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What's In a Study? The Elusive Numbers Behind Economic Impact Studies

Ilana Panich-Linsman/KUT
Events like ACL, SXSW, Circuit of the Americas and even UT Athletics perform economic impact studies to quantify their impact on Austin's economy.

The second weekend of the Austin City Limits Festival is upon us.

If you don’t go to ACL, you may just view the two-weekend music event as a headache that consumes a lot city attention and resources. But, the thousands of visitors it brings to the city pump millions of dollars into the Austin economy – $194 million last year, according to C3 Presents. 

In fact, the company says its annual shindig on the Zilker Park lawn has contributed nearly $1 billion in economic activity since 2006.

Just doing a back-of-the-envelope calculation, it’s definitely a lot more than the annual kite festival held in the same space.  Turns out, however, the exact amount of ACL’s impact, or any event's impact, is an elusive number to pin down.

Often when you hear about festivals and big events around town, you hear about their economic impact for the city. We’re not talking about ticket sales. We’re talking what happens before, during and just after.

“When you’re talking about these special events, I think you can summarize it best by saying that it’s all about the spending and who is doing the spending,” says Dr. Terry Clower, director of public policy at George Mason University. “Typically when you’re doing these analyses, it’s drawing the line between what is local versus non-local. Who is coming from outside the area that we want to count?”

For years, Clower was director of the Center for Economic Development and Research at the University of North Texas.

The reports tout how much a company or sports entity might mean to the local economy. But these reports aren’t always generated out of goodwill, according to Professor John Crompton at Texas A&M University.

“Economic impact studies are unfortunately, for the most part, not a search for truth. My experience has been they’re primarily commissioned to legitimize a position,” Crompton says.

He says usually that position involves the use of taxpayer dollars. Does the civic investment make the payoff worth it?

Economic impact reports are their own small industry. Economists are paid to perform market studies and research to determine a bottom line figure that we, as a public, can get our head around.

It makes something like subsidizing a Formula One race or giving tax incentives more palatable politically.

And it seems everyone is doing it. If you Google “economic impact reports,” you get Google’s own economic impact report on each state. It says it helps generate $6.64 billion in economic activity around the state of Texas.

Circuit of the Americas commissions one regularly to prove its worth.

Just last month, South by Southwest and the University of Texas Athletics Department reported their respective impacts on the Austin economy.

Hugh Forrest, CEO of South By Southwest Interactive, made the big announcement last month outside City Hall.

“At $317.2 million, the economic impact for SXSW is about two-thirds the economic impact of a Super Bowl,” he said. “I think that’s a great way for a lot of us to better understand and visualize the magnitude of this event. In many, many ways, SXSW is the big game for Austin.”

Mayor Steve Adler crowed over specific benefits to Austin tax receipts.

“In March of this year alone, the hotel occupancy tax fund was 70 percent more than in the average month,” Adler said.

But if South by Southwest is Austin’s big game, what about the guys who put on actual big games? The University of Texas Athletic Department published a glossy report characterizing itself as a force to be reckoned with as far as events in Austin go. 

A infographic from SXSW's recent economic impact study.

The report says UT generates more than $700 million in output a year. A closer look at the report includes numbers that may be a stretch in reality, like when it comes to tailgating. It says spending on food and supplies totals more than $33 million. In order for that to be correct, every man, woman and child that attends each of the six home games would have to spend an additional $55 per person on brats before the game. That would be on top of a ticket price and snacks and souvenirs inside, which are also added into the bottom line.

H-E-B has the largest market share of Austin grocers. A spokesperson wouldn’t provide exact figures, but says tailgating isn’t among the top ten events the stores plan for annually.

Not to say there isn’t a tremendous economic boon from Texas athletics, but UT’s study came out as then-Athletic Director Steve Patterson was pushing the city for a new arena to replace the aging Erwin Center.

“You follow the money,” says Crompton. “You see who commissioned it. And, for the most part, what you’re going to find that the person who commissioned it got the findings that they want.”

Angelos Angelou, who's firm did the study for UT, and others, declined an interview request.

So is there any way to get to the bottom of an event’s value to Austin?

“Those of us who have been involved in this for many years have a rule of thumb. And it generally is, if you move the decimal point on the number at the end one place to the left, most of the time you get it right,” says Crompton. “That’s a cynical point of view but, in fact, it actually isn’t far out when you look at these studies. So instead of $100 million, it ends up being $10 million.”

  While we may never get a true grasp of their dollar value, there is little doubt ACL, SXSW, UT Athletics, Formula One and others bring money, visitors and status to Austin. And if you think money is hard to keep track of, status is an even more elusive thing to measure, at least until someone commissions a status impact study.

Jimmy is the assistant program director, but still reports on business and sports every now and then. Got a tip? Email him at Follow him on Twitter @maasdinero.
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