Center At The Lake

Analysis of the likely contribution that the proposed Center at the Lake would make to the economy of the Smith Mountain Lake Area

March 2011

Mangum Economic Consulting, LLC is a Richmond, Virginia based firm that specializes in producing objective economic, quantitative, and qualitative analysis in support of strategic decision making. Examples of typical studies include: Policy Analysis – Identify the intended and, more importantly, unintended consequences of proposed legislation and other policy initiatives.

Economic Impact Assessments and Return on Investment Analyses – Measure the economic contribution that business, education, or other enterprises make to their localities.

Workforce Information – Project the demand for, and supply of, qualified workers.

Cluster Analysis – Use occupation and industry clusters to illuminate regional workforce and industry strengths and identify connections between the two.

Environmental Scanning – Assess the economic, demographic, and other factors likely to affect your enterprise in the future.

Dr. Mangum earned his Ph.D. in economics at George Mason University in 1995, where he was fortunate enough to receive his training under Nobel Laureate James Buchanan and the team of colleagues Dr. Buchanan had recruited to the Center for Study of Public Choice. He has nearly two decades of experience in quantitative analysis and policy development at the federal and state level.

Executive Summary This report assesses the likely economic contribution that the proposed Center at the Lake would make to the Smith Mountain Lake area. The principle findings from that assessment are as follows: 1. The proposed Center at the Lake would be a multi-use arts, cultural, and business events center that would be located in Franklin County: The facility is intended to fill a current void by providing an appropriately sized venue for cultural arts and music events, youth and adult arts and other education opportunities, and a space for conferences, trade shows, job fairs, banquets and other business-related and community events. Current plans envision an 18,000 square foot facility that would feature a 3,000 square foot stage, a food service area, a main entry vestibule, three classrooms, and a large central area that can be configured for arts and cultural events, as a banquet hall, or for conferences, trade shows, and other business-related events.

2. The economy of the Smith Mountain Lake area faces several structural challenges: Employment in the Smith Mountain Lake area is subject to large seasonal swings and is heavily dependent on the Manufacturing sector which has experienced significant employment losses in recent years. In addition, total employment has declined over the last five years and unemployment within the area typically exceeds the statewide average by about one percent.

3. The population of the Smith Mountain Lake area is growing rapidly: Between 2000 and 2010, the Smith Mountain Lake area experienced a significant increase in population and the largest proportion of that increase occurred in Franklin County along those sections of the county that border Smith Mountain Lake. This population increase was driven almost entirely by in-migration.

4. The proposed Center at the Lake is likely to impact the economy of the Smith Mountain Lake area in two ways: The first is directly attributable impact – the narrowly focused economic consequences that can be clearly tied to the proposed Center at the Lake’s operations, such the local spending and payroll, and the tourism expenditures of those who attend Center arts, cultural, and business events. The second is often referred to as instrumental impact and is far more difficult to quantify. This type of

i

impact is much broader than directly attributable impact and, in all likelihood, much larger. It refers to the role that the proposed Center at the Lake would play in enhancing the business and cultural amenities available in the Smith Mountain Lake area, and, in so doing, facilitating increased economic and residential development by making the community more attractive to new businesses and new residents.

5. The directly attributable economic impact of the proposed Center at the Lake would be significant: Analysis using the IMPLAN model, a commonly used regional economic impact model, shows that the total local impact from those narrowly focused expenditures would be: 1) nearly $0.8 million in economic output, 10 additional full time equivalent jobs, and $118 thousand in combined federal, state, and local tax revenue in the initial start-up phase, and 2) over $1.2 million in economic output, 15 additional full time equivalent jobs, and $186 thousand in combined federal, state, and local tax revenue by the third year of operation.

6. The instrumental economic impact of the proposed Center at the Lake could be even more substantial: Although difficult to quantify, the instrumental impact of arts and cultural organizations can nonetheless be highly significant and it is for that reason that the National Governor’s Association and other policy bodies have promoted development of the arts as a tool for stimulating state and community economic development. Our analysis shows that this may be particularly true of the Smith Mountain Lake area generally, and Franklin County in particular. Specifically, our analysis indicates that: • though hosting arts and cultural events, trade shows, conferences, and retreats on a year-round basis, the Center at the Lake could aid in mitigating some portion of the heavy seasonality that affects Smith Mountain Lake area employment, • by serving as a catalyst for increased tourism, the Center at the Lake could aid the region in rebalancing its industrial portfolio away from an over-dependence on the vulnerable Manufacturing sector, through encouraging the further development of those industry sectors – such as Accommodation and Food Services; Arts, Entertainment, and Recreation; Real Estate; and Retail Trade – that serve the resident and non-resident populations that are attracted to the region by lake related activities, • through increasing youth and adult arts education opportunities within the area, the Center at the Lake could play a role in nurturing

ii

creativity, the driving force behind economic growth in the new economy, and the most obvious attribute of the Professional and Technical Services, Virginia’s leading high wage/high growth industry sector, and • by providing cultural amenities that are of particular interest to retirees, the Center at the Lake could accelerate the in-migration that has favorably affected local population demographics and had a salutary impact on local government budgets.

7. In sum, the proposed Center at the Lake would be well positioned to serve as a catalyst for additional economic growth within the Smith Mountain Lake area generally, and Franklin County specifically.

This report was commissioned by the Moneta Arts, Education, and Community Center, and Franklin County and produced by Mangum Economic Consulting, LLC.

iii

Introduction This report assesses the likely economic contribution that the proposed Center at the Lake would make to the Smith Mountain Lake area. The remainder of the report is divided into five sections. The Project Description section provides a brief description of the proposed facility. The Regional Data Profile section supplies context for the economic impact analysis that follows by illuminating key economic and demographic characteristics of the Smith Mountain Lake area. The Economic Impact section quantifies and qualifies the economic contribution that the proposed facility would likely make to the Smith Mountain Lake area. The Comparable Facilities section provides reference data on similar facilities in Virginia. Finally, the Conclusion section provides a summary and concluding comments.

This report was commissioned by the Moneta Arts, Education, and Community Center, and Franklin County and produced by Mangum Economic Consulting, LLC.

Project Description The proposed Center at the Lake would be a multi-use arts and cultural center that would be located in Franklin County and serve the four localities that surround Smith Mountain Lake – Bedford City, Bedford County, Franklin County, and Pittsylvania County. The facility is intended to fill a current void by providing an appropriately sized venue for cultural arts and music events, youth and adult arts and other education opportunities, and a space for conferences, trade shows, job fairs, banquets and other business-related and community events. Current plans envision an 18,000 square foot facility that would feature a 3,000 square foot stage, a food service area, a main entry vestibule, three classrooms, and a large central area that can be configured for arts and cultural events, as a banquet hall, or for conferences, trade shows, and other business-related events.

As will be demonstrated in the pages that follow, Smith Mountain Lake is experiencing rapid population growth and no facility of this type currently exists to serve the needs of area residents and businesses. The goal of the Center at the Lake would be to significantly enhance the cultural amenities available to Smith Mountain Lake and, in so doing, improve the quality of life for current residents and increase the attractiveness of the area to tourists, new residents, and new businesses, thereby facilitating increased residential and economic development. The efficacy of this goal is ably demonstrated by the letters of support that the proposed facility has received from the National Park Service, the Roanoke Symphony, the Smith Mountain Arts Council, the Smith Mountain Lake Regional Chamber of Commerce, and Virginia Western Community College.

1

Regional Data Profile In this section we provide context for the economic impact analysis that follows by illuminating key economic and demographic characteristics of the Smith Mountain Lake area.

Economic Characteristics Total Employment Trends Figure 1 illustrates the trend in total employment in the Smith Mountain Lake area generally, and Franklin County specifically, from the third quarter of 2005 through the third quarter of 2010.1 Over this period, employment in the area as a whole declined from 45,300 in 2005:Q3 to 42,359 in 2010:Q3, a loss of 2,971 jobs (or minus 6.6 percent). Focusing on Franklin County specifically, employment declined from 12,337 in 2005:Q3 to 10,545 in 2010:Q3, for a loss of 1,792 jobs (or minus 14.5 percent).2 The driving factors behind these changes are addressed more fully in a subsequent portion of this section.

