THE ECONOMIC IMPACT OF THE PNC ARENA IN RALEIGH, NORTH CAROLINA - Prepared by: Michael L. Walden, Economic Consultant Prepared for: The Centennial ...
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THE ECONOMIC IMPACT OF
THE PNC ARENA
IN RALEIGH, NORTH CAROLINA
Prepared by: Michael L. Walden, Economic Consultant
Prepared for: The Centennial Authority
June 2012EXECUTIVE SUMMARY
The PNC Arena makes significant economic contributions to both the Wake County
(site of the Arena) and regional economies. Averaged over the period 2007-2011, it is
estimated the PNC Arena annually adds $92 million and 1595 jobs to the Wake County
economy, and it generates $84 million and 1472 jobs to the regional (Raleigh-Durham
Metropolitan Area) economy. The contribution to the region is lower than to Wake
County due to the greater number of visitors and net economic activity at the single county
level compared to the multi-county level.
The PNC Arena also has a positive impact on the real estate market. The one-time
increase in real estate values from the additional economic activity stimulated by the PNC
Arena is $83 million in Wake County and $73 million in the Raleigh-Durham Metropolitan
Area. Additionally, there may be a further increase in local real estate values from an
“amenity premium” associated with the high caliber of events attracted to the PNC Arena.
Although estimates of this amenity premium vary widely, an average in the range of a $50
million to $100 million one-time increase to local (primarily Wake County) property values
is reasonable.
Lastly, the PNC Arena contributes, both directly and indirectly, to state and local
public revenues. Again averaged over the period 2007-2011, it is estimated that the PNC
Arena is responsible for $9 million annually in state and local tax revenues, from economic
transactions at the PNC Arena and from economic activity created in the larger economy
by the PNC Arena.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 2TABLE OF CONTENTS
Acknowledgements …………………………………………………………… page 6
About the Author .……..................................................................................... page 6
Introduction …………………………………………………………………… page 7
Approach to Measuring the Economic Impact of the PNC Arena …………… page 12
Economic Impact of the PNC Arena Operations on Regional Economic
Activity and Employment …………………………………………….. page 18
Economic Impact of the PNC Arena on the Real Estate Market ……………... page 26
Economic Impact of the PNC Arena on Public Sector Revenues …………….. page 30
Summary and Conclusions ……………………………………………………. page 34
Appendix. Parameters and Calculations for Estimating the Economic
Impact of the PNC Arena’s Operations …………………………… …. page 35
Figures
Figure 1. Raleigh-Durham Combined Statistical Area in North Carolina ……. page 8
Figure 2. Economic Growth Rates of the Raleigh-Durham Metropolitan
Area Compared to National Economic Growth Rates, 2001-2010……. page 9
Figure 3. Population Growth Rate of Raleigh-Durham Metropolitan
Area Compared to National Population Growth Rates, 2001-2010 ….. page 10
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 3Figure 4. Economic Impact of the PNC Arena ………………………………. page 13
Figure 5. Total Revenue Flowing to the PNC Arena ……………………. ….. page 21
Figure 6. Outline of Procedure for Estimating Total Impact from
Revenues ………………………………………………………………. page 22
Tables
Table 1. Annual Revenue and Attendance, PNC Arena, 2007-2011 …………. page 19
Table 2. Economic Impact of PNC Arena Operations on the Economy
of Wake County ……………………………………………………….. page 24
Table 3. Economic Impact of PNC Arena Operations on the Economy
of the RDU Metropolitan Area ………………………………………… page 25
Table 4. Results of Studies of the Amenity Value of Major League Sports,
With Implications for the PNC Arena …………………………………. page 28
Table 5. Direct Public Revenue Paid by the PNC Arena …………………….. page 31
Table 6. Estimated Off-Site and Supply-Chain Public Revenue Impacts
from the PNC Arena …………………………………………………… page 33
Table 7. Summary of PNC Arena’s Economic Impact ………………………. page 34
Table A1. Economic Impact Parameter Values for Wake County ……………. page 38
Table A2. Economic Impact Parameter Values for the Raleigh-Durham
Metropolitan Area ……………………………………………………… page 39
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 4GENERAL LIMITING CONDITIONS
All practical and reasonable efforts have been used to make the analysis and conclusions
developed in this study reflect the best possible estimations of economic impact. The study is
based on numerous data, assumptions, and parameters provided by the client and other sources
cited in the study. No responsibility is assumed for inaccuracies reported by the client or any
other data source used in developing and preparing the study. No warranty or representation is
made by Michael L. Walden that any of the values or estimations included in the report has been,
or will be, actually achieved.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 5ACKNOWLEDGEMENTS
Several members of the Centennial Authority staff – most importantly Executive Director
Jeff Merritt and Finance Officer John House – were generous with their time and facilitated
development of the data needed for successful completion of the project. Diane Moose at North
Carolina State University made available important information for Wolfpack ticket sales at the
PNC Arena. William Traurig provided ticket sales information for Hurricanes’ games and other
events at the PNC Arena. Thanks are also due to the members of the Centennial Authority for
supporting the project and selecting the author to implement the work and complete the final
report.
ABOUT THE AUTHOR
Michael L. Walden is a William Neal Reynolds Distinguished Professor at North
Carolina State University, where he has taught since 1978. The author of eight books and over
250 articles and reports, among Walden’s specialties is economic impact analysis, particularly
for public and educational institutions and facilities. His most recent book is North Carolina in
the Connected Age (The University of North Carolina Press, 2008). The winner of several
national and state awards, he was the recipient of the UNC Board of Governors Award for
Excellence in Public Service in 2010. Walden frequently comments about the economy in the
media, writes a biweekly newspaper column, broadcasts a daily radio program, and makes scores
of public presentations each year in various forums.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 6INTRODUCTION
The PNC Arena (formerly the RBC Center, and the Raleigh Entertainment and Sports
Arena) was completed as a multi-purpose indoor facility in 1999. Its capacity varies according
to event, with maximum seating of 19,722 for basketball, 18,680 for ice hockey, and 20,150 for
concerts. PNC Arena’s two major tenants are the National Hockey League’s Carolina
Hurricanes and the North Carolina State University Wolfpack men’s basketball team. PNC
Arena is also used for a variety of other events, including concerts, conventions, and trade
shows. In 2011 the PNC Arena hosted 156 events with a total attendance of over 1.5 million.
