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The Fiscal Impact of Beaches in
California
by Philip King, Ph.D
Public Research Institute
San Francisco State University
September 1999
A Report
Commissioned by
The California
Department of Boating
and Waterways
Acknowledgements:
A number of people helped me
complete this project. Michael
Jonas assisted in collecting and
analyzing much of the data and
Kim Sterrett assisted in
collecting the Huntingdon
Beach Survey data. At PRI,
Rufus Browning, James
Newton and Erica Ballinger
were all helpful at various
stages of this project. Daniel
Milne is responsible for
desktop publishing the final
manuscript.
The Fiscal Impact of Beaches in California
Contents
Executive Summary 3
Introduction 4
l.The Economic Impact of California's Beaches: 1998 5
2. How Does Delaware Compare to California? 15
3. A Case Study of Huntingdon Beach 19
4. Conclusion 25
Appendix 1. Detailed Results from the Huntingdon Beach Survey 26
Appendix 2. Distribution of Funds Generated by
Sales and Use Taxes in Orange County 28
References 29
The Fiscal Impact of Beaches in California
Executive Summary
In 1998, California's beaches generated $14 billion dollars of direct revenue. When
the indirect and induced benefits of this spending are added, California's beaches
total contribution to the national economy is $73 billion.
The federal tax revenues generated by this beach activity are substantial. The direct
federal tax revenues generated are $2.6 billion; however, the total federal tax rev-
enues generated are much higher: $14 billion.
California's beaches generated 883,000 jobs across the U.S.
California receives less than one tenth as much in federal appropriations as New
York and New Jersey, which have much smaller coastlines and fewer miles of beaches.
California ranks eighth in terms of federal appropriations for shoreline protection,
just ahead of Delaware. It receives just under $12,000 per mile of coastline, com-
pared with well over $800,000 per mile for New York and New Jersey.
While California receives twice as much in federal shoreline protection appropria-
tions as Delaware (the ninth largest recipient of federal funds) its beaches generate
twenty times more economic activity for the national economy and roughly twenty
times more tax revenues than Delaware's beaches. In other words, California gener-
ates ten times more federal tax dollars, per dollar of shoreline appropriation, than
Delaware.
Our study of Huntington Beach indicates that much of the federal and state tax
revenues generated by local beach communities do not go back to local communi-
ties. In our survey in Huntington Beach, one-half of all spending on beach activities
occurred outside the city. Furthermore, many of the tax dollars generated within the
city go to state and federal authorities. Overall, Huntington Beach's beaches gener-
ated $135 million in federal tax revenues and $25 million in state sales tax revenues
compared to only $4.8 million in local revenues from sales taxes and parking fees.
The Fiscal Impact of Beaches in California
Introduction
Beaches are an important destination for tourists in California. They generate very large
revenues for local, state and federal governments. The purpose of this report is to estimate
these revenues. In particular, this study will provide data on the total economic impact that
beach visits have on the national economy and the total federal revenues that are generated
by this activity. The study also seeks to compare the amount of economic activity generated
in California relative to another state which ranks just behind California in overall federal
spending for shoreline preservation: Delaware.
The study also seeks to examine the economic impact at the local level by studying one
particular beach city: Huntington Beach. One often-made claim is that local beach com-
munities benefit substantially from beach tourism, so that little assistance from state or
federal authorities is required. The case study examines federal tax revenues as well as state
sales tax revenues generated in Huntington Beach. We find in fact that the revenues gener-
ated from these tax sources are substantial.
This study was commissioned by the California Department of Boating and Waterways
(DBW) to examine the economic and tax impact of California's beaches. The study is an
outgrowth of a previous study performed for DBW in 1995. This study is divided into three
sections: Chapter 1 updates the data from the 1995 study. Chapter 2 compares the fiscal
impact of California's beaches to another state: Delaware. Finally, Chapter 3 provides a
case study of a one-beach community, Huntington Beach, and examines the fiscal impact of
the state and city beaches.
