Amazon’s Impact in Crystal City, Virginia

Amazon announced plans for a new corporate headquarters in September 2017, setting off a frenzy of bids (238 proposals) as well as speculation as to which city would win the competition. On November 13, 2018, it became official, Crystal City, Virginia—just south of downtown Washington D.C. and the location of Ronald Reagan Washington National Airport—would become home to a new headquarters for Amazon, splitting the overall planned expansion with New York City. Chmura Economics & Analytics was honored to perform the economic impact analysis for the Crystal City expansion on behalf of the Virginia Chamber Foundation. This impact analysis included a study of the job, spending, and tax effects projected to result from Amazon’s new headquarters in Northern Virginia.

A Case Study in Labor Market Analytics

How would you handle a request from your boss asking whether you’ll be able to continue to attract the right talent needed for your current business operations? In today’s economy, that conversation might go something like this: The unemployment rate in Northern Virginia is 3.1 percent as of April 2017 and the company’s growth plans are contingent on adding at least 50 more cyber security jobs a year in the Stafford County office over the next four years. I need you to provide me with an assessment of whether we can acquire the talent in the region as well as a contingency plan for expanding to an alternative location where the labor is available.

The Economic Impact of Richmond 2015 in Richmond MSA and Virginia

In September 2015, Richmond hosted the Union Cycliste Internationale (UCI) World Road Cycling Championships. Based on the number of spectators and spending in the region, the event was a success!

This international sporting event attracted an estimated 645,000 spectators from around the world.

In addition to the spectators, there were 5,284 credentialed participants at Richmond 2015, including athletes and their supporting staff, UCI and Richmond 2015 organizers, race officials and staff, and media representatives and journalists.

An intercept survey we performed during the event found that spending by visitors to Richmond 2015 generated an estimated $138.4 million in economic impact (direct, indirect, and induced) in the Richmond metropolitan statistical area (MSA), and $145.9 million in Virginia.

Combining event organization and visitor spending, the total economic impact of Richmond 2015 was estimated at $161.5 million (direct, indirect, and induced) in the Richmond MSA and $169.8 million in Virginia.

See the full economic impact and survey results here: The Economic Impact of Richmond 2015 in Richmond MSA and Virginia (PDF).

Estimating Spectators for Economic Impacts is Tricky

The UCI World Championships will soon be held in Richmond, Virginia from September 19th through the 27th. In 2011, when the city was preparing the bid for hosting the cycling championship, Chmura was asked to estimate the event’s potential economic impact. One of the most formidable challenges in that process was to estimate the number of spectators.

We estimated the number of spectators would be 450,000.  As we clarified in a previous blog, 450,000 spectators is not the same as 450,000 visitors.  Despite having thought we explained this difference, we continue to field questions like “how did that number come about?”  The purpose of this blog is to de-mystify the process of estimating this figure and to provide guidance for others who are estimating the economic impact of events in their region.

Four years ago, faced with the challenge of estimating the number of spectators for a major event, the prudent approach was to look at past, similar events.  This mirrors the typical process of any economic projection— utilize data from the past to provide valuable information that helps predict the future.  The number of spectators did not come out of a magic “black box.” Rather, the process was guided by academic research in the tourism industry.

Tourism literature consistently indicates that a region’s population base is one of the key determining factors for the number of visitors/attendants to tourism attractions such as historic sites, festivals, concerts, parks, and museums. Other key factors are the population’s interests, economic conditions such as travel costs, and the existence of a tourism infrastructure such as roads and airports. 

Since we know the population base of Richmond, its surrounding counties, and other major cities within a few hours’ drive, the missing piece is how many of the nearby residents are interested enough to attend the race.  For that information, we examined the number of spectators who attended past UCI World Championship racing events relative to the population base of the host region. 

Right away, we faced challenges. The majority of past races have been held in Europe, which has a long history of public support for cycling. This being said, the public interest in these races in Europe would be higher than can be reasonably expected in the United States, therefore using European races as examples would likely over-estimate the attendance in Richmond.  Over the past decade, the only two non-European championship races were held in 2003 in Hamilton, Canada, and in 2010 in Melbourne, Australia. The 2003 Hamilton race reported 230,000 spectators while the 2010 Melbourne race reported 300,000 spectators.

Among those two races, Australia is very far from cycling centers in Europe or North America while Hamilton has more similarity to Richmond. For that reason, we used a survey from the Hamilton race to derive our estimate. 

