Download Shoals Cultural Asset Impact Analysis

ECONOMIC IMPACT OF ARTS AND
CULTURAL PRODUCION –
FLORENCE-MUSCLE SHOALS MSA
February 26, 2016
Authors:
Keith D. Malone
J. Douglas Barrett
Table of Contents
Executive Summary……………………………………………………………………………….ii
Arts and Cultural production in the United States………………………………………………...2
Arts and Cultural production: Florence-Muscle Shoals MSA…………………………………….6
Gross Domestic Product…………………………………………………………………………..8
Employment……………………………………………………………………………………...12
Earnings………………………………………………………………………………………….16
Taxes……………………………………………………………………………………………..18
Summary…………………………………………………………………………………………19
About the Authors………………………………………………………………………………..21
List of Tables
Table 1…………………………………………………………………………………………….4
Table 2…………………………………………………………………………………………….9
Table 3…………………………………………………………………………………………...10
Table 4…………………………………………………………………………………………...11
Table 5…………………………………………………………………………………………...13
Table 6…………………………………………………………………………………………...14
Table 7…………………………………………………………………………………………...15
Table 8…………………………………………………………………………………………...16
Table 9…………………………………………………………………………………………...17
Table 10………………………………………………………………………………………….19
Table 11………………………………………………………………………………………….19
ii
Executive Summary
Economic Impact: The Arts and Cultural Production entities contribute to both the economy of
the Florence-Muscle Shoals MSA and to quality of life. The economic contributions accrue
through goods and services produced, and direct, indirect, and induced spending. The direct
measures are spending, number of employees, and taxes generated by arts and cultural
production individuals and firms. The indirect measures are spending, number of employees,
and taxes resulting from spending of employees of the arts and cultural production firms.
Induced measures are the resulting spending, number of jobs, and taxes due to the existence of
the arts and cultural production in the Florence-Muscle Shoals MSA. Overall, the Arts and
Cultural Production in the Florence-Muscle Shoals MSA make a sizable contribution to the local
Gross Domestic Product (GDP).
Total Economic Impact of Arts and Cultural Production
EMPLOYMENT:
Direct Jobs
Indirect Jobs
Total Jobs*
EARNINGS (in millions):
Total GDP (in millions):
1,808.99
849.28
2,658.27
$62.81
$206.96
TAXES:
County Sales Taxes
City Sales Taxes
Total Sales Taxes
$103,270
$246,810
$350,080
ii
iii
The Economic Impact of the Arts and Cultural production
in the Shoals
Arts and Cultural Production (ACP) has obvious impacts on local and national culture,
and has recently become a topic of economic interest in the United States and around the world.
ACP has proven to be difficult to measure economically due to the non-monetary nature of
cultural benefits and the inter-industry composition required to produce arts and cultural goods
and services. During 2012, the Bureau of Economic Analysis (BEA) constructed and Arts and
Cultural Production Satellite Account (ACPSA) in an attempt to capture the inter-industry
composition, and assign an economic value for ACP in the United States. Specifically, this
satellite account measures economic value added, production value, and employment, but does
not attempt to place an economic value on quality of life components of ACP. The purpose of
this report is to extend the national analysis to estimate the annual economic impact of arts and
cultural production in the Florence-Muscle Shoals Metropolitan Statistical Area (F-MS).
This report applies national level and area specific data to approximate the economic
impact of ACP in the F-MS area. The economic impact is measured using four components:
Gross Domestic Product (GDP), employment, earnings, and taxes. Data limitations prevent this
study from examining the total economic impact of ACP, and therefore estimates included herein
should be considered as a starting point for considering the total economic impact of ACP in the
area. Additional data for ACP firms and employees along with monetary estimates for cultural
and quality of life benefits are needed to create a more comprehensive picture of ACP for F-MS.
This report is organized as follows: the following section reviews the national study
produced by the BEA, section two develops estimates for the F-MS area, and the final section
concludes.
