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Measuring and Understanding the Relationship Between Air Service and Regional Economic Development (2022)

Chapter: Chapter 4 Engaging with Regional Stakeholders on the Airport s Contributions to Economic Activity

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Suggested Citation:"Chapter 4 Engaging with Regional Stakeholders on the Airport s Contributions to Economic Activity." National Academies of Sciences, Engineering, and Medicine. 2022. Measuring and Understanding the Relationship Between Air Service and Regional Economic Development. Washington, DC: The National Academies Press. doi: 10.17226/26682.
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Suggested Citation:"Chapter 4 Engaging with Regional Stakeholders on the Airport s Contributions to Economic Activity." National Academies of Sciences, Engineering, and Medicine. 2022. Measuring and Understanding the Relationship Between Air Service and Regional Economic Development. Washington, DC: The National Academies Press. doi: 10.17226/26682.
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Suggested Citation:"Chapter 4 Engaging with Regional Stakeholders on the Airport s Contributions to Economic Activity." National Academies of Sciences, Engineering, and Medicine. 2022. Measuring and Understanding the Relationship Between Air Service and Regional Economic Development. Washington, DC: The National Academies Press. doi: 10.17226/26682.
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Suggested Citation:"Chapter 4 Engaging with Regional Stakeholders on the Airport s Contributions to Economic Activity." National Academies of Sciences, Engineering, and Medicine. 2022. Measuring and Understanding the Relationship Between Air Service and Regional Economic Development. Washington, DC: The National Academies Press. doi: 10.17226/26682.
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Suggested Citation:"Chapter 4 Engaging with Regional Stakeholders on the Airport s Contributions to Economic Activity." National Academies of Sciences, Engineering, and Medicine. 2022. Measuring and Understanding the Relationship Between Air Service and Regional Economic Development. Washington, DC: The National Academies Press. doi: 10.17226/26682.
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Suggested Citation:"Chapter 4 Engaging with Regional Stakeholders on the Airport s Contributions to Economic Activity." National Academies of Sciences, Engineering, and Medicine. 2022. Measuring and Understanding the Relationship Between Air Service and Regional Economic Development. Washington, DC: The National Academies Press. doi: 10.17226/26682.
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Suggested Citation:"Chapter 4 Engaging with Regional Stakeholders on the Airport s Contributions to Economic Activity." National Academies of Sciences, Engineering, and Medicine. 2022. Measuring and Understanding the Relationship Between Air Service and Regional Economic Development. Washington, DC: The National Academies Press. doi: 10.17226/26682.
×
Page 72
Page 73
Suggested Citation:"Chapter 4 Engaging with Regional Stakeholders on the Airport s Contributions to Economic Activity." National Academies of Sciences, Engineering, and Medicine. 2022. Measuring and Understanding the Relationship Between Air Service and Regional Economic Development. Washington, DC: The National Academies Press. doi: 10.17226/26682.
×
Page 73
Page 74
Suggested Citation:"Chapter 4 Engaging with Regional Stakeholders on the Airport s Contributions to Economic Activity." National Academies of Sciences, Engineering, and Medicine. 2022. Measuring and Understanding the Relationship Between Air Service and Regional Economic Development. Washington, DC: The National Academies Press. doi: 10.17226/26682.
×
Page 74
Page 75
Suggested Citation:"Chapter 4 Engaging with Regional Stakeholders on the Airport s Contributions to Economic Activity." National Academies of Sciences, Engineering, and Medicine. 2022. Measuring and Understanding the Relationship Between Air Service and Regional Economic Development. Washington, DC: The National Academies Press. doi: 10.17226/26682.
×
Page 75

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66 C H A P T E R 4 Engaging with Regional Stakeholders on the Airport’s Contributions to Economic Activity For airport management and regional economic development officials, it will be increasingly important for airports to retain and enhance their current levels of service and to improve that service as a means of preserving and increasing regional economic activity. And they will need to be able to convey these complex impacts to local audiences. Many stakeholders frequently struggle with fundamental economic concepts beyond measures of total jobs and wages at the airport. To the extent that airports and stakeholders better understand and recognize the contributions that air service makes to regional economic development, both will be better able to communicate that to the public at large. This will help position both to work toward common goals. Engaging with Regional Stakeholders Most cities or counties will have organizations that focus on general economic development and/or the needs and interests of the business community. These groups are valuable regional stakeholders for airports because they represent not only a major source of travelers, but more importantly because they can be effective advocates for improvements to the airport and its services. Evidence from the case studies show that airports with close working relationships can generate and sustain new or expanded air service to new markets. Chambers of Commerce Chambers of Commerce (“chambers”) are non-profit organizations that promote the local economy. There may be separate chambers for each community within a region along with an “umbrella” organization that supports broader regional interests. Chamber members pay fees to the organization for various services, including marketing and communication, advocacy (e.g., for changes in law or regulation at local, state, and federal governments), events, and other matters. The chambers elected or appoint officers and staff to assist with advocacy and programmatic efforts.