In addition to these general downward trends, another important characteristic of the data shown in Figure 1 is the pronounced seasonality of employment in the Smith Mountain Lake area. Figure 2 highlights this characteristic by comparing the average quarter to quarter changes in employment in the Smith Mountain Lake area and Franklin County to the average for Virginia as a whole over the 2005:Q3 to 2010:Q3 period. As these data show, seasonal employment swings are characteristic of all three geographies.

Employment typically declines in the first quarter of the year as the retail sector retrenches from the holiday season and weather affected industries, such as construction, are negatively impacted. Similarly, employment typically rebounds in the spring and summer as construction, recreational, and other weather affected industries add summer jobs.

1

Recall that we define the Smith Mountain Lake area to include the localities of Bedford City, Bedford County, Franklin County, and Pittsylvania County.

2 Regarding the other localities included in the Smith Mountain Lake area, between 2005:Q3 and 2010:Q3: employment in Bedford City declined by 885 jobs (or minus 21.2 percent), employment in Bedford County increased by 1,524 jobs (or 10.6 percent), and employment in Pittsylvania declined by 1,818 jobs (or minus 12.6 percent).

2

60,000

50,000

Franklin County

40,000

30,000

Smith Mountain Lake Area

20,000

10,000

0

Figure 1: Total Employment in the Smith Mountain Lake Area – 2005:Q3 to 2010:Q33

The difference, as Figure 2 demonstrates, is that these seasonal swings in employment are more pronounced in the Smith Mountain Lake area. For example, where in Virginia as a whole employment typically falls by 1.9 percent between the 4th quarter of the previous year and 1st quarter of the next year, in the Smith Mountain Lake area the average decline in 4.3 percent and in Franklin County 2.5 percent. Moreover, there is a similar differential in employment declines in the fall. Where statewide employment typically falls by 0.4 percent between the 2nd and 3rd quarters of the year, in the Smith Mountain Lake area the average decline in 2.8 percent and in Franklin County 3.4 percent. As will be demonstrated in the Economic Impact section, these seasonal swings in employment have significant economic consequences for the Smith Mountain Lake area generally, and Franklin County specifically.

3

Data Source: Virginia Employment Commission.

3

4.0%

3.5%

3.4% 3.3%

3.0% 2.0%

1.7%

2.0% 1.0%

0.6%

Franklin County

0.0%

1st Qtr. -1.0% -2.0% -3.0%

2nd Qtr.

3rd Qtr. -0.4%

4th Qtr.

Smith Mountain Lake Area Virginia

-1.9% -2.5% -2.8% -3.4%

-4.0% -4.3% -5.0%

Figure 2: Quarter to Quarter Changes in Total Employment – 2005:Q3 to 2010:Q34

Industry Employment Figure 3 breaks down total employment in 2010:Q3 (the most recent period for which we have data) by major industry category to compare the percentage of total employment in each category in the Smith Mountain Lake area, Franklin County, and Virginia as a whole. As these data reveal, relative to the state as a whole, both the Smith Mountain Lake area generally, and Franklin County specifically, are much more heavily dependent on: 1) the Manufacturing sector (17.3 percent of total employment in Franklin County and 15.2 percent of total employment in the Smith Mountain Lake area vs. 6.7 percent of total employment statewide), and 2) the Construction sector (9.2 percent of total employment in Franklin County and 9.0 percent of total employment in the Smith Mountain Lake area vs. 5.6 percent of total employment statewide). As will be demonstrated subsequently, these heavy dependencies have made the area more economically vulnerable in the face of increasing global competition and normal cyclical downturns.

4

Data Source: Derived from Virginia Employment Commission data.

4

In addition, the data displayed in Figure 3 also show that Franklin County, and to a lesser extent the Smith Mountain Lake area generally, are more invested in the Retail Trade sector than is typical of the state as a whole (15.4 percent of total employment in Franklin County and 12.4 percent of total employment in the Smith Mountain Lake area vs. 11.4 percent of total employment statewide). Finally, another important characteristic revealed in Figure 3 is that both the Smith Mountain Lake area and Franklin County are much less invested in the Professional and Technical Services sector than is typical for the state as a whole (2.3 percent of total employment in Franklin County and 3.8 percent of total employment in the Smith Mountain Lake area vs. 11.0 percent of total employment statewide). As will be discussed more fully later in this report, the reason this is significant is that this high wage/high growth sector is the driver for most economic growth within the state.

Figures 4 and 5 provide additional detail on the driving forces behind the total employment changes shown in Figure 1. Figure 4 presents a snapshot of employment in the Smith Mountain Lake area by major industry sector in 2005:Q3 as compared to 2010:Q3, while Figure 5 presents comparable data for Franklin County. As Figure 4 demonstrates, by far the largest absolute change in employment over the period occurred in the Manufacturing sector. Between 2005:Q3 and 2010:Q3, the Smith Mountain Lake area’s Manufacturing sector shed 3,137 jobs, for a 33 percent decline in employment.

The second largest loss in employment over the period occurred in the Construction sector, which shed 1,309 jobs, for a 26 percent decline in employment. At the other end of the spectrum, the Health Care sector posted the largest job gain over the period, rising by 875 jobs or 24 percent. This was followed by the Education sector which increased by 710 jobs, for a 29 percent gain in employment.

Turning to Franklin County, as shown in Figure 5, here again the largest absolute change in employment between 2005:Q3 and 2010:Q3 occurred in the Manufacturing sector, which shed 1,138 jobs for a 34 percent loss in employment. The second largest job decline occurred in the Administrative and Waste Services sector which fell by 548 jobs, or 50 percent of employment. In this case, the Construction sector posted the third largest loss, with a decline of 294 jobs or 20 percent of employment. On the other side of the ledger, the Health Care sector again posted the largest gain, increasing by 102 jobs over the period, for an eight percent increase in employment. The second largest job gain occurred in the Agriculture, Forestry, Fishing, and Hunting sector which increased by 67 jobs or 44 percent.

5

Agriculture Utilities

1.8% 1.5% 0.4% 0.0% 0.3% 0.5%

Const.

9.2% 9.0%

5.6%

Manuf.

15.2%

6.7% 3.9% 5.7% 3.1%

Whole. Trade Retail Trade

12.4% 11.4% 2.6% 2.3% 3.4%

Trans.

Information

2.0% 1.9% 3.4% 1.2% 1.3% 1.5% 2.3% 3.8%

Prof. & Tech. Serv.

Magmt. of Cos.

0.4% 0.5%

11.0%

Virginia

4.3% 7.0% 5.8% 0.0%

7.4%

9.0% 11.1% 10.8% 12.1%

Health Care Arts, Ent., and Rec.

Smith Mountain Lake Area

2.1%

Admin. & Waste Serv.

Education

15.4%

Franklin County

1.2% 1.3% 2.3%

Finance Real Estate

17.3%

2.3% 1.8% 2.2% 7.6% 6.7% 8.6%

Accom. & Food Serv.

Other Serv.

3.7% 3.8% 3.7%

Public Admin.

3.4% 4.0%

6.8%

Figure 3: Percentage of Total Employment by Major Industry Category5

5

Data Source: Virginia Employment Commission.

6

Agriculture Utilities

624 509 147 110 3,823

Const.

5,132 6,444

Manuf.

2,404 2,181

Whole. Trade

5,264 5,382

Retail Trade 956 1,158

Trans.

Information Finance

9,581

566 488 816 796

2010:Q3 Real Estate

561 590 1,622 1,524

Prof. & Tech. Serv.

Magmt. of Cos.

198 184

2005:Q3 2,966 3,271

Admin. & Waste Serv.

3,130 2,420

Education

4,593 3,718

Health Care Arts, Ent., and Rec. Accom. & Food Serv.

755 874 2,847 2,521

Other Serv.

1,615 1,598

Public Admin.

1,677 1,275

Figure 4: Employment by Major Industry Category – Smith Mountain Lake Area6

6

Data Source: Virginia Employment Commission.

7

Agriculture

221 154

Utilities 1,160 1,454

Const.

