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Making an Impact

From promoting goodwill to helping win grants, economic impact studies do more than just report the bottom line.
University Business, Sep 2007

WHEN OFFICIALS AT HARRISBURG UNIVERSITY of Science and Technology (Pa.) commissioned an economic impact study in 2001, they admit that at the time there wasn't much impact to report.

Harrisburg was starting from scratch, hoping to build a bricks-and mortar university from the ground up. But like any struggling startup, the school needed an infusion of cash-and a reason for grantors and legislators to open their pocketbooks.

With the help of Kaludis Consulting, a Washington, D.C.-based national consulting firm that has worked with hundreds of other schools on economic impact studies and financial strategy projects, Harrisburg U was able to offer more than just a vision of a brand-new school to grant-making organizations and government agencies. It had numbers that showcased the kind of economic vitality the new institution could bring to the community-new jobs, increased housing needs, and demand for retail and entertainment. In the university's first few years, the economic impact was estimated to be more than $14 million a year; a decade after starting up, the formulas predicted that Harrisburg U would pump nearly $45 million annually into the local economy.

The institution offered an array of benefits to the community, but boiling down its effect to dollars and cents likely helped cement its appeal to those throwing their financial support behind the school. Over the course of the university's existence, it's received more than $60 million in funding from local, state, and federal agencies to help construct buildings and pay for operating costs.

"The economic impact study was part of the supporting documentation and justification for why we thought grants should be awarded," says Eric Darr, provost and executive vice president at Harrisburg. "I'd say it's been effective." Considering that Darr puts the cost of the study at about $50,000, it's a remarkable return on investment-though he's quick to point out that it was just one of many different measures used to help secure funding.

'We would like to be able to grow as necessary. But we also want to be good neighbors.'
-Victoria Mullen, Marist College

Harrisburg U was in a unique position when commissioning its economic impact study six years ago, but now that the school is up and running, officials have used the study as support for a successful tax-exempt bond offering. A future study, which Darr expects they'll likely do in a few more years, will offer more up-to-date numbers to help in winning continued support.

Startups aren't the only institutions of higher ed benefiting from economic impact studies. By now, college and university leaders are used to talking about the positive effect they can have on a community by educating students, providing cultural opportunities, and offering space and services for community groups. But in recent years, there's also been a push to look at an IHE's value in economic terms. Such impact studies can give credence to a push for funding, rally support for new development, and help build and maintain town-gown relations.

While few would argue that a school's economic impact is its most important contribution to a community, such numbers can be an important addition to the mix of assets an IHE brings to its community.

Leaders at Marist College (N.Y.), located in Poughkeepsie on the edge of Route 9, a well-traveled thoroughfare between Albany and New York City, found this to be true when an impact study was commissioned partly in response to negative local reactions to recent expansions. With a few buildings and parking areas bumped to the other side of the highway, some town residents began to grumble, particularly about traffic tie-ups.

Marist's director of institutional research and planning, Victoria Mullen, was asked to do an economic impact study, in part with the hope that its results would help dampen the frustration. "We wanted to provide information so people could see that waiting for students to cross the road, for example, is a minor inconvenience when we're bringing money, jobs, employment, and an educated workforce to the community," says Mullen. "We wanted them to see that there were a lot of benefits to having a college."

Mullen's study estimated that Marist's economic impact on the county was more than a quarter billion dollars. As the college publicized the information through press releases and talks with local community groups, "people were really surprised," Mullen notes. "The information is anecdotal, but I think it's helped with town gown relations."

Marist's initial study, which was presented in the 2005 fiscal year, got an update last year. Mullen says she expects to do regular updates in coming years. And as Marist looks at additional development across the highway, she expects the economic impact studies to carry more weight. "We would like to be able to grow as necessary," she says. "But we also want to be good neighbors."

The cost of the study, says Mullen, was minimal. In addition to a few weeks of her time, Marist spent a few thousand dollars on data from the U.S. Department of Commerce's Bureau of Economic Analysis to come up with realistic figures. While the study was not as exhaustive as what some other IHEs have done, it helps give a guide to the value of the college beyond the intangibles.

That kind of evidence is particularly useful for state-funded institutions. At New Mexico State University, regular economic impact studies have helped show that the institution is giving the public good value for its investment.

Tony Popp, head of the state Department of Economics and International Business, has conducted three economic impact studies for NMSU over the course of two decades, including an extremely detailed study costing about $50,000 in 1991 and a far less expensive snapshot study done in 2005.

