University of North Alabama



ECONOMIC IMPACT OF ARTS AND CULTURAL PRODUCION – FLORENCE-MUSCLE SHOALS MSAFebruary 26, 2016Authors: Keith D. Malone J. Douglas BarrettTable of ContentsExecutive Summary……………………………………………………………………………….iiArts and Cultural production in the United States………………………………………………...2Arts and Cultural production: Florence-Muscle Shoals MSA…………………………………….6Gross Domestic Product…………………………………………………………………………..8Employment……………………………………………………………………………………...12Earnings………………………………………………………………………………………….16Taxes……………………………………………………………………………………………..18Summary…………………………………………………………………………………………19About the Authors………………………………………………………………………………..21List of TablesTable 1…………………………………………………………………………………………….4Table 2…………………………………………………………………………………………….9Table 3…………………………………………………………………………………………...10Table 4…………………………………………………………………………………………...11Table 5…………………………………………………………………………………………...13Table 6…………………………………………………………………………………………...14Table 7…………………………………………………………………………………………...15Table 8…………………………………………………………………………………………...16Table 9…………………………………………………………………………………………...17Table 10………………………………………………………………………………………….19Table 11………………………………………………………………………………………….19Executive SummaryEconomic 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 1,808.99Indirect Jobs 849.28Total Jobs* 2,658.27EARNINGS (in millions): $62.81Total GDP (in millions): $206.96TAXES:County Sales Taxes $103,270City Sales Taxes $246,810Total Sales Taxes $350,080The Economic Impact of the Arts and Cultural production in the ShoalsArts 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. Arts and Cultural Production in the United StatesFew question the importance of arts and culture in any vibrant society. However, the perception is that such “value” is heavily non-pecuniary in nature. 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. 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 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, 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 DesignationsOther CommoditiesInformationPrintingMotion Picture and VideoJewelry and SilverwareSound RecordingOther ManufacturingBroadcastingWholesale TradeTelecommunicationsRetail TradeInternet Publishing and BroadcastingConstructionOther Information ServicesGovernmentPublishingRental and LeasingSoftware PublishingProfessional ServicesArts and EntertainmentInterior Design TheaterIndustrial DesignDanceGraphic DesignOperaFashion DesignSymphonies Other DesignCircusesArchitectural ServicesMuseumsAdvertisingOther Arts and EntrainmentPhotographyPhotofinishingOther ServicesArts EducationGrant-Making and GivingFine ArtsUnionsOtherSource: NEA Guide to the Arts and Cultural Production Satellite AccountWithin 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, 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.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. Concerning the tiers, described above, $129.01 billion and $547 billion of GDP was produced in the core and supporting tiers respectively. Advertising 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 MSAThe 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. 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. 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. 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 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 $36.58Supporting ACP$159.90All Other Industries1 $7.28Total GDP$203.761 - 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 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$4.42Independent Artists, Writers, And Performers$5.55Agents/Managers For Artists$0.61Promoters of performing arts and similar events$2.39Museums$1.45Advertising$7.93Architectural Services$4.94Interior Design Services$2.34Industrial Design Services$0.45Graphic Design Services$2.26All Other Design Services$0.19Computer Systems Design$0.69Photography and Photofinishing Services$2.48Fine Arts Education$0.88Total Core Arts and Cultural Production GDP$36.58Source: Consultant ProjectionsTable 4: GDP by Supporting ACP Category - Florence - Muscle Shoals MSA (Millions)Rental and Leasing$2.03Other Support Services$0.13Publishing$24.30Motion Pictures$25.39Sound Recording$4.26Broadcasting$35.18Other Information Services$7.91Printed Goods Manufacturing$2.91Jewelry and Silverware Manufacturing$1.01Musical Instruments Manufacturing$0.27Custom Architectural Woodwork and Metalwork Manufacturing$0.67Camera and Motion Picture Equipment Manufacturing$0.10Grant-Making And Giving Services$0.16Government$29.65Construction$4.05Wholesale and Transportation Industries$8.39Retail Industries$13.48Total Supporting Arts and Cultural Production GDP$159.90Source: Consultant ProjectionsThe 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. EMPLOYMENTAlong 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. 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 supports 1,808.99 jobs. 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 MSACore ACP 333.37Supporting ACP1,399.58All Other Industries1 76.04Total Employment1,808.991 - Consists of the industries with secondary production that is designated as artistic and cultural production.Source: Consultant ProjectionsTables 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 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 MSAPerforming Arts39.70Independent Artists, Writers, And Performers14.02Agents/Managers For Artists8.16Promoters of performing arts and similar events28.83Museums45.54Advertising51.00Architectural Services45.43Interior Design Services8.25Industrial Design Services9.71Graphic Design Services25.29All Other Design Services0.84Computer Systems Design6.33Photography and Photofinishing Services35.23Fine Arts Education15.04Total Core Arts and Cultural Production333.37Source: Consultant ProjectionsTable 7: Direct Employment by Supporting ACP Category - Florence - Muscle Shoals MSARental and Leasing23.57Other Support Services1.44Publishing142.68Motion Pictures138.46Sound Recording5.25Broadcasting157.20Other Information Services15.88Printed Goods Manufacturing44.61Jewelry and Silverware Manufacturing11.14Musical Instruments Manufacturing3.30Custom Architectural Woodwork and Metalwork Manufacturing12.44Camera and Motion Picture Equipment Manufacturing0.79Grant-Making And Giving Services1.79Government443.94Construction43.41Wholesale and Transportation Industries73.74Retail Industries279.91Total Supporting Arts and Cultural Production1,399.58Source: Consultant ProjectionsOnce 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 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 EstimatesFlorence - Muscle Shoals MSACoreSupportingOtherTotal Direct333.371,399.5876.041,808.99Indirect140.42676.8432.03849.28Total 473.792,076.42108.072,658.27Source: Consultant ProjectionsNormally, 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. EARNINGSSalaries 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. 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. 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 $48.66 million. Earnings information is summarized in Table 9. Table 9: ACP Direct, Indirect and Total Earnings EstimatesFlorence - Muscle Shoals MSA ($Millions)CoreSupportingOtherTotal Earnings$11.80$48.66$2.35$62.81Source: Consultant ProjectionsCustomarily, 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. TAXESEarnings 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. 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%. 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 $350.08 thousand. Table 10 provides tax estimates for each of the tiers. Table 10: City and County Sales Tax Collections Attributable to ACPFlorence-Muscle Shoals MSA ($Thousands)Taxable SalesCounty TaxesCity TaxesTotal TaxesCore$1,940.07$19.40$46.37$65.77Supporting$8,000.31$80.00$191.21$271.21Other$386.37$3.86$9.23$13.10Total $10,326.75$103.27$246.81$350.08Source: Consultant ProjectionsSUMMARYOverall, 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 ACP Total Employment2,658.27ACP Total GDP$203.76 MillionACP Total Earnings$62.81 MillionACP County Sales Taxes$103,270ACP City Sales Taxes$246,810Source: Consultant ProjectionFinally, 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 F-MS as presented in this report. About the AuthorsKeith 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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