2,176

Manuf.

495 491

Whole. Trade

1,941 1,973

Retail Trade 332 266

Trans.

Information

149 115 247 254

Finance Real Estate

2010:Q3

150 206 292 300

Prof. & Tech. Serv.

Magmt. of Cos.

48

2005:Q3 546

Admin. & Waste Serv.

1,094

Education

1,212 1,398 1,296

Health Care Arts, Ent., and Rec.

291 300 957 1,004

Accom. & Food Serv.

Other Serv.

Public Admin.

3,314

471 464 423 386

Figure 5: Employment by Major Industry Category – Franklin County7

7

Data Source: Virginia Employment Commission.

8

Table 1 provides additional information on what these changes mean in terms of wages and the structure of the regional economy. Table 1 details the average weekly wage and the location quotient (LQ) associated with each of these major industry categories for both the Smith Mountain Lake area and Franklin County. The location quotient is a measure of the degree to which a region/county specializes in a given industry sector.8 If the location quotient is greater than one, it means that the industry has a larger employment “footprint� in the region/county than one would anticipate based on statewide norms. In contrast, if the location quotient is less than one the industry has a smaller employment footprint than one would anticipate.

The data in Table 1 clearly demonstrate that the significant job losses that the area experienced in the Manufacturing and Construction sectors between 2005:Q3 and 2010:Q3 had profound implications. With regard to Manufacturing, Table 1 shows that this sector pays the third highest weekly wage of any industry sector in the Smith Mountain Lake area ($785 per week) and the fourth highest weekly wage in Franklin County ($717 per week). Moreover, as shown by the location quotients and consistent with the data provided in Figure 3, the Manufacturing sector also exhibits the second largest employment footprint in both geographies. With regard to Construction, Table 1 also shows that this sector pays wages that are above the regional average in both geographies ($612 per week in the Smith Mountain Lake area and $629 per week in Franklin County) and, as again demonstrated by the location quotients, is the sector with the third largest employment footprint in the Smith Mountain Lake area, and the fourth largest in Franklin County.

Yet another important characteristic revealed by these data is again the relatively small contribution that the Professional and Technical Services sector makes to the area.

Currently, employment in this sector is only one-fifth of what one would anticipate based on statewide norms. The reason this finding is significant is because, statewide, this is the high wage/high growth sector that is the driving force behind most recent economic growth and is also the sector that has proved the most robust in the face of cyclical downturns.

8

The location quotient is calculated as: ((regional employment in industryi)/(total regional employment))/((state employment in industryi)/(total state employment))

9

Table 1:

Average Weekly Wage and Location Quotient (LQ) by Major Industry Category – 2010:Q39 Smith Mountain Lake Area

Industry

Average Weekly Wage

LQ

Average Weekly Wage

$579

Agriculture, Forestry, Fishing & Hunting

$464

3.9

$505

4.6

Construction

$629

1.6

$612

1.6

Manufacturing

$785

2.3

$717

2.6

Wholesale Trade

$953

1.8

$1,121

1.3

Retail Trade

$402

1.1

$405

1.3

Transportation and Warehousing

$667

0.7

$611

0.8

Information

$727

0.6

$580

0.5

Finance and Insurance

$762

0.6

$700

0.6

Real Estate and Rental and Leasing

$461

0.9

$519

0.8

Professional and Technical Services

$658

0.3

$611

0.2

$1,052

0.2

$897

0.2

Administrative and Waste Services

$334

1.2

$413

0.7

Health Care and Social Assistance

$561

0.9

$557

0.9

Arts, Entertainment, and Recreation

$349

0.8

$326

1.1

Accommodation and Food Services

$240

0.8

$243

0.9

Other Services, Ex. Public Admin

$475

1.0

$371

1.0

Public Administration

$670

0.6

$754

0.5

9

Data Source: Virginia Employment Commission.

10

$558

LQ

Total, All Industries

Management of Companies and Enterprises

N/A

Franklin County

N/A

Unemployment Trends Figure 6 compares trends in the unemployment rate in the Smith Mountain Lake area and Franklin County to the statewide unemployment rate for the period from December of 2005 (2005:M12) through December of 2010 (2010:M12). As these data show, unemployment rose sharply in all three geographies in the latter part of 2008 as the state and country entered into what has justly become known as the “Great Recession.�

Unemployment then generally peaked in early 2009, but has remained stubbornly high since, remaining at 6.4 percent statewide in December of 2010, and 7.9 percent in the Smith Mountain Lake area and 7.6 percent in Franklin County.

10% 9% 8%

Smith Mountain Lake Area

7% 6% 5%

Franklin County

4% 3%

Virginia

2% 1% 0%

Figure 6: Unemployment Rate – December 2005 to December 201010

One feature of the data presented in Figure 6 that bears notice, is the structural shift that occurred in the unemployment rate for Franklin County toward the middle of 2007. Prior to that, unemployment in Franklin County tended to tracked closely with the statewide average, while unemployment in the broader Smith Mountain Lake area was persistently about one percentage above the statewide average. However, since the middle of 2007 10

Data Source: Virginia Employment Commission.

11

the unemployment rates for Franklin County and the Smith Mountain Lake area have converged and now both track about one percent above the statewide unemployment rate.

Commuting Patterns The final economic characteristic we address in this section is workforce commuting patterns and here we focus exclusively on Franklin County, the site of the proposed facility. As Figure 7 demonstrates, Franklin County is a net exporter of workers.

According to census 2000 data (census 2010 data for commuting patterns are not yet available), 8,951 county residents commuted outside of the county to work, while 1,947 non-residents commuted into the county to work. This means that, on net, 7,004 more individuals commuted out of the county to find work than commuted in.

10,000 9,000

8,951

8,000 7,000 6,000 5,000 4,000 3,000 1,947

2,000 1,000 0

Out-commute

In-commute

Figure 7: Census 2000 Workforce Commuting Patterns11

11

Data Source: U.S. Census Bureau.

12

Demographic Characteristics 2000 to 2010 Population Trends Figure 8 presents data on the total population change between the 2000 and the recently released 2010 census for the Smith Mountain Lake area generally, Franklin County specifically, and Virginia as a whole. As these data demonstrate, Franklin County experienced significant population growth over this period, with total population rising by 18.8%, as compared to 10.7 percent in the Smith Mountain Lake area generally and 13.0% in Virginia statewide. Perhaps even more important, however, are the components of this change. As Figure 8 shows, where population growth statewide was evenly split between natural increase and net migration, in both Franklin County and the Smith Mountain Lake area generally, the overwhelming driver for population growth between 2000 and 2010 was in-migration. In Franklin County, 17.1 percent of the 18.8 percent total population increase was attributable to net in-migration, whereas in the Smith Mountain Lake area generally, 9.7 percent of the 10.7 percent increase in total population was attributable to net in-migration.

20.0%

18.8%

18.0%

17.1%

16.0% 14.0%

13.0%

12.0%

Total

10.7% 9.7%

10.0%

Natural Increase

8.0%

6.5% 6.5%

6.0%

Net Migration

4.0% 2.0%

1.6%

1.0%

0.0%

Franklin County

Smith Mountain Lake Area

Virginia

Figure 8: Population Change between 2000 and 201012

12

Data Source: Weldon Cooper Center for Public Service, Demographics & Workforce Group.

13

The maps presented in Figures 9 and 10 provide some geographical context for these numbers (in both maps darker shading reflects higher percentages of growth). Figure 9 graphically depicts percentage change in population between 2000 and 2010 in the localities surrounding the Smith Mountain Lake area. As map shows, over this period the Smith Mountain Lake area generally and Franklin County in particular exhibited some of the largest population increases in the southern and western portions of the Virginia.

Overall, between 2000 and 2010 Franklin County’s population growth ranked 26th out of the state’s 134 localities and Bedford County’s ranked 37th, while Pittsylvania County’s ranked 88th and the City of Bedford’s ranked 109th.

Figure 9: Geographic Representation of Percentage Population Increase between 2000 and 2010 by Locality13

Figure 10 graphically depicts percentage change in population between 2000 and 2010 at the census tract level in the Smith Mountain Lake area specifically. As these data 13

Data Source: Weldon Cooper Center for Public Service, Demographics & Workforce Group.