The PNC Arena is located in Raleigh, North Carolina, in Wake County, and is in the
center of the Raleigh-Durham Metropolitan Area (technically defined as the Raleigh-Durham
Combined Statistical Area – see Figure 1). The Raleigh-Durham Metropolitan Area has been
one of the premiere growth regions in the country during the past quarter-century. The region’s
growth using the broadest measure of the economy – Real Gross Domestic Product – was almost
three times faster from 2001 to 2010 than the growth rate in all metropolitan regions in the nation
(see upper panel of Figure 2).1 The region also had the 12th fastest growth rate among 374
metropolitan areas during the same time period. Likewise, the Real Gross Domestic Product
growth rate on a per capita (per person) basis from 2001 to 2010 was twice as fast in the Raleigh-
Durham Metropolitan Area than in the nation (lower panel of Figure 2). The region has been a
magnet for population growth, with the total number of people in the region growing three times
faster than in the nation in the decade from 2001 to 2010 (Figure 3).
1
Real Gross Domestic Product (GDP) is the total aggregate value of production from all economic sectors in a
region or nation. “Real” GDP means the impact of economy-wide price inflation in the value measure has been
removed.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 7Figure 1. Raleigh-Durham Combined Statistical Area in North Carolina.
Red: Chatham, Durham, Orange, and Person Counties (Durham-Chapel Hill Metropolitan
Statistical Area)
Blue: Franklin, Johnston, and Wake Counties (Raleigh-Cary Metropolitan Statistical Area)
Yellow: Harnett County (Dunn Micropolitan Statistical Area)
Source: U.S. Census.
Spending power is also greater in the region than in the nation. In 2010, regional per
capita income was 117% of per capita income in all U.S. metropolitan areas, an increase of five
percentage points over the same comparison in 2001.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 8Figure 2. Economic Growth Rates of the Raleigh-Durham Metropolitan Area Compared
to National Economic Growth Rates, 2001-2010.
Growth Rate in Real Gross Domestic Product (%)
50
40
30
20
10
0
RDU Metro All Metros
Growth Rate in Real Gross Domestic Product Per Capita (%)
12
10
8
6
4
2
0
RDU Metro All Metros
Source: U.S. Department of Commerce.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 9Figure 3. Population Growth Rate of Raleigh-Durham Metropolitan Area Compared to
National Population Growth Rate, 2001-2010 (%).
30
25
20
15
10
5
0
RDU Metro U.S.
Source: U.S. Census.
The PNC Arena is therefore located in an expanding region that has enjoyed superior
growth rates compared to other metropolitan areas in the country during the last decade. The
purpose of this report is to assess the degree to which the PNC Arena has contributed to this
growth and added to the variety of entertainment options available for regional residents. It
should be noted this report will not evaluate the economic impact from the construction of the
PNC Arena. Those economic impacts were limited to the construction period and ended once
the facility was completed. Instead, the report will evaluate the economic impact associated
with the continuing operation of the PNC Arena.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 10Following this introduction, the report is divided into five sections. The next section describes the approach to measuring economic impact for the PNC Arena and identifies the kinds of data and information required to calibrate the impact. Then are two sections which provide estimates for the economic impact – one based on revenues to the facility and revenues to associated off-site businesses, and the second from broader real estate activities both in the vicinity of the facility and region-wide. Afterward is a section estimating the public fiscal impacts of the PNC Arena. A summary and conclusion are presented in the final section. The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 11
APPROACH TO MEASURING THE ECONOMIC IMPACT OF THE PNC ARENA
The approach to thinking about the economic impact of the PNC Arena is illustrated in
Figure 4. In the title of the figure, “economic impact” is defined as additional income and
employment in the region that only occurs due to the existence of the PNC Arena. From this
perspective, economic impact is prompted by two sources. First are revenues to the PNC Arena
brought from outside the region. Examples are spending by attendees at PNC Arena events who
live in regions other than the Raleigh-Durham Metropolitan Area, such as Rocky Mount-Wilson,
Fayetteville, the Triad, Charlotte, or southern Virginia. Or, if the perspective is narrower, such
as only Wake County, then spending by attendees living in counties other than Wake would be
identified. Including as economic impact spending by PNC Arena attendees from outside the
region of interest is similar to considering purchases of a manufacturer’s product from buyers
outside the company’s home region. In the case of the PNC Arena, the “product” is the
“entertainment services” provided by the various events held at the PNC Arena.
The second impact source is from attendees from within the region. However, all
revenues derived from within-region attendees will not be considered as economic impact. Only
those revenues that within-region attendees would not have spent on other activities within the
region (termed “retained revenues”) should be considered as economic impact. To understand
why, consider two situations. If, in the absence of the PNC Arena, a regional household would
have traveled to Washington, D.C. to attend professional hockey games, but now – due to the
presence of the PNC Arena - that household can attend professional hockey games in the region,
then revenues from this household’s spending would be considered economic impact.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 12Figure 4. Economic Impact of the PNC Arena.
LEAKAGE LEAKAGE
RETAINED NEW
VISITOR INDIRECT
REVENUES REVENUES
FROM INSIDE FROM SPENDING IN SPENDING
THE REGION OUTSIDE THE REGION
REGION
INDUCED
SPENDING
LEAKAGE INDIRECT LEAKAGE
SPENDING
GROSS NEW REGIONAL REVENUES
TOTAL
NET NEW
IMPACT
REGIONAL
FROM
REVENUES
REVENUES
INDUCED
LEAKAGE SPENDING
LEAKAGE OF
PAYMENTS TO
OUTSIDE THE IMPACT ON
REGION AMENITY REGIONAL
VALUE REAL
REGION
ESTATE
MARKET
Note: Size of figures (boxes, circles) does not necessarily indicate size of impact.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 13But if, in the absence of professional hockey games offered at the PNC Arena, the household
would have spent the same monetary amounts on other entertainment options within the region,
then such spending would not be considered economic impact.
