Avian Flu Study and Cruise Ship

Connecticut Department of Economic & Community Development: 

Connecticut Department of Economic & Community Development W. Michael Regan, Director of Research and Planning Mark R. Prisloe, Associate Economist REMI User Conference May 12-14, 2004 Amherst, MA

DECD and Economic Impact Analysis: 

DECD and Economic Impact Analysis Estimating Economic and Fiscal Impacts Of: Economic Development Projects Events Economic and Socio-Economic Policies

DECD Use of the REMI Policy Insight Model: 

DECD Use of the REMI Policy Insight Model Role Economic and Fiscal Impact Analysis at DECD Due Diligence What If Scenarios Decision Making

The Economic Impact of Avian Influenza on Connecticut’s Egg Industry&The Economic Impact of a Cruise Ship Visit on Connecticut’s Economy: 

The Economic Impact of Avian Influenza on Connecticut’s Egg Industry & The Economic Impact of a Cruise Ship Visit on Connecticut’s Economy

The Economic Impact of Avian Influenza on Connecticut’s Egg Industry : 

The Economic Impact of Avian Influenza on Connecticut’s Egg Industry

Situation: 

Situation A confirmed outbreak of Avian Influenza virus at facilities owned by Kofkoff Egg Farms, LLC.

Avian Influenza (AI): 

Avian Influenza (AI) Avian influenza (AI) is a disease of viral etiology that ranges from a mild or even asymptomatic infection to an acute, fatal disease of chickens, turkeys, guinea fowls, and other avian species, especially migratory waterfowl.

Kofkoff Egg Farms, LLC: 

Kofkoff Egg Farms, LLC Owns 4.7 million birds and seven poultry facilities located in five towns in eastern Connecticut. Largest egg producer not only in Connecticut but also in the northeastern United States. Employs 300 people, Annual payroll of $12 million Gross sales of $90 million Supplies more than 90 percent of Connecticut’s egg market

Slide10: 

The company’s large customers include major supermarket chains such as: Wal-Mart Stop & Shop Big Y Shaws BJ’s Wholesale King Kullen Pathmark Shoprite

Traditional Response To AI: 

Traditional Response To AI Depopulation The Connecticut Department of Agriculture (Connecticut DOA) estimates that the cost of depopulation would exceed $30 million with Connecticut’s share of that cost being approximately $7.5 million.

Alternative Response To AI: 

Alternative Response To AI Vaccination of all chickens located at the Kofkoff facilities. The DOA’s hypothesis: “vaccination is more cost effective”

CT DOA’s Objective: 

CT DOA’s Objective Avoid depopulation through vaccination Get the USDA to approve the vaccination plan Get the USDA to cover some or all of the cost the vaccination program

DECD’s Charge: 

DECD’s Charge Conduct an Economic Impact Analysis that estimates the impact of the various approaches to the Avian Influenza crisis. Prepare a report that relates the findings of DECD research and analysis and provides a clear comparison of the impact of the aforementioned approaches.

Estimating The Economic Impact of AI: The EIA Process: 

Estimating The Economic Impact of AI: The EIA Process Research: Interviews Conducted an Extensive Literature Search Collected and Analyzed Economic and Demographic Data Conducted a RIMS II Analysis Conducted a REMI Policy Insight Analysis

Modeling: 

Modeling Static and Dynamic Approaches

Static Modeling: 

Static Modeling BEA’s RIMS II – Provides a quick “snap shot” Widely used and accepted Easy to use, which allows for a quick analysis Provides a reference point or point of comparison

Estimating The Economic Impact of AI: Static Model - RIMS II: 

Estimating The Economic Impact of AI: Static Model - RIMS II The dollar value of the industry output is $90 million per year (Kofkoff gross sales) RIMS II Application 1 The BEA’s “final demand multiplier” for poultry and egg production is 1.6042 Impact is $144 million ($90 million x 1.6042)

Slide19: 

RIMS II Application 2 The final demand multiplier for agricultural production in general is 1.8871 Impact is $169 million ($90 million x 1.8871)

Shortfall of the Static Model: 

Shortfall of the Static Model One limitation of this “static” (single point-in-time) analysis is that it does not take into account numerous interactions among variables such as labor, capital, wages, population, fiscal, and other effects, nor does it account for change over time.

