Investment in Big Sky EDA pays off, MSU-B study says

Yellowstone County taxpayers make a $620,000 annual investment in economic development by paying a property tax levy to the Big Sky Economic Development Authority.

What kind of financial return are they getting for their tax dollars?

By TOM HOWARD
Of The Gazette Staff

http://www.billingsgazette.com/index.php?id=1&display=rednews/2004/05/19/build/local/40-bseda.inc

Not only does Big Sky EDA create a lot of jobs and generate new business in the community, it also generates a net increase in tax dollars that support local government, according to a local economist.

Scott Rickard, director of the Center for Applied Economic Research at Montana State University-Billings, recently completed a study of the agency’s economic impact locally. He estimates that every local tax dollar that went to the county-run economic development agency last year generated between $43 and $355 in new economic activity locally.

He also estimates that each local tax dollar spent on Big Sky EDA generated at least $1.70 in new tax revenue for local government because of the activity generated by the agency’s clients.

Joe McClure, Big Sky EDA’s executive director, said he asked Rickard to do the study because Yellowstone County commissioners had asked whether the county tax levy generates a positive return on investment.

"We’ve always had that discussion about whether we’ve had a positive return, so we decided to have an independent analysis," McClure said.

But Big Sky EDA also has a $40,000 annual contract with Rickard’s Center for Applied Economic Research to conduct economic research. The economic impact study was one of several projects that CAER has completed for the agency this year.

Rickard’s study says the "potential" economic impact from Big Sky EDA’s operations was $92 million in 2003.

Rickard said he was careful to classify the benefits from Big Sky EDA’s expenditures as "potential" because there’s no way to measure precisely whether the new dollars were a direct result of Big Sky EDA’s activities.

"The reason for this wording is that there is no way to know, and there are few ways to estimate, what percentage of the business Big Sky EDA’s clients would have successfully completed without Big Sky EDA’s assistance," Rickard said. For example it’s possible that a businessman who received government marketing assistance through Big Sky EDA would have found out that information through another source.

Because of that, Rickard calculated Big Sky EDA’s effect on the economy using a variety of assumptions. Under this most conservative scenario, Rickard assumed that the agency was responsible for only one-fourth of new economic activity generated by its clients.

"Even if three-quarters of this activity would have taken place without Big Sky EDA’s involvement, each dollar of (local) tax revenue produced $43 of business activity and $1.70 in new tax revenues," he said.

Rickard said he expects to continue his research in order to develop year-to-year comparisons. He also may try to learn whether Big Sky EDA’s clients have a higher rate of success than businesspersons who haven’t been helped by the agency.

McClure said the study "shows the dollars flowing through the economy, for things like new jobs and payroll. It also translates into fiscal impact" of additional tax revenues, he said.

McClure added that he always tries to be careful not to give Big Sky EDA too much credit for creating jobs.

"My saying is ‘Shoot at everything that flies, but don’t claim everything that falls,’ " he said.

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