14

demonstrate, the largest percentage increase over the period occurred in census tract 302.01 in Bedford County (40.9 percent), just southwest of the City of Lynchburg.

Importantly, however, the second and third largest increases occurred in census tracts 201 (30.1 percent) and 203 (26.3 percent) in Franklin County, immediately south of Smith Mountain Lake. Moreover, consistent with the county/city level data presented in Figure 9, the data shown in Figure 10 confirm that the Franklin County was the locus of most of the population growth that occurred in the Smith Mountain Lake area over this period.

Figure 10: Geographic Representation of Percentage Population Increase between 2000 and 2010 by Census Tract14

14

Data Source: U.S. Census Bureau.

15

2000 to 2009 Age Demographics Figures 11 through 13 provide a comparison of age distribution in 2000 relative to 2009 for Franklin County, the Smith Mountain Lake area generally, and Virginia (age demographic data are not yet available from the 2010 census). As these data show, relative to Virginia as a whole, the population in the Smith Mountain Lake area tends to be older. Where in Virginia in 2000, 34.3 percent of the population was 45 or older, in Franklin County the number was 41.6 percent and in the Smith Mountain Lake area as a whole 41.0 percent. In 2009, 37.6 percent of the population in Virginia was 45 or older, while in Franklin County the number was 46.4 percent and in the Smith Mountain Lake area as a whole 45.7 percent.

2000

14.4%

24.9%

2009

15.6% 0-19

23.8%

20-44 27.2%

0-19 20-44

45-64

45-64

30.8%

65 and above

29.8%

33.6%

65 and above

Figure 11: Age Distribution – Franklin County15

Moreover, as a review of these pie charts reveals, this gap appears to be widening.

Where in 2000, the proportion of the population that was 45 and older in Franklin County was 7.3 percent higher than in the state as a whole, by 2009 the difference had grown to 8.8 percent. Similarly, where in 2000 the proportion of the population that was 45 and older in the Smith Mountain Lake area generally was 6.7 percent higher than in the state as a whole, by 2009 the difference had grown to 8.1 percent.

15

Data Source: U.S. Census Bureau.

16

2009

2000

14.1%

14.4%

25.4%

24.6%

0-19 20-44

26.9%

0-19 20-44

45-64

45-64

31.3%

65 and above

29.8%

33.7%

65 and above

Figure 12: Age Distribution – Smith Mountain Lake Area16

2000

2009

11.2%

11.8% 27.3%

26.8%

0-19 20-44

23.1%

20-44

25.8%

45-64

45-64

65 and above

65 and above 35.6%

38.4%

Figure 13: Age Distribution – Virginia17

16 17

0-19

Data Source: U.S. Census Bureau.

Data Source: U.S. Census Bureau.

17

2000 to 2009 Educational Attainment Figure 14 compares educational attainment rates in Franklin County, the Smith Mountain Lake area generally, and Virginia for 2000 and 2009 (educational attainment data are not yet available from the 2010 census). At the high school level, these data indicate that high school attainment rates in Franklin County are comparable to the statewide norm and higher than those for the Smith Mountain Lake area generally. At the baccalaureate (BA) level, educational attainment rates are again higher in Franklin County than in the Smith Mountain Lake area generally, although both geographies lag the statewide average.

100.0% 90.0%

85.0% 80.1%

80.0%

85.8% 81.5%

80.3% 73.2%

High school or above 2000

70.0% 60.0%

High school or above 2009

50.0% 33.4% 29.5%

40.0% 30.0%

23.4% 20.9%

20.0%

17.3% 15.0%

BA or above 2000 BA or above 2009

10.0% 0.0% Franklin County

Smith Mountain Lake Area

Virginia

Figure 14: Proportion of the Population 25 and above with a High School or Baccalaureate (BA) degree – 2000 and 200918

18

Data Source: U.S. Census Bureau.

18

Economic Impact It is undisputed that the arts have a positive economic impact on their host communities.

According to a recent policy brief from the National Governor’s Association entitled, “Arts and the Economy: Using Arts and Culture to Stimulate State Economic Development,” Arts and culture-related industries, also known as “creative industries,” provide direct economic benefits to states and communities. They create jobs, attract investments, generate tax revenues, and stimulate local economies through tourism and consumer purchases. These industries also provide an array of other benefits, such as infusing other industries with creative insight for their products and services and preparing workers to participate in the contemporary workforce.19 The economic impact created by facilities such as the Center at the Lake can generally be characterized in two ways. The first is directly attributable impact – narrowly focused economic consequences that can be clearly tied to arts, community, and business events, such as the local spending and payroll or the tourism expenditures of those who attend events hosted at the center. This type of economic impact is relatively easy to quantify and several studies of this nature have already been done in Virginia. For example, an analysis conducted by the Roanoke Valley – Alleghany Regional Commission and The Arts Council of the Blue Ridge in 2010, found that arts and cultural organizations were responsible was generating 175 full time equivalent jobs, $4.2 million in annual labor income, and $11.6 million in annual economic output in a broad study area that encompassed both Bedford and Franklin counties.20 A less recent analysis conducted in 2000, found that, statewide, arts and cultural organizations were responsible for generating 18,850 part- and full-time jobs, $307 million in annual labor income, and $849 million in annual economic output in Virginia.21

19

“Arts and The Economy: Using Arts and Culture to Stimulate State Economic Development,” Center for Best Practices, National Governor’s Association, January 2009, p.4.

20 “Economic Impact of the Arts and Cultural Industry in the Blue Ride Region of Virginia,” Roanoke Valley – Alleghany Regional Commission and The Arts Council of the Blue Ridge, 2010. The study area used in this analysis included Alleghany, Bath, Bedford, Botetourt, Floyd, Franklin, Henry, Montgomery, Patrick, Pulaski, Roanoke, and Rockbridge counties, and the cities of Roanoke and Salem. Study results were based on a survey of existing arts and cultural organizations that collected information on employment, budget expenditures, and event attendees.

21 “Virginians for the Arts: The Economic Impact of Arts and Cultural Organizations in Virginia,” The Wessex Group, Ltd., December 2000. The study area used in this analysis encompassed the state of Virginia in its entirety.

Study results were based on a survey of existing arts and cultural organizations that collected information on employment, budget expenditures, and event attendees.

19

The second way in which facilities such as the Center at the Lake impact the economy is often referred to as instrumental impact and is far more difficult to quantify, although it can be generally qualified. This type of impact is much broader than directly attributable impact and, in all likelihood, much larger. It refers to the role that such facilities play in enhancing a community’s business and cultural amenities, and, in so doing, facilitating increased economic and residential development by making the community more attractive to new businesses and new residents.

Still another form of instrumental impact often attributed to the arts has to do with their role in nurturing creativity, and the belief that creativity has become the driving force behind economic growth in the knowledge-based “new economy” of the 21st Century.

This causal connection was popularized by Richard Florida in his book, “The Rise of the Creative Class.” Moreover, corroborating real-world evidence of this connection can readily be found in the rise of the Professional and Technical Services sector as the driving force behind Virginia’s statewide economy (e.g., between the third quarter of 2000 and the third quarter of 2010, Professional and Technical Services contributed 99,674 of the 105,492 in total net new jobs that were added to Virginia’s economy).

In this section, we address the economic contribution that proposed Center at the Lake would make to the Smith Mountain Lake area in terms of both directly attributable impact and instrumental impact.

Directly Attributable Impact To quantify the more narrowly focused directly attributable contribution that the proposed Center at the Lake would likely make to the economy of the Smith Mountain Lake area, we employ a commonly used regional economic impact model called IMPLAN.22 The IMPLAN model uses regional and national economic data to construct traditional Keynesian multipliers and uses these multipliers to quantify economic impact.

Keynesian multipliers are named after the British economist John Maynard Keynes.

They measure the ripple effects that an expenditure has as it makes its way through the economy. For example, as when tourism expenditures by out-of-town visitors to events at the proposed Center at the Lake become income for someone else, and are then spent in turn on other goods and services, thereby becoming income for someone else, and so on, and so on. Through this process, one dollar in expenditures generates multiple dollars of income. The mathematical relationship between the initial expenditure and the total income generated is the Keynesian multiplier.

