2015-433-E Arts - American for the Arts for Arts & Economic Prosperity V impact study

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DocuSign Envelope ID: B3F2DE33-B038-4BE5-825E-715B2AB5F376 IMPORTANT NOTE:For the purpose of this contract,the region to be included in the analysis is defined as the geographic region that includes Orange County. AMERICANS FOR THE ARTS' PROPRIETARY ECONOMIC ANALYSIS Input-output analysis will be used to determine the economic impact findings for Orange County. An input-output model is a system of mathematical equations that combine statistical methods and economic theory in an area of economic study called econometrics. It is based on a matrix which tracks the dollar flows between 533 finely detailed industries within your community and allows researchers to determine the economic impact of local spending on jobs,household income, and government revenue. Our economist will customize an econometric input-output model to reflect the unique economy of Orange County. In addition to your survey results,this economic model will include wage, labor, and commerce data from local, state and federal government sources. Input-output modeling is a widely-accepted methodology has been the basis for two Nobel prizes in economics. The overall Arts &Econon is Prosperity©methodology has been reviewed and approved in the past by economists from Bank of America and by the White House Council of Economic Advisors. Your customized input-output model will be designed to measure the direct, indirect, and induced economic impacts of expenditures by your cultural organizations and their audiences.More specifically,the model will calculate the economic impacts resulting from the direct expenditures made by the nonprofit arts organizations and their audiences(i.e., direct impacts), as well as the economic impact of those dollars as they are being re-spent in the region's economy(i.e., indirect and induced impacts). How can a dollar be"re-spent?"Consider this example: A nonprofit arts organization located in Orange County purchases several gallons of paint from a local hardware store for$200,and the hardware store allocates some of that money to pay its employees.But then,the hardware store re-spends some of the money to purchase goods and services from other businesses located in the community(for example, it pays the electric bill and the rent bill, and it purchases supplies to re-stock the shelves).Those businesses,in turn,spend a portion of the money to do the same. In addition,the hardware store uses a portion of the money to pay its employees,who then re-spend some of the money at the grocery store;the grocery store uses some to pay its cashier;the cashier spends some on rent; and so on. Thus,the initial$200 expenditure by the theater company was followed by several additional rounds of spending(by the hardware store and its employees,the grocery store and its employees, and so on). The economic impact of the theater company's initial$200 expenditure is the direct economic impact. The economic impacts of the subsequent rounds of spending that take place in Orange County are the indirect and induced impacts. The total impact is the sum of the direct impacts plus all indirect and induced impacts. Our economist's model measures the impact of the initial expenditure as well as each additional round of spending until the all of the dollars spent by the arts organizations and their audiences have leaked out of the local economy. How does money"leak"out of the local economy? To continue the example above: The hardware store spent a portion of the$200 to pay the sales clerk's salary.But another portion of the$200 was paid to the paint distributor who supplied the paint to the store. Because the distributor is located outside of the local community,that portion of the$200 has no impact on Orange County's economy—instead,that portion of the initial expenditure is considered to have"leaked"from the local economy. 3