Hamilton is a mid-sized city (over 700,000 persons in the metro area) not too far from Toronto with a gateway international airport. Richmond is also a mid-sized city (over 1,000,000 population in the metro area) and not too far from several major U.S. cities.  Both Hamilton and Richmond are on the eastern part of the North American continent and are relatively easy to reach.

Hamilton’s survey of over 1,000 race attendants identified the spectators based on the distance of their home to Hamilton. Using that information as a proxy, we calculated the percentage of the regional population base that would travel to see the race based on their distance to Richmond.  The Hamilton survey also contained information on the number of races each visitor attended. Adjusting for the fact that the Richmond race is longer (9 days as opposed to 6 days for Hamilton), we estimated that the total spectators to the Richmond race would be 450,000.

Four years ago, we used the past events to make a future projection, just like any economist would do.  Like any economic projections, there are many unforeseeable events that can affect the actual number of spectators. For example, the global economy and exchange rates can play a role in attendance. With the European economy struggling and the high value of the dollar, European visitors may find it too expensive to travel to America.  Marketing and outreach efforts will also affect the number of spectators. Locally, traffic and parking can affect the number of spectators from the region, and even weather can play a role in attendance.

With the race just about to begin in 22 days, we look forward to measuring the true number of spectators.

 

Governor Announces New Chmura Economics Report Finding New Spending on Construction Will Annually Sustain 13,058 Jobs and Have $9.5 Billion in Economic Impact

Governor McDonnell Ceremonially Signs Virginia's Historic Bi-Partisan Transportation Funding Bill
– Legislation Provides Over $3.4 Billion in Statewide Funding, $1.5 Billion for Northern Virginia, and $1 Billion for Hampton Roads Over Next 5 Years Alone –

~Reduces Prices at the Pump While Providing Virginia's First New Dedicated, Sustainable Revenue for Transportation in 27 Years~

~At Signing, Governor Announces New Chmura Economics Report Finding New Spending on Construction Will Annually Sustain 13,058 Jobs and Have $9.5 Billion in Economic Impact~

***McDonnell: "This may technically be transportation legislation, but at the end of the day, it's a jobs bill."***

RICHMOND - Today, surrounded by legislators and community and transportation leaders from across the Commonwealth, Governor Bob McDonnell ceremonially signed Virginia's Road to the Future (HB 2313), the state's first comprehensive transportation funding plan approved in 27 years. Following on the heels of nearly three decades of inaction on the critical challenges facing transportation funding in Virginia, this historic bi-partisan legislation supported by Republicans and Democrats from each chamber will provide more than $3.4 billion in additional statewide transportation funding, more than $1.5 billion in additional funding for Northern Virginia, and more than $1 billion in additional funding for Hampton Roads, over the next five years alone.

"For 27 years our citizens have sat in traffic as congestion has increased and our bridges and roadways have deteriorated," said Governor McDonnell. "For 27 years our citizens and businesses have demanded solutions. For 27 years, Democrats and Republicans in the General Assembly failed to reach an agreement on this critical issue. However, we stand here today, thanks to the leadership and support of Speaker Howell and a broad bi-partisan coalition of legislators, business leaders and citizens, to celebrate this historic achievement. Not only will this legislation address both the short and long-term funding needs of our transportation system, it will also annually sustain 13,058 new jobs, have more than $9.5 billion in economic impact, and improve Virginians' quality of life. Instead of sitting in traffic, our citizens will be able to spend more time with their families enjoying the many benefits this great Commonwealth has to offer. Most importantly, this legislation will ensure that Virginia's economy can grow in the years ahead, and that businesses will have the infrastructure they need to create the good-paying jobs Virginians deserve. This may technically be transportation legislation, but at the end of the day, it's a jobs bill.

"When we put forward our comprehensive transportation funding plan this year, we called for three fundamental changes to how Virginia funds transportation, all based on conservative fiscal policy. First, we called for a reduction or elimination of our dependence on an archaic, outdated gasoline tax in the decades ahead. Second, we called for tying future transportation funding to the far more sustainable sales tax. Third, we called for treating transportation like the true core function of government that it is, one essential to economic growth and job creation in our state. While the final bill was in some ways different than our original proposal, it met all three of the goals we established. The final product is the very essence of compromise in that this legislation has components some will like, and components others may dislike. That's the nature of any true compromise. Our success demonstrates that both parties - be it here in the Commonwealth or up in Washington - can still achieve a great deal when partisan differences are put to the side and we work collaboratively toward the solutions our citizens demand. This bill is crucial to the future growth of Virginia's economy, and this is a great day for job-creation in the Commonwealth."