The revenues from the two sources – from outside the region and retained from within
the region - are termed gross new regional revenues. However, some of these revenues will
immediately be paid to entities outside the region, meaning those funds will be lost to the region.
Examples are contractors and vendors who provide services to the PNC Arena but whose owners
and employees live outside the region. Other examples are professional entertainers (sports and
non-sports) who perform at the PNC Arena but who live elsewhere – meaning most of their
compensation will not be spent within the region. Only that part of the entertainers’
compensation spent within the region on meals, housing, and incidentals would be kept as
economic impact. These payments to entities from outside the region which are not spent within
the region are identified in Figure 4 as leakage of payments to outside the region. Net new
regional revenues are then new revenues from outside the region plus retained revenues from
inside the region (with the sum being gross new regional revenues) minus leakage of payments
to outside the region.
Once net new regional revenues are calculated, there are two further economic impacts
related to the re-spending of these revenues within the region. These are termed indirect
spending and induced spending.
Indirect spending (sometimes termed “supply-chain spending”) calibrates the additional
spending in the regional economy created when the net new regional revenues (often termed
direct spending) are spent on local suppliers and service providers, and, in turn, those local
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 14suppliers and service providers engage in further spending on other suppliers and service
providers, etc. That is, this spending and re-spending can go on for many “rounds”. For
example, the concessionary firms at the PNC Arena purchase food and drink products from
suppliers. Those suppliers, in turn, purchase their products from food and drink wholesalers,
who have made purchases from food and drink processors, who ultimately made purchases from
agribusiness firms and farmers. As another example, out-of-region attendees at the PNC Arena
may spend funds for lodging, food, and gasoline at local hotels, restaurants, and fuel stations.
This spending also sets off another “chain reaction” of providers and suppliers to those
businesses. However, there is leakage at each round of re-spending as some of the purchases
along the chain are made from out-of-region suppliers. This leakage is accounted for in the
impact analysis.
Induced spending measures the spending on consumer products and services by workers
at the PNC Arena and workers at the suppliers and service provider firms. That is, the wages and
salaries earned by these workers as a result of PNC Arena activities will largely be spent on a
variety of consumer products and services. Again, however, there will be leakage of this
spending when purchases are made from out-of-region firms.
The total impact from the revenues associated with the operation of the PNC Arena
therefore includes three effects: the net new regional revenues, the new indirect spending, and
the new induced spending – all, however, summed after subtracting the impacts of leakage.
There are also a series of economic impacts occurring from the visitor spending in the
region created by the out-of-region attendees at the PNC Arena (see upper section of Figure 4).
Like the net new regional revenues of the PNC Arena discussed above, these expenditures on
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 15lodging, food, gasoline, etc. will have direct, indirect, and induced effects. Again, however,
leakage must be subtracted from each effect.
There is a second major impact of sports and entertainment facilities such as the PNC
Arena, and this is the potential impact on the regional real estate market. This impact can come
from two sources. First is from the additional spending (total impact from revenues) associated
with the PNC Arena. Sustained additional spending at regional retailers and other commercial
firms is, over the long-run, associated with greater investments in real estate, including both
residential and non-residential investments. These new investments are necessary to house the
new workers and locate the new commercial activities affiliated with the additional spending in
the region attracted by the PNC Arena.
The second source of impact on the regional real estate market can come from
considering the PNC Arena as a contributor to entertainment amenities that are valued by
regional residents (termed amenity value in Figure 4). The notion is that households consider
and value a range of entertainment options when choosing a region in which to live. Research
shows this consideration can especially be important for higher-income and highly-educated
households.2 A facility like the PNC Arena can offer the very highest level of entertainment
events, such as NHL hockey, ACC basketball, the NCAA basketball tournament, the world’s
2
Gerald Carlino and Albert Saiz. 2008. “Beautiful City: Leisure Amenities and Urban Growth”, Federal Reserve
Bank of Philadelphia and The Wharton School of Finance, University of Pennsylvania.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 16best professional skaters, and national and world caliber concerts. The value households place
on having access to these events can be reflected in enhanced regional property values.3
The next three sections of the report provide monetary, job market, and public fiscal
estimates for the total economic impact associated with the PNC Arena’s revenues and for the
PNC Arena’s impact on the regional real estate market.
3
Xia Feng and Brad Humphreys. 2008. “Assessing the Economic Impact of Sports Facilities on Residential Property
Values: A Spatial Hedonic Approach”, International Association of Sports Economists and North American
Association of Sports Economists Working Paper Series No. 08-12.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 17ECONOMC IMPACT OF THE PNC ARENA OPERATIONS ON REGIONAL
ECONOMIC ACTIVITY AND EMPLOYMENT
This section of the report estimates the economic impact of the PNC Arena’s operations
on regional income and regional employment. Two definitions of “region” are used, the
Raleigh-Durham Combined Statistical Area (Figure 1), and Wake County, the most populous of
the Raleigh-Durham Combined Statistical Area’s counties and site of the PNC Arena. The
economic impact is estimated from an average of the most recent five years (2007-2011) of the
facility’s operation. In terms of the national business cycle, this time period includes both
recessionary years (2008, 2009) and growth years (2007, 2010, 2011).
Table 1 shows the basic data for the PNC Arena used in the economic impact analysis,
with all monetary values adjusted to 2011 purchasing power dollars. NCSU ticket sales are for
Wolfpack men’s basketball games, and Hurricane’s ticket sales are for the NHL franchise’s
contests. “Other event rental” is the rental revenue for other performances and presentations at
the building and paid to the PNC Arena. Gate receipts (ticket sales) are kept by the performing
companies. Concession revenues are from all games and performances, as are parking revenues.
