Land Use and Infrastructure Investments by Olympic Host Cities

 

On Friday, October 2nd, the International Olympic Committee (IOC) will select a host city for the 2016 Summer Games. The City of Chicago has submitted an extensive and thoughtful bid book that proposes a compact games centered on the lakefront and embracing the diversity of the city. Many cities would welcome the opportunity to achieve global recognition, and while the Olympics accelerate that opportunity, not every city is well-equipped to host the Games.  Chicago has that necessary aptitude to be a host city and can take advantage of the resulting benefits.  However, to gain the optimum benefit from the 2016 Summer Olympics, Chicago must use the Games as an investment catalyst that will spearhead long-term improvements in infrastructure, new developments, and city amenities and services.

 

Chicago 2016’s bid book includes a thorough budget for hosting the Games.  However, it does not elaborate on costs, or revenue sources, associated with improvements to municipal infrastructure, such as roadways, airports, public transportation, public spaces, and telecommunications.  These projects are simply said to occur as part of the city’s “natural growth.” Simply following the path of natural growth, however, would result on a significant missed opportunity to fully leverage the Olympic Games.

 

In this paper we address the issue of long-term land-use and infrastructure projects (legacy projects) that Olympic host cities commonly undertake, and the potential economic benefit of these legacy projects. This builds upon another recently released paper on the topic of the Olympics and their economic impacts—The Likely Economic Impact of a Chicago 2016 Summer Olympics—that was authored by one of this paper’s co-authors. That paper focused solely on the economic impacts that the games, as presented in Chicago 2016’s bid book, would likely have on the city and county. This paper goes a step further and discusses strategies for maximizing public investments so that projects commissioned prior to the Olympics create long-running economic value within the city.

Economic Benefits of the Earned Income Tax Credit in Michigan

The Michigan Association of United Ways and the Community Economic Development Association of Michigan commissioned Anderson Economic Group to analyze the economic benefits to local economies of the Earned Income Tax Credit (EITC) in Michigan. This report builds upon our two previous reports and uses new data to estimate the usage of the EITC among low-income households, and the net economic impact by county due to new spending from EITC refunds.

Costs and Benefits of a Wage Increase for Michigan's Home Help Workers

The Michigan Quality Home Care Campaign (MQHCC) is a coalition of senior citizen advocacy groups, home care providers, community groups, and religious leaders that represents the interests of state home care workers. In 2006, the MQHCC commissioned Anderson Economic Group to analyze the costs and benefits of the State of Michigan increasing the wages of Home Help workers. In that 2006 report we hypothesized that a wage increase for Home Help workers would lead to cost savings for the State of Michigan as higher wages would improve the quality of Home Help care and increase the usage of this program over more expensive state-funded nursing facility care. This update to our 2006 report analyzes whether the cost savings to the State we projected three years ago actually happened. 

The State of Michigan provides long-term care (LTC) for low-income individuals through Medicaid, a program funded jointly by federal and state governments. In FY 2008, Michigan spent a majority (80%) of its LTC budget paying for care delivered in nursing facilities. The remaining LTC expenditures funded home- and community-based programs, including Home Help.  Home Help provides eligible persons in-home assistance with Activities of Daily Living (ADL), such as such as eating and grooming, and Instrumental Activities of Daily Living (IADL), such as taking medication and meal preparation. To be eligible for the program, individuals must be financially eligible for Medicaid and need help with one or more ADLs or IADLs. In FY 2008, an average of 52,623 individuals each month received care through the Home Help program. Government expenditures for Home Help were $251 million in FY 2008—12.5% of all Medicaid long-term care expenditures in Michigan.

We found that the cost savings we originally projected in our 2006 report likely under-estimate the actual savings to the State of Michigan due to the increases in Home Help usage since FY 2005. Specifically we found:

  1. Participation in the Home Help program increased faster than we originally projected.
    The average monthly number of Home Help beneficiaries increased 16.5% from 45,166 to 52,623 between fiscal years 2005 and 2008. This meant an average annual increase in the number of beneficiaries of 5.2%, compared to the 4% we projected in 2006.
  2. Home Help is less expensive than nursing facility care.
    The State of Michigan spent $47,096 per year less on average providing home based care for Home Help clients than it did caring for Medicaid LTC clients in nursing facilities. While the average annual cost per beneficiary of the Home Help program increased slightly at $240, the average cost per beneficiary of nursing facility care increased significantly during the three period with the state paying $4,954 more in FY 2008 than in did in FY 2005.
  3. Administrative costs for Home Help have fallen every year since FY 2005.
    Administrative and case management costs per Home Help beneficiary fell from $439 in 2005 to $355 in 2008, falling in each intervening year. In FY 2008, administrative costs made up 7.4% of total program expenditures.
  4. The State of Michigan is saving more than we originally projected.
    Home Help is paid for jointly by federal and state governments. In FY 2008, the federal government paid 58.1% of Home Help expenditures. After updating our fiscal impact model with actual numbers of beneficiaries in each program and the cost per beneficiary, the overall government savings is likely $34.3 million in FY 2008, with $8.2 million in savings for the State of Michigan. This is higher than the original projections of $32.6 million federal and state savings and $7.6 million for Michigan’s General Fund. 

While we cannot say that the wage increase by itself caused the increased usage of Home Help and the subsequent savings to the state government, a significant increase in Home Help usage has followed the wage increase. Administrative costs are down for the program and more people are using this program. These results are consistent with the reasons for expecting cost savings that we stated in our 2006 report: higher wages leading to lower turnover (lowering administrative costs) and increased usage of Home Help over more expensive nursing facility care. This clearly benefits taxpayers as the State is able to save money by increasing the usage of Home Help over Medicaid-funded nursing facility care.

