A guide to placing exaggerated economic impact claims in context

Large and small private investors seeking public subsidies routinely turn to “Economic Impact” reports to make their case. The missing piece in virtually all of these reports is the size of the local economy where the project is situated. This is purposeful to encourage active imaginations to place a high priority on the proponents project.

To mitigate the irrational exuberance which can be whipped up with these reports, the size of the local economy (and recent organic growth) must be placed next to the proponents claims. This important contextual information can be derived from readily available data on aggregate income published online by the US Census Bureau. Here are the 7 steps to find the size of your local economy for a given year (we are in search of table B19025.

  1. Go to the advanced search function at data.census.gov.
  2. On the menu on the left hand side of the screen select Topics>
  3. Select Income and Poverty
  4. Then select “Income and Earnings” (at the top of the list)
  5. Check the box for “Income (Households, Families, Individuals)
  6. On the menu on the left side of the screen select Geographies>
  7. There will be nine boxes with each representing a different type of geography. Select the “Metropolitan Statistical Area” option. It will take some time to load. Scroll down and “check” the box next to your area. Note: I recommend MSAs because most economic reports address regional economies which span multiple jurisdictions.
  8. Finally, select the year.

On the right hand side of your screen there will be a list of tables which provide data that meet the filters you selected. If you select the “x” to close out your “Select Years” filter the list will fill the center of your screen. Scroll down to find table B19025: AGGREGATE HOUSEHOLD INCOME IN THE PAST 12 MONTHS. On the example below it was about 35 tables down the list.

You can change the years to see the annual growth of the economy.

Example #1: City of Detroit lands the NFL Draft after five years of trying

The claim is made that the event has brought $100 million in economic activity to other cities. No mention is made of the numerator – the size of the Detroit economy.

The aggregate income for the Detroit-Warren-Dearborn MSA in 2020 was $150 billion. This is up from $125 billion in 2015. So, to place the $100 million impact of the NFL Draft in context, it represents up to 0.67% in activity, while organic growth in the economy averaged four percent (4.0%) over a five year period.

Example #2: Richmond garners $161 million from UCI Cycling Race

Chmura is a well-connected economic consulting group that prepares reports on the economic impacts of public and private activities. They prepared economic impact reports on VCU’s contribution to downtown Richmond, and in one instance, a UCI cycling competition (aka Richmond 2015). The report on the cycling event indicated an economic impact of $161 million for the week-long event (which cost the city $20 million to secure).

No mention of a numerator, which in this case, is a $39.7 billion regional economy in 2015, up from $35.3 billion in 2010 – an organic increase of $4.4 billion over five years. The UCI event represented less than five tenths of one percent in potential economic activity.

But that footnote.

Chmura, whose president served on VCU’s Business School Advisory Board at the time, included the following statement in their economic impact report on the UCI event:

This estimate ..only captures the economic impact directly associated with Richmond 2015 participants and spectators. It does not take into consideration other factors that may have affected local businesses. For example, Virginia Commonwealth University cancelled its classes for a week, and some students left Richmond. Those factors are beyond the control of the Richmond 2015 organizers and were not incorporated into this analysis.

Chmura pretended that VCU did not closed its campus for two weeks in anticipation of the negative impacts of the event on campus life. But, having assessed the economic impact of VCU earlier, they could easily have looked at that study and suggested an offset of $50 million in economic activity for the VCU closure (this would produce a result significantly less than what was used to sell the city’s investment in the race).

Our presidential contenders could all benefit from free college tuition when they were 18

Daily ClogLilia Vega of the Daily Clog takes baby boomers on a walk down memory lane with her piece that details the history of tuition and fees in the University of California system since 1868.

The UC system, one of two in California, and home to UC Berkeley and UCLA, started in 1868 with a goal of free tuition for all students. The system met that goal for over one hundred years. Here are the undergraduate tuition and fees that our presidential candidates would have paid if they entered the UC system when they were 18:

The above charges were fees for non-classroom expenses. Tuition was free. Adjusting these fees to today’s dollars, results in annual college costs for our candidates of $1,123, $1,348, $1,510, and $2,146.

And the cost for our next generation of leaders?

In 2015-16 our next generation is paying $5,006 per quarter ($15,000 per year) for the UC system. Of this amount, $3,740 per quarter is for tuition ($11,220 per year) and $1,266 is for fees ($3,800 per year). The new college catalogs address this with an entire section devoted to student loan programs, a feature missing in catalogs from the baby boom years.