Within the broad category “other revenues”, merchandise includes the sales of hats, shirts,
banners, etc. associated with the teams and events playing and performing at the PNC Arena. A
very modest amount of these totals is from off-site sales of the same merchandise, which are tied
to the building’s tenants. Over the time period studied (2077-2011), naming rights revenues are
from RBC Bank. There are separate entries for national and local media contracts, and
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 18Table 1. Annual Revenue and Attendance, PNC Arena, 2007-2011 (2011$ for monetary amounts).; persons for attendance). Category 2007 2008 2009 2010 2011 Average NCSU ticket $6,130,250 $6,040,100 $5,711,600 $5,314,800 $5,360,000 $5,711,350 sales1 NCSU game 250,250 246,118 230,622 232,592 252,783 239,374 attendance Hurricanes $35,989,037 $35,442,124 $46,425,710 $29,558,681 $30,145,163 $35,512,143 ticket sales1 Hurricane game 742,989 715,715 855,792 633,761 758,454 769,458 attendance Other event $4,763,432 $6,689,510 $7,137,471 $6,141,452 $5,638,782 $6,074,129 rental2 Other event 608,119 488,427 474,143 437,331 519,163 502,580 attendance Concession $12,794,174 $12,520,750 $13,146,471 $9,983,907 $11,696,564 $12,028,373 revenues Parking $3,405,703 $3,202,059 $3,937,978 $3,138,253 $3,720,195 $3,480,838 revenues Other revenues: *merchandise3 $4,267,664 $3,076,147 $3,617,544 $2,531,004 $4,179,631 $3,534,398 *naming rights $1,318,321 $1,271,084 $1,276,300 $1,258,401 $1,220,964 $1,269,014 *national media $16,248,873 $17,543,258 $29,316,577 $24,278,949 $27,993,236 $23,076,179 *local media $4,572,309 $4,244,388 $6,296,681 $6,157,998 $6,280,417 $5,510,359 *advertising $8,072,922 $7,682,738 $8,263,195 $7,462,993 $7,860,060 $7,868,382 *other 4 $1,201,447 $1,016,774 $1,041,085 $1,231,365 $1,520,677 $1,202,270 Total revenues $98,820,932 $98,761,865 $126,229,421 $97,093,619 $105,668,200 $105,314,807 Sources: Gale Force Sports and Entertainment; North Carolina State University Department of Athletics. 1 includes suites 2excludes gate receipts kept by performing company 3 includes merchandise sales at remote stores 4 primarily Ticketmaster revenues and foreign exchange adjustments The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 19
advertising revenue is related to ads within the PNC Arena. There are modest “other” revenues
from Ticketmaster and foreign exchange adjustments.
Figure 5 shows the variation in total revenue flowing to the PNC Arena (in millions of
2011$) over the study period. There appears to be a business cycle component to the data, with
a large decline in revenue in 2010 corresponding to the slow economic recovery, and a boost in
total revenue in 2011 as the economy gained traction. The spike in total revenue in 2009 was
primarily associated with a jump in Hurricane ticket revenue and national media revenue when
the team went deep in the season’s playoffs.
Figure 6 shows the steps and needed parameter values used in estimating the economic
impact from the PNC Arena’s operations in any year and for any region. In column 1 are listed
the six broad categories of revenues flowing into the PNC Arena, as provided in Table 1. From
these revenues are estimated the two components, new revenues from outside the region (labeled
“O” in Figure 6) and retained revenues from inside the regions (labeled “R” in Figure 6) under
column 2. Combining “O” and “R” produces gross new regional revenues by category to the
PNC Arena in column 3. Under column 4 is a comprehensive leakage factor (designated “L”)
which includes leakage of payments to outside the region from the gross new regional revenues
as well as leakage from the indirect spending and the induced spending associated with each
category of gross new regional revenues. The remaining net new regional revenues (designated
by factor “K”) then have a multiplier applied (labeled “M” under column 5) which accounts for
the additional indirect and induced spending. The results for each PNC Arena revenue category
are summed to give the total impact from revenues in column 6.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 20Figure 5. Total Revenue Flowing to the PNC Arena, millions 2011$.
130
120
110
100
90
2007 2008 2009 2010 2011
Source: Table 1.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 21Figure 6. Outline of Procedure for Estimating Total Impact from Revenues.
1 2 3 4 5 6
VISITOR
V x SPENDING IN L
REGION
K x M
NCSU ticket O NCSU gross L
sales new regional
R revenues K x M
Hurricanes O Hurricanes L
ticket sales gross new
R regional K x M
revenues
TOTAL
Other event O Other event L
ticket sales gross new
R regional K x M
revenues IMPACT
Concession O Concession L
revenues gross new
R regional
K x M FROM
revenues
Parking O Parking gross L REVENUES
revenues new regional
R revenues K x M
Other O Other gross L
revenues new regional
R revenues K x M
Legend
O = revenues from outside the region;
R = retained revenues from inside the region;
V = visitor spending per outside attendee; L = leakage; K = kept; M = multiplier
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 22The process for estimating the economic impact from visitor spending in the region is
shown at the top of Figure 6. To the estimates of “O” (revenues from outside the region) from
ticket sales is applied a factor, “V”, measuring off-site spending for food, lodging, gasoline, and
other personal items per ticket bought at the PNC Arena. A leakage factor (“L” in column 4)
eliminates that spending flowing outside the region. The remainder (“K”, for “kept”, under
column 4), with a multiplier (“M” under column 5) applied to account for indirect and induced
spending, becomes the net new off-site visitor spending in the region and is added to the total
impact from revenues.