1
Arts and Cultural Production in the United States
Few question the importance of arts and culture in any vibrant society. However, the
perception is that such “value” is heavily non-pecuniary in nature.1 Attaching a monetary value
to the arts and cultural segments of the economy recently has become a priority in several
countries, including the UK, Canada, Australia, Spain, and Colombia. In 2012, the United States
joined this group with the National Endowment for the Arts (NEA) and the US Department of
Commerce Bureau of Economic Analysis (BEA) undertaking the project of establishing a system
in which arts and cultural production would be a distinct and measureable sector of the American
economy. The NEA Guide to the U.S. Arts and Cultural Production Satellite Account: Including
a Blueprint for Capturing the Economic Value of Arts and Cultural Workers and Volunteers
delineates the process and outcomes of this work.2 The remainder of this section provides an
overview of this methodology which is employed to estimate the economic impact of arts and
cultural production for the F-MS. Gross Domestic Product (GDP) is examined first.
The first step to determine economic value in any sector requires quantifying its
contribution to GDP. Specifically, GDP is a monetary measure of national (or other geographic
entity’s) production that captures the final value of all goods and services produced in a given
geographic area during a specified period (typically one year). The BEA publishes “industry
accounts” GDP data for more than seventy industries including federal, state and local
governments. However, while the list of industries spans the national economy, certain
components of different industries themselves are affected by other “latent” industries. Thusly,
such industries require additional examination to determine the total economic impact of the
1
Non-pecuniary is an economics term used to describe objects that have a subjective value, depending on
individual preferences, and therefore do not have a precise quantifiable dollar value.
2
Published in 2013, this NEA white-paper can be found at https://www.arts.gov/artistic-fields/researchanalysis/arts-data-profiles/arts-data-profile-9/nea-guide-us-arts-and
2
industry. A common example given is travel and tourism, as its services are provided within
multiple industry accounts; namely, Accommodation, Transportation, Entertainment, and Retail
Sales. Measuring the specific dollar contributions for travel and tourism is not simple, since only
a part of each of the aforementioned industries is reflective of the travel and tourism component.
Consequently, the actual contribution from travel and tourism to GDP must be determined/
estimated.
The Arts and Cultural Production sector also experiences this dilemma. Considering the
current interest in developing monetary estimates for this industry, the BEA has constructed a
satellite account for the purposes of estimating total GDP for this industry. These accounts are
necessary given the propensity of economic activity in arts and cultural production (and others
such as travel and tourism), actually cut across multiple major industry accounts. In establishing
an arts and culture satellite GDP account, monetary information from the following is combined
to provide a more complete measure of arts and cultural production in the United States:
agents/managers for artists; museums; advertising; architectural services; interior design
services; industrial design services; graphic design services; other design services; computer
systems design; photography and photofinishing services; and fine arts education. The new BEA
account was given the name “Arts and Cultural Production Satellite Account” (ACPSA).
In constructing this and similar satellite accounts, the BEA uses data sources including
Economic Census Annual Survey, Non-Employer Statistics, and Census of Governments. Key
components gathered include data concerning industry output, value added, employment,
compensation and measures of indirect production. The first step involves an analysis to
determine a list of applicable commodities for the various categories. The following categories
are included in the ACPSA account: Arts and Entertainment, Arts Education, Information,
3
Professional Services, Other Services and finally Other Commodities. Table 1 below identifies
the commodities included in each respective category. Examination of the table reveals that arts
and cultural production activity can be found in thirty-six different commodities as identified by
the BEA. The table illustrates the importance of creating this and other satellite accounts for
industries which exhibit inter-industry production relationships.
Table 1: ACPSA Category and Commodity Designations
Other Commodities
Information
Printing
Motion Picture and Video
Jewelry and Silverware
Sound Recording
Other Manufacturing
Broadcasting
Wholesale Trade
Telecommunications
Retail Trade
Internet Publishing and Broadcasting
Construction
Other Information Services
Government
Publishing
Rental and Leasing
Software Publishing
Professional Services
Interior Design
Industrial Design
Graphic Design
Fashion Design
Other Design
Architectural Services
Advertising
Photography
Photofinishing
Arts and Entertainment
Theater
Dance
Opera
Symphonies
Circuses
Museums
Other Arts and Entrainment
Other Services
Grant-Making and Giving
Unions
Arts Education
Fine Arts
Other
Source: NEA Guide to the Arts and Cultural Production Satellite Account
Within the industry categories, the BEA analyzes earnings and other employment data
and divides ACPSA into three categories. Tier 1 contains core occupations representing the
primary sources of arts and cultural creativity. Tier 2 is designated for supporting occupations,
4
and includes technical and supporting occupations required to assemble and distribute arts and
cultural products. Finally, Tier 3 consists of management occupations not specific to arts and
cultural industries, but are required for their production. Examples from Tier 1 include
performing artists, media occupations, and architects. Museum and library technicians, motion
picture and video technicians, and printing occupations fall under the Tier 2 designation. Tier 3
contains television broadcasting managers, museum managers, and motion picture marketing
managers.3
In addition to estimating GDP for each tier, employment and earnings also can be
estimated. The key difference between measuring employment in the ACPSA and the
Occupation Employment Statistics Program (OES) from the Bureau of Labor Statistics (as used
in the standard industry accounts) is that ACPSA employment includes self-employed works
where they are excluded by the OES. Additional differences include the ACPSA differentiating
between workers in a general industry and workers in a given industry engaged in arts and
cultural production and the satellite account does exclude general employment by occupation.