The Fiscal Impact of Beaches in California
1. The Economic Impact of California's Beaches: 1998
During the fall of 1995, the Public Research Institute (PRI) at San Francisco State Univer-
sity conducted a telephone survey under a contract with the California Department of Boating
and Waterways. Over 600 residents throughout the state were randomly selected and asked
a series of questions regarding their beach-going activities during the previous year. The
results of this survey were published and they have been widely disseminated throughout
the state and on the World Wide Web. Results from the survey were used to calculate the
total economic impact of California's beaches on the state and national economies.1
Although the study is still relatively recent, the tremendous growth in California's economy
in the late nineties coupled with a substantial increase in the growth of population of the
state and moderate inflation mean that the 1995 statistics now significantly underestimate
the economic impact of California's beaches. In addition, the figures provided in this study
develop the analysis of the impact California's beaches have on federal tax revenues. As in
the 1995 study, the impact has been analyzed using IMPLAN software; we have used the
latest available data to ensure the accuracy of the results. IMPLAN uses data provided by
federal, state and local governments and uses the same methodology (input-output matri-
ces) used by the U.S. Bureau of Economic Analysis. IMPLAN's software has become the
standard methodology for conducting this type of analysis. It is used by academics and
applied economists all over the United States.2
Since conducting an entirely new survey would be prohibitively expensive and it is very
unlikely that peoples' basic preferences for beaches has changed significantly, the data here
has been updated from the 1995 data. The 1995 survey determined average household
spending for one-day trips and for overnight trips by state residents. Tables 1.1 to 1.4 up-
date the old study in several ways. First while inflation has been low, it has not been nonex-
istent and three years of inflation compounded has a significant effect on the overall impact.
Using monthly Consumer Price Index (CPI) data for Western consumers from the Bureau
of Labor Statistics (BLS), the total cumulative change in prices is 9.4%.
In addition, California's population has grown significantly. The number of households in
California has increased from 10.8 million to an (estimated) 11.45 million (data from Cali-
fornia Statistical Abstract). In the previous report, all spending was computed at the house-
hold level and then multiplied by the number of households. Since the number of house-
holds has now increased, the corresponding state numbers should increase proportionately.
As in the previous report, spending was broken down into day-trip spending by Califor-
nians, overnight spending by Californians, and spending by tourists from out of state in-
eluding foreign visitors. Except for the changes mentioned above, the methodology em-
ployed is the same as in the 1995 study.
* King, Philip and Michael Potepan, The Economic Value of California's Beaches, Public Reseach Institute Re-
port Commision by the California Department of Boating and Waterways, May 1997.
2 For more information on IMPLAN software see www.implan.com.
The Fiscal Impact of Beaches in California
Table 1 .1 Average Number of and Average Expenditure on Beach Trips by
California Households: A Summary of Survey Responses
Based on 9.47% inflation from 1 995 to 1 998
Total Number of Households Responding to Survey 641 Households
A. Households Taking Day Trips
Total Number of Households Taking Day Trips 409 Households (63.8%)
Mean Number of Day Trips per Year 1 5.24 Day Trips
Mean Number of Persons on Typical Day Trip 4.0 Persons
Mean Expenditures Per Household on
Typical Day Trip 1995 Dollars _ 1998 Dollars
Gas & Auto $11.05 $12.10
Parking & Entrance Fees $3.15 $3.45
Food & Drinks from stores $1 5.04 $1 6.46
Restaurants $15.78 $17.27
Equipment Rental $2.53 $2.77
Beach Sporting Goods $2.35 $2.57
Incidentals _ $4.97 $5.44
All Items $54.87 $60.07
B. Households Taking Overnight Trips
Total Number of Households Taking Overnight Trips 234 Households (36.5%)
Mean Number of Overnight Trips per Year 4.6 Overnight Trips
Mean Number of Days of Typical Overnight Trip 2.65 Days
Mean Number of Persons on Typical Overnight Trip 4.34 Persons
Mean Expenditures Per Household on
Typical Overnight Trip 1995 Dollars _ 1998 Dollars
Gas & Aulo $35.28 $38.62
Beach Related Lodging $90.47 $99.04
Parking & Entrance Fees $4.63 $5.07
Food & Drinks from stores $39.45 $43.19
Restaurants $53.39 $58.45
Equipment Rental $9.11 $9.97
Beach Sporting Goods $2.34 $2.56
Incidentals _ $11.11 $12.16
All Items $246.83 $269.06
The Fiscal Impact of Beaches in California
Table 1.2 Estimates of Beach Attendance and Spending
for California Households on Day Trips to the Beach
1995
Sub-Sample Full Sample
of 409 Taking of 641 Total
Day Trips Households
Surveyed
Attendance Days from Survey
Mean Number of Day Trips 15.24 10.13
Mean Number of Persons Per Day Trip 4 2.66
Mean Annual Person Attendance Days 48.14 32.02
B. Spending From Survey