The Value of Private Businesses in the United States

The vast majority of businesses in the United States are privately held, and approximately 99 percent meet a common government definition of “small.” However, we know surprisingly little about the market values of these organizations. In this paper, we estimate the market value of privately held firms in the United States from sources on earnings, assets, and reported market value of multiple forms of business entities, including corporations, partnerships, LLCs, and sole proprietorships. We discuss various theoretical and practical methods of valuing assets, including those arising from economics, neoclassical finance, portfolio theory, and tradition. Concluding that most of them are not appropriate for valuing private firms, we use insights from dynamic programming and ratio analyses from traditional technique to produce a new estimate based on reported taxable earnings, net worth, and tax filing status. Using this approach, we estimate that privately held U.S. firms had earnings that exceeded those of publicly held firms in two recent years by a significant margin. Moreover, the market value of these firms exceeded that of publicly traded firms. We also conclude that policymakers, perhaps grossly, underestimate the true scale of “small” and privately held firms in the economy.

 

Information on Business Economics as well as this article can be found on NABE’s website (Vol. 44 No. 2). Or you can contact us if you are interested in viewing an author copy.

Preliminary Report: Life Sciences Industry in Michigan and the University Research Corridor

The University Research Corridor (URC) is an alliance of Michigan’s three largest academic institutions: Michigan State University, the University of Michigan, and Wayne State University. The purpose of this alliance is to accelerate economic development in Michigan by educating students, attracting talented workers, supporting innovation, and facilitating the transfer of technology to the private sector.

In May of each year, the URC releases a report on a special topic that is important to Michigan’s economy. This summer (July 2009) marks the ten year anniversary of the founding of the Life Sciences Corridor, a collaboration among the URC universities and the Van Andel Institute, where the state committed to invest $1 billion in life sciences research and development (R&D) over a 20-year period. This report analyzes how this industry has changed since the founding of the Life Sciences Corridor, and how URC activities—research and development, education, and collaboration with private industry—support the growth of the life sciences industry.

Summary: The Costs and Benefits of Investing in Mental Health Services In Michigan

Community Mental Health Service Programs provide mental health services for Michigan residents across the state. Many persons with mental illness use the public system since many private insurance plans do not adequately cover mental health services and many residents cannot afford these services on their own. In recent years, a reduction in funding from the state government’s General Fund has resulted in fewer Michigan residents receiving mental health care services. There are people who would benefit from services but are currently not receiving them. Specifically, those on waiting lists for services, those who have a long-standing un-met need, and residents who have historically received mental health care services but are no longer receiving them due to budget cuts. The Michigan Association of Community Health Boards retained Anderson Economic Group (AEG) to conduct an independent analysis of the costs and benefits of providing mental health services to all Michigan residents who need them.

Market Strategy: Witt Property & Downtown Riverfront Development

The City of Adrian, located in southern Michigan, is home to a historic downtown, three centers of education, and the Lenawaee County seat.  The City and its Downtown Development Authority identified two areas that were being underutilized, and retained Anderson Economic Group to develop a market strategy for both its Witt Property and the downtown riverfront.

We started the project by visiting the market, interviewing key stakeholders, and inventorying local retail supply to supplement our retail database. We combined this with our quantitative analyses, including demographic projections, a drive-time analysis and trade area delineation, a retail supply-demand analysis, a consumer expenditure analysis, and a residential unit absorption assessment. We then drafted a market strategy, with specific recommendations, for each of the two properties. Our strategy included residential, retail, and entertainment opportunities, specific project types and staging, and tenant recommendations for retail space.

We documented our analysis, findings, methods, and recommendations in a final report, which was delivered to the DDA and community leaders. The report included a detailed data appendix, visual examples and development options, and a concise executive summary to highlight our findings, and is available on the City of Adrian Economic Development web site, and from the link below.

Effectiveness of Michigan’s Key Business Tax Incentives, May 2009

 

Effective business tax incentive programs are imperative when a state is in economic decline, when its business tax burdens are considered uncompetitive for many industries, or when state budgets are strained. Michigan suffers from all three of these conditions. It can afford to pursue only the most effective tax incentive programs.

Unfortunately, there exists no comprehensive assessment of the effectiveness of Michigan’s tax incentive programs. The purpose of this report is to fill much of that gap, first by creating a systematic inventory of Michigan’s tax abatement programs, and second by evaluating the available evidence of their effectiveness in attracting and retaining businesses.

The Michigan Education Association and National Education Association commissioned this report to improve the quality of the debate on business tax incentives. The report was completed by the independent consulting firm of Anderson Economic Group, LLC, which has considerable expertise in business tax policy, tax incentives, and state tax burden comparisons.

Phase II of this report will be available on Thursday, March 4, 2010 at 1:30pm. 

 

The Cost of Bailout Versus Bankruptcy Among the Big 3

Our experts have closely followed the ups and downs of the automotive industry, providing clients with detailed information to help them understand and plan for the resulting changes. Our industry analysis is designed to provide timely, concise, and relevant information that can help any organization—from professional investors, to retailers, to governments—understand the rapid change in the industry, and how restructuring in the industry may impact their own sales, revenues, customer base, and more.  

In October, November, and December of 2008, our experts provided clients with a series of reports updating them on the economic relaities facing the automotive industry. AEG then teamed up with BBK, Ltd. in order to produce the first comprehensive analysis of the taxpayer costs of the Federal bridge financing requested by the auto manufacturers, compared with the likely costs of a bankruptcy declared by one or more of the same manufacturers.

The Economic and Fiscal Impact of a Proposed Powerplant in Rogers City

Wolverine Power Cooperative, City of Rogers City, Rogers Township, and Presque Isle County Economic Development Commission retained Anderson Economic Group (AEG) to provide an independent study…