67 The project team interviewed officials with the chambers in each of the case study locations and analyzed basic information on those organizations. The team reviewed the chambers’ websites and annual reports (if available) to understand their organizations, vision, missions, goals, and metrics. The vision and mission statements speak to goals of enhancing local or regional economic activity. The chambers commonly adopted organizations that featured key themes: Economic development efforts promote business and a positive economic environment by assisting with business relocation or expansion. These may include development or multi-year strategic plans to build on the unique economic strengths of the region and promote targeted industries. For the case study regions, those targeted industries cited most often (by number of references) were  Advanced manufacturing  Financial services and technology  Health care, medical technology, bioscience, or life science  Logistics and distribution  Aerospace & defense  IT  Corporate headquarters and regional offices  Creative and digital media technology  Clean technology Workforce development efforts, incorporating initiatives to train people to start or advance their careers and ensure more students are college-, career-, and military- ready. Most included a reference to transportation and infrastructure. The areas of interest covered highways, bridges, public transportation, rail (freight and passenger), and air service. The emphasis on highways and surface transportation was usually connected to congestion and the ability of business and residents to travel within the area. The references to air service included links to the local airport’s website and a high-level summary of service offerings (e.g., number of nonstop destinations served)  Several case study airports noted that they maintain structured relationships with chambers or other regional partners regarding air service improvements. The regional stakeholders or partners can offer suggestions for new nonstop service, based on information from their memberships on developing Examples of Chamber “Vision Statements” – The chamber is the catalyst for business growth, community engagement and action to drive economic vitality and advance our position as a global leader in technology and innovation. – To lead our community, drive commerce in our region, and advance community and regional collaboration thereby enhancing the quality of where we live, learn, work, and play. – United to drive economic growth with one voice, one mission and as one region. – The chamber promotes economic opportunity, business education and successful business relationships throughout the region. Examples of Chamber “Mission Statements” – Prepare, develop and promote our community for economic growth. – Promote success and sustained growth by proactively providing information and resources, facilitating knowledge-sharing and elevating understanding of economic issues. – Promote and support the success of the regional business community through effective advocacy, education and relationship building. – Strengthen member businesses by enhancing economic and workforce development, resulting in improved quality of life in our community and region. – Add quality jobs to the region by recruiting new companies, supporting the success of existing companies, and assisting newly forming companies, to diversify the economy and have a positive impact on the quality of life.

68 markets and economic activity. In some cases, regional partners developed or supported initiatives to mitigate the financial risk that airlines might undertake when entering a market.  In interviews, airport officials cautioned that some stakeholder groups may not have extensive experience with air service development efforts. Consequently, those groups may have unrealistic expectations about airlines’ abilities or willingness to operate to specific markets. Among the stakeholder staffs interviewed, most did not understand how commercial air service was related to different businesses in the region. However, some organizations’ staffs thoroughly understood the value that air service contributes to different industry sectors via enhancing connectivity to markets and suppliers. This was especially true where airports had service to international business locations (as opposed to international locations that are primarily known as tourist destinations). Less frequently, chamber goals and advocacy efforts included references to enhancing the regional QOL. Although usually not clearly defined, these QOL aspirations were associated enhancing employment opportunities, economic diversity, improved average wages, and housing affordability. Against organizational visions and missions, chambers reported on the extent to which they achieved different goals and objectives. The chambers and other partners measured regional development and activity along these dimensions. As shown in Table 12, the performance metrics most often used were the number of new or retained jobs (with a highlight on those paying average wages above the regional median), the amount of capital invested, and the number of new businesses established. Table 12: Common Stakeholder Internal Metrics for Goal / Objective Assessment Metric Explanation Employment growth Increase the number of jobs from existing and new employers High wage employment growth Increase the number of jobs that pay above the area median wages and/or above the median wage within the industry Capital investment Attract a higher level of new investment from new and existing companies, real estate developers, and other investors Business startups Increase the number of new businesses created locally and startups attracted from outside the region (related: Diverse economy) Recruit businesses across a diverse set of industries Business recruitment and relocation Attract business expansion and/or relocation projects from outside of the community Educational attainment Increase the share of adult population with bachelor’s degrees Tax base growth Expand the local property tax and sale tax base for Brown County and for local municipalities Regions Characterized by Dominant Employer with Ties to Aviation Some regions may be characterized by single industry major employers that have a reliance on aviation. The local chambers of commerce may include that employer or not, depending on whether the employer is in the public or private sector. State governments and public universities are example of employers that may be the largest in an area but not be a member of a chamber.

