A User Guide for CAHSEIM: The Culture, Arts, Heritage and Sport Economic Impact Model

1.1 What is economic impact modelling and CAHSEIM

Economic impact models assume that changes in expenditure can have ripple effects throughout an economy, and estimate the impact of such changes. The underlying assumption is that a decrease in expenditures result in economic contractions, while increased expenditures stimulate economic growth.

Statistics Canada measures this cascading effect throughout the Canadian economy through its Input-Output Models. These models are based on Statistics Canada's comprehensive Supply and Use Tables (formerly known as the Input-Output Tables) which consist of detailed statistics on activities in the Canadian economy (i.e. production, intermediate use and final consumption of goods and services) to estimate the total effect of an initial change in spending in a particular area of the economy, which are defined as multipliers. The statistics also aid in determining coefficients, which essentially are estimates of what proportion of a dollar spent on an organization, facility or event will be spent in the local or regional economy, as well as in other provinces and territories.

CAHSEIM specifically relies on Statistics Canada's Inter-provincial Input-Output Model, which takes into account inter-provincial/territorial trade, as well as provincial production and consumption of goods and services, and provides comparable multipliers and coefficients for each province and territory. The current version of CAHSEIM uses coefficients and multipliers for the base year 2014.

CAHSEIM uses the multipliers and coefficients to estimate the impact of an organization, facility or event in terms of labour income, gross domestic product (GDP), employment and tax revenues (confined to taxes on production and taxes on products), which are explained in greater detail in Section 1.5.

1.2 Important advantages of CAHSEIM and other Input-Output models

CAHSEIM is a simple and easy to use tool. It is unique in the sense that it specifically estimates the economic impact of arts, culture, sport and heritage organizations, facilities and events at the micro-economic level. The model also shows a multitude of different types of impacts for a variety of economic indicators at both the local level, as well as across the country.

The model relies on data from Statistic Canada's Supply and Use Tables (formerly known as the Input-Output tables), which are the most comprehensive, coherent and detailed statistics on the production and consumption of goods and services in the Canadian economy.

Moreover, the assumptions used by the model are straightforward, easy to understand and transparent. The model's assumptions are discussed at length in Section 1.5.

Much like all economic models, it is important to note that CAHSEIM uses assumptions to estimate economic impacts. Ultimately, all economic models, including CAHSEIM, are inherently limited by their reliance on assumptions. Models are only as reliable as their assumptions, and due to their assumptions only produce approximations of what they are seeking to measure.

1.3 What CAHSEIM measures

CAHSEIM measures three types of economic impact: direct, indirect, and induced impacts. All three types of impact are added together to calculate the total impact of an organization, facility or event. Further, it measures the direct, indirect and induced impacts in terms of the following indicators: gross domestic product (GDP), labour income, employment (total jobs, and number of full-time equivalents), as well as taxes (limited to taxes on production and products).

Each of these terms are defined in detail below.

Static Models versus General Equilibrium Models

Static models, like CAHSEIM, have assumptions that are relatively straightforward, easy to understand and transparent. CAHSEIM relies on data from Statistics Canada's Input-Output tables. These tables contain comprehensive and detailed statistics on the production and consumption of goods and services in the Canadian economy. As a result of this, Input-Output models tend to be more reliable as they are based on observed patterns of economic activity.

By contrast, the limitations and assumptions of general equilibrium models, which tend to be the most common type of economic impact model, are not always known to the user or easy to understand. General equilibrium models describe the allocation of resources in an economy as the result of the interaction of supply and demand. They make multiple assumptions regarding factors such as competition, elasticity, levels of employment, and income. Although general equilibrium models can be more accurate than Input-Output models, this accuracy is highly dependent on the validity of the assumptions and the methodology used to implement them (as opposed to the actual observed patterns of economic activity of Input-Output models).

Using CAHSEIM: An Overview

CAHSEIM is an excel spreadsheet.

To use CAHSEIM, the user should input all known expenditures in the first tab, which is on the bottom left of the Excel document which is labelled "Exp." Once all available data have been inputted, the economic impact calculations are instantly available in the results tab.

The specific steps for using CAHSEIM are as follows:

Step one: Identify what you want to measure

The first and most important step is clearly identifying what you wish to measure, and the period of measurement (e.g. a few months, a full year, several years). This is necessary to determine which expenditures you should include, and possibly also exclude, when using CAHSEIM. CAHSEIM can be used for any arts, culture, sport or heritage organizations, facilities or events (e.g. a museum [or just a limited run exhibition], a theatre season, a hockey arena, a music festival, or sporting event), but not for any other types of organizations, facilities or events.

For example, a performing arts theatre may just wish to measure the impact of one production, as opposed to an entire theatrical season. This would require identifying the total expenditures related to the production specifically, instead of the theatre's full expenditures when the production was active if there were also other productions being staged at the same time.