22

IMPLAN is produced by Minnesota IMPLAN Group, Inc. The IMPLAN model is routinely used by state agencies such as the Virginia Department of Planning and Budget, Virginia Economic Development Partnership, and the Virginia Employment Commission, as well as researchers and consultants.

20

Economic impact is generally referred to in terms of “direct,” “indirect,” and “induced.”

Direct economic impact measures the immediate effect of an economic event (e.g., tourism expenditures). Indirect economic impact measures the cumulative impact of the ripple effects generated by the direct economic impact through other business (nonhousehold) purchases. While induced economic impact measures the cumulative impact generated through the household purchases of employees. In the estimates that follow, direct, indirect, and induced impact are further disaggregated into three categories of economic impact: 1) economic output, or the dollar value of the impact, 2) employment impact, or the number of jobs that are necessary to support that economic output, and 3) fiscal impact, or the tax revenue generated.

Operational Expenditures In assessing the likely annual economic impact attributable to the proposed Center at the Lake’s expenditures on goods and services within the Smith Mountain Lake area, we evaluate two time periods, the scope of operations that are anticipated at the initial startup of the facility and scope of operations that are anticipated in the third year of operations. In those assessments, we employ the following assumptions.

Initial start-up: • Total annual expenditures for goods and services are $64,800.23 • Total annual salaries for administrative and other personnel are $71,000.24 Third year of operation: • Total annual expenditures for goods and services are $64,800.25 • Total annual salaries for administrative and other personnel are $151,000.26 By feeding these assumptions into the IMPLAN model, we obtain the estimates of annual regional economic impact shown in Tables 2 and 3. As shown in Table 2, during the facility’s initial start-up phase, it is estimated that the Center at the Lake’s operational expenditures would generate approximately $161,815 in additional economic output in the Smith Mountain Lake area. In addition, that output impact would create two additional full time equivalent jobs within the area, and generate $32,794 in combined additional tax revenue at the federal, state, and local levels.

23

Data source: Data source: 25 Data source: 26 Data source: 24

Moneta Arts, Education, and Community Center.

Moneta Arts, Education, and Community Center.

Moneta Arts, Education, and Community Center.

Moneta Arts, Education, and Community Center.

21

Table 2:

Estimated Annual Economic Impact of Center at the Lake Operational Expenditures on the Smith Mountain Lake Area – Initial Start-up Direct

Output

Indirect

Induced

Total

$135,800

$15,192

$10,824

$161,815

2

0

0

2

Employment Fiscal Impact

$32,794

Federal

$13,394

State and Local

$19,400

As shown in Table 3, by the third year it is estimated that the Center at the Lake’s operational expenditures would generate approximately $257,140 in additional economic output in the Smith Mountain Lake area, and that economic output would be associated with approximately three additional full time equivalent jobs and $52,112 in additional combined tax revenue at the federal, state, and local levels.

Table 3:

Estimated Annual Economic Impact of Center at the Lake Operational Expenditures on the Smith Mountain Lake Area – Third Year of Operation Direct

Output Employment

Indirect

Induced

Total

$215,800

$24,141

$17,199

$257,140

3

0

0

3

Fiscal Impact

$52,112

Federal

$21,284

State and Local

$30,828

Tourism Expenditures In addition to its economic impact from operational expenditures, the proposed Center at the Lake will also generate local economic impact from the tourist expenditures associated with out-of-area attendees at Center of the Lake events. Here again, we evaluate two time periods, the scope of operations that are anticipated at the initial start-

22

up of the facility and scope of operations that are anticipated in the third year of operations. Our analysis employs the following assumptions.

Initial start-up: • Events hosted at the Center by the Lake will attract approximately 2,573 out of area visitors annually.27 • Average visitor stay is 2.2 days.28 • Average visitor expenditure is $86 per visitor per day.29 • $486,774 in annual expenditures from visitors from outside of the region.

Third year of operation: • Events hosted at the Center by the Lake will attract approximately 4,020 out of area visitors annually.30 • Average visitor stay is 2.2 days.31 • Average visitor expenditure is $86 per visitor per day.32 • $760,584 in annual expenditures from visitors from outside of the region.

Feeding these assumptions into the IMPLAN model, we obtain the annual estimates of regional economic impact shown in Tables 4 and 5. As shown in Table 4, it is estimated initial tourist expenditures from out-of-area attendees at Center of the Lake events would generate approximately $628,546 in additional economic output in the Smith Mountain Lake area. In addition, that output impact would create eight additional full time 27

This estimate is derived from events attendance projections compiled by Moneta Arts, Education, and Community Center based on interviews with interested parties from the Roanoke Symphony, the Smith Mountain Arts Council, the Smith Mountain Lake Regional Chamber of Commerce, and others. To estimate the number of attendees that are likely to be from out of the area, we rely on survey data from the 2010 “Economic Impact of the Arts and Cultural Industry in the Blue Ride Region of Virginia,” analysis conducted by the Roanoke Valley – Alleghany Regional Commission and The Arts Council of the Blue Ridge. Those data indicate that 26.8 percent of attendees at arts and cultural events in the Blue Ridge Region (defined as Alleghany, Bath, Bedford, Botetourt, Floyd, Franklin, Henry, Montgomery, Patrick, Pulaski, Roanoke, and Rockbridge counties, and the cities of Roanoke and Salem) were tourists from out of the area.

28 Based on data from the Virginia Tourism Corporation.

29 The data were obtained from the Smith Mountain Lake Regional Chamber of Commerce.

30 T his estimate is derived from events attendance projections compiled by Moneta Arts, Education, and Community Center. To estimate the number of attendees that are likely to be from out of the area, we rely on estimates developed through survey data from the 2010 “Economic Impact of the Arts and Cultural Industry in the Blue Ride Region of Virginia,” analysis conducted by the Roanoke Valley – Alleghany Regional Commission and The Arts Council of the Blue Ridge.

31 Based on data from the Virginia Tourism Corporation.

32 The data were obtained from the Smith Mountain Lake Regional Chamber of Commerce.

23

equivalent jobs within the area and generate $85,180 in additional combined tax revenue at the federal, state, and local levels.

Table 4:

Estimated Annual Economic Impact on the Smith Mountain Lake Area of Tourist Expenditures Attributable to Center at the Lake Events – Initial Start-up Direct

Output Employment

Indirect

Induced

Total

$411,11933

$98,627

$62,615

$628,546

6

1

1

8

Fiscal Impact

$85,180

Federal

$43,572

State and Local

$41,609

As shown in Table 5, by the third year it is estimated that tourist expenditures from outof-area attendees at Center of the Lake events would generate approximately $982,092 in additional economic output in the Smith Mountain Lake area, and that economic output would be associated with approximately 13 additional full time equivalent jobs and $133,184 in additional combined tax revenue at the federal, state, and local levels.

33

The reader may note that the $411,119 in direct impact listed here is smaller than the estimated total tourism expenditures of $486,774 provided earlier. The difference is attributable to “leakages” of consumer expenditures out of the area from purchases of goods that are not produced within the area (e.g. gasoline).

24

Table 5:

Estimated Annual Economic Impact on the Smith Mountain Lake Area of Tourist Expenditures Attributable to Center at the Lake Events – Third Year of Operation Direct

Output Employment

Indirect

Induced

Total

$642,34634

$154,100

$97,831

$982,092

10

1

1

13

Fiscal Impact

$133,184

Federal

$68,077

State and Local

$65,107

Total Directly Attributable Impact on the Smith Mountain Lake Area Tables 6 and 7 sum the estimated annual economic on the Smith Mountain Lake area from the analyses of the Center at the Lake’s operational expenditures, and out of area tourist expenditures detailed above. As these tables indicate: 1) in the initial start-up phase, total annual regional economic impact is estimated to be nearly $0.8 million, and is expected to generate 10 additional full time equivalent jobs within the area, and $118 thousand in combined federal, state, and local tax revenue, and 2) in the third year of operation, total annual regional economic impact is estimated to be over $1.2 million, and is expected to generate 15 additional full time equivalent jobs within the area, and $186 thousand in combined federal, state, and local tax revenue.

