More background data on Spokane International Airport

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More Spokane International Airport historical data from an EWU produced report on the economic impacts of SIA:

After sharply growing during the 1990s, Airport passenger and air cargo growth has slightly increased since 2001, largely as a consequence of local economic conditions and population growth as well as international political events. As Figure 2.3 indicates, the number of passengers leaving or arriving Spokane rose rapidly from 1.9 million in 1992 to 3.3 million in 1996, stagnated around 3.0 million to 2000, declined to 2.8 million during the next three years, reflecting the general air travel malaise produced by the 9/11 attacks, and then increased to 3.1 million passengers in 2004. The growth of air cargo was even sharper as Figure 2.4 shows, doubling from 33,100 tons in 1992 to 67,300 tons in 2000 but then sharply declining to 53,300 tons by 2002 before rising to 57,300 tons in 2004.

Since 2004, passenger and cargo grew for a bit but then plummeted in the depression to levels below 1996.  Both 2009 and 2010 passenger levels remained below 1996 but are likely to surpass that in 2011. As noted at the link, the airport has been funding capital infrastructure improvements based on a year 2000 Master Plan that forecast rapidly expansion in both passenger and cargo traffic. The forecast was completely wrong and no such growth occurred – but the airport has continued to spend money based on the forecast in the year 2000 Master Plan. In 2011, they are revisiting that original plan and will issue new forecasts. (And as previously noted, the drops in passenger and cargo were not due to the airport management but due to changes in the local and national economy, the airline business and other factors. However, airport management was slow to respond, taking until 2011 to revise their forecast.)

Chart from EWU study:

Source: EWU report, page 17.

Since the forecast of greatly expanding growth:

How much money has been spent on infrastructure improvements from 2002 to 2010?

Data table – amounts in Millions of $s

2002 $18.50
2003 $14.80
2004 $18.10
2005 $30.00
2006 $24.10
2007 $18.00
2008 $30.40
2009 $30.74
2010 $0.60
2010 $6.00
$191.24

Source of data: The EWU study and contract announcements for 2009 and 2010 on the SIA web site.

More than $191 million dollars has been spent at SIA on capital improvement projects since 2002.

It is as if the managers at the airport and local politicians do their work by ignoring all available data. Bewildering.

The airport generates much local economic activity but it is primarily the result of pouring in tax money to do work that is questionable, considering no overall increase in passengers or cargo. The tax money comes from both general income taxes and government spending, and the $4.50 per passenger ticket tax used to fund airport improvements.

When EWU calculates the economic impact of the airport, they measure not only the incoming tax money, but also spending by visitors and then a multiplier effect that assumes that business that receive the first spending, in turn, spend the money again, locally. They call this “induced” impacts.

Combining all of this, they come up with a figure that SIA yields about $900 million a year in economic impacts and 12,243 additional jobs in Spokane County.

In 2008, Spokane’s GDP was about $17.5 Billion. Therefore, the Airport’s estimated $900M impact is responsible all by itself for over 5% of Spokane’s GDP. Probably not…

A problem with this type of analysis is that it leads to claims like health care represents one-third of the local GDP, a claim that is not true. Or funky calculations of the return on investing in colleges and universities (which I strongly support) – see after the “Read more” at the end of this article.

Another issue is – were there potentially better investments than spending on the SIA? What if a portion of that money could have been used instead to build a medical school or comprehensive research university presence in Spokane? We will never know.  SIA spending has unfortunately become a short term jobs program for the politically connected construction firms and is not leading to the long term return on investment that this region needs.

Update: “San Jose’s airport has since lost a quarter of its passengers and a third of its scheduled flights.” That airport competes with near by San Francisco International and Oakland Airports, both of which are drawing more passengers. For reasons unknown, a flight to San Jose from Spokane (via hops) is much more expensive than flying to nearby Oakland.

First, as anyone who reads this blog regularly  knows, I overwhelmingly and strongly support our university and college system and believe its funding is critical to our local and the state economy.

That said, this claim is amusing:

Wise said that for every dollar of state taxpayer support, the UW returns $22 in impact to the Washington economy and generates $1.50 in state and local tax revenue.

via Local News | State university presidents paint grim picture on budget cuts | Seattle Times Newspaper.

That implies we could easily finance the entire state budget just by spending more money! Wow – a direct 50% return on every dollar spent on higher education! That’s a great perpetual motion machine!

Yes, there is a return on investment. Unfortunately, we can create models (hypotheses) about their return and produce what ever results we want. When we sum the returns of these investments they quickly exceed the total economy. Probably fun to do as a sensitivity analysis and return on a single item, but none exist in a vacuum.

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