How are jobs and economic impact of a project estimated – a quick analysis

This past weekend I helped pace and crew for several good friends in the Leadville Trail 100 mile race. This is a high-altitude ultra-marathon mountain race that’s regarded as one of the toughest and most prestigious long distance races in the world.  This year, 802 crazy souls started the race and only 45% finished. I know what you’re thinking because I thought it too: running 100 miles (continuously for almost 30 hours) over mountain passes and at high elevation sounds ridiculous! But pacing this race was an amazing, life-changing experience that I felt privileged to be a part of.

The Leadville Trail 100 is part of a race series held in Leadville Colorado every summer that also includes a 10k, trail marathon,  50 mile trail ultra-marathon, 50 mile mountain bike race, and 100 mile mountain bike race (Lance Armstrong and Floyd Landis won these in previous years). For an old mining town with a population of little more than 2,500 residents, these races have a huge impact on the local and regional economy.

After spending several days in Leadville, my entire team got to talking about how impactful this race series is from an economic perspective.  Similar to real estate development projects serving as economic generators (increased jobs, income, and GDP) this race series attracts large sums of money that generate increased economic activity for local businesses, the municipality, and area residents.  Since there are basically two things that get me up in the morning—running and real estate—I decided that it’d be fun to do a quick back-of-the-envelope economic impact analysis of the Leadville Race Series. 

Economic impact studies are typically done using Input-Output models such as the Regional Input-Output Modeling System (RIMS II). Regional input-output multipliers such as the RIMS II attempt to estimate how much a one-time or sustained increase in economic activity will be supplied by industries located in the region. Essentially, what you have from an economic activity such as a race series (or real estate development, municipal infrastructure project, etc.) is a series of inputs that come from money spent during that activity that get multiplied throughout an economy.  In the case of the race series, these invested inputs likely take the form of money spent on race fees, hotel fares, restaurant dining, local shopping, and transportation. By spending this money in an economy, jobs are supported, salaries/wages are paid, and dollars get trickled through the region that wouldn’t otherwise be there.

Money invested in the local economy through these inputs are then multiplied by outputs (RIMS II multipliers) to generate estimates of total jobs supported by the race series, added income in the community, and total output (GDP) for Leadville. These output numbers are derived from census data on local and regional economies (at the county level).  So through this analysis (with some general assumptions) one can actually estimate how many jobs and income is generated by the Leadville Race Series. This analysis could also be useful if you’re developing a property and want to show how the construction, operation, and maintenance of that building will improve/impact the local economy (great as a marketing tool if you need to state your case for entitlements, public opinion, etc).

To do this, we’ll take a look at some general assumptions on money spent on and during this race series. Here we go!

First we need inputs:

Here are some general assumptions made for money spent on various categories.

Ok, this next part is pretty simple. We simply collect multiplier estimates for the industries affected by the race. These numbers are available from the Bureau of Economic Analysis.

(Quick note, since each order of data cost $275, I have substituted data I collected from a previous economic impact study for this post…so final conclusions will not be completely accurate. The big assumption here is that these multiplier numbers are correlated with those for Leadville).

Here are the numbers we’ll use to multiply against our assumed expenditures:

And now for the interesting stuff—the results!

Below are the total jobs, earnings, and GDP of the Leadville Race Series (again, similar analysis could be done for a real estate project, master planned community, rehabilitation, etc.)

So, through some basic assumptions (and some large ones), an estimated 190 jobs are supported, $12.2 million in earnings is created, and $13.3 million in total output is produced! For a town of 2,500, I think that’s pretty incredible!

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