Time Switchers and Casuals Abuse of Multipliers Ignoring Costs
INCLUDING LOCAL RESIDENTS:
THE MOST FREQUENT MISCHIEVOUS
PROCEDURE
Economic impact
... [Show More] attributable to a tourism attraction
relates only to new money injected into an economy by visitors, media, vendors, exhibitors, volunteers, sponsors, external government entities, or banks and investors from outside
the community. Only those visitors who reside outside the
jurisdiction and whose primary motivation for visiting is
to attend a tourism attraction or who stay longer and spend
more time there because of it should be included in an
economic impact study.
Expenditures by those who reside in the community do
not contribute to an event’s economic impact because these
expenditures represent a recycling of money that already
existed there. There is no new economic growth, only a
transfer of resources between sectors of the local economy.
It is probable that if local residents had not spent their
money at the tourism attraction, they would have disposed
of it either now or later by purchasing other goods and
services in the community. Twenty dollars spent by a local
family at an attraction is likely to be 20 fewer dollars spent
on movie tickets or other entertainment elsewhere in the
community. Thus, expenditures associated with the attraction by local residents are likely merely to be switched
spending, which offers no net economic stimulus to the
community. Hence, these expenditures should not be
included when estimating economic impact. Appendix B
elaborates on this issue. Unfortunately, the widespread
admonition from economists to disregard locals’ expenditures is ignored frequently, because when expenditures by
local residents are omitted, the economic-impact numbers
often become too small to be politically useful.
A study commissioned to measure the economic impact
of the proposed Miami–Dade County general obligation
bond program took the total bond expenditures of $680.3
million for parks and recreation capital projects, inserted
those expenditures into a multiplier model, and reported the
economic impact from parks and recreation general obligation bond projects would be “$1.382.2 billion and result in
an average of 1,176 employment positions being created
annually” (Villamil and Cruz 2004, p. 3).
However, all of the tax funds used to service the
bond debt were paid by Dade County residents. Hence, the
$680.3 million and the large interest payments of more than
$1 billion that will be paid to borrow the money for 30 years
will come from residents’ pockets, which means this is
$680.3 million (plus interest) that those residents will not
have available to spend in the local community; that is, there
is no net gain. Indeed, there is a high probability that the
bonds will be purchased by an investment organization from
outside the community, so the substantial bond interest will
leak out of the local economy immediately, resulting in the
capital projects having a substantial net negative economic
impact on the county. The predominant use of these facilities is likely to be by local residents, so there is likely to be
little potential for attracting out-of-town spending that
would offset some of these losses. The consultants conclude,
“the end result of the GOB investments is . . . a noticeable
boost to economic opportunities and jobs for Miami–Dade’s
residents” (Villamil and Cruz 2004, p. 1). They declare,
“these estimates form a conservative base [bold in the original] (floor) of economic impacts” (p. 2), and they have the
audacity to claim, “this study utilizes professionally
accepted methodology” (p. 1)!
The available evidence suggests that not only is the substitution effect likely to result in no net economic gain when
the impact of construction projects in a community is measured but, often, there will be no net economic gain even
within the construction sector of the local economy. An economic gain would occur within that sector only if those
workers employed on the capital projects would not have
been otherwise employed. During the 1990s in St. Louis,
two major athletic facilities were built: the Kiel Center
($171.5 million) and the Edward Jones Dome ($290 million).
An analysis of overall employment in the construction sector of the St. Louis standard metropolitan statistical area
concluded: “We find no evidence that construction industry
employment in the St. Louis SMSA was higher in the periods during which the Kiel Center and the Edward Jones
Dome were being constructed” (Miller 2002, p. 172).
Sometimes consultants acknowledge the inappropriateness of including local residents, then go on mischievously
to provide a spurious rationale that they surely know is fallacious and appears to be designed to obfuscate and confuse
the reader:
Spending by both local area residents and travelers from
outside the area are included in the measurement of [Show Less]