Prepared for

Prepared by

April 3, 2018

Metropolitan Airports Commission

ECONOMIC IMPACT OF THE RELIEVER AIRPORTS

This document is made available electronically by the Minnesota Legislative Reference Library as part of an ongoing digital archiving project. http://www.leg.state.mn.us/lrl/lrl.asp

Metropolitan Airports Commission – 2017 Reliever Airport System Economic Impact Study i

Executive Summary The Metropolitan Airports Commission engaged InterVISTAS Consulting Inc. (InterVISTAS) to conduct an economic impact study to account for the operations of the six general aviation (GA) airports under its jurisdiction in the greater Minneapolis-St. Paul metropolitan area. Collectively, they are referred to as the MAC reliever airport system. This study updates a previous economic impact report prepared in 2005 and provides a current snapshot of the airport’s economic contribution to the greater Minneapolis-St. Paul area.

General aviation is defined as the operation of any type of aircraft certificated by the U.S. Federal Aviation Administration (FAA) other than those used for scheduled airline service, government or the military. General aviation aircraft include fixed-wing piston and turboprop airplanes, jets, helicopters, gliders, and hot-air balloons. General aviation covers everything from the personal use of aircraft by recreational pilots to operations of corporate aircraft to transport people and/or cargo for business purposes. The term general aviation also incorporates sight-seeing flights, aerial photography, air medical services, agriculture-related flights and flight training. The facilities primarily used by GA aircraft are commonly referred to as general aviation airports.

The six general aviation airports that form the MAC reliever airport system are:

 Airlake Airport (LVN). Airlake Airport is located in Lakeville, a suburb south of the metropolitan area. It primarily serves private and recreational pilots on its single runway.

 Anoka County – Blaine Airport (ANE). The airport is located in Blaine, directly north of the Twin Cities. In terms of the number of aircraft based at the airport, it is the largest in the reliever system, serving the most diverse assortment of aircraft, including recreational pilots, corporate and antique aircraft.

 Crystal Airport (MIC). Northwest of Minneapolis and adjacent to Brooklyn Park and Brooklyn Center, Crystal Airport has three paved and one turf runway and two non-precision instrument approaches.

 Flying Cloud Airport (FCM). Southwest of the metro area in the suburb of Eden Prairie, Flying Cloud Airport serves both corporate and recreational flying. It is the busiest airport in the reliever system based on the number of aircraft operations.

 Lake Elmo Airport (21D). East of the Twin Cities, Lake Elmo Airport provides easy access to the metropolitan region along with the scenic destinations along the St. Croix River.

 St. Paul Downtown Airport (STP). Near the banks of the Mississippi River and in the shadow of downtown St. Paul, this airport is the only airport in the reliever system with a runway longer than 5,000’.

These six airports complement the operations of Minneapolis-St. Paul International Airport (MSP) and serve as significant economic contributors to the region. Collectively, the airports play critical roles within the metropolitan area by facilitating economic development. They support direct employment and facilitate trade of goods and services, tourism, investment, and enhanced productivity. Individually, each airport supports a relatively large number of aircraft operations (takeoffs and landings). Individually, each airport not only serves both a particular local community, but also contributes as part of an integrated system to support the regional economy. Altogether in 2016, the reliever airports supported an average

Metropolitan Airports Commission – 2017 Reliever Airport System Economic Impact Study ii

of almost 900 operations each day – or about 80 percent of the average number of daily operations at MSP.

Overview of Economic Impact Concepts

Economic impact is a measure of the spending and employment associated with a sector of the economy, a specific project, or a change in government policy or regulation.

Economic impact can be measured along several dimensions. The most common are:

1. Employment – person years of employment supported (expressed in terms of “full time equivalents” or FTEs).1 Because many jobs may be only part-time or seasonal, the number of jobs is greater than the number of person years of employment. Hours worked in part-time and seasonal employment are translated into FTEs.

2. Earnings – includes wages, salaries, and benefits associated with employment tied to the airport.

3. Economic output – the dollar value of industrial output produced. Sometimes referred to as “economic activity,” it reflects the spending (e.g., capital improvement plus revenue) by firms, organizations, and individuals. In the case of organizations that do not generate revenue (e.g., government-provided air traffic control services), annual operating expenses are counted.

