Economic Impacts of the Georgia Center

Economic Impacts of the Georgia Center
on Surrounding Communities

This spring, the Georgia Center's Department of Marketing Services studied, with the assistance of many Center departments, the economic impacts of the Georgia Center on Athens/Clarke County, Georgia, and the surrounding communities. The study began as an idea that surfaced through the Georgia Center's Environmental Scanning program. A 1994 article by Gary Matkin initiated discussion that resulted in the study.

The area investigated included the following 10 Georgia counties: Barrow, Clarke, Elbert, Greene, Jackson, Madison, Morgan, Oconee, Oglethorpe, and Walton. The latest complete Georgia Center financial figures available were used, which were those from fiscal year 1994-1995 (FY 94-95; July 1994 through June 1995).

The study was based on an updated and modified version of an American Council on Education (ACE) model. It measured direct and indirect impacts on local businesses by combining expenditures in the local community and measured direct and indirect impacts on individuals in terms of jobs, personal income, and durable goods. While these figures cannot be combined, they do form a composite view of the Center's impact on the local community.

Summary of Findings

Findings assessed the direct and indirect economic impacts of the Georgia Center's expenditures on local businesses and on local individuals. The impacts-on-local-businesses model calculated an estimate of the Center's related local business volume, that is, a total of Center-related local expenditures, purchases from local business sources, and local business volume stimulated by the expenditure of Center-related income. The Center's total economic impact on local businesses was $20,174,083, the sum of the total direct impact of $10,507,334, plus the indirect impact of$9,666,749.

The model also measured the Center's economic impact on the local community in terms of the Center's effects on local individuals. The impact models for individuals measured the number of local jobs attributable to the presence of the Center in the area, the personal income of local individuals from Center-related jobs and business activities, and durable goods procured with income from Center-related jobs and business activities.

Total economic impact	$20,174,083
Total direct impact	$10,507,334
Total indirect impact	$9,666,749
Number of local jobs	778
Personal income of local individuals	$14,736,203
Durable goods purchased with income	$1,970,230

Methodology and Limitations

The models, processes, and procedures used in this study were adapted from the American Council on Education (ACE) publication "Estimating the Impact of a College or University on the Local Economy," by John Caffrey and Herbert H. Isaacs, 1971.

The Model

The model was a series of linear cash-flow formulas that included only the organization's expenditures. This model was used for three reasons: (a) it was developed for colleges and therefore was more applicable than some models; (b) it took into account the practical limitations of time and money; and (c) it followed a "bottom-up" approach, rather than the more traditional "top-down" approach, as explained in "The Economic Impact of Expenditures by Tourists on Athens/Clarke County," Davidson and Peterson Associates, Inc., 1994. This approach used Center expenditures rather than industry receipts-based measures identified by Standard Industrial Classification codes (SIC). These codes are part of an industry classification system devised by the U.S. Office of Management and Budget and are used as a guidelines for reporting business statistics. This resulted in a more accurate accounting of expenditures in all industries rather than using the top-down procedure that is based on only traditional industries. This bottom-up approach enabled the study to account for all expenditures in all industries.

Limitations

The following qualifying statement, from the ACE report, applied to this study as well:

"In developing these models, some nontechnical judgments about the project's scope were made. These judgments were based on the assumption that the user of the models would have a limited amount of time and money available and that the reliability level desired would be one of confidence in order-of-magnitude results rather than in exact dollar figures. The models developed do represent a reasonable compromise between accuracy and depth of analysis required. To the extent that a user may wish to further limit the scope of a study effort, some of the models for which data are difficult to obtain may be estimated grossly or omitted completely ...." (p. 42)

The Study Process

Impact on Local Businesses

This first approach studied the impact on local businesses by measuring both the direct and indirect economic impacts. These figures were combined to calculate one number that represented the total economic impacts of the Center on local businesses.

Economic Impact

The economic impact of a dollar spent in the community that would otherwise not have been spent has both direct and indirect impacts. The direct impacts are the result of the initial spending of this dollar in the community to purchase goods and services. The indirect impacts are the subsequent effects of the spending and re-spending of this dollar in the community, effecting more wages, salaries, and jobs -- the multiplier effects of the direct impact. Together, these direct and indirect impacts effect the total economic impact of the Center's presence in the community.

Center-Related Local Business Volume

Direct economic impacts were found by totaling a variety of Center-related expenditures that impact the local business community. Adjustments were made so that only local expenditures were counted and no expenditures were accounted for more than once. Excluded were pensions and insurance payments, internal transfers, honorariums, and taxes, since these do not impact the community as expenditures.

Included in the Center-related local business volume were Center-related local expenditures, local expenditures by the Center, local expenditures by Center personnel, expenditures by personnel for local housing, local non-housing expenditures by local personnel, local expenditures by non-local personnel, local expenditures by conferees, local expenditures by exhibitors, and local expenditures by students. These figures, when combined, measured the total direct economic impacts of the Center on the local businesses. The total direct economic impacts of the Center on the local business was $10,507,334 for the year studied.

