision that may be
ultimately based on the information in this report
The Roanoke Valley Alleghany Regional Commission is not responsible
for any errors, omissions, the accuracy of data /inputs supplied by its
client(s), or for the ultimate use of this data including any decisions made
or the effects of any decisions made based on the information in this
report.
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Introduction
In 2010, the Roanoke Valley-ooPZvZP]}vo}uu]]}v}uov^}v}u]/u
}(Zvoo/v]vZoZ]PZP]}v}(s]P]v]_vv^}v}u]/u
of the Arts avoo/v]vZ]}(Z}v}l_X
In 2013, the City of Roanoke requested that the staff of the Roanoke Valley t Alleghany
Regional Commission revisit aspects of those reports to again determine the economic
contribution of arts and culture on the Region.
There is great deal of the discourse regarding the intangible impacts of arts and culture that is
often reflected when translating and measuring economic value. Thus, this study only
measures the economic impact in terms of dollars spent and visitor spending.
Methodology
The study area for this analysis includes arts and cultural organizations in the City of Roanoke,
but measures the impact on the Roanoke Metropolitan Statistical Area (MSA) as a whole. It is
generally the opinion of most analysts and tourism professionals that visitors often disregard
jurisdictional boundaries.
Staff of the Roanoke Valley t Alleghany Regional Commission (RVARC) utilized results from a
survey performed in the summer of 2013 to determine the contribution of arts and cultural
organizations located within the City of Roav}l[i]]]}vo}v]. Fifteen
organizations responded to the survey.
Detailed information in expenditures and
visitation was collected. Few of the
organizations were able to supply detailed
financials based on local vs. non-local
funding.
Staff then used specialized software called
IMPLAN which was developed by IMPLAN
Group LLC.
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How does IMPLAN Work?
At the heart of the IMPLAN model is a national input-output dollar flow table called the Social
Accounting Matrix (SAM). Unlike other static input-output models, which just measure the
purchasing relationships between industry and household sectors, SAM also measures the
economic relationships between government, industry, and household sectors.
The model uses actual economic and employment data to model 440 industries to determine
how industry dollars are spent to produce commodities. National level and county level
production data sets are then combined to produce a series of multipliers.
Multipliers measure the amount of total economic activity that results from an industry or
household spending money in the local economy. IMPLAN uses the national and county-level
data multipliers to estimate economic impacts of various activities. Once all input data has been
entered into the model, IMPLAN then generates a series of summary output tables to show the
direct, indirect, and induced economic impacts.
x Direct impacts are those that result from the direct infusion of money in the economy
as a result of an economic event. These impacts consist of permanent jobs, wages, and
output of economic events.
x Indirect impacts are the jobs, wages, and output created by businesses, which provide
goods and services essential to an economic activity (construction, tourism, etc.).
Indirect impacts represent a cumulative total of several cycles of spending that work
their way through the local economic supply chain until all remaining money from the
initial stimulus leaks from the study area economy. For example, a series of restaurants
making purchases of goods from local suppliers as a result of participant spending on
meals would be an example of a portion of indirect impacts as defined in this analysis
x Induced impacts are those impacts that result from household spending by those
impacted by the direct and indirect phases of economic activities. The spending of
wages earned by employees working for industries impacted by economic events
represents the largest portion of induced impacts. This spending creates induced
employment, especially in the service sectors.
The summary output tables also show the direct, indirect, and induced effects of labor income,
value added, and output.
x Labor income equals employee compensation plus proprietor income. Employee
compensation in the IMPLAN model is the total payroll cost of the employees paid by
the employer. This includes wage and salary, all benefits, and employers paid payroll
taxes (social security, unemployment, etc.) Proprietor Income consists of payments
received by self-employed individuals and unincorporated business owners.