4. Gross Domestic Product (GDP). Sometimes referred to as Value Added, this is a measure of the money value of final goods and services produced as a result of economic activity. This measure is net of the value of intermediate goods and services used up to produce the final goods and services.

The three major components of economic impact are classified as direct, indirect, and induced impacts.

• Direct impacts account for the economic activity of the aviation sector itself. In the case of an airport, all of those people who work in an aviation-related capacity either on-site or off-site would be considered direct employment (e.g., ground handling, air traffic controllers, etc.). At GA airports, typically the businesses that handle aircraft operations – known as Fixed Base Operators (FBOs) — account for the largest concentration of employment.

• Indirect impacts arise because of the direct impacts. For an airport, indirect impacts originate from off-site firms that supply goods or services to airport users. An example would be food wholesalers or restaurants that supply food for catering on flights.

• Induced impacts are those created by the spending of wages, salaries, and profits earned in the course of the direct and indirect economic activities. For instance, if a maintenance employee re- models his/her home, the renovation would support activity in the home construction industry.

• Visitor spending impacts. Another related economic impact that arises from the airport’s operations flows from visitors to a region who arrive and depart via the airport rather than by other means (e.g., auto). The hospitality industry in particular benefits from visitors who spend money on lodging, meals,

1 One person year is equivalent to 1,800 hours of work. Person years are the same as FTEs.

Metropolitan Airports Commission – 2017 Reliever Airport System Economic Impact Study iii

entertainment, car rentals, and retail. Direct employment associated with those industries is counted as part of the economic impacts of the airport.

• Total impacts are the sum of direct, indirect, induced, and visitor spending impacts.

Figure ES-1 provides a graphical overview of economic impact at airports.

Figure ES-1: Economic Impact Overview – Airports

Economic Impact of Ongoing Operations The economic impact of the MAC Reliever Airport System extends throughout the entire metropolitan region.

Direct economic impact measures the factors directly associated with the six airports. This includes employment of all tenants located on the airports’ properties. The direct impacts of the reliever airport system in 2016 are estimated to be nearly 1,030 direct jobs (equivalent to approximately 870 direct FTEs or person years of employment), earning approximately $56 million in direct wages. Direct employment generates $198 million in direct GDP and $355 million in direct economic output annually.

Indirect economic impacts are those that are attributable to firms and organizations that supply goods and/or services to those directly involved in the airports and their operations. This measure accounts for the employment and economic activity that would not occur were it not for the operations of the reliever airports. All of these firms are located off airport properties, elsewhere in the metropolitan region. In 2016, the

Ongoing Economic Impacts of the MAC Reliever Airports

Annual Direct Impacts:

 1,030 jobs

 870 full-time equivalents

 $56 million in wages

 $198 million in gross domestic product (GDP)

 $355 million in economic output

Metropolitan Airports Commission – 2017 Reliever Airport System Economic Impact Study iv

indirect impacts associated with the reliever airports’ operations included 670 indirect FTEs or person years of employment, earning approximately $44 million in wages.

The extent of the airport’s economic footprint reverberates throughout the region as employees in firms directly and indirectly associated with the airports spend their wages and salaries and generate another wave of economic activity. These “rippled effects” are known as the induced economic impacts of the airports’ operations. The induced impacts resulting from ongoing the reliever airports’ operations include an estimated 810 induced FTEs with an associated $36 million in wages.

The total operational economic impact of the reliever airports’ operations on the region’s economy is calculated by summing the direct, indirect and induced impacts from the airports’ operations. Table ES-1 summarizes the economic impact of the MAC reliever airport system’s operations on the metropolitan region in 2016. Altogether, in 2016, the economic impacts include a total of 2,340 FTEs in the Minneapolis-St. Paul regional economy. Total regional income of all employees amounts to $136 million in wages. Furthermore, the airports’ operations contributed an estimated $370 million and $662 million in total GDP and total economic output, respectively, to the regional economy.

