Robert Mackenzie
November 19, 2004
The merits of the proposed LVEC and its siting need to be better understood. So far the proposal with so many uncertainties has been met with considerable controversy. If Kingston is to enjoy any possibility of reaching a community consensus on the LVEC, economic and community impact studies of the type outline below must be undertaken.
There are two very relevant financial studies that apply to significant major public projects such as the proposed LVEC .The first is the micro study concerned with project financing. Such a study is concerned with how much and who pays for constructing and operating a proposed project. The importance of the project financing study is well understood and considered essential. This type of study is apparently being undertaken.
Should the project financing study indicate that the proposed LVEC requires public financial support a second type of financial study dealing with project economics becomes relevant. In such circumstances the question then arises whether the project generates sufficient net economic benefit to the community to justify public financial support. Supporters of the proposed LVEC claim it will make Kingston an entertainment centre, have an economic spin-off on the central business district and be a source of community pride. A project economics study attempts to substantiate this type of claim by assessing the economic impact of the project on the community as a whole. Such studies are not without their difficulties and critics claim such studies are frequently flawed in various ways including overstating multiplier effects and understating substitution effects. There is a wealth of literature on the subject. Much that has been written expresses grave doubts about the magnitude of the community benefit claims arising from LVEC type projects.
However the methodology of project economic studies is not difficult to understand. Even the attempt to undertake such a study stimulates the thought processes and lead to a deeper understanding of the extent of the economic merits of the proposed LVEC. Undertaking such a study would force a consideration of a number of relevant matters. How many new dollars would the proposed LVEC cause to be spent in Kingston? How many dollars currently spent in Kingston for entertainment would be diverted to the proposed LVEC? How many dollars would travelling entertainments take out of Kingston? What is the overall pecuniary impact? Will it actually be positive? Who will be the beneficiaries? Will there be losers? What is the value of the non-pecuniary impact? What is Kingston willing to pay for such things as publicly subsidized entertainment, economic stimulation and pride? If these are the nature of the payoffs then are there other more effective ways of achieving the same ends?
The literature is vast and needs to be surveyed and appreciated. Here is a commentary published by the C.D, Howe Institute: Bread and Circuses -The Local Benefits of Sport and Cultural Businesses
The benefits of having sports or cultural businesses in a community are not nearly as large as their proponents argue. One way to analyze those benefits is to look at the multiplier effects of spending on sports and culture. It is important, however, to look at new spending on sports or cultural events; if such spending is simply diverted from other spending in the community, there will be no multiplier effect. Also, it is often the case that much spending in a local economy tends to be for goods and services produced outside that economy.
The upshot is that the multipliers for spending on sports and culture tend to be small, and might even be zero or negative in some cases. Because the multipliers are low, new job creation is minimal. And many of the jobs that are created come at the expense of jobs and business in other locales.
A second type of benefit involves nonpecuniary benefits: the argument that having more sports and culture in a community improves the ambience, morale, civic pride, and desirability of living in it. The problem with this argument is that it is difficult to evaluate.
Ideally public expenditures should be spent in the combination that maximizes net economic benefit. A project such as the proposed LVEC will maximize net economic benefit only if it produces a greater net community benefit than a forgone opportunity. If Kingston was unexpectedly to find $35-40 million on its doorstep how would the City spend it so as to produce the maximum benefit to the city?
The City has approved the concept of a freestanding LVEC. In doing so the City would appear to have given little consideration to the range of alternatives such as co-siting the LVEC with other arenas, co-siting it with other recreational facilities, or considering a large enough site that would permit the possible future construction of some other type of related facility such as convention facilities. What opportunities will the City be giving up or postponing to finance the City's share of the proposed LVEC? Roads and sewers? A new police station? An expanded fire service?
The idea of maximizing net community benefit is also applicable to the siting of the proposed LVEC. Different sites may have different advantages and disadvantages and the overall net benefit is likely to vary depending on location The Inner Harbour site might alternatively be better used for residential, waterfront or some other use. What are the opportunity costs of sitting on the Inner Harbour?
The failure to assess the net community benefit of the proposed LVEC in comparison with other possibilities will become increasingly apparent depending on the magnitude of the necessary public financial support required by the proposed LVEC.. How will the City support a claim that by financially supporting the proposed LVEC it was maximizing the net economic benefit from its limited resources?
The concept of environmental assessment has become widely accepted as a part of the planning process for major projects. The concept has more recently been broadened to provide a comprehensive approach to assessing the impact of projects on people. Traffic and parking and perhaps noise have been identified for early study as a part of determining the feasibility of the Inner Harbour site. These and other matters should be assessed not only with a view to determining whether the proposed LVEC will work at the Inner Harbour site. The potential nuisance aspects should also be assessed from the perspective of those people who will be impacted. Early citizen involvement is needed if the decision makers are to have a true view of the impacts as perceived by those affected and if satisfactory mitigation measures are to be adopted.
Here are three web sites that relate to community impact assessment:
Start with http://www.dot.state.fl.us/emo/pubs/Phys_Soc/Phys_Soc_Sci.htm
... and then open ...Community Impact Assessment Brochure
... and also open ...National Community Impact Assessment Strategic Plan
Then for more detail on the scope of CIA see: http://www.ciatrans.net/TABLE.html and http://www.cutr.usf.edu/pubs/cia_handbook.htm. Both of these documents would of course have to be adapted for application to the LVEC proposal.
Last updated 20.11.2004