Once comprehensive employment estimates for the ACPSA are established, wage and earnings
data from the OES can then be utilized to estimate earnings for the arts and culture industry.
Some of the important findings from the national analysis are related to US GDP and
contributions from several categories. Arts and cultural GDP during 2012 was $698.7 billion,
representing 4.3% of total U.S. GDP.4 Concerning the tiers, described above, $129.01 billion
and $547 billion of GDP was produced in the core and supporting tiers respectively. Advertising
3
See Table 3 on page 15 of the NEA white paper for a complete listing of commodities included in the
core, supporting, and other tiers of the ACPSA.
4
The 2012 data set was first published in 2013 and represents the most recent data for arts and cultural
production as a whole. The National Endowment for the Arts (NEA) reports that a full update for ACRSA is
scheduled for later during 2016.
5
represents the largest contributor to the core tier with GDP of $29.29 billion during 2012.
Broadcasting generated$121.09 billion GDP for the supporting tier. Furthermore, the arts and
cultural sector employed approximately 4.7 million workers who earned $334.94 billion during
the same year.
With a comprehensive picture of how arts and cultural industries fit into the national
economy, the approach developed by the BEA can applied to estimate the economic impact of
arts and culture in individual states or smaller local regions. In the next section the BEA
template will be applied to the Florence-Muscle Shoals MSA to estimate the economic impact of
arts and culture in the local area. In addition to estimating GDP, employment, and earnings, the
following section also examines local sales taxes generated by arts and cultural production.
Arts and Cultural Production: Florence-Muscle Shoals MSA
The Florence-Muscle Shoals area has a vibrant history of arts and cultural production.
Most notable is the music industry, as documented in many works such as the documentary
Muscle Shoals. World renowned recording artists such as the Rolling Stones, Rod Stewart,
Aretha Franklin, the Allman Brothers, and Bob Seger produced notable contributions to modern
rock/R&B in Muscle Shoals in the 1960s and 1970s. The Muscle Shoals Sound section of
backing musicians and Fame Studios were staples of that era in popular music. Prior to that, W.
C. Handy (the “Father of the Blues”) and Sam Phillips (producer of Elvis Presley and Johnny
Cash) paved the way for the Shoals music scene. The Shoals remains home to well respected
songwriters such as Walt Aldridge, Gary Baker, and Mac McAnally. The area is also home to
the Alabama Music Hall of Fame (Tuscumbia) which was located based on this rich history of
success in music recording.
6
In addition to the music industry, the Shoals is home to the Kennedy-Douglass Center for
the Arts, the Tennessee Valley Museum of Art, and the Frank Lloyd Wright-Rosenbaum House.
Numerous live entertainment events occur in the Shoals throughout the year include the Shoals
Symphony, Shoals Community Theatre, and the George Lindsay Theatre at the University of
North Alabama. During the summer months, regular live productions of The Miracle Worker are
performed at Ivy Green – home of the world famous Helen Keller. Various festivals also occur
throughout the year, including; the W.C. Handy Music Festival, the Helen Keller Festival (which
features arts, crafts and live music), and the Oka Kapassa Native American Festival (celebrating
culture and traditions of American Indians who once flourished in the area).
Given the recent interest in estimating the economic impact of arts and cultural
production around the world and the rich history of arts and culture in the Florence-Muscle
Shoals MSA, it is instinctive to question how this industry contributes to the local economy. The
remainder of this report examines the economic impact by applying national averages for arts
and cultural production to the local economy. This process necessarily assumes that arts and
cultural production in the local area operate and interact in exactly the same manner as found in
the national ACPSA data. It should be noted that following this process can only provide an
educated estimate of the economic impact of arts and cultural production in the area. Simply
applying national averages may overstate estimates in some areas and understate the impact of
this industry in areas with a vibrant arts and cultural sector similar to Florence-Muscle Shoals.
