This problem set is due at the beginning of class on 12 November. Late submission will be penalized.
"Economic impact analysis" provides a measurement of the direct and indirect effect within an area of expenditures induced by the creation of a new facility. In this case the "new facility" is the Carolina Panthers operation inclusive of Ericsson Stadium. We are interested in the impact of the new facility on Mecklenburg County alone in this exercise. The figures used in this assignment are manufactured for this use, and are not necessarily an accurate representation of the Panthers' true contribution to the economy of Mecklenburg County.
A. Sources of increased expenditure associated with Carolina Panthers.
1. Operating revenues of the Carolina Panthers. The attached memo outlines the ticket and non-ticket revenue of the Panthers for its events.
In addition to these, the Panthers receive $89 million annually in broadcast revenues, $6 million in local advertising, and $8 million as a share of the receipts of NFL-licensed merchandise.
2. Revenues generated by other events. We expect that there will be the equivalent of five sold-out non-football events at Ericcson on an annual basis. Total expenditures at these events are expected to yield $15 million in ticket sales, concessions and parking.
3. Revenues generated by the visiting teams and media. These expenditures come exclusively from individuals residing outside the MSA, and are reported in the attached table. These are all expected to occur within Mecklenburg County.
4. Revenues generated by spectators at Ericcson events. Various studies have indicated that spectators tend to spend on average the following percentages of the cost of admission on other activities:
B. Where do the spectators come from?
According to recent estimates, 55 percent of spectators at the Panthers games will live in Mecklenburg County. For the non-Panthers events, we anticipate that the spectators will have the same split between Mecklenburg and non-Mecklenburg residents.
C. What is the appropriate multiplier for indirect
effects?
Professor John Connaughton of UNC-Charlotte estimates that the appropriate indirect
expenditure multiplier for Mecklenburg County is 2.05. Studies of comparable
cities across the US suggest a multiplier of 1.2 for Mecklenburg County.
You may also use the rule that $50000 in expenditures will create one job on average.
D. Your assignment.
Your job in this exercise is the derivation of an economic impact analysis for
Mecklenburg County of one season of the Panthers' operation.
You can do so in the following steps:
1. (40 points) Calculate the direct increases in expenditure in Mecklenburg County due to the annual operations of the Carolina Panthers and Bank of America stadium. Show your calculations for each category of expenditure so that I can follow your reasoning.
2. (20 points) What component of the expenditures you cite in 2. can be considered incremental? (I.e., what part of the expenditure would not have occurred in Mecklenburg County in the absence of Bank of America Stadium and the Panthers?) Explain your reasoning. How do you treat the possibility that the Panthers will go into the playoffs? Explain how that will change your answers.
3. (20 points) Using the argument of the circular flow, there will be indirect expenditure and income effects associated with your calculations in 1. and 2. Calculate the income effect of the expenditures in 2, indicate what multiplier you will use for your calculations, and explain the reasoning behind your choice. What will be the total (direct plus indirect) expenditure effect on Mecklenburg County attributable to the Panthers and Bank of America Stadium?
4. (20 points) What is the annual employment impact of the Panthers/Bank of America operation in Mecklenburg County? Explain your calculations. Should it be based on total expenditures or total incomes? Which should be the basis for future development planning?
You may find it necessary to make assumptions on consumer behavior to complete your work. When (and if) you do so, be sure to document what you have done in your assignment. Provide an explanation for any assumption made.