With values for column 1 (Figure 6) provided in Table 1, parameter values for O, R, L,
K, M, and V allow the economic impact to be measured. These values differ by spending type
and by region and are provided in the Appendix. The results for the economic impact of the
PNC Arena operations on Wake County are given in Table 2. The results are based on the
averages for the time period 2007-2011 in Table 1. The averages remove the impacts of
business cycle fluctuations – which are beyond the control of the PNC Arena - on the results.
As Table 2 shows, it is estimated the operations of the PNC Arena generated an annual
average of $92 million of additional economic value (“value-added”) to Wake County over the
period 2007-2011.4 The economic impact is composed of $76 million from net new regional
revenues and its associated indirect and induced effects from the building and $16 million in off-
site (outside the building) visitor expenditures. From the $92 million, $61 million is estimated
as payment to workers. Details on the calculations are in the Appendix.
4
To place the economic impact in context, the estimated aggregate economic production (“value-added”) in Wake
County in 2010 (latest year available) was $44.3 billion (Implan for North Carolina, Mig., Inc., 2011).
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 23Table 2. Economic Impact of PNC Arena Operations on the Economy of Wake County,
Annual Average for Period 2007-2011 (Total Impact from Revenues).
TOTAL VALUE-ADDED $92 MILLION
EMPLOYMENT 1595 workers
Source: Table 1; author’s calculations from Appendix.
There is also an estimated 1595 annual jobs (full-time and part-time) in the Wake
County economy associated with the operational activities of the PNC Arena. These include
jobs in the building as well as jobs off-site associated with the indirect and induced effects from
the building’s revenues and the spending in the local economy by visitors.5
5
In 2011 there were an estimated 445,000 non-farm employees in Wake County (Establishment Survey, U.S.
Bureau of Labor Statistics).
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 24Table 3. Economic Impact of PNC Arena Operations on the Economy of RDU
Metropolitan Area, Annual Average for Period 2007-2011 (Total Impact from Revenues).
TOTAL VALUE-ADDED $84 MILLION
EMPLOYMENT 1472 workers
Source: Table 1; author’s calculations from Appendix.
The calculations and derived estimates were repeated for the Raleigh-Durham
Metropolitan Area (Raleigh-Durham Consolidated Statistical Area) and are presented in Table 3.
Both the total value-added and employment numbers are slightly lower than for Wake County.
This is because the larger the geographic area, the greater is the number of attendees at the PNC
Arena from within that area and the less is spending coming from outside that geographic area.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 25ECONOMC IMPACT OF THE PNC ARENA ON THE REAL ESTATE MARKET
As shown by Figure 4, there are two potential impacts of the PNC Arena on the local real
estate market. The first flows from the additional spending generated in the local economy as a
result of the PNC Arena – as estimated in the previous section. There is a positive relationship
between the amount of spending in a region and real estate values for two logical reasons. First,
today’s value of commercial space is equal to the expected discounted net value (after expenses)
of future consumer spending. Hence, the increased consumer income and spending generated
by the PNC Arena directly leads to a higher value of commercial space. Second, the additional
jobs resulting from the PNC Arena operations will – in the long run – ultimately lead to more
local population and enhanced residential property values to serve that population.6
Data for Wake County show a change of $0.91 of real property value (commercial and
residential combined) for every dollar change of personal income, and the relationship is a $0.85
change in real property value associated with a dollar change of personal income in the entire
RDU Metropolitan Area.7 Using the result from Table 2, this relationship implies the PNC
Arena’s operations are associated with a one-time increase of $83 million in additional real
estate value in Wake County. Using the result from Table 3, the impact is a one-time
increase of $73 million in additional real estate value in the RDU Metropolitan Area. These
numbers do not include the property value of the PNC Arena itself.
6
Even in periods of less than full employment, when residential construction is slow and residential property
values – in aggregate – may be declining, an increase in jobs is associated with stronger demand for residencies
and an improved real estate market.
7
The relationships are based on an analysis of data from 1994 to 2009 and account for variation in national
interest rates, which influence the market value of real property. Data are from the North Carolina Department of
Commerce, LINC (“Log Into North Carolina”, www.osbm.state.nc.us).
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 26The second potential economic impact of the PNC Arena on the local real estate market
is on the region’s “quality of life”. The theory is that the PNC Arena, by providing a venue for
attracting first-class entertainment to the region, elevates the region’s quality of life, thereby
making the region more attractive for households and businesses. This increased attractiveness
of the region results in greater demand for the region’s real estate and, hence, higher real estate
values. The real estate premium associated with this quality of life factor is termed an “amenity
value”.
Several recent empirical studies have attempted to quantify the relationship between
major entertainment venues and regional real estate values, and Table 4 summarizes the findings.
The studies use different approaches to the issue, from the statistical technique of isolating the
impact of major league teams and their venues on property values (Carlino and Coulson) to
surveying residences about their “willingness to pay” for a major league team in their region
(Johnson, Groothuis, and Whitehead). The results are also mixed, with some studies finding a
significant amenity value of teams and venues (Carlino and Coulson) and others concluding
there is no impact (Kiel, Matheson, and Sullivan).
Given the unsettled nature of this potential impact, any conclusions must be viewed as
tentative. The third column of Table 4 shows the one-time amenity values implied for the PNC
Arena from the cited studies. For the Carlino/Coulson study, the PNC Arena value is
calculated as 8% of the Wake County aggregate property value, with the result multiplied by
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 27Table 4. Results of Studies of the Amenity Value of Major League Sports, with
Implications for the PNC Arena.