Nevertheless, desiring a measure of the economic impact of arts and culture production and
lacking area specific data for this industry, utilizing such average estimates for the U.S. economy
will produce a practical, conservative representation for the economic impact of arts and culture
production in the local economy.
7
The remainder of this report is organized as follows. Following the outline of the NEA
report, arts and cultural Gross Regional Product is examined first. Employment estimates are
then examined, followed by earnings projections. The fourth section projects county and city
sales tax estimates. The final section summarizes.
Gross Domestic Product
As detailed in the BEA regional account data, total GDP in F-MS was $4,813 million
during 2014. Manufacturing is the largest industry in the area, accounting for $1,113 million or
approximately 23% of GDP. Contrastingly, GDP generated by Arts, Entertainment, and
Recreation sector totals only $14 million, which is less than one percent (< 1%) of total GDP.
However, the BEA report indicates that GDP estimates for Performing Arts and related activities
are not available at the regional level. Thusly, the current accounting method does not yield a
complete picture of how arts and cultural production impact the local economy. Therefore,
national ACPSA trends will be employed to obtain a clearer picture of how this industry fits into
the F-MS economy.
Recall that arts and cultural production (ACP) represents 4.3% of U.S. GDP. Reviewing
ACPSA commodity designations from Table 1 reveals nearly all commodities included in the
table are also present in the F-MS area. Four commodity groups – landscape architectural
services, educational services, unions, and other goods manufacturing – have an
indistinguishable impact on ACP in the local economy.5 As such, these commodities have been
eliminated from estimations of ACP for the F-MS area, reducing ACP GDP to 4.23%. Given the
vibrant history of ACP in F-MS, it is likely that using this percentage to estimate ACP GDP will
5
These four commodity groups were identified by Dr. Burkhalter, Dean of Arts and Sciences at the
University of North Alabama, as having little to no on ACP in the F-MS area.
8
undervalue the total contribution of the ACP industry. Nonetheless, lacking more specific data
for the area, this process affords meaningful insights into how ACP impacts the local economy.
Applying the 4.23% ACP estimate to regional GDP yields ACP GDP totaling $203.76
million during 2014. This represents a significant increase over the BEA estimate of $14
million, indicating that a considerable amount of ACP activity in reality does cut across multiple
industries in the local area. National estimates can be further broken down into core ACP,
supporting ACP and other ACP tiers. Specifically, 18.76% of ACP economic activity is
classified as core while 77.72% and 3.52% is generated by supporting and other tiers
respectively. Accordingly, core ACP GDP totals $36.58 million while supporting GDP totals
$159.9 million. The final $7.28 million is classified as other ACP. This information is
summarized in Table 2 below.
Table 2: GDP by Arts and Cultural Production
Industry - Florence-Muscle Shoals MSA (Millions)
Core ACP
$36.58
Supporting ACP
$159.90
All Other Industries1
Total GDP
$7.28
$203.76
1 - Consists of the industries with secondary production that is designated as
artistic and cultural production.
Source: Consultant Projections
Tables 3 and 4 provide additional information by estimating ACP economic activity by
industry classification within the core and supporting ACP classifications. These estimates are
again obtained by applying national percentages for each industry classification to the F-MS
area. Examination of Table 3 reveals that Advertising is the largest contributor to Core ACP
GDP totaling $7.93 million. Performing Arts accounts for $4.42 million of GDP while $5.55
million of economic activity is generated by Independent Artists, Writers, and Performers.
Excluding Other Design Services, Agents/Managers for Artists and Computer Systems Design
9
represent the two smallest components of Core ACP, totaling $0.61 and $0.69 million
respectively. See Table 3 for estimates for each industry contained in Core ACP.
Table 4 provides analogous information for industries classified in the supporting tier.
Examination of this table reveals that four supporting industries – Broadcasting, Government,
Motion Picture, and Publishing – account for $114.52 million or 71.62% of Supporting ACP
GDP. Broadcasting is estimated to contribute the largest amount at $35.18 million while the
Government contributes an additional $29.65 million. Sound recording, as noted previously, is
part of the rich ACP history of the area and is estimated to generate a $4.26 million contribution
to GDP. Camera and Motion Picture Equipment Manufacturing is the smallest contributor to
Supporting ACP, totaling only $0.10 million.