Step two: Collect expenditures data for what you want to measure

This is often found in the year-end audited financial statements of incorporated businesses. Conversely, this may be information tracked through regular bookkeeping, or by some other means, especially for periods of more or less than a year. Regardless of the source, this information is vital to using CAHSEIM.

Broadly, there are three types of expenditures that can be entered into CAHSEIM (see below), each with their own set of specific sub-categories. Notably, you do not need to provide expenditures under each category to use CAHSEIM. CAHSEIM will work even if you only enter expenditures under one sub-category. However, entering more expenditures will generate more robust results, and better reflect the full breadth of the economic impacts.

Please note, it is recommended to the degree possible to limit expenditures to 'new' expenditures in the economy, as opposed to 'redirected' expenditures. Redirected expenditures are, for example, a local visitor's expenditures on an admission ticket to a museum, in lieu of a going to see a movie in the local theater. A 'new' expenditure would be a tourist from out of town buying an admission ticket to a museum. Capturing 'new' expenditures, such as expenditures by visitors from out-of-province or out-of-country will produce more reliable estimates of economic impacts.

1. Operating and Maintenance Expenditures

This is the amount spent by an organization, facility or event, and by any partners as one may wish to include, for the purchase of goods and services that fall under the following categories:

• Governmental and related personnel for arts, culture, sport and heritage organizations, facilities and events;
• Personnel (non-governmental or related) for arts, culture, sport and heritage organizations, facilities and events;
• Transportation and communications;
• Information;
• Professional and special services;
• Rentals;
• Purchased repairs and maintenance;
• Utilities;
• Materials and supplies;
• Payments in lieu of taxes; and
• Transfer payments and public debt charges.

Specific sub-categories of note are as follows:

Governmental and related personnel for arts, culture, sport and heritage organizations, facilities and events – This category applies to employee wages at government owned and operated organizations, facilities and events such as an employee at a national museum such as the National Gallery of Canada.

Personnel (non-governmental or related) for arts, culture, sport and heritage organizations, facilities and events – This category applies to employee wages at non-governmental organizations, facilities and events such as a private museum.

Payments in lieu of taxes – As federal property is constitutionally exempt from local taxation, national museums or other federally-owned properties make payments to local governments in lieu of taxes. This category of expenditure specifically applies to these type of expenditures.

Transfer payments – Transfer payments are a one-way payment of money for which no money, good, or service is received in exchange. Examples of transfer payments are government grants, contributions, or subsidies. This category of expenditure should be used in the case when an entity is unable to determine where a transfer payment is spent (i.e. how grant money is spent by an organization that received the grant).

2. Investment and Infrastructure Expenditures

The amount spent by an organization, facility or event, and by any partners as one may wish to include, on infrastructure (capital) for both new organizations, facilities or events (including expansion of existing infrastructure) and improvements made to existing capital structure. These expenditures are broken down into the following categories:

• Acquisition of machinery and equipment;
• Residential infrastructure (new and renovations);
• Non-residential infrastructure (new and renovations);
• Transportation infrastructure; and
• Other infrastructure investments.

Please note, the costs allocated for the acquisition of land, existing buildings and used equipment and machinery and other goods (such as artifacts, etc.) must not be included in the organizations' expenditures. Expenditures made on those items add nothing to the provincial or territorial economy because they are simply transfers of property (and thus requiring no additional production) between two economic agents.

3. Visitor Expenditures

This is the amount spent by visitors, spectators or an audience on items in the following categories:

• Transportation (automobiles);
• Transportation (car rentals);
• Transportation (other modes);
• Accommodations;
• Food and beverages (at restaurants);
• Recreation and entertainment;
• On retail (souvenirs, film, incidental items); and
• Other expenditures.

Visitor expenditures in the province or territory where the facility (e.g. a museum) is located or the event is taking place, which are generated by the facility or event, should be included in an economic impact analysis. However, when several facilities and/or events are visited during one trip (i.e. a multi-destination trip), only a portion of visitor travel and accommodation expenditures should be attributed to any one facility or event. Revenues (incomes) received by those facilities or events from these visitors must be deducted from total visitor expenditures.

A facility's or event's revenues can be used as a proxy for tourist expenditures in CAHSEIM, but all sales taxes must be included in the totals entered into CAHSEIM (i.e. GST, PST, and/or HST depending on the province/territory) in order to be calculated correctly. If they do not, one must multiply the revenues by the applicable tax rate for a province/territory, and using that new total in CAHSEIM.

Step three: Input expenditures into CAHSEIM's expenditures tab

The user should input all known expenditures in the first tab, which is on the bottom left of the Excel document and is labelled "Exp." The expenditures must be in the column of the province and/or territory where the expenditures were made, which is most often where the organization, facility and/or even is physically located. Exceptions to this can include known expenditures made in another province or territory, especially for larger entities that operate across two or more jurisdictions. Further, include all taxes when inputting expenditures into the excel table.

Step four: Results are instantly available in CAHSEIM's results tab

Once all available expenditures data have been inputted, the economic impact calculations become instantly available in the results tab (labelled "Results" in the Excel file).