Over the first five years, HB 2313 will:

  • Generate more than $1.8 billion in additional funding for maintenance, thereby eliminating maintenance crossover transfers
  • Provide $660 million in dedicated new construction funding, which, when combined with the elimination of maintenance crossover, will grow construction spending by more than $2.4 billion
  • Increase funding for Virginia's transit providers by $509 million
  • Provide more than $256 million in funding for intercity passenger rail, the first dedicated state funding for this vital service
  • Generate additional revenue for Virginia's airports and seaports
  • Generate annually between $272 million to $335 million in Northern Virginia and $172 million to $226 million in Hampton Roads for regional transportation priorities

Additionally, in his remarks, the governor today announced the findings of recently completed economic impact analyses conducted by nationally renowned firm Chmura Economics. The first analysis, which focuses on new roadway construction spending as a result of HB 2313, determined that the additional funds in the Commonwealth Transportation Board's Six-Year Improvement Program will have an economic impact of $8.1 billion and annually sustain 10,133 jobs from FY 2014 through FY 2019. The second analysis, which focuses on new transit and rail spending, determined that the additional funding provided to the Department of Rail and Public Transportation will have an economic impact of more than $1.4 billion support 14,625 jobs, or 2,925 jobs per year, between FY 2014 and FY 2018. The new dedicated intercity passenger rail funding will enable Virginia to extend passenger rail service to Roanoke within the next four years.

"This year, Republicans and Democrats put their differences aside, sat down at the table and demonstrated to our citizens that unlike Washington we are able to work together to achieve the results they demand," said Speaker of the House Bill Howell. "I applaud Governor McDonnell for his leadership and willingness to tackle the difficult challenges facing Virginia, and I thank the broad bi-partisan group of legislators and stakeholders who made today possible."

Speaking about this historic legislation, Marty Nohe, Prince William County supervisor and chairman of the Northern Virginia Transportation Authority said, "Years of inaction in the General Assembly have resulted in Northern Virginia now being ranked as part of the most congested region in the United States. No other singular issue has as great an impact on our ability to attract and retain economic development opportunities and jobs. Now, with the passage of this historic compromise, the local governments in Northern Virginia will be able to work collaboratively to address our critical regional needs so that we can remain economically competitive and improve our citizens' quality of life."

"As home to one of the largest naval installations in the U.S. and the economically crucial Port of Virginia, the Hampton Roads' region has for years struggled with our unique transportation challenges," said Hampton Mayor Molly Ward, chair of the Hampton Roads Transportation Planning Organization. "Our region's infrastructure needs are tremendous and with the inclusion of the Hampton Roads regional component, HB 2313 will finally provide us with the foundation to begin tackling these difficult challenges."

"Following on the heels of the 2011 bond package, Governor McDonnell made a promise to continue his successful efforts to address Virginia's transportation funding needs by putting in place dedicated, sustainable revenues for the long-term," said Virginia Transportation Construction Alliance Executive Vice President Jeff Southard. "This year the governor delivered. Not only will this legislation improve mobility, reduce congestion and promote further economic activity, but it will put in place the sustainability necessary to build upon and continue the progress Governor McDonnell has made over the past three years."

Following General Assembly approval of the governor's recommended amendments, HB 2313:

  • Eliminates the 17.5 cents per gallon excise tax on gasoline and diesel fuel
  • Replaces the motor fuels tax with a 3.5 percent sales tax on the wholesale price of gasoline and a 6 percent sales tax on the wholesale price of diesel fuel
  • Increases the state and local sales and use tax from 5 percent to 5.3 percent
  • Partially eliminates the 2 percent motor vehicle titling tax exemption by increasing the rate from 3 percent to 4.15 percent
  • Creates a $64 Alternative Fuel Vehicle fee to ensure that all drivers are contributing to Virginia's roadways
  • Levies an additional 0.7 percent local sales tax, a $0.15/$100 Grantor's Tax, and a 2 percent Transient Occupancy Tax in Planning District 8
  • Levies an additional 0.7 percent local sales tax and a 2.1 percent fuel sales tax in Planning District 23

A final summary of the HB 2313 and the Chmura economic impact analyses can be found at:http://www.varoadtothefuture.com/.