Indirect Center-Related Local Expenditures

The indirect economic impact on local business volume was measured by studying the "second round" of local expenditures. For example, when the Center makes a purchase from a local vendor, a chain of subsequent economic transactions is begun. Indirect impacts are the multiplier effects of the direct expenditures resulting from initial dollars being spent and re-spent within the study area. Included in this calculation were (a) purchases from local sources by local businesses in support of their Center-related business volume and (b) local business volume stimulated by the expenditure of Center-related income by local individuals other than Center personnel, conferees, or students. These figures, when combined, measured the total indirect economic impacts.

Coefficient multipliers were used to account for the secondary spending effects of Center-related expenditures made in the local community. The coefficient used to calculate purchases from local sources was 30 percent, as recommended by the ACE model. The coefficient used to calculate local business volume stimulated by the expenditure of Center-related income by local individuals other than Center personnel, conferees, or students was 62 percent, as recommended by Jeffrey M. Humphreys (director, Georgia Economic Forecasting Project, The University of Georgia) and the ACE model. The total indirect impact on local business was found to be $9,666,749 for the year studied.

Impact on Local Businesses: Center-Related Business Volume

The total direct and indirect impacts on local business (a total of all Center-related business volume that combined all direct and indirect economic impacts) was $20,174,083.

Impact on Individuals: Jobs, Personal Income, and Durable Goods

A second approach that the model used to measure the Center's impacts on the greater community was to study impacts on individuals. There are three ways to measure the Center's economic impacts on the individual level: (a) the number of local jobs attributable to the presence of the Center, (b) personal income of local individuals from Center-related jobs and business activities, and (c) durable goods purchased with income from Center-related jobs and business activities. These figures cannot be added in any combination as were the business volume figures, that is, they are different views of the Center's impacts on individuals in the community.

The following method was used to find the number of local jobs attributable to the presence of the Center. This number was determined by adding the total number of local Center personnel (full-time equivalents, FTEs) to the product of the Center- related local expenditures and the employment multiplier (full-time jobs, or equivalents, per dollar of direct expenditures in the local community). The employment multiplier, 30 jobs per $1 million, was obtained from Humphreys. The total number of persons employed locally as a result of the Center's presence in the community was found to be 778.

A second method used to study the Center's impact on individuals was to measure the personal income of local individuals from Center-related jobs and business activities. This figure was calculated by multiplying the proportion of Center personnel who reside locally times the gross compensation to all personnel. This number is multiplied by the payrolls and profits per dollar of local direct expenditures, then added to the product of the earnings multiplier and the Center-related local expenditures, not including payroll. Coefficients and multipliers were obtained from Humphreys. The total personal income of local individuals as a result of the Center's presence in the community was found to be $14,736,203.

A third measure of the study's impact on individuals was durable goods procured with income from Center-related jobs and business activities. This figure was determined by multiplying the personal income of local individuals from Center-related jobs and business activities by the proportion of total income typically used to purchase durable goods as found in the "Consumer Expenditure Survey 1992-93" from the Bureau of Labor Statistics. The total amount spent on durable goods by local individuals as a result of the Center's presence in the community was found to be $1,970,230.

A Consideration of Educational Impacts

Although this study was concerned with the economic impacts of the Center on the community, some stakeholders contend that the appropriate measurement scale for an educational organization should be educational impacts. The Georgia Center's educational impacts on the local community include: (a) the Center acts as a magnet, attracting individuals and businesses to the community; (b) the Center provides cultural benefits that contribute to the quality of life within the community, such as its library, WUGA-FM and its local programming, and Masters Hall Performances; (c) the Center provides educational programming opportunities -- noncredit short courses, teleconferences, and seminars; (d) the Center supports person-to-person contributions -- staff members make professional and personal contributions to the community individually; and (e) the Center contributes to the research, teaching, and service areas of The University of Georgia vis-a-vis program support, transfers, and honorariums.

References

Bureau of Economic Analysis. (1994). Regional economic information system, 1969-1993. Washington, DC. Available: http://www.lib.virginia.edu/socsci/reis/reis1.html.

Bureau of Labor Statistics. (1994). Consumer expenditure survey 1992-93. Washington, DC. Available: ftp://stats.bls.gov/pub/news.release/cesan.txt.

Caffrey, J., & Isaacs, H. B. (1971). Estimating the impact of a college or university on the local economy. Washington, DC: American Council on Education.

Deloitte, & Touche. (1993). Convention income survey. Champaign, IL: International Association of Convention & Visitor Bureaus.

Davidson and Peterson Associates, Inc. (1994). The economic impact of expenditures by tourists on Athens/Clarke County calendar year 1994. York, ME.

Haigh, M. S. (1995). Estimating the economic impact of foreign students. Washington, DC: NAFSA--Association of International Educators.

Humphreys, J.M. (1991). Buy greater Athens -- The economic costs of consumer outshopping and the potential benefits of reducing outshopping expenditures. Athens, GA: Simon S. Selig, Jr. Center for Economic Growth, The University of Georgia.

Matkin, G.W. (1994). "From cash cow to golden goose: measuring and reporting the economic impact of continuing education." Continuing Higher Education Review, Vol. 58, no 3, The Journal of the National University Continuing Education Association: Washington, DC.

For more information about this study: Michael F. Healy, Research and Planning, Department of Marketing Services, Georgia Center for Continuing Education, The University of Georgia, Athens, Georgia 30602-3603, Phone: 706-542-6793; Fax: 706-542-6720; e-mail: healym@gactr.uga.edu.

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