Games CEO Discusses Economic Activity Model
Sunday, June 24, 2012 @ 4:43 AM
Prince George, B.C. – The 2012 tax notice issued by the City of Prince George states that the 2015 Canada Winter Games could generate 70 to 90 million dollars in economic activity. But where does that figure come from and how is it arrived at?
Attempts to reach Mayor Shari Green to pose the questions to her have not been successful. The City’s Manager of Communications, Chris Bone, says she believes the figure results from a standard activity formula that is used by the Canada Games Council and is based on experience with past games.
The CEO of the 2015 Canada Winter Games, Stu Ballantyne, says the Canadian Sport Tourism Alliance in Ottawa has developed a model which is widely accepted by government as the economic modeling for events. Events are scored based on the model and that’s how the government decides on funding. He says the 70 to 90 million was done on an estimate based at the bid time, and an estimate will be re-done once the final budget for the games is released. Ballantyne says “we will produce a pre-games forecast and then we will do a post-games proper assessment and compare the two and that will give us an actual economic assessment for the games.” He says the 70 to 90 million is simply a general assessment.
Ballantyne says the 70 to 90 million “captures money spent by the host society, money spent on a particular games by outside sources within the private sector, money spent by visitors coming here from further than 80 kilometres away, what roughly would have been paid in provincial and federal tax, how many full-time job equivalents the games have created, how much activity went on and how much industry output was directed at the games.” He says the 70 to 90 million measures everything that the city would have benefitted from. “It doesn’t mean that that money went to City Hall or came to the games. It’s just a collective.” It is an assessment model that works for government so they can determine what their funding for an event is going to be long term.
The 70 to 90 million also includes legacy funds. Ballantyne says “if it’s spent on behalf of the games or if its spent by the games on a form of legacy, for instance, the Kin Centre Enhancement Project would factor in because it is a legacy for the community and ultimately the games were the catalyst, so it does get counted.
Ballantyne says the 2015 committee wants to have its budget forecast completed by the end of this year.
Comments
This is another example of **creative accounting** The end result is a rosy picture of the games.
Fact of the matter is, these games actually cost the host city money.
Murkey calculations, PR Statements, and other data, not based of fact, is the problem.
Much like the Northern Sports Centre that was to be self supporting. The end result is that it is subsidized by approx $600,000.00 per year. $300,000.00 from the City and $300,000.00 from the University.
Phony numbers are used to get these projects approved, and after the money is spent we get the real costs. Ie; maintenance, staffing, etc; The same thing applies to the Winter Games. There is not a hope in hell that these games will make money for the City.
Have a nice day.
So do I get my tax levy back?
No you can’t. They need that money to pay Stu, Todd and Mike’s salaries.
There is no proper economic model in place for any of the 8 development regions in BC.
The link below is to a site provided by the Institute of Charter Accountants of BC.
http://www.bccheckup.com
Click on the regional reports to see an annual summary of economic activity.
A proper economic model for this province would be able to take a project such as the construction of a building like the RCMP station, a housing subdivision, a 100 room hotel, a major concert at the CN Centre, a 600 delegate 3 day convention, a BC Summer Games, a Canada Winter Games, a new biomass Ethanol plant operation, etc. and distribute the money invested on a pone time basis or an annual operating basis to the various economic regions.
To the best of my knowledge, we have no such model. I know, because I have been involved with projects which would require such a model to do a proper economic income assessment for at least the Cariboo Development Region. It simply does not exist.
If $40 million is spent on a project here, there is a model of how it will affect BC versus leakage out of the province.
The thing is, no one is concerned about that. My only rational conclusion for that attitude is that the numbers for BC are, of course, generally quite high so it presents a “positive” image for the local promoters. If they were to see the actual economic benefit to the local region, some of the projects/events simply do not do anywhere near as well as the reports indicate.
When that happens, the answers to questions posed to goods and service providers afterwards are sometimes inconsistent with the reporting out economic numbers.
Will a two week national event in the middle of winter increase gross income for:
1. car rentals
2. hotels
3. taxis
4. KFC
5. Two Rivers Gallery shop
6. Grocery stores
7. Liquor stores
8. Pubs
etc. ?
Of course!!
Will there be loss of opportunity from “regular” customers?
Of course!!
Will a two week national event in the middle of winter increase gross income for:
1. Auto body shops
2. Appliance stores
3. Electronics stores
4. Furniture stores
5. Electronics stores
6. Kitchen appliance stores (departments)
etc. ?
Of course not!!
Will there be a loss of opportunity by the CN Centre to bring in an international music star touring the Western Circuit at the time?
Who knows?
This is a link that explains a bit more about the model which will likely be used:
http://canadiansporttourism.com/industry-tools/steam-sport-tourism-economic-assessment-model.html
Sport Tourism Economic Assessment Model (STEAM)
As it says on the site:
“depending on the assumptions made during the preparation of these studies, the estimated impact can vary widely.
This is not like modelling the weather for weather forcasts, or modelling the preciptiation impact of a watershed on the water flow or high level of a downstream river. In both those situations the predicted attribute values can be measured for the predicted slice in time.
There is no large scale, integrated economic model that can do that. Stream can look at surveys after the fact, but real impact cannot be measured with a 100% certainty.
So, that leaves a lot of room for those on either side of an economic impact discussion to feel that they have won their side of the argument. ;-)
This is the STEAM model applied to the 2011 Canada Winter Games in Halifax
http://canadiansporttourism.com/sites/default/files/docs/2011_CWG_EI_Assessment_Final.pdf
We must remember that Halifax is the provincial capital, is actually a regional municiplaity, and thus is a large population base in the provincial economy, unlike Prince George. The Whitehorse Games were similar. From an economic perspective, Whitehorse is essentially the Yukon. So were at l;east half of all the previous Winter Games
Prince George is different.
