Basics of Economic Impact Analysis

Prepared For:
Siena College Economics of Travel and Tourism Course

Prepared By:

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 Agenda
• About Camoin Associates
• Why do an economic impact analysis?
• Key terms
• How to do an economic impact study: step-by-step
• Other examples
• Discussion

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 Introduction to Camoin Associates
• Founded in 1999 by Robert Camoin

• Completed Work in 22 States and Counting

• Employ 10 Full-Time Staff

3 3
 Start-to-Finish
Economic Development Solutions
• Economic Development Strategic Planning
• Market Analysis & Financial Feasibility
• Economic & Fiscal Impact Analysis
• Evaluation & Benchmarking Indicators
• ED Communication & Marketing Recommendations
• Workforce Development
• Stakeholder Engagement

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 What is Economic Impact Analysis?

• Examine effect of event on the economy of a

specified geography

• Measures change in jobs, sales, and earnings –

can be positive or negative

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 What’s the point?
Why do an economic impact study
anyway?

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 Why do an economic impact study?
• Compare proposed incentive packages and public outlays.

• Help sell a project to a community.

• Understand long-term impact on a community and help plan for a major

change (e.g. loss of a major employer).

• Fulfill statutory requirements to award incentives.

• Use as “mitigation” during an environmental review process.

• A version of economic impact studies can be used to identify economic

development opportunities by evaluating the economic base (i.e. which
industries drive your economy) and “missing” industries in your region.

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 Key terms

Direct Effect Indirect Effect Induced Effect

Total Impact: Jobs, Earnings, & Sales

Multipliers: Ratio between direct and total effects

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 KeyKey
terms
termsto understand.
to understand.
Direct Effects

Jobs created as a result of a particular project or change in

circumstances.
Example: The gain of a major employer.

Tourism is a special case and could have two “direct”

effects.
Example: A new casino being built that brings in many
visitors.
1. The economic activity at the casino
2. All of the visitor spending on lodging, food,
transport, entertainment (other than casino), etc.

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 KeyKey
terms
termsto understand.
to understand.

Indirect Effects

Business-to-business purchases that occur within the

geography causing additional impacts and rounds of
spending.

Example: New office occupant purchases

maintenance services to clean offices.

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 KeyKey
terms
termsto understand.
to understand.

Induced Effects
Employees spending wages in the geography (e.g. some
employees live locally and purchase groceries), causing
additional impacts and rounds of spending.

Example: Some employees live locally and

purchases groceries from local businesses.

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 Key terms to understand.

Economic Impact

Total of direct, indirect and induced impacts.

Multipliers
This is the ratio between “direct” jobs and “total” jobs. A
ratio of 2.5 means one new direct job creates one and a
half additional jobs for a total of 2.5.

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So what are we really measuring?

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 KeyKey
terms
termsto understand.
to understand.

Change in Final Demand

“Exogenous Change” - Money is coming in from

somewhere outside of your community.

Usually occurs when:

• Community exports a good or service elsewhere
• Tourism or Retail: People bringing outside dollars into
your community - “visitor spending”

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 But…what if I’m going to visit the
community regardless of the project?

Can you count my spending?

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 KeyIt’s
terms
Key all totounderstand.
about
terms the
understand.
Net New!
Single biggest pitfall to impact studies is failing to
correctly calculate “net new” when thinking about
change in final demand.

“Net new” is the change in final demand once you

have eliminated and accounted for all other changes.

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Net New: Importance of Geography

Walkway Over the Hudson

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How to do an impact study
Case Study: Adirondack Rail Corridor

Rail vs. Trail

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 Step 1
Select Geography

• Typically a single or
multi-county
geography is used.

• Can also use MSAs

and even ZIP Codes
(not all models allow
this). Franklin County and Essex County, NY
• Adirondacks – major tourism area
• Think about the • Home to Lake Placid, Saranac Lake,
project’s logical Tupper Lake
economic reach.

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 Step 2
Modeling Software
Select & Build Your
Impact Model • RIMS II • REMI
• Choose what • IMPLAN • EMSI
software you will use.

• Purchase data
specific to your
geography.

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 Data needed
Step 3 • Projected increase in train riders
Data Gathering & • Estimated number of trail users
Qualitative Analysis (hikers, cyclists, snowmobilers)
• Discuss project with • Average visitor spending on food,
stakeholders and project
sponsor to gather shopping, recreation, lodging,
information for basic transportation
inputs to model –
customize the model
Sources
based on results. • Ridership estimates from
comparable railroads
• Trail usage estimates for
comparable trails
• Travel spending studies

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 How much new visitor spending would
occur as a result of the rail upgrade or trail
Step 4 construction?
Estimate Direct Impacts
Key Assumptions
• Figure out how initial
economic output • Only non-local visitors are net new
levels will change in • Half-day additional spending per new
the industry affected visitor, on average
in your economy.
• “Net New”

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 Step 5
Apply to Model

• Enter change in
economic output into
model to appropriate
industry sector or
sectors

• Run model

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 Step 6
Report Results or
Refine
• Report direct,
indirect/induced, and
total jobs, earnings,
and spending

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 Recent Tourism-Based Impact Studies
• Nevele Casino & Resort
• North Hampton (MGM Springfield Casino)
• Erie County Fairgrounds & Raceway
• Walkway Over the Hudson
• Friends of Old 7 (7-Mile Bridge)
• Nassau Coliseum: Islanders
• Bangor Arena & Conference Center
• Tug Hill ATV
• Omega Institute

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 Questions?

?
Christa Franzi: christa@camoinassociates.com
Tom Dworetsky: tom@camoinassociates.com

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