69 Examples of airport regions (MSAs) that feature state capitals and/or large public universities include  Lansing - East Lansing, Michigan MSA (state government and Michigan State University)  Columbia, Missouri MSA (state government and University of Missouri)  Eugene-Springfield, Oregon MSA (University of Oregon)  Athens, Georgia MSA (University of Georgia)  Lincoln, Nebraska MSA (state government and University of Nebraska)  Burlington-South Burlington, Vermont MSA (University of Vermont)  Lexington-Fayette, Kentucky MSA (state government and University of Kentucky)  Bryan-College Station, Texas MSA (Texas A&M University) Other cities and regions where an industry can dominate employment include:  Bloomington/Normal, Illinois (State Farm Insurance)  Peoria, Illinois (Caterpillar)  The Quad Cities (Moline and Rock Island, Illinois along with Davenport and Bettendorf, Iowa)(John Deere)  Elmira, New York MSA (Corning, Inc.) These employers and their operational travel needs can obviously influence a local airport’s air service development goals. Regional Economic Development Organizations A Regional Development Organization (RDO) is an umbrella term that describes a multi‐jurisdictional, public‐based regional planning and development organization. These public‐sector entities are governed by a regional policy board with majority control by local elected officials. RDOs are known by various names, among them:  Area development districts  Councils of government  Local development districts  Regional councils  Regional development boards  Economic development districts Economic Development Districts (EDDs) are a particular type of RDO recognized by the U.S. Economic Development Agency. They also are multi-jurisdictional entities, commonly composed of multiple counties and in certain cases even cross-state borders. They help lead the locally based, regionally driven economic development planning process. Each of the 380 EDDs in the U.S. is required to develop a strategic plan for regional economic development known as a Comprehensive Economic Development Strategy (CEDS). A CEDS is the result of a “regionally-owned” planning process. It provides a coordinating mechanism for individuals, organizations, local governments, and private industry to engage in the economic direction of their region.

70 Like local or regional chamber of commerce strategic plans, the CEDS may feature target industries. For example, the 2020 CEDs for the Mid-Region New Mexico COG highlighted aerospace, IT, advanced manufacturing, renewable energy, and health among others. The Mid- Region New Mexico area includes the four counties surrounding Albuquerque. (Figure 31.) Consequently, there can be significant consistency between the goals established by a local chamber of commerce and EDD. Other Regional Advocacy Groups Specific regions may be home to other groups that have the aim to develop or enhance regional economic development. Examples revealed by the case studies include  The Research Triangle Regional Partnership (https://www.researchtriangle.org) is an economic development organization sustained by and committed to 12 core counties in central North Carolina. Its primary goal is to market the region to external audiences on why the Research Triangle Region is the best place to live and do business. Target industries identified are  Advanced manufacturing  AgTech. Companies in this cluster explore plant and animal health, precision farming, environmental remediation, and human medicine. There is a continuing emergence of new technologies  CleanTech. Companies in this sector can generally be identified by the fact that they are working towards preserving natural resources. In the Research Triangle Region, this includes a heavy focus on smart grid technologies, smart metering and expanding renewable energy technologies  Life Sciences • Gene and cell therapy  Technology • Cybersecurity • Fintech financial technology  The Miami-Dade Beacon Council (https://www.beaconcouncil.com), a public-private partnership, is the official economic development organization for Miami-Dade County. The organization facilitates business growth and expansion locally, nationally and internationally. The Council was founded as an outgrowth of the Greater Miami Chamber of Commerce to focus on business recruitment, expansion and retention. Its Board of Directors includes business leaders, university officials, local mayors, school superintendents, and a member of the Florida state House of Representatives. Figure 31: Example of Local Comprehensive Economic Development Strategy (CEDS)