Table 3: GDP by Core ACP Category Florence - Muscle Shoals MSA (Millions)
Performing Arts
Independent Artists, Writers, And Performers
Agents/Managers For Artists
Promoters of performing arts and similar events
Museums
Advertising
Architectural Services
Interior Design Services
Industrial Design Services
Graphic Design Services
All Other Design Services
Computer Systems Design
Photography and Photofinishing Services
Fine Arts Education
Total Core Arts and Cultural Production GDP
$4.42
$5.55
$0.61
$2.39
$1.45
$7.93
$4.94
$2.34
$0.45
$2.26
$0.19
$0.69
$2.48
$0.88
$36.58
Source: Consultant Projections
10
Table 4: GDP by Supporting ACP Category Florence - Muscle Shoals MSA (Millions)
Rental and Leasing
Other Support Services
Publishing
Motion Pictures
Sound Recording
Broadcasting
Other Information Services
Printed Goods Manufacturing
Jewelry and Silverware Manufacturing
Musical Instruments Manufacturing
Custom Architectural Woodwork and Metalwork Manufacturing
Camera and Motion Picture Equipment Manufacturing
Grant-Making And Giving Services
Government
Construction
Wholesale and Transportation Industries
Retail Industries
Total Supporting Arts and Cultural Production GDP
$2.03
$0.13
$24.30
$25.39
$4.26
$35.18
$7.91
$2.91
$1.01
$0.27
$0.67
$0.10
$0.16
$29.65
$4.05
$8.39
$13.48
$159.90
Source: Consultant Projections
The Sound Recording industry provides an excellent example in which GDP estimates,
based on national averages, may undervalue certain components of a regional economy. It is
likely that sound recording activities in the F-MS area exceed the U.S. average given the national
reputation Muscle Shoals Sound and FAME Records. Likewise, some industries in the area may
underperform the national average, thusly overestimating economic activity in that industry. As
noted previously, local applicable percentages are unavailable, and while expected to be
approximately close to national figures are not the same. Actual values may be larger or smaller
depending on the category. However, the overall impact very likely is larger than estimated in
Table 1 due to the aforementioned presence of the university, community college, and
longstanding vibrant arts and cultural sector.
11
EMPLOYMENT
Along with GDP, employment is a major economic indicator commonly used to evaluate
the size and state of a national or regional economy. Employment indicates the well-being of the
economy and the labor force in general. As such, employment estimates can be used to examine
growth or recessionary trends in a local area or within industries. Employment data also can be
used to investigate how a given industry supports employment opportunities for local residents.
Specifically, three employment effects are considered when examining the economic impact of
any industry – direct, indirect and induced. The direct employment effect simply refers to those
who are directly involved in producing GDP related to ACP. Indirect employment effects
describe the employment opportunities generated when Core and Supporting ACP firms
purchase goods and services from other firms in the local area (i.e., or non-payroll spending).
Finally, the induced effect represents the change in regional employment that occurs when direct
and indirect employees spend their wages and salaries in the region. The purpose of the section
is to estimate the overall employment effects associated with ACP in the F-MS.
We begin by estimating the direct employment effect of ACP. During 2014, F-MS
employed 52,070 individuals as reported by the Bureau of Labor Statistics.6 Similar to the GDP
section above, we again apply national average ACP employment percentages to estimate the
direct employment effect. Specifically, the employment section of ACPSA illustrates that ACP
employment represents 3.59% of total employment in the U.S. during 2012. Removal of the four
commodities outlined previously, ACP employment in F-MS is projected to be 3.47%. Applying
this employment percentage to F-MS total employment we estimate that ACP in the area
6
Employment levels for F-MS were gathered from the BLS Occupational Employment Statistics division
available at www.bls.gov.
12
supports 1,808.99 jobs.7 Of this total, 20.26% is Core ACP, 75.67% is Supporting ACP and
4.07% is “All Other” ACP. Consequently, Core ACP employment totals 333.37, while
Supporting and “All Other” employment equals 1,399.58 and 76.04 respectively. This
information is summarized in Table 5.
