An analysis released by the city says a Newton Branch YMCA would provide a greater economic impact for the city, compared to a proposal to expand the existing Newton Activity Center.
Tim Johnson, assistant city manager and director of community development, said the “Benefits, Costs and Economic Impact of Enhanced Recreational Facilities” analysis shows the city will see 50 percent more economic benefits from a YMCA than an expanded activity center.
But Brian Bascue, superintendent of the Newton Recreation Commission, which oversees the Newton Activity Center, raised questions about the findings.
Study information
The analysis was prepared by The Center for Urban Studies at the Hugo Wall School of Urban and Public Affairs at Wichita State University. Dr. John Wong is the interim director of the center and professor who oversaw the analysis.
Johnson said the city contacted Wong to do the study because “he is the best.” Wong is a revenue estimator for the state of Kansas and has done work with Newton and other cities in the past, including Wichita.
The study was requested by and funded through the city’s Office of Community Development; Johnson said the cost was about $7,000. Johnson said the study started in January.
Johnson said the analysis may be the first of its kind, comparing a governmental entity (Newton Recreation Commission) with a private non-profit (YMCA) in terms of economic impact.
Wong said one challenge of comparing the two was that with an entity on a strictly fee basis, it’s easier to determine what a service is worth based on what people are willing to pay for it. But with a publicly delivered service that is subsidized in whole or in part by taxpayers, Wong said it is difficult to know for sure what a service is worth to the patrons. For example, if people attend a free promotional event, Wong said it’s difficult to know how many people would attend the event if they have to pay.
Issues such as tax dollars and existing bond obligations can make comparisons difficult, Wong said.
The study was presented to the city commission on April 14. At the time, City Manager Randall Riggs said in the discussion about recreation facilities in Newton, the city could play the role of getting “objective information into the hands of the community.”
Study findings
According to the results of the study, “both the Newton Recreation Commission and the Newton Branch YMCA proposals will generate economic benefits to the Newton area.” But the analysis says the YMCA impact will be significantly more. Wong said with a larger project, the impact will be larger.
The Newton Recreation Commission has proposed expanding the current activity center on Poplar Street, adding 60,000 square feet to the existing 50,000 square feet to make a 110,000-square-foot facility. The YMCA proposal is for a 75,000-square-foot facility. The YMCA would be a branch of the Greater Wichita YMCA.
The study looked at direct effects, indirect effects and induced effects of the two proposals. Direct effects are the production changes associated with the immediate effects of changes in economic activity. Indirect effects are charges resulting from “various rounds of re-spending of the enhanced recreational facility’s receipts” such as increases in sales, jobs and income in the sporting goods supply industry. Induced effects are changes in economic activity resulting from household spending of income earned directly or indirectly as a result of the initial change in economic activity, such as sporting goods supply employees spending their income on housing, food, transportation, etc.
In a 20-year time period, a Newton YMCA would generate a net benefit of $19.7 million in economic benefits, while an enhanced NRC facility will generate a net benefit of $10.2 million. That equates to $1.48 in benefits for every dollar expended for a Newton YMCA and $1.34 in benefits for every dollar expended on an enhanced NRC facility, according to the study. That would translate into a 14.8 percent return on investment for the YMCA and a 12.6 percent return for an enhanced NRC facility.
For the economic impact of construction, the analysis states construction of a YMCA will result in a direct economic impact of $18 million, while construction for an enhanced activity center would result in a direct economic impact of $12.4 million. With indirect and induced impacts, the analysis figures a $25.1 million for the YMCA and $17.3 million for the NRC overall economic impact for construction.
For employment, the YMCA is expected to have an overall employment impact during construction of 224 jobs, with the NRC having a construction employment impact of 154 jobs.
The study noted an enhanced NRC would require an additional $8.9 million in tax dollars to finance construction. The YMCA is expected to be constructed with private sector and non-profit sector funds. One funding model released by the city last year showed the YMCA using current recreation taxes to help fund a new facility.
On economic impact of operations, in 20 years, the YMCA should have a direct economic impact of $54 million and overall impact of $77.6 million. An expanded activity center would have a direct economic impact of $33.8 million and an overall impact of $53.1 million. The expenditure of every dollar on an enhanced NRC facility will result in a generation of $1.57 in the local economy, while the expenditure of every dollar on a new Newton Branch YMCA will result in a generation of $1.54 in the local economy.
The estimated employment impact for operations for a YMCA was stated at 105 jobs for the first year, compared to 78 jobs for an expanded NRC in its first year.
Wong said the numbers are built on a group of assumptions, and if those assumptions change, the numbers will shift. That’s why he said he “wouldn’t pay that much attention” to particular numbers, but he said the relationship, how the two proposals compare and stack up to one another, should stay “pretty consistent” regardless of fluctuations in calculations.
The entire study can be found online at www.newtonkansas.com.
Concerns about the study
While Bascue is mentioned in the acknowledgements of the study, he said the NRC was not aware this type of analysis was being done. A researcher from WSU contacted him via e-mail, he said, and he provided the operating budget and participation numbers for memberships and programming.
Bascue said he was never contacted by city officials in regard to the study, and he only found out a formal analysis was presented to the city commission after reading it in the Kansan the next day.
As for the findings, Bascue said with a proposed cost of $18 million for a new YMCA and $12.7 million for an expanded activity center, the economic impact would obviously be more. But he raised some doubts about the numbers put forth in the study and pointed out three specific areas of concern for him.
The first had to do with the economic impact of jobs created by the facilities. According to the study, an expanded activity center would result in a direct employment impact of 72 jobs in the first year, an indirect job employment of five jobs, and a one-job induced employment impact, resulting in a total employment impact of 78 jobs in the first year.
But Bascue said the NRC already employs about 125 people, and the number would be even higher in an expanded facility. Wong said the numbers in the analysis look at the expansion only, not what the facility is currently doing or how many employees are currently employed.
Also, the study estimated operational costs for both facilities at $25 a square foot which, according to the study, was based on a comparison of comparable facilities conducted by the Fraser Valley (Colorado) Metropolitan Recreation District. Bascue said current costs for the NRC run about $10 a square foot.
Another number Bascue noted was an anticipated first-year membership fee revenue of $3.5 million for a Newton YMCA. That number doesn’t line up with the just-less-than $1.1 million estimate from the FourSquare Market Study done in 2008, Bascue said. (That study was paid for by the city, USD 373, the Newton Area Chamber of Commerce and private sector, and results were released in May 2008.)
With a projected revenue that large, Bascue questioned why YMCA proponents don’t simply ignore the NRC and its funding and continue with the plans.
“If they can generate $3.5 million a year, they should go ahead and build a facility,” he said.