Study Result Implied Value from
PNC Arena
Carlino and Coulson, 2004 Cities with NFL teams experience 8% $1.4 billion
increase in aggregate property value
Dehring, Depken, and No impact on aggregate property value if -
Ward, 2007 stadium/arena is financed by public
monies (Dallas)
Feng and Humphreys, For Nationwide Arena, an increase of $222 million
2008 $222 million in property value for
residences within 1 mile of the arena
Johnson, Groothuis, and Amenity value of between $23.5 million $18 to $50 million
Whitehead, 2001 and $66 million associated with the
Pittsburgh Penguins
Kiel, Matheson, and Cities with NFL teams experience no $0
Sullivan, 2010 increase in aggregate property value
Tu, 2005 Aggregate property values in Prince $42 million
George’s County, Maryland rose $42
million as a result of FedEx Field
Sources:
Carlino, Gerald and N. Edward Coulson, 2004, “Compensating Differentials and the Social Benefits of the NFL”,
Journal of Urban Economics, Vol. 56, No. 1, 25-50.
Dehring, Carolyn, Craig Depkin, and C. Ward, 2007, “The Impact of Stadium Announcements on Residential
Property Values: Evidence from a National Experiment in Dallas-Ft. Worth”, Contemporary Economic Policy,
Vol. 25, No. 4, 627-638.
Feng, Xia and Brad Humphreys, 2008, “Assessing the Economic Impact of Sports Facilities on Residential
Property Values: A Spatial Hedonic Approach”, International Association of Sports Economists, Working
Paper No. 08-12.
Johnson, Bruce, Peter Groothuis, and John Whitehead, 2001, “The Value of Public Goods Generated by a Major
League Sports Team: The CVM Approach”, Journal of Sports Economics, Vol. 2, No. 1, 6-21.
Kiel, Katherine, Victor Matheson, and Christopher Sullivan, 2010, “The Effect of Sports Franchises on Property
Values: The Role of Owners vs. Renters”, Dept. of Economics, College of Holy Cross, Faculty Research Series
Paper No. 10-01.
Tu, Charles, 2005, “How Does a Sports Stadium Affect Housing Values: The Case of FedEx Field”, Land
Economics, Vol. 81, No. 3, 379-395.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 280.17. The last factor is the ratio of the estimated Carolina Hurricanes market value to the
average market value for NFL teams.8 No market value is implied from
Dehring/Depken/Ward. The Feng/Humphreys study is for Nationwide Arena in Columbus,
Ohio. Columbus has approximately the same population and Gross Domestic Product as the
Raleigh-Durham Metropolitan Area, so the same amenity value is used. Pittsburgh’s metro
population is 30% greater, and its Gross Domestic Product is 20% larger, respectively than the
population and GDP in the Raleigh-Durham Metropolitan Area; thereby the amenity range is
reduced by 25% for the PNC Arena. An amenity value of $0 is implied by
Kiel/Matheson/Sullivan. In the Tu study, Prince George’s County is smaller in population than
the Raleigh-Durham Metropolitan Area; however, FedEx Field hosts a much larger market-value
team (the Washington Redskins) than does the PNC Arena. The two opposite effects are
assumed to be off-setting, so the same amenity value is applied to the PNC Arena.
Hence, the recent studies for amenity values of
professional sports teams and their venues imply a
one-time property value enhancement from the PNC
Arena ranging from $0 to $1.4 billion, with a typical
value in the range of $50 million to $100 million.
8
Market values are taken from forbes.com.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 29ECONOMIC IMPACT OF THE PNC ARENA ON PUBLIC SECTOR REVENUES
This section of the report calculates the impact of the PNC Arena on public (government)
revenues. These monies do not represent new funds; instead, they are an allocation of already
calculated revenues from the private sector to the public sector. Nonetheless, it is important to
evaluate the degree to which the public sector shares in the economic impacts from the PNC
Arena.
The public sector revenues generated by the PNC Arena are presented in two categories.
First are direct public sector revenues from operations within the PNC Arena and paid to
government entities by the Centennial Authority and the Carolina Hurricanes. These include
state and local sales taxes, the Wake County prepared food and beverage tax, the state gross
receipts tax on ticketed events, and a “payment in lieu of property taxes”. Since the PNC Arena
is a publicly owned facility, it is not subject to local property taxes. However, the “payment in
lieu of property taxes” replaces the property tax.
Table 5 shows the averages – in 2011 dollars – for the years 2007 to 2011 for these direct
taxes paid by the PNC Arena. The total is $4.9 million, with the largest component being the
“payment in lieu of property taxes.”
The second category of public sector revenues generated by the PNC Arena are those
forthcoming from the off-site, indirect, and induced economic activities associated with the
arena. These public sector revenues are also of two types. First is the spending done off-site by
visitors and by the suppliers and their workers along the “multiplier” or “supply” chain created
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 30Table 5. Direct Public Revenue Paid by the PNC Arena, Annual Average for 2007-2011 in
2011 $ (annual).
Type Amount
State sales and use tax $864,809
County (Wake) sales and use tax $303,602
County (Wake) prepared food and beverage tax $97,154
State gross receipts tax on ticketed events $1,566,403
Payment in lieu of property taxes $2,074,499
Total $4,906,467
Source: The Centennial Authority
by the PNC Arena (see Figure 4). Second are public sector revenues from the increased local
real values prompted by the PNC Arena’s impacts.
Each of these public revenue impacts are estimated separately. For the public revenues
associated with off-site and supply-chain spending, state and local average aggregate tax rates
(but excluding taxes levied on real estate) are applied to the estimated annual economic activity
values generated by the PNC Arena’s off-site and from supply-chain spending. The aggregate
state revenue average tax rate is 5%, and the aggregate local revenue average tax rate (minus real
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 31estate) is 0.6%.9 For property tax revenues generated from the economic impact of the PNC
Arena ($83 million for Wake County and $73 million for the RDU Metropolitan Area), the
property values are multiplied by average property tax rates for the associated geographic area. 10
For the property tax revenues associated with the amenity values from the PNC Arena, only
values for Wake County are calculated, based on the findings that most of the amenity value
occurs in a geographic area near the venue. The amenity value for Wake County was found by
applying the Wake County property tax rate to the average of the “implied values from PNC
Arena” in Table 4, after omitting both the highest and lowest values.11
The results of these calculations are in Table 6. As would be expected, revenue to the
state is the largest component, followed by local property tax revenue.