Table 5: Direct Employment by Arts and Cultural
Production Industry - Florence-Muscle Shoals MSA
Core ACP
333.37
Supporting ACP
1,399.58
All Other Industries1
Total Employment
76.04
1,808.99
1 - Consists of the industries with secondary production that is designated as artistic
and cultural production.
Source: Consultant Projections
Tables 6 and 7 provide industry specific estimates for Core and Supporting ACP
employment, respectively. In Table 6, Advertising employs the most employees within the core
tier at 51 while employment in the computer systems design category is only 6.33. Museums
and Architectural services are integral pieces to Core ACP employment, accounting for 27.29%
of the total employment. Combining Advertising employment with these two categories, the
three largest employment categories in this tier account for approximately 42% of Core ACP
employment.
Continuing to Table 7, Government employs the largest number in the Supporting ACP
tier at 443.94, accounting for 31.7% of total direct supporting employment. While the
Government sector is the second largest sector in terms of GDP calculations, its employment
footprint far surpasses employment in the broadcasting sector which was the largest GDP
contributor from Table 4. In fact, the Government sector employment exceeds Broadcasting
7
It should be noted that this figure represents both full-time and part-time jobs. Employment data and
estimation procedures will not allow differentiating between full and part-time jobs in this analysis.
13
employment by a factor of 2.82. The Retail Industry supports the second largest number of
Supporting ACP employees, totaling 279.91. While having a large employment footprint,
Government and Retail Industries do not create a considerable amount of economic value in the
local economy. For Government, GDP per employee is approximately $66,788 and only
$48,158 for Retail Industries. Comparatively GDP per employee for Broadcasting is $223,791
and Performing Arts from the Core tier is $111,335.
Table 6: Direct Employment by Core ACP Category Florence - Muscle Shoals MSA
Performing Arts
39.70
Independent Artists, Writers, And Performers
14.02
Agents/Managers For Artists
Promoters of performing arts and similar events
Museums
Advertising
Architectural Services
Interior Design Services
Industrial Design Services
Graphic Design Services
All Other Design Services
Computer Systems Design
Photography and Photofinishing Services
Fine Arts Education
Total Core Arts and Cultural Production
8.16
28.83
45.54
51.00
45.43
8.25
9.71
25.29
0.84
6.33
35.23
15.04
333.37
Source: Consultant Projections
14
Table 7: Direct Employment by Supporting ACP Category Florence - Muscle Shoals MSA
Rental and Leasing
23.57
Other Support Services
1.44
Publishing
Motion Pictures
Sound Recording
Broadcasting
Other Information Services
Printed Goods Manufacturing
Jewelry and Silverware Manufacturing
Musical Instruments Manufacturing
Custom Architectural Woodwork and Metalwork Manufacturing
Camera and Motion Picture Equipment Manufacturing
Grant-Making And Giving Services
Government
Construction
Wholesale and Transportation Industries
Retail Industries
Total Supporting Arts and Cultural Production
142.68
138.46
5.25
157.20
15.88
44.61
11.14
3.30
12.44
0.79
1.79
443.94
43.41
73.74
279.91
1,399.58
Source: Consultant Projections
Once the direct employment estimates have been obtained, the next step is to investigate
the indirect and induced employment impact of ACP in F-MS. As noted previously, indirect
employment effects are created by non-payroll spending of ACP firms in the local economy. To
estimate indirect employment, employment multipliers are utilized. These multipliers are
created by the BEA based on how the average firm in a given industry spends money in a local
economy. Furthermore, the multiplier represents the number of indirect jobs created for each
direct job created in the corresponding industry. In this study, the most appropriate multiplier is
for the BEA category “Performing Arts, Spectator Sports, Museums, Zoos, and Parks.” The
BEA estimates the employment multiplier for this industry to be 0.4212 for 2014. Thusly,
0.4212 jobs are created across all sectors of the economy for each direct job created in the ACP
15
industry. In total we estimate that 249.28 jobs are created indirectly by ACP activity in F-MS.
Specifically, 140.42 jobs are indirectly related to Core ACP, 676.84 Supporting ACP and 32.03
“Other” ACP. Indirect employment estimates are shown in Table 8.