71 Miami-Dade’s economic development strategic plan identified target industries with the highest potential for job growth and high wages. They include • Aviation • Creative design • Banking and finance • Hospitality and tourism • Technology • Trade and logistics • Life sciences and healthcare  The Aerotropolis Atlanta Alliance (https://aeroatl.org) is a public-private partnership working to improve the regional economic competitiveness of the area around metro Atlanta’s greatest asset – the world’s busiest and most efficient airport. The Alliance works with its partners to coordinate economic development that integrates into the functions and impacts of the airport. The Alliance convenes, organizes, and aligns stakeholder interests in the area around actionable initiatives meant to change the way people think about airport areas. These initiatives include marketing the airport area as a place to invest, facilitating solutions to workforce challenges, and partnering with educational institutions to develop the next generations of business and civic leaders. The Alliance is in the early stages of developing its strategic blueprint but has preliminarily identified several target industry clusters, including: • Aerospace • Food / Agri-business • Logistics • Bio-Life Sciences • Multi-media production Distinguishing Economic Impact from Regional Economic Development Part of the disconnect between airports and regional economic development organizations lies in the mechanism and measures used to describe their contributions to the local economy. Airports tend to report their economic impact, but the measures included in those analyses generally are limited to activity on airport property, unless the effects of spending by visitors is included. Even in those situations, the economic impact of airports expands to incorporate effects on the hospitality industry and not necessarily other business sectors that have been identified as key targets for recruitment and retention. As a result, community stakeholders and audiences do not attach or recognize the same importance to the airport’s economic impact reports, because they fail to capture the greater value that air service provides to the region. Overview of Airport Economic Impact Analyses Airports typically rely on economic impact assessments. As an earlier ACRP synthesis noted: The economic impact study is a tool frequently used by airport operators, planners, and regulatory agencies to measure the economic value that an airport contributes to its local and regional surroundings. It has become one of the standard airport planning documents, along with the airport

72 master plan update, noise compatibility study, and required environmental documents. (ACRP Synthesis 7, p. 1) These analyses typically measure an airport’s economic impact along a number of standard dimensions. (See Figure 32.) These are:  Employment—jobs in the aviation industry, jobs in sectors that support aviation or use aviation, etc.  Payroll—wages paid to workers employed in the aviation industry or workers who support or use the aviation industry  GDP—the value of final goods and services produced locally because of economic activity, not including the value of intermediate goods and services used to produce the final goods and services  Economic Output—value of final goods sold, value of services sold, capital expenditures, operating budgets for aviation-dependent government agencies, etc. Figure 32: Measures of Economic Impact Airport economic impact studies also typically include estimates of the economic impact of spending by visitors who arrive in the region via commercial or GA. The hospitality industry in particular benefits greatly from these visitors, who spend money on lodging, meals, entertainment, car rentals, and retail. These studies and analyses are conducted via an accounting of jobs, payroll, and sales. Rather, they are modeled using statistical methods. • Measured in the total number of jobs or employees engaged at a firm or organization Employment (Jobs) • Includes wages, salaries, and benefitsEarnings • Measure of the dollar value of final goods and services produced locally because of economic activity, not including the value of intermediate goods and services used to produce the final goods and services Gross Domestic Product (GDP) • Dollar value of industrial output produced that is sometimes referred to as “economic activity”; reflects the spending by firms, organizations, and individuals except in the case of organizations that do not generate revenue (e.g., government- provided air traffic control services), where annual operating expenses are counted as the output Economic Output