The on-site and off-site public revenue impacts from
the PNC Arena are estimated at $9.1 million annually.
9
The aggregate state average tax rate is derived by dividing North Carolina total state public tax revenues from
own sources by aggregate state value-added (gross state product). The local average tax rate is derived by
dividing local (e.g., Wake County) tax revenues – excluding intergovernmental, property, and borrowed revenues -
by aggregate local value-added (gross local product). Sources: North Carolina Department of Commerce; North
Carolina Treasurer’s Office; U.S. Census Bureau; U.S. Department of Commerce; and Implan for North Carolina, for
years 2009 and 2010. Off-site spending is travel expenditures of visitors, and supply chain spending is total
economic impact from the PNC Center minus “net new regional revenues” (Figure 4).
10
For each geographic area, the property tax rate is a blended rate of the county-wide and municipal rates based
on the proportion of total county population in each.
11
For the results with a range of impacts (Johnson/Groothuis/Whitehead) the average of the range was first
calculated. The results from Carlino/Coulson and from Dehring/Depken/Ward study were omitted. The average
value used was $75 million.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 32Table 6. Estimated Off-Site and Supply-Chain Public Revenue Impacts from the PNC
Arena, Wake County (annual).
Type Amount
State public revenue $2.9 million
Wake County non-property revenue $0.3 million
Wake County property revenue $0.5 million
Wake County amenity value revenue $0.5 million
Total $4.2 million
Source: Table 1; author’s calculations.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 33SUMMARY AND CONCLUSIONS
This study has calculated the considerable impact of the PNC Arena on additional
economic activity, additional jobs, increases in real estate values, and payments to state and local
public revenues. These contributions are summarized in Table 7. As the Wake County and
Raleigh-Durham Metropolitan Area regions expand in the future and become even more of a
preferred home for households and businesses and a destination for visitors and tourists, the PNC
Arena’s economic impacts will likely become even larger.
Table 7. Summary of PNC Arena’s Economic Impacts
ANNUAL VALUE-ADDED TO WAKE COUNTY $92 MILLION
ADDITIONAL JOBS TO WAKE COUNTY 1595
ANNUAL VALUE-ADDED TO RDU METRO AREA $84 MILLION
ADDITIONAL JOBS TO RDU METRO AREA 1472
INCREASE IN WAKE COUNTY REAL ESTATE VALUE $83 MILLION
INCREASE IN RDU METRO AREA REAL ESTATE VALUE $73 MILLION
ADDITIONAL “AMENTITY VALUE” TO WAKE COUNTY $50 TO $100 MILLION
ANNUAL STATE AND LOCAL PUBLIC REVENUES $9 MILLION
Source: Tables 2, 3, 5, 6.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 34APPENDIX. PARAMETERS AND CALCULATIONS FOR ESTIMATING THE
ECONOMIC IMPACT OF THE PNC ARENA’S OPERATIONS
Values for the parameters O, R, K, L, M, and V must be obtained to estimate the
economic impact of the PNC Arena’s operations (see Figure 6). These values were derived
from several sources. Values for O (the proportion of PNC Arena revenues from outside the
region) were primarily taken from an analysis of available PNC Arena ticket sales information.
Ticket sales were grouped by zip code of buyers, and this allowed identification of zip codes of
buyers within Wake County, within the Raleigh-Durham Metropolitan Area, and buyers in other
geographic areas to be identified. This ticket zip code methodology was used to calculate the
O’s for ticket sales (NCSU, Hurricanes, and other events), concession revenues, parking
revenues, and merchandise revenues. For revenues from naming rights, the national media, and
“other revenues” (revenues from Ticketmaster and foreign currency exchange), it was assumed
the value for O was 1.00, under the assumption these revenues originate from national companies
and organizations. Conversely, a value of 0.0 for O was used for local media revenues,
following the logic the local media would have spent the funds on other local events or venues in
the absence of the PNC Arena. Likewise, the same logic is used for an O value of 0.0 for
advertising in the Raleigh-Durham region (Table A2). However, the broader regional exposure
the PNC Arena provides should bring outside advertising revenues to Wake County. Therefore,
the value of O for Wake County was set at 0.33, which is the estimated proportionate increase in
PNC Arena revenues when the Raleigh-Durham region is compared to Wake County.
Typically revenues derived from customers (for example, ticket buyers) from within the
designated economy are not included in economic impact under the assumption those monies
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 35would have been spent elsewhere if the venue of interest (here the PNC Arena) did not exist.
However, there is one exception to this rule. There may be a proportion of locally derived
revenues that would have been spent outside the local economy if the venue and its activities
didn’t exist. That is, some portion of college basketball, professional hockey, and concert
attendees from the local economy would have traveled outside the local economy – and taken
their spending with them - to enjoy these activities if the PNC Arena was not available to attract
those events. This factor is defined as R. Specifically, R is defined as the proportion of
revenues from within the designated economy that are retained within the local area because of
the existence of the PNC Arena. In the absence of surveys of local ticket buyers – which were
not available – a plausible value of R of 0.10 is taken from other studies and applied to NCSU
ticket sales, Hurricanes ticket sales, other events sales, concession revenues, parking revenues,
and merchandise revenues.12 R is not applicable (its value is 0.0) for naming rights, national
media revenues, and “other revenues” where the spending source is entirely outside the local
economy and for advertising where firms would have directed their spending to other local
options.
The values for K, L, and M were taken from Implan for North Carolina.13 Implan is a
statistical package that calibrates economic interrelationships within a geographic area. Implan
is available for counties, combinations of counties, and states. Implan divides the designated
economy into 440 individual economic sectors and estimates monetary flows (buying and
12
Bureau of Business, 2006, Preliminary Economic Impact Analysis for the Lincoln Arena Task Force, University of
Nebraska-Lincoln.