Table ES-1: Total Operational Economic Impact of the Reliever Airport System’s Operations, 2016

Impact Employment Wages

($ millions) GDP

($ millions) Output

($ millions) Jobs FTEs

Direct 1,030 870 $56 $198 $355

Indirect 780 670 $44 $100 $179

Induced 950 810 $36 $72 $128

Total 2,750 2,340 $136 $370 $662 Note: Employment figures (jobs and FTEs) are rounded to the nearest ten. Totals may not sum due to rounding.

Economic Impact of Airport-Related Visitor Spending in the Region Individuals who visit the region via the reliever airports support additional economic impacts by spending their travel dollars locally. The economic impact of visitor spending depends on the total number of “true visitors,” the amount they spend, the length of stay, and the distribution of their spending across different categories – mostly in the hospitality sector. Spending on hotels, restaurants, retail, and entertainment supports jobs and additional spending in the region.

Little data is available on the number of visitors to the region who arrived via these airports. No government agency formally and systematically collects data on the number of travelers who use general aviation. The very nature of business aviation, which places a premium on anonymity, makes it difficult to gather data on passenger movements.

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Many airports may not have statistically reliable data on the total number of aircraft operations that occur at the airfield. Moreover, not every operation at an airport brings “true visitors” to the area. Some aircraft operations are “local” in nature, as opposed to “itinerant.” In general, local operations are those that occur within the immediate area, originating and returning to the same airport while itinerant operations originated at or were destined to land outside the area. Local operations basically do not bring visitors to the airport, but itinerant operations do.

Each of the reliever airports sees a number of itinerant operations, and some of those airports experience large numbers of these flights. With those flights, some pilots and visitors might only stop for fuel or to take a break from flying. A sizeable percentage, however, will spend several hours in the area visiting friends or relatives or conducting business. Some visitors will stay a night or more in the area for personal or business reasons. In those cases, the activity at the airport supports additional economic activity in the local economies, most directly in the hospitality industry. (The impact of business aviation – possibly including major business deals – is impossible to measure but can clearly have broad and significant impacts on the local and regional economies.)

The total economic impact of non-local visitor spending is shown in Table ES-2.

Table ES-2: Total Economic Impact of Reliever Airports’ Visitor Spending, 2016

Impact Employment Wages

($ millions) GDP

($ millions) Output

($ millions) Jobs FTEs

Direct 620 520 $15 $27 $48

Indirect 110 90 $6 $12 $21

Induced 180 150 $7 $13 $24

Total 910 760 $27 $52 $94 Note: Employment figures (jobs and FTEs) are rounded to the nearest ten. Totals may not sum due to rounding.

Consolidated Economic Impact on the Region The sum of the impacts of the airport’s ongoing operations and visitor spending constitute the reliever airports’ consolidated economic impact in the seven-county region. Table ES-3 summarizes these impacts.

Metropolitan Airports Commission – 2017 Reliever Airport System Economic Impact Study vi

Table ES-3: Consolidated Economic Impacts of the Reliever Airports’ Operations and Visitor Spending, 2016

Impact Employment Wages

($ millions) GDP

($ millions) Output

($ millions) Jobs FTEs

Total Direct 1,650 1,380 $71 $224 $403

Total Indirect 890 760 $50 $112 $200

Total Induced 1,130 960 $43 $85 $153

Grand Total 3,660 3,100 $164 $421 $756 Note: Employment figures (jobs and FTEs) are rounded to the nearest ten. Totals may not sum due to rounding.

Annual Tax Impacts of Ongoing Operations In addition, ongoing operations at the reliever airport system’s airports contribute to government revenue including those received by federal, state, and local governments. Total taxes paid on an annual basis, by airport employers and employees as well as passengers, are estimated at $27 million per year. The majority of taxes accrue to the federal government at 59 percent overall, while the State of Minnesota and local governments receive 41 percent of the tax revenue generated by the airport. These figures exclude any estimated taxes levied on corporate profits.