73 The most commonly used method to estimate an airport’s economic impact is via an “input–output” method, which typically measures the sum of direct, indirect, and induced economic impacts (or multiplier effects). The FAA has offered guidance for airports on how to conduct input–output studies since the 1980s. The areas of impact are defined as: – Direct impacts account for the economic activity of the aviation sector itself. Direct employment impacts are measured by counting those individuals who work in this sector of the economy. In the case of an airport, all of those people who work in an aviation-related capacity either on-site or off- site would be considered direct employment (e.g., airline ticket or gate agents, fixed base operators, maintenance, airport staff members, etc.). For ease of labeling, these impacts are sometimes categorized as “airport operations” even if the employment occurs off airport properties. Capital development at airports is incorporated but often modeled separately because airports’ capital spending tends to vary significantly over time on a project-by-project basis. – Indirect impacts are the “supplier” impacts that arise because of the direct impacts. For an airport, indirect impacts originate from off-site firms that serve airport users. Indirect employment includes the portion of employment in supplier industries which are dependent on sales to the air transport sector. – Induced impacts are economic impacts created by the spending of wages, salaries, and profits earned in the course of the direct and indirect economic activities. Induced employment is employment generated from expenditures by individuals employed indirectly or directly. – Total impacts are the sum of direct, indirect, and induced impacts. It should be noted that indirect and induced impacts are sometimes collectively referred to as “multiplier impacts.” Figure 33 illustrates how these different elements form a traditional economic impact assessment.

74 Figure 33: Economic Impact - What Gets Counted The Shortcomings of Traditional Economic Impact Analyses Vis-à-vis Regional Economic Activity Although traditional input–output airport economic impact assessments account for off-airport effects (e.g., supplier industries or remote airport rental car facilities), they do not include the impacts on other non-aviation-related businesses in the regional economy. That is, they do not pick up the effects that air service has on businesses that require air service as an element of their operations (either to reach clients or customers or as a means of providing obtaining a supply of inputs). Studies that employ the “catalytic” method attempt to measure the impacts that “spill over” from the airport into the rest of the economy, including impacts on investment, trade, and overall economic productivity. Though not often used, studies of the catalytic impacts of aviation tie the value of air transportation to other industries. The economic catalytic effects of air transportation have been defined as: The net economic effects (e.g., on employment, incomes, government finances etc.) resulting from the contribution of air transport to tourism and trade (demand-side effects) and the long-run contribution to productivity and GDP of growth in air transport usage (the supply-side performance of the economy). (EUROCONTROL p. 16) Air transportation facilitates employment and economic development in the national and regional economy through increased trade, attracting new businesses to the region and encouraging investment. Industries and activities that would otherwise not exist in a region can be attracted by improved air transport connectivity. Catalytic effects can include some or all of the following:

75 – Trade effects – additional air services open new markets to many businesses as a result of new destinations, better flight connections and higher frequencies offered. This leads to a broader demand for existing products. – Investment effects – a key factor many companies take into account when taking decisions about location of office, manufacturing or warehouses is proximity of an airport. – Productivity effects – air transportation offers access to new markets which in term enables businesses to achieve greater economies of scale. Air access also enables companies to attract and retain high- quality employees. The Disconnect with Regional Economic Development Consequently, a disconnect arises between the information developed in a traditional airport economic impact study and the interests of regional stakeholders. Standard airport economic impact studies generally reflect activities confined to the airport properties, except those that are modeled to include the off-airport supplier industries and local businesses like grocery stores where airport employees spend their wages (the induced effects). Where the impacts of visitor spending are modeled, the airports’ effects incorporate impacts on the hospitality industry – basically in the areas of accommodations, food service, ground transportation, entertainment and recreation, and retail. Community stakeholders, especially the regional development organizations, may not attach or recognize great value in an airport’s economic impact reports because they fail to capture the greater contributions that air service provides to the region. Airport economic impact studies do not generally describe how the airport and air service enable or facilitate activity in the business or economic sectors of most interest to the economic development organizations. The target industries identified by the chambers and economic development organizations (e.g., advanced manufacturing, financial technology, IT, bio- and life sciences) rely on air service to maintain and grow their operations, but the linkage between air service and regional economic activity is not made.

Next: Chapter 5 Telling the Airport s Story of Contributions to Regional Economic Development: Tools and Suggestions »
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Airport economic impact studies may accurately measure the activity that occurs on airport properties or is tied directly to airport operations (such as off-site parking and hotels that accommodate airline crew who overnight in a location), but they do not capture how air service supports business and employment throughout the region.

The TRB Airport Cooperative Research Program's ACRP Web-Only Document 53: Measuring and Understanding the Relationship Between Air Service and Regional Economic Development provides airports and major regional stakeholders concerned with economic development with the information and tools necessary to understand and communicate the nexus between air service and regional employment.

The Web-Only Document is supplemental to ACRP WebResource 12: Air Service Development and Regional Economic Activity. Supplemental to the Web-Only Document is a Case Study Compilation with the full versions of the 14 case studies performed as part of the project.

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