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0 COST / BENEFIT ANALYSIS DRAFT COPY Economic Impact Concepts & Methods The investment in a new Youth and Amateur Sports Complex project will be expected to provide quantifiable benefits. These quantifiable benefits often serve as the "return on investment' of public dollars that are contributed to develop the facility project and site. Quantifiable measurements of the effects that facility project could have on the local economy are characterized in terms of economic impacts and fiscal impacts. Direct spending represents the primary spending that would occur as a result of the construction and operations of the Youth and Amateur Sports Complex. Direct spending occurs in three ways: A primary intent of this analysis is to estimate the direct spending that could occur directly at the Youth and Amateur Sports Complex itself, in order to approximate the potential associated tax revenues generated from such spending. The vast majority of Construction and In -Facility Spending will be estimated to occur within the Mounds View area. Additionally, net new impacts will be generated throughout the Mounds View area, primarily relating to Out -of -Facility Spending (i.e., spending occurring off the Youth and Amateur Sports Complex site by visitors to the Mounds View area on items such as hotels, restaurants, retail, transportation, etc.). From a broad perspective, gross direct spending would flow to various economic entities, including the City of Mounds View, Ramsey County and other applicable municipal government(s), restaurants, hotel operators, retail businesses and other such entities. However, some of the spending that occurs in connection with the ongoing operations of the Youth and Amateur Sports Complex project would not fully impact the local area. As such, reductions must be made to gross direct spending to reflect the amount of direct spending associated with the Youth and Amateur Sports Complex project and site improvements that are considered net new to Mounds View. These adjustments include: LEAKAGE represents the portion of gross spending estimated to occur outside the larger geographic area considered for this analysis (Mounds View). Immediate leakage occurs when initial direct expenditures occur outside the area, such as an out-of-town Youth and Amateur Sports Complex visitor that patronizes a hotel or restaurant located outside of Mounds View. Leakage also occurs when initial local spending is used immediately to pay for goods, services, etc. outside of Mounds View. Examples of this type of secondary leakage include food and beverage profits retained by companies based outside of Mounds View. DISPLACEMENT refers to spending that would have likely occurred anyway in Mounds View without the presence of the Youth and Amateur Sports Complex. Examples of displaced spending would include spending by Mounds View residents in connection with their visit to the new Youth and Amateur Sports Complex site (registrations, food and beverage, retail items, etc.) that would have been spent in Mounds View anyway on other items (e.g., movies, restaurants, shopping, etc.) if they did not visit the Youth and Amateur Sports Complex site. Another example of displaced spending would include out -of -facility spending by non -local individuals visiting from outside of Mounds View whose primary purpose for visiting Mounds View was something other than visiting or participating in activities at the Youth and Amateur Sports Complex itself, and who would have spent their money in some other form in Mounds View. The concept of displacement is oftentimes referred to as the substitution effect. The flow of gross direct spending is adjusted to reflect only the spending that is considered net new to the local economy (i.e., Mounds View). The resulting spending after all adjustments is referred to throughout the remainder of this analysis as net new direct spending. C1 .,,iS Feasibility Study of a Potential new Youth and Amateur Sports Complex in Mounds View, Minnesota 9 Page 55