Figure ES-2: Annual Estimated Tax Revenues of the Reliever Airports by Level of Government

Metropolitan Airports Commission – 2017 Reliever Airport System Economic Impact Study vii

Contents

Executive Summary …………………………………………………………………………………………. i 1 Introduction and Background ……………………………………………………………………. 9

The Greater Minneapolis-St. Paul Region ………………………………………………………………….. 10 General Aviation is a Substantial Economic Contributor ………………………………………………. 11 The MAC Reliever Airport System …………………………………………………………………………….. 13 Economic Impact Defined ………………………………………………………………………………………… 14 Contributions to Local Governments from Airport Operations ……………………………………….. 17 Overview of Methodology …………………………………………………………………………………………. 17

2 Economic Impact of Airlake Airport ………………………………………………………….. 19 Direct Impacts…………………………………………………………………………………………………………. 19 Multiplier Impacts…………………………………………………………………………………………………….. 20 Total Operational Impacts ………………………………………………………………………………………… 20 Visitor Impacts ………………………………………………………………………………………………………… 21 Consolidated Impacts ………………………………………………………………………………………………. 21 Tax Contributions from Airlake Airport ……………………………………………………………………….. 21

3 Economic Impact of Anoka County-Blaine Airport …………………………………….. 22 Direct Impacts…………………………………………………………………………………………………………. 23 Multiplier Impacts…………………………………………………………………………………………………….. 23 Total Operational Impacts ………………………………………………………………………………………… 23 Visitor Impacts ………………………………………………………………………………………………………… 24 Consolidated Impacts ………………………………………………………………………………………………. 24 Tax Contributions from Anoka County – Blaine Airport …………………………………………………. 25

4 Economic Impact of Crystal Airport …………………………………………………………. 26 Direct Impacts…………………………………………………………………………………………………………. 27 Multiplier Impacts…………………………………………………………………………………………………….. 27 Total Operational Impacts ………………………………………………………………………………………… 27 Visitor Impacts ………………………………………………………………………………………………………… 28 Consolidated Impacts ………………………………………………………………………………………………. 28 Tax Contributions from Crystal Airport ……………………………………………………………………….. 29

5 Economic Impact of Flying Cloud Airport …………………………………………………. 30 Direct Impacts…………………………………………………………………………………………………………. 31 Multiplier Impacts…………………………………………………………………………………………………….. 31 Total Operational Impacts ………………………………………………………………………………………… 31 Visitor Impacts ………………………………………………………………………………………………………… 32 Consolidated Impacts ………………………………………………………………………………………………. 32 Tax Contributions from Flying Cloud Airport ……………………………………………………………….. 33

6 Economic Impact of Lake Elmo Airport …………………………………………………….. 34 Direct Impacts…………………………………………………………………………………………………………. 34 Multiplier Impacts…………………………………………………………………………………………………….. 35 Total Operational Impacts ………………………………………………………………………………………… 35 Visitor Impacts ………………………………………………………………………………………………………… 36 Consolidated Impacts ………………………………………………………………………………………………. 36 Tax Contributions from Lake Elmo Airport ………………………………………………………………….. 36

7 Economic Impact of St. Paul Downtown Airport ………………………………………… 37 Direct Impacts…………………………………………………………………………………………………………. 37

Metropolitan Airports Commission – 2017 Reliever Airport System Economic Impact Study viii

Multiplier Impacts…………………………………………………………………………………………………….. 38 Total Operational Impacts ………………………………………………………………………………………… 38 Visitor Impacts ………………………………………………………………………………………………………… 39 Consolidated Impacts ………………………………………………………………………………………………. 39 Tax Contributions from St. Paul Downtown Airport ………………………………………………………. 39

8 Summary of Economic Impact Results …………………………………………………….. 40 Operational Economic Impacts …………………………………………………………………………………. 40 Economic Impacts from Visitor Spending …………………………………………………………………… 41 Consolidated Economic Impact of the Reliever Airports ……………………………………………….. 41 Tax Revenue Impacts ……………………………………………………………………………………………… 42

9 Comparison of 2005 and 2016 Economic Impacts ……………………………………… 43 Comment on Changes over Time ……………………………………………………………………………… 44