13
Federal taxes are not subtracted from these values because the latest data show North Carolina receives as
much in federal spending as it pays in federal taxes (The Tax Foundation, 2007, Federal Taxes Paid versus Federal
Spending Received by State, 1981-2005, October.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 36selling) between each of those sectors and with buyers and sellers outside the designated
economy. So, for example, of $1000 spent at a company located in the designated economy –
such as Wake County – Implan estimates how much immediately leaves the economy as
purchases from firms outside the designated area as well as how much stays in the local economy
and is spent and re-spent with other local firms. Implan derives estimates of impacts on
employment from the identified spending interrelationships.
Analysis of available ticket sale data for the PNC Arena was also the source for V – the
proportion of PNC Arena attendees who make off-site (outside the PNC Arena) visitor
expenditures. Attendees who traveled more than 150 miles (one-way) from their residence to
the PNC Arena were assumed to be “overnight visitors” and make expenditures for one day on
lodging, meals, gasoline, and other incidentals away from the PNC Arena. Attendees who
traveled less than 150 miles (one-way) from their residence to the PNC Arena and did not live in
Wake County (site of the PNC Arena) or any county contiguous to Wake County (Chatham,
Durham, Franklin, Granville, Harnett, Johnston, and Franklin) or nearly contiguous to Wake
County (Orange, Lee) were assumed to be “day visitors” and make expenditures for part of a day
for meals, gasoline, and other incidentals away from the PNC Arena. Using data from the
annual visitor profile of the North Carolina Department of Commerce, each “overnight visitor”
was assumed to spend $55 for lodging, food, gasoline, and incidentals, while each “day visitor”
was assumed to spend $35 for gasoline and incidentals.14
14
North Carolina Division of Tourism, Film, and Sports Development, North Carolina Department of Commerce.
2010 North Carolina Visitor Profile, May 2011.
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 37Table A1. Economic Impact Parameter Values for Wake County.
Category O R K L M V1
NCSU ticket sales 0.43 0.10 1.00 0.00 1.50 Overnight=0.08
Day=0.15
Hurricanes tickets sales 0.59 0.10 0.50 0.50 2.50 Overnight=0.08
Day=0.15
Other event rental 0.63 0.10 0.81 0.19 1.24 Overnight=0.08
Day=0.15
Concession revenues 0.58 0.10 0.53 0.47 1.90 n.a.
Parking revenues 0.58 0.10 0.46 0.54 2.43 n.a.
Merchandise 0.58 0.10 0.67 0.33 1.83 n.a.
Naming rights 1.00 0.00 0.78 0.22 1.60 n.a.
National media 1.00 0.00 0.36 0.64 2.51 n.a.
Local media 0.00 0.00 0.00 0.00 0.00 n.a.
Advertising 0.33 0.00 0.78 0.22 1.60 n.a.
Other 1.00 0.00 0.62 0.38 1.88 n.a.
1
proportion applied to attendance; n.a. = not applicable
Implan sectors:
NCSU ticket sales: sector 438, state and local government education
Hurricanes ticket sales: sector 403, spectator sports companies
Other rental income: sector 361, imputed rental activity for dwellings
Concession revenues: sector 413, food and service drinking places
Parking revenues: sector 385, facilities support services
Merchandise: sector 328, retail stores – sporting and hobby
Naming rights: sector 377, advertising and related services
National media: sector 348, radio and television broadcasting
Local media: sector 348, radio and television broadcasting
Advertising: sector 377, advertising and related services
Other: sector 383, travel arrangement and reservation services
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 38Table A2. Economic Impact Parameter Values for Raleigh-Durham Metropolitan Area.
Category O R K L M V1
NCSU ticket sales 0.31 0.10 1.00 0.00 1.51 Overnight=0.08
Day=0.15
Hurricanes tickets sales 0.48 0.10 0.52 0.48 2.62 Overnight=0.08
Day=0.15
Other event rental 0.46 0.10 0.81 0.19 1.25 Overnight=0.08
Day=0.15
Concession revenues 0.44 0.10 0.54 0.46 1.91 n.a.
Parking revenues 0.44 0.10 0.57 0.43 2.43 n.a.
Merchandise 0.44 0.10 0.67 0.33 1.84 n.a.
Naming rights 1.00 0.00 0.78 0.22 1.60 n.a.
National media 1.00 0.00 0.36 0.64 2.51 n.a.
Local media 0.00 0.00 0.00 0.00 0.00 n.a.
Advertising 0.00 0.00 0.78 0.22 1.60 n.a.
Other 1.00 0.00 0.62 0.38 1.88 n.a.
1
proportion applied to attendance; n.a. = not applicable
Implan sectors:
NCSU ticket sales: sector 438, state and local government education
Hurricanes ticket sales: sector 403, spectator sports companies
Other rental income: sector 361, imputed rental activity for dwellings
Concession revenues: sector 413, food and service drinking places
Parking revenues: sector 385, facilities support services
Merchandise: sector 328, retail stores – sporting and hobby
Naming rights: sector 377, advertising and related services
National media: sector 348, radio and television broadcasting
Local media: sector 348, radio and television broadcasting
Advertising: sector 377, advertising and related services
Other: sector 383, travel arrangement and reservation services
The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 39The resulting values for parameters O, R, K, L, M, and V are in Table A1 for Wake County and Table A2 for the Raleigh-Durham Metropolitan Area. The values for O are smaller for the RDU Metropolitan Area than for Wake County because more attendees come from within the metropolitan area than from one county. In both geographic areas, local media has a value of “0” for O under the assumption these advertising dollars would be spent somewhere in the local area if activities at the PNC Arena were not available. There is also assumed to be a value of “0” for R related to advertising, assuming those funds would flow outside the geographic area in the absence of the PNC Arena activities. The values for K and M are always the same or larger, and the values for L always the same or smaller, for the metropolitan area than for Wake County because a larger geographic area allows for more aggregate economic transactions to occur. The Economic Impact of the PNC Arena in Raleigh, North Carolina Page 40
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