Estimating The Economic Impact of AI: Dynamic Model – REMI Policy Insight: 

Estimating The Economic Impact of AI: Dynamic Model – REMI Policy Insight Assumptions The egg production industry in Connecticut, in particular Kofkoff Egg Farms, LLC, is assumed to employ 300 at an industry average salary of $40,000 (wage disbursements only).   Sales are reportedly $90 million annually. (The model assumes that $90 million in gross sales (or output) are lost in the Connecticut economy). This loss is modelled in the “farm sales” policy variable.

Additional Assumptions: 

Additional Assumptions Additional changes simulated are the loss of: $21 million in feed grain sales that currently support the farm’s operations; $1 million in fuel purchases; $1 million in electric utility purchases, and $1 million in rail delivery services

Slide23: 

Model Results The essential results of the loss of the egg farm sales are demonstrated in this Table

Modeling Nuances: 

Modeling Nuances Interesting Thing We Learned About the REMI Policy Insight Model.

Exogenous Nature of the Farm Sector In REMI Policy Insight: 

Exogenous Nature of the Farm Sector In REMI Policy Insight It should be noted that (due to the structural nature of the REMI Policy Insight Model): The farm sector in the model is exogenous, that is, it is determined outside the model. Therefore the model’s results only reflect the indirect effect or impact of the aforementioned assumptions (the direct effect is added later) .

Post Script: 

Post Script The USDA allowed the vaccination program to continue to completion. Depopulation was avoided DOA, with help from Congressman Rob Simmons (and DECD’s Report), is petitioning the USDA for cost reimbursements A recent outbreak of AI in Delaware lead to aggressive depopulation – Ordered by the USDA.

The Economic Impact of a Cruise Ship Visit on Connecticut’s Economy: 

The Economic Impact of a Cruise Ship Visit on Connecticut’s Economy

Holland America’s ms Maasdam: 

Holland America’s ms Maasdam

Answer this Question:What is the economic impact of the cruise ship’s onshore visitor spending to the state and local economies?: 

Answer this Question: What is the economic impact of the cruise ship’s onshore visitor spending to the state and local economies? DECD’s Charge

The Cruise Industry: 

The Cruise Industry One of the fastest growing segments Global cruise revenues have increased Passengers grew 8.4% annually since 1980 Projected at 13-14 million worldwide Industry is vast with 260 ships and accommodations for 300,000 passengers

Cruise industry influences:: 

Cruise industry influences: Passenger Vessel Services Act Jones Act Canada’s Coastal Trade Act Promote visits to U.S. ports

Industry Costs: 

Industry Costs Advertising and marketing expenses Busses, congestion, crowds, and pollution Construction and maintenance of piers Demands on local health care system Environmental hazards Port security

Sources of Cruise Industry Spending: 

Sources of Cruise Industry Spending capital expenditures for vessels, equipment operational goods and services shore-side staffing spending for port services spending by onshore visitors

Slide35: 

New London Ledge Light

Slide36: 

Renovated Historic Fort Trumbull

Slide37: 

Lyman Allyn Art Museum

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Monte Cristo O’Neill Home

Slide39: 

New London Mall

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US Navy Submarine Force Museum – USS Nautilus

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Mystic Marine Aquarium

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Mystic Seaport Historic Village

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Casinos and Resorts

The Spending Issue: 

The Spending Issue Bar Harbor $85 per passenger Florida $75 NY $187 Alaska $100

New England Ports Per Visit: 

New England Ports Per Visit Boston $500,000 Portland, ME $235,000 New Bedford $100,000 International Council of Cruise Lines says $180,000 per port, on average Connecticut Maritime Coalition $250,000 per port visit

Modeling: 

Modeling Tourist Spending

Slide47: 

$85/pp and $153,000 per ship visit was modeled

Assumptions and Methodology: 

Assumptions and Methodology Spending allocated to 53 sectors Use model’s tourism “daytripper’s” shares Apply same percentage to $85 Multiply by 1800 Express in millions Enter input data into policy variable values

Slide49: 

The REMI Results

Additional Scenarios: 

Additional Scenarios A single visit annually for 20 years Two visits one time (this year’s event) Two visits annually/20 years Six visits annually/20 years Twelve visits annually/20 years

Conclusion: 

Conclusion One-time event has a negligible impact Multi-visits per year annually yield nominal gains for the state Negative impact on local revenues Local government incurs costs and derives no meaningful new revenue.

Questions: 

Questions ?

Slide53: 

DECD.ORG