Appendix: Methodology ……………………………………………………………………………….. 46 Estimating Current Economic Impact …………………………………………………………………………. 46 Surveying Direct Employment …………………………………………………………………………………… 46 Inferring Employment ………………………………………………………………………………………………. 47 Estimating Indirect and Induced Impacts with Economic Multipliers ……………………………….. 47 Study Time Frame …………………………………………………………………………………………………… 48 Jobs versus Person Years of Employment …………………………………………………………………. 48 Visitor Spending Analysis …………………………………………………………………………………………. 48 Tax Impact Analysis ………………………………………………………………………………………………… 50

Glossary of Terms ………………………………………………………………………………………… 51

Metropolitan Airports Commission – 2017 Reliever Airport System Economic Impact Study 9

1 Introduction and Background The Metropolitan Airports Commission engaged InterVISTAS Consulting Inc. (InterVISTAS) to conduct an economic impact study to account for the operations of the six general aviation (GA) airports under its jurisdiction in the greater Minneapolis-St. Paul metropolitan area. Collectively, they are referred to as the MAC reliever airport system. This study updates a previous economic impact report prepared in 2005, and provides a current snapshot of the airport’s economic contribution to the greater Minneapolis-St. Paul area.

General aviation is defined as the operation of any type of aircraft certificated by the U.S. Federal Aviation Administration (FAA) other than those used for scheduled airline service, government or the military. General aviation aircraft include fixed-wing piston and turboprop airplanes, jets, helicopters, gliders, and hot-air balloons. General aviation covers everything from the personal use of aircraft by recreational pilots to operations of corporate aircraft to transport people and/or cargo for business purposes. The term general aviation also incorporates sight-seeing flights, aerial photography, air medical services, agriculture-related flights and flight training. The facilities primarily used by GA aircraft are commonly referred to as general aviation airports.

The six general aviation airports that form the MAC reliever airport system are:

 Airlake Airport. Airlake Airport is located in Lakeville, a suburb south of the metropolitan area. It primarily serves private and recreational pilots on its single runway.

 Anoka County – Blaine Airport. Directly north of the Twin Cities in Blaine, the airport is the largest in the reliever system, serving the most diverse assortment of aircraft, including recreational pilots, corporate and antique aircraft.

 Crystal Airport. Northwest of Minneapolis and adjacent to Brooklyn Park and Brooklyn Center, Crystal Airport has three paved and one turf runway and two non-precision instrument approaches.

 Flying Cloud Airport. Southwest of the metro area in the suburb of Eden Prairie, Flying Cloud Airport serves both corporate and recreational flying. It is one of the busiest airports in the reliever airport system.

 Lake Elmo Airport. East of the Twin Cities, Lake Elmo Airport provides easy access to the metropolitan region along with the scenic destinations along the St. Croix River.

 St. Paul Downtown Airport. Near the banks of the Mississippi River and in the shadow of downtown St. Paul, this airport is the only airport in the reliever system with a runway longer than 5,000.’

These six airports complement Minneapolis-St. Paul International Airport (MSP), which hosts both GA and commercial airline operations. The reliever airports provide alternative points of access to the metropolitan region for GA operators and help alleviate congestion in the airspace and on MSP’s airfield. Collectively, the reliever airports play critical roles within the industry by facilitating the movement of people, goods, and services regionally, nationally, and internationally. The industry facilitates employment and economic development in the broader economy through mechanisms that include trade of goods and services, tourism, investment, and enhanced productivity.

Metropolitan Airports Commission – 2017 Reliever Airport System Economic Impact Study 10

The aviation sector is a major economic generator, and airports play a critical role within the industry by facilitating the movement of people, goods, and services throughout the nation and world. The industry facilitates employment and economic development in the broader economy through a number of key mechanisms including tourism, investment, trade of goods and services, and productivity.

The Greater Minneapolis-St. Paul Region One of the great metropolitan regions in the United States, Minneapolis, Saint Paul, and the neighboring communities, collectively referred to as the Twin Cities, is renowned for its exceptional quality of life. The area boasts a vibrant culture, tremendous recreational opportunities, beautiful natural surroundings, and a thriving diverse economy.

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