THE ECONOMIC IMPACT OF THE PNC ARENA IN RALEIGH, NORTH CAROLINA - Prepared by: Michael L. Walden, Economic Consultant Prepared for: The Centennial ...

 
THE ECONOMIC IMPACT OF THE PNC ARENA IN RALEIGH, NORTH CAROLINA - Prepared by: Michael L. Walden, Economic Consultant Prepared for: The Centennial ...
THE ECONOMIC IMPACT OF
          THE PNC ARENA
IN RALEIGH, NORTH CAROLINA

  Prepared by: Michael L. Walden, Economic Consultant
         Prepared for: The Centennial Authority

                     June 2012
EXECUTIVE 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 2
TABLE 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 3
Figure 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 4
GENERAL 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 5
ACKNOWLEDGEMENTS

          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 6
INTRODUCTION

        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 7
Figure 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 8
Figure 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 9
Figure 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 10
Following 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 12
Figure 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 13
But 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 14
suppliers 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 15
lodging, 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 16
best 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 17
ECONOMC 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 18
Table 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 20
Figure 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 21
Figure 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 22
The 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 23
Table 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 24
Table 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 25
ECONOMC 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 26
The 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 27
Table 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 28
0.17. 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 29
ECONOMIC 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 30
Table 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 31
estate) 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 32
Table 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 33
SUMMARY 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 34
APPENDIX. 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 35
would 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 36
selling) 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 37
Table 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 38
Table 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 39
The 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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