Airport Economic Impact Methods and Models (2008)

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24 The survey and literature review included in this synthesis report confirm that airport economic impact studies are com- monly used as tools for airport operators, planners, and state agencies. They are used for a number of purposes, including measuring the economic value of the airport to the local community, region, and specific industries; justifying capital expenditures of public funds for airport improvement projects; and supporting ongoing airport and community planning efforts. Airport economic impact studies also rank highly as tools to support community education and public relations, as well as to raise public awareness. The review presented here shows that both users and authors of airport economic impact studies have identified a number of areas that could benefit from innovation. These needs pertain to the data collection process, the application of the model, and the presentation and use of the results. Some practitioners have begun to address some of these shortcomings. However, there is no central clearinghouse for information on airport economic impact studies and few doc- uments that define standardized methodologies. The combination of a relatively large number of identified shortcomings and a relatively moderate number of innova- tive techniques points to the need for future research. Part of the motivation for future research is simply that the FAA’s official guidance on economic impact analyses (Measuring the Regional Economic Significance of Airports) was origi- nally developed in 1986, with only a major update in 1992 (Estimating the Regional Significance of Airports). Therefore, there is no current, comprehensive guidance on this topic. This is especially noticeable for users of economic impact studies, which are less likely to be exposed to the broader (i.e., non- aviation) literature on economic impacts. Other reasons for conducting future research include the large range of vari- ations in definitions of variables and impact categories, the desire to address dynamic trends, the need to provide mod- els that present more than static snapshots, and the flexibil- ity to tailor methods to the unique circumstances at specific airports. This research should be structured to address two fun- damental approaches: (1) validation, assessment, and improve- ment of traditional methods; and (2) development of new methods. The following are specific suggestions for possible research in the area of airport economic impact studies. These sugges- tions are not intended to be exhaustive, but document some of the needs identified as part of this synthesis study. • Comparison of models: The literature review conducted for this study did not uncover any aviation-specific studies comparing input–output models. Such a compar- ison, especially of Regional Input–Output Modeling Sys- tem (RIMS II), Impact Analysis for Planning (IMPLAN), and Regional Economic Models, Inc. (REMI), would be useful because it would highlight the strengths and weaknesses of the models, and would provide input to the broader question of whether standardization is war- ranted. A study prepared for the U.S.DOT Office of Research and Special Programs provides limited evi- dence that the models can differ significantly, by a factor of 100% in one example. However, this study is based on hypothetical examples and is not specific to airports. Another article, by Rickman and Schwer, “A Compar- ison of the Multipliers of IMPLAN, REMI, and RIMS II: Benchmarking Ready-Made Models for Comparison,” compares the multipliers for RIMS II, IMPLAN, and REMI, as applied to a single county in Nevada. This report finds significant differences in the multipliers. The differences can be explained by the techniques used to regionalize national input–output coefficients. However, this study is also not aviation-specific. A more direct approach is recommended here, where each model is applied in an aviation setting, comparing results across models for one or more airports. • Evaluation of the benefits and trade-offs of standard- ization: It appears that standardization could resolve many of the issues identified as limitations to existing models in the survey and literature review. Standards for specifying data sources, geographic boundaries, and impact categories, for example, could allow airport-to- airport comparisons, as well as comparisons over time at any one specific airport. Standardization could also reduce the large variation in definitions and applica- tions of impact areas, variables, and multipliers, as well as address how offsetting impacts should be handled. Overall, this should contribute to improved credibility and familiarity with the methods used. Some drawbacks however are possible, such as in- creased cost and complexity, especially for smaller air- ports, and a reduced flexibility in designing creative or highly tailored approaches. New approaches should, to the extent possible, address the unique aspects of each airport. Standardization should not result in the use of an identical approach to measure the impact of all air- ports, but should instead focus on improving the process CHAPTER SIX CONCLUSIONS

25 of applying the models and methodologies. Standard- ization may also constrain the currently available wide range of budget options for conducting economic impact studies. Consequently, both the benefits and trade-offs of standardization should be evaluated. This analysis should include specific recommendations as to which aspects of economic impact studies represent the best candidates for standardization. • Research on improvements over the traditional input– output multiplier driven analysis: The primary objec- tive here would be to refine the existing approach. One possible technique for investigation includes relying more heavily on direct and indirect impacts, and less on induced effects. This would address the critique that induced impacts and the use of multipliers can be diffi- cult to explain. Impacts could also be divided into a more refined quantification of impacts, such as: – On-airport impacts; – Off-airport direct and indirect impacts (e.g., visitor spending); – Airport-dependent impacts (i.e., businesses that rely on transporting cargo and personnel by means of air transport); – Airport-related impacts through the provision of goods and services to airports, airlines, airport agencies, and airport-dependent businesses; – Investment impacts (i.e., economic benefits from investment in airport infrastructure); and – Tax revenue impacts (i.e., aviation-related tax revenues generated in the economy such as airport fees, fuel taxes, state income taxes, sales taxes, local property taxes for airport business users and suppliers, etc.). • Publication of a guide describing best practices for preparing economic impact studies: Such a guide should be intended both for users (e.g., how to define studies, select consultants, analyze results, and communicate to constituents) and authors (e.g., recommended models, specific methodologies, validation techniques, and stan- dardized practices). The guide should pay considerable attention to the development of strategies for improved data collection of more accurate information on aircraft operations and origin–destination data, especially at general aviation airports. Because one of the challenges relating to data collection at such airports may be fixed- base operator concerns over releasing commercially sensitive information, a survey of best practices has the potential of identifying approaches for obtaining this information. Traditional methodologies generally do not separate impacts by types of airport use, such as corporate, recre- ational, passenger, and cargo. These uses have different impacts, which may need to be approached in different ways. This is particularly applicable to general aviation activities, which often are treated as a single entity. Indeed, there is a wide range of different types of general avia- tion facilities that may provide unique impacts. At the same time, operators of general aviation airports are more likely to have budgetary constraints and therefore have less ability to initiate more complex, nuanced studies. More than any other type of operator, general aviation airports are likely to benefit from additional attention spent on documenting best practices for conducting air- port economic impact studies. Additionally, the guide should incorporate practical advice for conducting catalytic impact studies and other innovative approaches. The publication should also identify the risk of double counting impacts in hybrid approaches that combine methods. It should describe how economic impacts relate to the cost and benefit of a specific improvement to avoid a misapplication of economic impact studies where economic impact dollar amounts are used to directly offset cost dollar amounts. Finally, this evaluation should also consider the estab- lishment of a clearinghouse for information related to the conduct of airport economic impact studies. • Research on dynamic models and other methods to capture trends: The purpose of this research would be to address the issue of outdated results and the notion that economic impact studies represent a static snapshot in time. It would also address the absence of periodic updates documented in the survey results and the lack of information on trends. For example, one possible trend is that direct impacts may actually decrease over time with increases in industry efficiency. This trend, if documented, may place additional emphasis on the use of the measurement of catalytic impacts. Additional contributions to this list are possible. In gen- eral terms, the goal of such research should be to address the limitations of current methods, especially the lack of unique approaches for different types of airports, the difficulty of identifying trends over time, the challenge in comparing eco- nomic impact studies, and the inability to update an economic impact report without conducting an entirely new study. New models should be considered, as well as improvements on existing techniques that reduce the risk of misapplying or mis- interpreting current methods. Successful research could poten- tially allow for an economic impact analysis to be used to cap- ture new sources of funding, which would increase its value as tool for communities facing local investment decisions.