Table 8: ACP Direct, Indirect and Total Employment
Estimates
Florence - Muscle Shoals MSA
Core
Supporting
Other
Total
333.37
1,399.58
76.04
1,808.99
Direct
676.84
32.03
849.28
Indirect 140.42
Total
473.79
2,076.42
108.07 2,658.27
Source: Consultant Projections
Normally, before determining the total employment impact, the next step would be to
estimate the induced effects of employee spending in the area and estimate the associated
employment effects. However, this process requires spending data from direct employees which
is not available. Without this information, the total employment effect as depicted in Table 8 can
only be considered as a conservative estimate. Examining Table 8 ACP employment in F-MS is
estimated to support 2,658.27 jobs per year where 473.79 jobs are related to the Core tier,
2,076.42 are classified as supporting and finally, 108.07 are classified as “other.” Thusly, ACP
in the local area supports a minimum of 2,658.27 jobs.
EARNINGS
Salaries and wages of employees is the another item of interest when considering the
economic impact of a firm or industry in the local area. The BEA ACPSA does not provide
information on estimated earnings for this industry. Therefore, a multiplier process – similar to
the one employed for estimating indirect employment must be utilized to examine earnings of
ACP employees. Unfortunately, this process will not allow the level of detailed analysis for core
and supporting ACP tiers that was performed in the previous sections. Accordingly, only total
direct and indirect earnings can be estimated.
16
Earnings multipliers are constructed by the BEA based on GDP contributions by
industry. Therefore, earnings estimates are calculated by combining earnings multipliers
available from the BEA and GDP estimates from Table 2. For example, each $1 of GDP
produced by Core ACP firms generates $0.3226 in earnings in the F-MS economy.8 In total,
Core ACP earnings are estimated to be $11.8 million during 2014. Due to the lack of
specification in the “other” category the multiplier for the BEA “Performing Arts” category is
also used for estimating earnings in this tier. Earnings in this category total $2.35 million. The
Supporting ACP tier contains many different industries which are included in basic BEA
accounts; hence, a weighted average multiplier is calculated to estimate earnings for this
category. Earnings in the Supporting tier are estimated to be $48.66 million. Earnings
information is summarized in Table 9.
Table 9: ACP Direct, Indirect and Total Earnings Estimates
Florence - Muscle Shoals MSA ($Millions)
Core
Supporting
Other
Total
$48.66
$2.35
$62.81
Earnings $11.80
Source: Consultant Projections
Customarily, the discussion of earnings estimates would follow the direct, indirect, and
induced methodology utilized in the employment section. In this case, lack of direct earnings
data for each industry will not allow such estimates to be calculated. Utilizing the GDP method
provides an approximation of changes in total earnings for all households in the F-MS economy.
Accordingly total ACP earnings are estimated to be $62.81 million during 2014. Total earnings
in F-MS during the same time period were $2,964.7 million. ACP earnings then represent
approximately 3% of total wages and salaries in the F-MS area.
8
The Core ACP earnings multiplier is derived from the same BEA category as utilized for indirect
employment.
17
TAXES
Earnings and spending associated with ACP generate various types of tax revenue for the
F-MS economy. Direct and indirect employee spending along with non-payroll spending of
ACP firms contributes to sales tax collections for both local cities and counties. Similar
spending on real estate, personal property, and purchases of vehicles would generate additional
property taxes and vehicle sales taxes. Unfortunately, direct spending patterns of ACP
employees and firms are not available; however, spending pattern data available from the BLS
will allow estimation of city and county sales tax collections for employee spending. The first
step in the process is estimation of taxable sales.
Using data from the Consumer Expenditure Survey (CEX), it is estimated that residents
in the southern region spend 75.16% of their disposable income. Of this amount, approximately
31.25% of spending is subject to sales taxes. Finally, we adjust this figure down by 30% to
adjust for purchases which are made outside of F-MS.9 As shown in Table 10, application of this
process yields taxable sales in excess of $10 million where $1.9 million, $8.0 million, and $0.386
million are generated by Core, Supporting and other tiers respectively. Next, county and city
sales taxes are estimated by applying average city and county sales tax rates. The average
county tax rate is 1% and the average city tax rate is 2.39%.10 Tax estimates are located in Table
10. Specifically, county sales taxes total $103.27 while $246.81 thousand is generated in city
sales taxes. Therefore, total ACP sales taxes equal $350.08 thousand. Table 10 provides tax
estimates for each of the tiers.
9
This adjustment for purchases made outside of the area is a standard adjustment for studies of the F-MS
area.