Here is the conclusion of the 2011 post games economic impact assessment.
1. The total industry output (or gross economic activity) supported by the event was $131.0 million (that includes the multiplier effects and includes total Canadian impact as far as I can determine from reading the report)
2. total spending generated by the Games was $61.8 million (this is direct spending)
3. The resultant increase in net economic activity was $58.3 million throughout the province
4. of which $34.9 million occurred in Halifax.
Thus just over half of the expenditures occurred in Halifax.
We have to remember that as the capial and a relatively large regional municipality, Halifax has a large service industry and even goods producing community. Thus, I expect to see the proportion of direct money spent on the Ganes staying in our community to be significantly less than the soituation encountered in Halifax.
Finally, the taxman – the event brought federal government tax revenues of $10.5 million, and an additional $10 million in taxes to the province with $1.2 million to Halifax. I am not sure where that comes from other than the taxes raised by increased taxation of property owners as is happening here.
So, just as an example, there is one of those losses of opportunity. We could have raises those taxes to spend on maintenance projects. But, we did not. So now infrastructure will suffer because the maintenance will happen too late and we will have to pay more to fix the problems in the future.
Debora Munoz voted against this because we could not support it.
Debora Munoz lost her seat at the election.
PG residents only have themselves to blame for the the group sitting at the Council table right now.
Oh, btw, total spending includes capital spending on such things as the KIN I in our case.
Some, or all of that would have had to be spent by us anyway somewhere down the road for upgrading and improving the capacity of an existing facility.
I would include those types of spending in a different category.
http://metronews.ca/news/halifax/14499/officials-laud-big-gains-from-games
March 1, 2011 Headline in Halifax paper – OFFICIALS LAUD BIG GAINS FROM GAMES
“Numbers arenât solid yet, but it looks like the Canada Winter Games slid at least $125 million into Halifaxâs pocket.”
“Games CEO Chris Morrissey said theyâre conducting a post-Games economic study that will take about three months to complete.”
âBut we still believe (the economic impact) will be $125 million-plus,â he said.
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Some people just do not understand where the money which was spent goes.
Of course, the other thing that people do not understand is that the average person tends to have a relatively finite amount of disposable income which they spend on a regular basis.
In order to spend it at Location A instead of locations B or time period A instead of time period B one has to do exactly that – make a choice.
Thus, the key question that is likely never asked of people in addition to what they spent money on is what they did not spend money on defined by location.
I do not think very much of this money is NEW money but simply reallocated and redistributed money.
Thus it becomes even more important to determine what is re-allocated locally. In other words, what did the event City gain by picking up leakage from other communities across the country?
And, of course, what did local infrastructure and associate user groups gain by reallocating money from project/event A to B?
We do not really want to know that, do we?
If games would make money for a City, then the FCM would be lobbying Ottawa and the provinces to double the number of celebrations we have.
We could have a Parks festival each year in a differnt location. Germany did that for a while, for instance, and they got beautiful urban parks out of it. At a cost. Not for free.
We could have a national theatre festival in alternate years in different locations. New theatres will grow in each region over time.
Once we set our minds to it, cities would be overflowing with money. ;-)
From Scientific American
Why Economic Models Are Always Wrong
http://www.scientificamerican.com/article.cfm?id=finance-why-economic-models-are-always-wrong
“It has become routine for modelers in finance to simply keep recalibrating their models over and over again as the models continue to turn out bad predictions.
“When you have to keep recalibrating a model, something is wrong with it,” he says.
“If you had to readjust the constant in Newton’s law of gravity every time you got out of bed in the morning in order for it to agree with your scale, it wouldn’t be much of a law.
But in finance they just keep on recalibrating and pretending that the models work.”
The Problem of Accuracy of Economic Data
http://mises.org/daily/2280
“There is a complete lack of incentive to provide accurate information for government statistics and economic researchers on the part of companies, because to do so would require a costly and burdensome process.
“In addition to the lack of accurately designed collections of data, there exists …. the possibility of hiding of information or outright lying.
“Another potential source of error consists in the inadequate training of those who observe economic data. Whereas in the physical sciences the observers are the scientists conducting the experiment, the observers of economic data are often not trained at all. A lack of training can lead to error in data collection”.
So, let us all continue to play the game of pretend, why don’t we.
A lot of people understand how primitive this stuff actually is but no one has an incentivet to change it because that is simply how the world of regional economic works. Voodoo economics continues ot come to mind … ;-)
man Gus you must be retired. I wish I had the time to scan the web and blog like you.
Unlike you, I see the Canada Games as nothing but positive. If I understand it correctly the only money we taxpayers are putting out is the money for the badly needed capital improvements at the Kin centre so it is an investment in infrastructure. The added bonus is the province and federal governments are also kicking in some capital dollars, I think 3 or 4 million each which will make it a better facility than we could have ever have afforded on our own.
The operational budget is completely financed by the province and federal government with fund raising and ticket sales covering the rest. No taxpayer money for operations and in fact the host society should pay market rates for use of civic facilities.
Now you can argue that the money from the feds and province is still taxpayers money and there is only one taxpayer but if it comes down to a choice between spending that here or in Kamloops or Kelowna, I am glad PG did a great job and won the bid!
I say way to go to Les Waldie and all those who volunteered in putting the successful bid together and I am sure Stu and his crew with the Host Society will do an excellent job implementing this once in a lifetime experience.
Maybe Opinion 250 needs a name upgrade. How about “Opinion 250 and Gus”?
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