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x Value added ](]vZ]((vvv]v[}o}vZ
cost of any intermediate inputs. Value added includes employee compensation, taxes,
and operating surplus. Value added is best understood as the contribution made to
gross domestic product or, more simply, as new wealth in the region.
x Output can generally be understood as regional sales activity. Output is more precisely
defined as the value of industry production.
x Employment is reported from by the model as all jobs, including part-time and seasonal
workers. Employment numbers can be changed to full-time equivalency (FTE), but the
ratio varies by industry sector.
What Can IMPLAN Analyses Reveal
An IMPLAN analysis seeks to quantify the economic benefit that expenditures for a project
(construction) or an activity (tourism or events.) have on a local or regional economy. For
example, expenditures spent on the construction of a building or the purchase of items on a
trip such as lodging and gasoline create additional purchases in various sectors of the economy.
Money spent on landscaping for a newly constructed building or the purchase of hotel furniture
both create numerous opportunities for those receiving the money to make additional
consumer and business purchases. This process creates jobs and expands the economy.
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Economic Scope of Arts Organizations in the City of Roanoke
The purpose of this section of the report is to identify economic activity in the arts and cultural
industry and to quantify the degree of impact made to the P]}v[ economy. It should be
noted that the activity represented here is not a complete picture of the total impact of the arts
and cultural organizations in the Region. As previously mentioned, this study only measures
the economic impact in terms of organization and visitor spending. One analysis measures the
relative size of the arts and cultural institutions as a sector of the economy. The second
analysis measures the impact of visitors and tourists to the region. No attempt has been made
to measure intangible benefits the organizations and their impact on visitors and the residents
they serve.
Employment
Employment is one of the most direct methods of quantifying economic contribution. The
following table shows that arts and cultural organizations responding to the survey and located
within the City of Roanoke employ 95 full-time employees and 132 part-time employees.
Volunteers are shown to make an important and valuable contribution to arts and cultural
organizations, most if not all of which are nonprofit organizations. The organizations reported
that 5,085 volunteers assisted their organizations in 2012, spending 12 hours on average per
volunteer.
Funding
Organizations were asked to report revenues for the 2012 tax year. Respondents were asked to
itemize their revenues using a set of categories. RVARC staff used this information to
determine the proportion of arts and culture organization funding that can be considered new
money to the region. It is important to note that money attracted from residents and
businesses within the local region is merely a recirculation of wealth existing within the region.
More positive economic impacts are made when funds are attracted from outside the
immediate region.
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See the following table for a breakdown of all revenues by category and a breakdown of
revenues attracted from all sources.
The above table includes all revenue from visitors and local residents. One should also note that only
$224,133 was reported as revenue from State and Federal sources. The total revenue was $13,268,864,
while total expenditures were $15,462,158. The economic impact analysis was completed using total
expenditures.
Ideally, revenue should be separated by local vs. non-local sources. Only five of the 15 organizations
were able to detail their revenue streams in this manner, thus the decision was made to measure visitor
impacts using reported visitation of tourists.
Tourism and Visitation
The project team knew it was of vital importance to quantify to the degree possible the amount
of tourist visitation generated as a result of the arts and culture offerings in the City of
Roanoke. The following table details the visitation estimates of participating organizations.
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Because not all organizations are able to distinguish local residents from tourists, the reported
visitation numbers are considered incomplete. However, one could also assume that each
tourist visits more than one museum or venue, thus the count in the table likely represents a
higher number than actual visitors. Without another measure to use for tourist visitation, and
the fact that the number of 92,579 is very similar to past visitation estimates, this number was
used to estimate the visitor impact using an IMPLAN model.
Finally, a tourist profile was compiled of the arts and cultural tourist to the Region. Data was
obtained from the Virginia Tourism Corporation that represents tourist spending to the region.
The following table shows average spending by party and per-person spending based on their
survey. The average travel party size reported was 2.9 people.
Estimates of expenditures by tourists were applied to estimated attendance and visitation data
to arrive at a direct expenditure estimate which was entered into the model and parsed among
gasoline retail, lodging, food and beverage, entertainment, and retail industry sectors. The data
was obtained from the Virginia Tourism Corporation and represents spending in the
Shenandoah Valley Region, which includes Roanoke. It should be noted that only 45% of
visitors spend the night in a motel /hotel, thus lodging numbers may seem lower than what
might be expected according to the Virginia Tourism Corporation survey.