Popp says larger studies can provide enormous amounts of data, but the 2005 study offers important information as well. "Our data showed that we represented about 20 percent of the economy," he says, referring to Las Cruces, the location of NMSU's main campus. "Does it matter if we're 17 percent or 22 percent? Not really. We're about a fifth of the economy, and that's what we wanted to take out of that study."

There may be people in the community who seem to perk up only when a college's value is delineated in dollars and cents, but Popp argues that anyone who focuses only on economics is missing the point. A lower economic impact doesn't suggest a university isn't doing its job. "There's so much going on at a university that's just as important to talk about [as the economic impact], like the fact that we're educating people's sons and daughters to be productive citizens, we have public lectures, we have employees sitting on the boards of almost every volunteer organization in town," he says. "We're not doing this just to create business for other people."

If Marist College had the problem of being heavily scrutinized, The College of William and Mary (Va.) had the opposite problem. Located in the historic town of Williamsburg, W&M was often overlooked by local officials, who tended to focus more on the significant visitor population that came to enjoy the colonial tourist destination.

W&M officials worried that businesses also seemed to focus their energy on this tourist population, while the opportunities for businesses to develop around the perimeter of the mostly residential campus went unnoticed. To help jumpstart interest in developing affordable restaurants, retail shops, and entertainment options, the college did an economic impact study. Officials wanted to show there were real opportunities for businesses willing to focus on the college.

The study was conducted with 2005 data and published in 2006 by The Wessex Group, a locally based company founded by W&M professor emeritus Don Messmer, who has done work with several other IHEs. It included basic information like budgets, payroll, and other expenses, as well as surveys to determine student spending and other factors.

In total, W&M put its impact at about a half billion dollars, making it a significant economic force by any measure. "We knew individuals in the region valued the college as an educational institution, but we wanted to be able to articulate its impact in terms that would resonate with the private sector," says Jim Golden, associate vice president and director of economic development at the college. "It's an important economic player in the community."

After its results were published online and press releases were distributed, the local media took notice. "We've been talking with the press in the area, and there have been a number of stories about students and what sort of retail stores they'd like to see," Golden says. "We've generated continuing discussion as a result of the study." He says he hopes the numbers will be useful for people making business decisions in the area.

Larger institutions may have no trouble using their size to report their significant economic clout, but that doesn't mean smaller institutions can't benefit from an economic impact study. In 2005, DePaul University published results of an effort it spearheaded to show the impact of higher ed institutions in the south loop of downtown Chicago. The study included information on enrollment, employment, space utilization, real estate investment, and student spending, among other areas.

While 11 of the 24 schools participating in the study had fewer than 1,000 students enrolled (one had just 81 students), the combined impact of the entire group of colleges was a sizable $1.2 billion. It would have been easy to disregard the impact of individual institutions, but as a whole, they help make Chicago the largest "college town" in the state.

John Holden, a spokesperson for DePaul, says the study was released at about the same time as the development of University Center, a housing facility used by three different major schools in the area. Though the two projects evolved separately, Holden says the study didn't hurt. "It put an exclamation point on the work we were already doing."

George Kaludis of Kaludis Consulting says that impact studies can help college and university officials keep from overlooking their own economic good. "One of the major benefits of an economic impact study is to provide those inside the institution with an internal appreciation for a [college's economic impact] and arm them with the knowledge they can use in their roles as ambassadors."

Allegheny College (Pa.) was spurred to perform its own economic impact study in 2006, after seeing several other enterprises in the region (not colleges or universities) offer information on their own economic impact. Located in Meadville in the Lake Erie region of the state, Allegheny had been making estimates of its impact for years. But officials wanted a firmer grasp on the effect on the area. Two Allegheny economics professors, Behrooz Afrasiabi and Stephen Onyeiwu, took on the task, spending nearly a year on the project.

Allegheny President Robert Cook says the study (which found a $93 million impact) offered a hook to talk about the many different benefits of a college. "A combination of our higher-than-average employee compensation, the fact that we don't swing with economic cycles, and the fact that we're not moving anywhere-those things create a tremendous economic flywheel," says Cook. "The college can serve as an anchor for the community."

Because economic models show how money can be recycled in a community, the study highlighted ways it could be a more positive force in the community, says Cook. "It re-emphasized the importance of doing business locally."

There is no single perfect model for an economic impact study, since a study's size and scope will be determined by different objectives. They can be comprehensive enough to include even the value of volunteer time by university employees, or simple enough to include little more than payroll and budget data.

In the end, what's important is that a college or university make a case for itself not just with numbers but beyond them. "We're not doing this to have a dollar impact on a community," says New Mexico's Popp. "We're doing it to have an impact on society. But hopefully [the economic impact] is another plus."

Erin Peterson is a Minneapolis-based freelance writer.

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