34

The reader may note that the $642,346 in direct impact listed here is smaller than the estimated total tourism expenditures of $760,584 provided earlier. The difference is attributable to “leakages” of consumer expenditures out of the area from purchases of goods that are not produced within the area (e.g. gasoline).

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Table 6:

Estimated Total Directly Attributable Annual Economic Impact of the Center at the Lake on the Smith Mountain Lake Area – Initial Start-up Direct

Output

Indirect

Induced

Total

$546,919

$113,819

$73,439

$790,361

8

1

1

10

Employment Fiscal Impact

$117,974

Federal

$56,965

State and Local

$61,008

Table 7:

Estimated Total Directly Attributable Annual Economic Impact of the Center at the Lake on the Smith Mountain Lake Area – Third Year of Operation Direct

Output Employment

Indirect

Induced

Total

$858,146

$178,240

$115,030

$1,239,231

13

1

1

15

Fiscal Impact

$185,296

Federal

$89,361

State and Local

$95,935

Instrumental Impact As stated earlier, instrumental impact refers to the role that facilities such as the Center at the Lake play in enhancing a community’s business and cultural amenities, and, in so doing, facilitating increased economic and residential development by making the community more attractive to new businesses and new residents. This category of economic impact is far more difficult to quantify than the more narrowly focused directly attributable impact of arts and cultural organizations. As the earlier “Economic Impact of the Arts and Cultural Industry in the Blue Ride Region of Virginia,” analysis determined:

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Only a portion of [the economic contribution made by the arts] can be quantified easily. For instance, the quality of life component of arts and cultural organizations ... can have its own economic impacts on the region.

The arts, combined with the overall package of place-based amenities, help attract new residents and new businesses, both large and small. To what degree the arts alone plays a role as an overall pull factor, attracting new residents, is hard to determine. Nonetheless, new residents and new businesses consider the arts along with other amenities, location, and cost of doing business when locating operations.35 However, the instrumental impact of arts and cultural organizations can be highly significant and it is for that reason that the National Governor’s Association and other policy bodies have promoted development of the arts as a tool for stimulating economic development. In this section, we illuminate some of the reasons why that may be particularly true of the Smith Mountain Lake area generally, and Franklin County in particular.

Reducing the Impact of Seasonal Swings in Employment As shown in the Total Employment Trends portion of the Economic Characteristics section, relative to Virginia as a whole, seasonal swings in employment are more pronounced in the Smith Mountain Lake area. By hosting arts and cultural events, trade shows, conferences, retreats, and other events on a year-round basis, the Center at the Lake could prove instrumental in mitigating some portion of this seasonality. Should that be the case, the potential economic impact is quite large. For example, in Franklin County alone, if seasonal declines in employment in the 1st and 3rd quarters of the year had been consistent with the statewide norm in 2010, that would have generated an additional $3.5 million in labor income alone within the county.36

Rebalancing the Industrial Portfolio As demonstrated in the Industry Employment portion of the Economic Characteristics section, both the economy of the Smith Mountain Lake area generally, and the economy 35

“Economic Impact of the Arts and Cultural Industry in the Blue Ride Region of Virginia,� p.1.

Total employment in Franklin County in the 4th quarter of 2009 was 12,898 at an average weekly wage of $594.

Reducing the drop off in seasonal employment in the 1st quarter of 2010 from the current 2.5 percent to the statewide average of 1.9 percent would have generated $599,232 in additional labor income in the 1st quarter of 2010. Similarly, total employment in Franklin County in the 2nd quarter of 2010 was 13,109 at an average weekly wage of $565. Reducing the drop off in seasonal employment in the 3rd quarter of 2010 from the current 3.4 percent to the statewide average of 0.4 percent would have generated $2,896,504 in additional labor income in the 3rd quarter of 2010.

36

27

of Franklin County specifically, are heavily dependent on the Manufacturing sector. The Manufacturing sector is the largest employment sector in both geographies and pays the third highest weekly wage of any industry sector in the Smith Mountain Lake area, and the fourth highest weekly wage in Franklin County. However, the Manufacturing sector has been hard hit by employment losses in recent years, suffering a 33 percent drop in employment in the Smith Mountain Lake area, and a 34 percent drop in employment in Franklin County, in the last five years alone.

By serving as a catalyst for increased tourism, the Center at the Lake could aid the region in leveraging its largest natural asset, Smith Mountain Lake, and facilitate enhanced development of those industry sectors –Accommodation and Food Services; Arts, Entertainment, and Recreation; Real Estate; and Retail Trade – that serve the resident and non-resident populations that are attracted to the region by lake related activities. In doing so, the Center at the Lake would aid the area in “rebalancing” the its industrial portfolio in a way that would make the regional economy more robust in the face external forces (increased global competition in the manufacturing sector) and cyclical downturns.

Facilitating Growth in Creative Industries One of the economic benefits of arts and cultural development cited in the National Governor’s Association policy brief, “Arts and the Economy: Using Arts and Culture to Stimulate State Economic Development,” was that: The decentralized nature of the creative industries can benefit residents of areas often thought to lack economic strength – such as rural areas and the urban core. At the heart of the creative industries are individual artists who are typically well-connected to the communities where they reside.

Linking artists with entrepreneurial opportunities both inside and beyond their regions offers many economic development possibilities.37 In short, it is generally believed that the arts nurture creativity and creativity has become the driving force behind economic growth in the knowledge-based “new economy” of the 21st Century.

One of the more tangible examples of the impact that creativity has on economic prosperity is the rise of the Professional and Technical Services sector as the driving force behind the U.S. economy in general, and Virginia’s economy in particular. As mentioned earlier, over the last ten years Professional and Technical Services contributed 99,674 of the 105,492 in total net new jobs that were added to Virginia’s economy. Also 37

“Arts and The Economy: Using Arts and Culture to Stimulate State Economic Development,” p.5.

28

recall from the Industry Employment portion of the Economic Characteristics section, that the Professional and Technical Services sector is significantly under-represented in the Smith Mountain Lake area. In particular, in Franklin County this sector is only onefifth the size one would expect based on statewide norms.

One of the primary goals of the Center at the Lake would be to use the three classrooms that are part of the building plan to enhance youth and adult arts and other education opportunities available in the Smith Mountain Lake area. Further, the Moneta Arts, Education, and Community Center has received expressions of interest from Central Virginia Community College, Ferrum College, Hollins University, University of Virginia, Virginia Tech, and Virginia Western Community College in offering such programs at the Center.

The long-term impact attributable to these efforts could potentially be substantial, as the Professional and Technical Services sector is one sector within the Smith Mountain Lake area that could viably offset wage losses that the area has experienced from declines in Manufacturing sector employment. To place the upper boundaries off that opportunity in perspective, had the Professional and Technical Services sector in Franklin County exhibited the same relative employment footprint that it did in the City of Lynchburg in 2010, that would have generated an additional $16.8 million in labor income within the county.38

Increasing Tourism Tourism is big business in the Smith Mountain Lake area. According to estimates from the Virginia Tourism Corporation, in 2009 tourists spent $208.8 million in the Smith Mountain Lake area generally, and $84.7 million in Franklin County specifically.39 Moreover, although tourism expenditures generally declined in Virginia between 2008 and 2009, that decline was less pronounced in the Smith Mountain Lake area. On average across the state, tourism expenditures are estimated to have fallen by 7.9 percent between 2008 and 2009. In the Smith Mountain Lake area, however, that decrease was only 4.0 percent, and in Franklin County only 3.7 percent. These data indicate that, although hardly “recession proof,� this industry tends to be more immune to cyclical downturns in the economy than other mainstays of the Smith Mountain Lake area economy such as the Construction and Manufacturing sectors.

38

In the 3rd quarter of 2010 (the most recent period for which we have data), employment in professional and Technical Services in Franklin County was 292 at an average weekly wage of $611. Had that sector exhibited the same relative employment footprint that it did in the City of Lynchburg that quarter, employment would have been 819. That would have equated to an increase of $16.8 million in annual labor income for the county.