10
Sales tax rate data was obtained from www.sales-tax.com.
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Table 10: City and County Sales Tax Collections Attributable to ACP
Florence-Muscle Shoals MSA ($Thousands)
City
Total
Taxable Sales County Taxes
Taxes
Taxes
$1,940.07
$19.40
$46.37
$65.77
Core
Supporting
Other
$8,000.31
$386.37
$80.00
$3.86
$191.21
$9.23
$271.21
$13.10
Total
$10,326.75
$103.27
$246.81
$350.08
Source: Consultant Projections
SUMMARY
Overall, ACP is an integral part of the F-MS economy as demonstrated by inter-industry
production. The results presented herein likely are quite conservative due to the lack of data on
ACP firm spending in the local area, spending patterns of employees directly linked to ACP, and
the use of national percentages that tend to underestimate the effect commensurate with the
existence of two institutions of higher education and the vibrant music and arts culture present in
F-MS. Despite these evaluation issues, the purpose of this study is to construct a representation
of how ACP impacts the local economy. This analysis concludes that ACP in the F-MS is
estimated to support 2,658.27 jobs, earning a projected $62.81 million per year. Spending of
these earnings generates sales taxes totaling $350,080 with $103,270 flowing to counties and
$246,810 flowing to cities. ACP is also responsible for producing $203.76 million of GDP in the
F-MS. These contributions are summarized in Table 11.
Table 11: Summary of Arts and Cultural Production Yearly
Economic Impact Florence-Muscle Shoals MSA
2,658.27
ACP Total Employment
$203.76
Million
ACP Total GDP
ACP Total Earnings
ACP County Sales Taxes
ACP City Sales Taxes
$62.81 Million
$103,270
$246,810
Source: Consultant Projection
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Finally, the focus of this analysis has been on the employment and monetary components
of ACP, which can be measurable in a straightforward manner. ACP also makes significant
contributions to the quality of life in F-MS. In fact, many lists of “best places to live” include
components for “culture” and “entertainment options.” A vibrant arts/cultural production
community obviously improves ratings in these categories.
In addition to these style rankings,
it is widely considered that quality of life improvements contribute indirectly and sometimes
directly to economic well-being in an area. However, the basis of these impacts is non-monetary
in nature and difficult to quantify. Accordingly, quality of life changes have not been factored
into this study. Developing a methodology to measure these quality of life issues, as part of a
more comprehensive study of the ACP industry, would increase the total impact of ACP in the FMS as presented in this report.
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About the Authors
Keith Malone received his Ph.D. in Economics with fields of specialization in public economics
and applied microeconomics. Specifically, his work in applied microeconomics focuses on
income distribution and tax policy and regional economic development. Dr. Malone has
published several articles in journals such as the Journal of Sports Economics, International
Journal of Humanities and Social Science, Journal of Business, Industry and Economics, Cato
Journal and The Independent Review. Concerning economic development, he has published an
article detailing the economic impact of Boeing’s Missile Defense Segment on the State of
Alabama in the Journal of Business, Industry and Economics. Dr. Malone has also delivered
economic impact studies to, among others, the Boeing Company, City of Florence, Alabama,
Shoals Home Builder Association, Huntsville Housing Authority, Colbert Development LLC,
University of North Alabama, E.S. Robbins Corporation, RegionalCare Hospital Partners, and
Alabama Road Builders Association.
J. Douglas Barrett received his Ph.D. in Statistics, with specialties in statistical process control,
engineering statistics, and industrial statistics. He is a senior member of the American Society
for Quality and the American Economic Association. Dr. Barrett has published numerous
articles and reviews in journals such as Technometrics, Journal of the American Statistical
Association, IIE Transactions, Journal of Business Ethics, Human Relations, and Public Finance
Review, among many others. Dr. Barrett recently published a chapter in the book, Economics of
the National Football League, and has contributed to the publications of numerous books and
other instructional materials and monographs. Concerning economic development, he has
published on Enterprise Zones in Alabama and Mississippi in Public Finance Review. In
addition to economic development publications, Dr. Barrett has also worked on a variety of
funded economic impact studies. He has delivered economic impact analysis studies to the City
of Florence, Huntsville Housing Authority, Shoals Economic Development Authority,
RegionalCare Hospital Partners, and the University of North Alabama.
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