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Economic Impact of Visitor Spending
The true measure of the economic impact can be estimated if the contribution of outside
spending is known. This can be easily calculated using the number of visitors and visitor
spending profile. The following table shows the estimated regional impact of 92,579 visitors to
attractions in the City of Roanoke:
It is estimated that these visitors help employ 91 people (full or part-part time) and contribute
over $10 million to the regional economy. Additionally, the arts and cultural organizations
brought in another $224,000 of state funds. As outside money, this adds an additional $347,000
of total output. Thus, the total estimated impact of outside dollars is $10,817,217. These are
new dollars that are brought to the region by the arts and cultural sector in the City of Roanoke.
Size and Impact of Local Arts and Cultural Sector
The arts and culture industry is part of the existing economy within the region. Total
expenditures were input into the IMPLAN Professional economic input-output modeling
software utilizing proprietary data for the City of Roanoke for 2011.1
The following is a summary table of the model output:
It is estimated by the model that 1162
jobs (full or part-time) are supported per year. Indirect
job creation occurs when industries that support the arts and culture sector employ people as a
result of the increased business. Induced job creation occurs as a result of spending by
1
Model software and data provided by the Minnesota IMPLAN Group, 0 1 R.
2
Please note that this employment figure differs from the one reported in the actual survey. This difference is due
to the fact that the model is estimating employment in the economy. Also note that the estimated Labor Income is
very similar to the number self-reported by the organizations.
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employees supported in the indirect and induced phases of impact. Indirect and induced
impacts are responsible for the creation or retention of an estimated 68 additional jobs for a
total job impact of 184 jobs supported through arts and cultural activities in the Region. The
direct stimulus of the funding led to a total output impact (including impacts in the indirect and
induced phases of impact) of $23,922,591.
This analysis measures the relative size and impact of arts and cultural sector in the region. A
large portion of dollars used in this analysis come from local sources, thus they are considered a
part of the existing economy. For example, local governments and residents could find other
ways to spend their dollars, known as economic substitution, that would have a similar impact
on the economy should the arts and cultural organizations cease to exist. However, one could
easily argue that non-tangible impact would be higher and could not be replaced.
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Impact Summary
The Arts and Cultural Industry of the City of Roanoke impacts the economy in important ways.
The central core of this industry is the group of nonprofit organizations that serves as a support
and stimulus to the entire industry. By holding culturally relevant and exciting events, these
nonprofits contribute to the economy by attracting financial stimulus to the region introduced
by tourists who spend money for traveler services (food, gas, and lodging) in the Region. By
attracting dollars from visitors and other outside sources, arts and cultural organizations in the
City of Roanoke have a large impact on the region.
There are undoubtedly other ways that the arts and cultural industry of the City of Roanoke
contributes to economic well-being. These other contributions are much more difficult if not
impossible to track. For instance, arts and culture are oP}(Z[}oolP
of quality of life amenities and other positives that make the region unique. For-profit
companies who have located to this region have been undoubtedly influenced by this overall
package of amenities which include the arts and cultural attractions among other categories.
The degree to which these amenities have played a role in relation to other traditional factors,
including cost of doing business, differs depending upon the individual company and indeed the
individual decision-maker. Quantifying this type of impact is nearly impossible.
The following are the main points of this report, which seeks to quantify aspects of the
economic contribution of the Arts and Cultural Industry.
– The Arts and Cultural Industry of the City of Roanoke helps generates $10,817,217 in
new sales activity in the Region as a result of new dollars attracted through
visitation /tourism, and other funds attracted from external sources. The 2010 study
found an impact of just over $8 million.
– The size and impact of the local industry sector, based on the expenditures of arts and
culture organizations in the City, is $23,922,591. These are not considered new funds to
the region, but a measure of the relative size and impact of the industry to the region[s
economy.

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