39 Data Source: Virginia Tourism Corporation.

29

In the Directly Attributable Impact section above, we quantified the additional tourism impact that could be overtly tied to the proposed Center at the Lake and those estimates showed that that impact would be approximately $0.6 million during the initial start-up phase of the facility and $1.0 million by its third year of operation. However, it also reasonable to assume that by enhancing the business and cultural amenities available in the Smith Mountain Lake area generally, the Center at the Lake would also have a broader spillover impact in terms of providing a year-round venue that would attract additional tourism to the area. Again, to provide some perspective on the upper boundaries of that possible impact, if the Center at the Lake were instrumental in effecting only a five percent increase in tourism within the area, that would equate to approximately $10.4 million in additional tourist expenditures for the area generally, and $4.2 million in additional tourist expenditures for Franklin County specifically.

Accelerating In-Migration As the data presented in the 2000 to 2010 Population trends portion of the Demographic Characteristics section showed, the Smith Mountain Lake area experienced a significant population increase between 2000 and 2010. Moreover, the largest portion of that increase occurred in Franklin County along those sections of the county that border Smith Mountain Lake.

In addition, another key finding from those data was that the overwhelming majority of that increase was attributable to in-migration. Where statewide, population increased by 13.0 percent between 2000 and 2010 and that growth was evenly divided between natural increase and in-migration, in the Smith Mountain Lake area generally, population increased by 10.7 percent and 9.7 percent of that total was attributable to in-migration, and in Franklin County total population increased by 18.8 percent and 17.1 percent of that total was attributable to in-migration.

Consistent with anecdotal evidence that a large portion of the population increase within the area is attributable to Smith Mountain Lake becoming a valued retirement destination, the data presented in the 2000 to 2009 Age Demographics portion of the Demographic Characteristics section also show that individuals who are 45 years of age and older, and 65 years of age and older, comprise a larger proportion of the area’s population than is typical for the state as a whole. And that, moreover, between 2000 and 2010 those proportions grew even larger relative to the statewide norm.

These population trends have important and tangible consequences for local government budgets. Focusing on Franklin County where most of this population increase took place, according to county data, between 2006 and 2010 new residential and commercial construction added a cumulative increase of $125.3 million in property value to the

30

County’s rolls and that increase generated $624 thousand in additional county revenue.40 Moreover, it is important to note that residential growth accounted for 95 percent of this increase.

Franklin County budget data also reveal another interesting characteristic that is likely a result of the magnitude and, importantly, the nature of the in-migration that the county experienced between 2000 and 2010. That is the relative change that occurred between 2000 and 2010 in the revenue that the county received from property taxes and the expenditures it made on providing K-12 educational services. In 2000, county revenue from real property taxes accounted for 41.1 percent of total local revenues, but by 2010 that proportion had grown to 57.0 percent.41 In contrast, in 2000 county expenditures for education for 71.4 percent of total county expenditures, but by 2010 that proportion had fallen to 62.5 percent.42 Although not conclusive, these data are certainly consistent with the assumption that retirees comprised a large proportion of the new residents who came into the county between 2000 and 2010, and that those retirees tend to contribute more to the county in tax revenue than they cost the county in expenditures for services. By providing cultural amenities that are of particular interest to retirees, it is likely that the Center at the Lake will only enhance and accelerate this beneficial trend.

Consistency with Local Planning One very concrete measure of the likely instrumental economic impact that the Center at the Lake could have on the Smith Mountain Lake area is the extent to which the proposed project is consistent with existing local comprehensive and economic development plans.

The greater that consistency, the more likely that the proposed project will act as a force multiplier for existing local initiatives. Focusing again on Franklin County, where the proposed project would be located, our analysis has shown that the Center at the Lake would be highly consistent with several of the county’s published goals. In particular, it would: • aid in facilitating greater economic diversity and realigning the local economy to make it more robust in the face of cyclical downturns by encouraging growth in targeted sectors such as retail trade and professional and technical services, • encourage year-round employment and thereby reduce out-commuting by providing opportunities for more county residents to work in the county, 40

Data Source: Franklin County.

Data Source: Virginia Auditor of Public Accounts.

42 Data Source: Virginia Auditor of Public Accounts.

41

31

• support the goals of the Department of Commerce and Leisure Services, established by the county in 1996 to manage economic development, parks and recreation, and tourism programs, • enhance the county’s appeal as a popular area for individuals at retirement age, and • generally increase the quality of life for county residents.

Analysis of Comparable Facilities In this portion of the analysis, we provide reference data on a subset of arts and cultural facilities in Virginia that were selected for the comparability to the proposed Center at the Lake.

General Description The following information was obtained through telephone interviews with facility personnel and on-line and other publicly available materials.

Charlottesville Pavilion Location and contact information: 235 West Main Street, Charlottesville, Virginia 22902 www.charlottesvillepavilion.com (434) 245-4910 Facility description: The Charlottesville Pavilion opened in 2009 as part of the Charlottesville Mall Restoration Project. Initial funding was mostly private, with some low-interest credit provided by the City of Charlottesville. The vast majority of events hosted at the facility are comprised of musical events. The open-air pavilion is in operation from mid-April through October, holding about 50 to 60 events during the season. It also hosts occasional private events, which this year will include the University of Virginia’s Spring Fling and a local high school graduation. According to management, approximately 60 percent of attendees at facility events are local, and 40 percent are out-of-area visitors.

32

Henrico Theatre Location and contact information: 305 East Nine Mile Road, Highland Springs, Virginia 23075 www.co.henrico.va.us/departments/rec/recreation-centers---facilities/henrico-theatre (804) 328-4491 Facility description: The Henrico Theater was purchased by Henrico County in 1999, and opened in 2007 after a $5.8 million dollar renovation. Initial funding came from a bond referendum, and the county continues to fund the facility. The facility is utilized for county functions, including police ceremonies and educational arts programs. The facility is also rented out for musical events, small theater and church performances, and dance recitals, generating a small amount of revenue from those activities. The facility receives $330,000 from the county annually to support its operations, as insufficient revenue is generated from the facility’s non-county events to fully support the facility and its programs. It should be noted, however, that cultural and arts facilities typically receive only a third of their operating revenue from tickets sales and facility rental, with the remainder coming from private donations, endowments, grants, and other sources.

The Prizery Location and contact information: 700 Bruce Street, South Boston, Virginia 24592 www.prizery.com (434) 572-8339 Facility description: The Prizery is located in a renovated tobacco warehouse in the town of South Boston. It opened in 2005 after a one-year, $7 million dollar renovation. The facility includes an art gallery, classroom, banquet hall for community and private functions, and a performing arts theatre with a capacity to seat 326. The facility’s management has recently decided to realign program offerings toward plays and away from musical events based on prior experience with program costs and turnout. The facility produces its own plays and also partners with a local theater group. On average they produce four plays

33

per year. According to management, approximately 80 percent of attendees at facility events are local, and 20 percent are out-of-area visitors. The facility generates approximately $25,000 per year in revenue from community events such as weddings and banquets. Currently, facility revenues do not fully support its operations and it must rely in part on outside funding.

Star Theater Location and contact information: 318 Patrick Ave., Stuart, Virginia 24171 www.historicstartheatre.com (276) 694-7064 Facility description: The Star Theatre in located in Stuart and opened as a movie house in 1947. It is privately owned, and currently shows films, and hosts live theatre and music events. The theater seats 250, or 142 when used as a banquet hall.

State Theater Location and contact information: 210 Main St., Culpeper, Virginia 22701 www.culpepertheatre.org (703) 608-7379 Facility description: Renovation began on the vaudeville movie house, the State Theater, in 2004 under the management of the State Theatre Foundation, Inc., an independent, non-profit organization. The Foundation plans to open the theater on March 12, 2011, and intends to provide a venue for live music, theatre, comedy, and films. The Foundation hopes to raise $2 million through independent donations and the sale of naming rights, including seats, bricks, the theatre itself, and other features.

34

Comparison of Market Demographics Table 8 provides immediate market data on the population demographics for these five comparator facilities and the proposed Center at the Lake. In each case, the market is defined as those communities within a 25 mile drive-time circle of the facility. What these data show is that, relative to the markets served by the five comparator facilities, the immediate market that would be served by the proposed Center at the Lake: • Has a total population that exceeds that of the immediate market area of three of the five comparator facilities (The Prizery, Star Theater, and State Theater).

• Has experienced, and is projected to experience, higher population growth than two out of the five comparator facilities (The Prizery and Star Theater).

• Has a larger proportion of individuals 55 years of age and older (29.7 percent), and a larger largest proportion of individuals 65 years of age and older (16.6 percent), than the immediate markets of the three comparator facilities (Charlottesville Pavilion, Henrico Theater, and State Theater).

• Exhibits educational attainment rates that exceed those of two out of the five comparator facilities (The Prizery and Star Theater).

35

Table 8:

Market Population Demographics43 25 Mile Drive-Time Center at the Lake

Charlottesville Pavilion (Charlottesville)

Henrico Theater (Highland Springs)

Population 2015 Projection

194,744

204,725

995,038

2010 Estimate

191,971

194,208

951,591

2000 Census

183,558

169,765

849,035

Growth 2010-2015

1.4%

5.4%

4.6%

Growth 2000-2010

4.6%

14.4%

12.1%

Under 18

21.5%

21.9%

24.1%

18 to 24

7.5%

11.9%

9.6%

25 to 34

12.6%

14.5%

13.4%

35 to 54

28.6%

26.7%

29.2%

55 to 64

13.1%

10.8%

11.8%

65 and older

16.6%

14.2%

12.0%

High School or above

82.6%

87.4%

87.2%

BA and above

21.5%

42.3%

34.2%

7.3%

20.3%

12.2%

2010 Est. Population by Age

2010 Est. Population 25 and above

by Educational Attainment

Graduate degree

43

Data Source: The Nielsen Company.

36

Table 8:

Market Population Demographics (continued)44 25 Mile Drive-Time The Prizery (South Boston)

Star Theater (Stuart)

State Theater (Culpeper)

Population 2015 Projection

67,171

67,229

157,217

2010 Estimate

68,002

68,254

142,024

2000 Census

69,050

69,725

108,240

Growth 2010-2015

-1.2%

-1.5%

10.7%

Growth 2000-2010

-1.5%

-2.1%

31.2%

Under 18

21.9%

20.1%

23.9%

18 to 24

7.8%

7.6%

8.1%

25 to 34

11.8%

12.3%

14.9%

35 to 54

26.7%

28.5%

28.7%

55 to 64

13.4%

13.1%

11.1%

65 and older

18.5%

18.4%

13.3%

High School or above

74.0%

69.2%

83.8%

BA and above

12.5%

8.6%

22.0%

4.6%

2.3%

7.5%

2010 Est. Population by Age

2010 Est. Population 25 and above

by Educational Attainment

Graduate degree

44

Data Source: The Nielsen Company.

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Table 9 provides a similar comparison for data on the household demographics for the five comparator facilities and the proposed Center at the Lake. Here again, the market is defined as those communities within a 25 mile drive-time circle of the facility. In this case the data show that, relative to the markets served by the five comparator facilities, the immediate market that would be served by the proposed Center at the Lake: • Has a larger number of households than the immediate market area of four of the five comparator facilities (Charlottesville Pavilion, The Prizery, Star Theater, and State Theater).

• Has experienced, and is projected to experience, higher growth in the number of households than two out of the five comparator facilities (The Prizery and Star Theater).

• Has a larger proportion of households with no children than the immediate markets of three out of the five comparator facilities (Charlottesville Pavilion, Henrico Theater, and State Theater).

• Has higher median household income than the immediate markets of two of the five comparator facilities (The Prizery and Star Theater).

• Has a higher median housing value than the immediate markets of three out of the five comparator facilities (The Prizery, Star Theater, and Star Theater).

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Table 6:

Market Household Demographics45 25 Mile Drive-Time Center at the Lake

Charlottesville Pavilion (Charlottesville)

Henrico Theater (Highland Springs)

Households 2015 Projection

85,473

82,840

392,833

2010 Estimate

83,493

77,743

375,472

2000 Census

77,762

65,809

334,698

Growth 2010-2015

2.4%

6.6%

4.6%

Growth 2000-2010

7.4%

18.1%

12.2%

With Children

40.8%

44.7%

47.4%

Without Children

59.2%

55.3%

52.6%

2010 Est. Median Household Income

$45,943

$59,752

$60,378

2010 Est. Median All OwnerOccupied Housing Value

$146,243

$266,789

$208,448

2010 Household Composition

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Data Source: The Nielsen Company.

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Table 6:

Market Household Demographics (continued)46 25 Mile Drive-Time The Prizery (South Boston)

Star Theater (Stuart)

State Theater (Culpeper)

Households 2015 Projection

28,383

28,566

59,825

2010 Estimate

28,389

28,705

53,507

2000 Census

27,798

28,440

39,557

Growth 2010-2015

-0.0%

-0.5%

11.8%

Growth 2000-2010

2.1%

0.95%

35.3%

With Children

38.7%

39.1%

45.5%

Without Children

61.3%

60.9%

54.5%

2010 Est. Median Household Income

$37,296

$35,878

$65,670

2010 Est. Median All OwnerOccupied Housing Value

$100,672

$123,137

$97,675

2010 Household Composition

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Data Source: The Nielsen Company.

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Conclusion This report has assessed the likely economic contribution that the proposed Center at the Lake would make to the Smith Mountain Lake area. What that analysis has shown is that contribution would likely take two forms. The first is the narrowly focused economic impact that can be clearly attributed to the proposed facility’s local expenditures on payroll and goods and services, and the additional tourism expenditures that would be generate by out-of-area attendees to events hosted at the Center at the Lake. Employing the IMPLAN model, a commonly used regional economic impact model, we have demonstrated that the total local impact from those narrowly focused expenditures would be: 1) nearly $0.8 million in economic output, 10 additional full time equivalent jobs, and $118 thousand in combined federal, state, and local tax revenue in the initial start-up phase, and 2) over $1.2 million in economic output, 15 additional full time equivalent jobs, and $186 thousand in combined federal, state, and local tax revenue by the third year of operation.

The second way in which the proposed Center at the Lake would contribute to the economy of the Smith Mountain Lake area is often called instrumental impact.

Instrumental impact refers to the role that the arts play in enhancing a community’s business and cultural amenities, and, in so doing, facilitating increased economic and residential development by making the community more attractive to new businesses and new residents. Although difficult to quantify, the instrumental impact of arts and cultural organizations can nonetheless be highly significant and it is for that reason that the National Governor’s Association and other policy bodies have promoted development of the arts as a tool for stimulating state and community economic development.

Moreover, our analysis has demonstrated why this may be particularly true of the Smith Mountain Lake area generally, and Franklin County in particular. Specifically, we have shown that by: 1) hosting arts and cultural events, trade shows, conferences, and retreats on a year-round basis, the Center at the Lake could aid in mitigating some portion of the heavy seasonality that affects Smith Mountain Lake area employment, 2) serving as a catalyst for increased tourism, the Center at the Lake could aid the region in rebalancing its industrial portfolio away from an over-dependence on the vulnerable Manufacturing sector, through encouraging the further development of those industry sectors – such as Accommodation and Food Services; Arts, Entertainment, and Recreation; Real Estate; and Retail Trade – that serve the resident and non-resident populations that are attracted to the region by lake related activities, 3) enhancing youth and adult arts education opportunities within the area, the Center at the Lake could play a role in nurturing creativity, the driving force behind economic

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growth in the new economy, and the most obvious attribute of the Professional and Technical Services, Virginia’s leading high wage/high growth industry sector, and 4) providing cultural amenities that are of particular interest to retirees, the Center at the Lake could accelerate the in-migration that has favorably affected local population demographics and had a salutary impact on local government budgets.

In short, our analysis has shown that the proposed Center at the Lake would be well positioned to serve as a catalyst for additional economic growth within the Smith Mountain Lake area generally, and Franklin County specifically.

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