Mean Household Spending Per Trip
Mean Per Person Spending Per Trip
Mean Annual Household Spending
Mean Annual Per Person Spending
C. Statewide Attendance Projections
Mean Annual Person Attendance Days per Household 32.02
Total California Households (millions) 10.8
Total Person Attendance Days (millions) 345.78
D. Total Direct Statewide Spending on Day Trips
Mean Annual Spending Per Household 344.75
Total CA Households (millions) 10.8
Total Statewide Spending (millions) . $3,723.34
1998
Sub-Sample Full Sample
of 409 of 641 Total
Taking Day Households
Trips Surveyed
$54.87
$16.45
$518.40
$171.57
$36.49
$10.94
$344.75
$114.10
$60.07
$18.01
$567.51
$187.82
$39.95
$11.98
$377.41
$124.91
32.02
11.45
366.63
382.84
11.45
$4,383.52
The Fiscal Impact of Beaches in California
Table 1.3 Estimates of Beach Attendance and Spending
for California Households on Overnight Trips to the Beach
1995
Sub-Sample Full Sample
of 409 Taking of 641 Total
Day Trips Households
Surveyed
1998
Sub-Sample Full Sample
of 409 of 641 Total
Taking Day Households
Trips Surveyed
1.75
1.01
1.65
12.59
A. Attendance Days from Survey
Mean Number of Overnight Trips 4.6
Mean Number of Days per Trip 2.65
Mean Number of Persons Per Trip 4.34
Mean Annual Person Attendance Days 33.1
B. Spending From Survey
Mean Household Spending Per Trip
Mean Per Person Spending Per Trip
Mean Annual Household Spending
Mean Annual Per Person Spending
C. Statewide Attendance Projections
Mean Annual Person Attendance Days per Household 12.59
Total California Households (millions) 10.8
Total Person Attendance Days (millions) 135.97
D. Total Direct Statewide Spending on Overnight Trips
Mean Annual Spending Per Household 345.4
Total CA Households (millions) 10.8
Total Spending (millions) $3,730.32
$246.83
$82.09
$907.79
$345.24
$93.92
$31.24
$345.40
$131.36
$270.21
$89.87
$993.79
$377.95
$102.82
$34.20
$378.12
$143.80
12.59
11.45
144.16
383.57
11.45
$4,391.88
The Fiscal Impact of Beaches in California
Table 1.4 Estimates of Beach Attendance and Spending for Out-of-State
Tourists Taking Trips to California's Beaches
A. Statewide Attendance Estimates
Total Attendance Days (Tourists 15% of Total) 566.76
California Residents' Total Attendance Person Days 481.75
Out-of-State Tourist Person Attendance Days (millions) 85.01
B. Converting Attendance Days to Out-of-State Tourist Trips
Out-of-State Tourist Attendance Days 85.01
Mean Trip Length for Out-of-State Tourists (days) 2.65
Out-of-State Tourists Visiting State's Beaches (millions) 32.08
Total Out-of-State Tourist Trips to the Beach (millions) 12.83
C. Statewide Spending Projections
1995 1998
Household Spending Per Trip (3) $246.83 $270.21
Out of State Tourist Trips (millions) 12.83 12.83
Total Statewide Spending (millions) $3,166.87 $3,466.84
Tables 1.5 to 1.8 provide the "Economic Impact" numbers using the data provided in Tables
1.1-1.4. As one can see, total direct statewide spending on California's beaches is just over
$12 billion dollars, a significant increase from 1995, when it was just over $10 billion. How-
ever, one must also take into account the indirect and induced effects of state spending on
beaches since this spending provides jobs and income for California and non-California
residents, who in turn spend their added income. Since the numbers provided here are
national figures, this indirect and induced effect is much larger than the effects formerly
calculated for the state. This is because more of the spillover effect of adding new jobs is
captured at the national level. As a result, the employment generated by California's beaches
has a substantial impact on the national economy, generating $63 billion in revenue when
all effects are taken into account.
The primary purpose of this investigation is to examine the impact of California's beaches
on federal tax revenues. Tables 1.6 and 1.7 provide this information. If one just looks at the
direct expenditures, California's beaches provide $2.3 billion in tax revenues for the federal
government. If one includes indirect and induced effects, the number rises to $12 billion.
Finally, Table 1.8 estimates the number of jobs created by California's beaches in 1998. The
direct effect is 273,000 jobs; the total effect is 883,000 jobs.
The Fiscal Impact of Beaches in California
Table 1.5 Total National Economic Impact of Beach Spending in
California in 1998: Expenditures Updated for Inflation and Population
A. Spending by California Households on Day Trips
Spending by California Households on Overnight Trips
Spending by Out-of-State Tourists
Total Direct Statewide Spending
B. Indirect Spending
Induced Spending
$4,321,537,219
$4,311,359,394
$3,452,096,522
$12,084,993,135
$6,582,000,000
$44,698,000,000
|C. Combined National Economic Impact of Beach Spending $63,364,993,135
Table 1.6 Impact of California Beach Direct Expenditure on Federal
Tax Receipts, Updated Updated for Inflation and Population
B.
C.
D.
Ratios of Tax Receipts to GDP are average values from 1995-1997
Estimated 1998 California Beach Direct Expenditure:
Updated using Inflation
Ratio of Income Tax Receipts to GDP
Estimated 1998 Federal Income Tax Revenue Generated
By Direct California Beach Spending
Ratio of Corporate Tax Receipts to GDP
Estimated 1998 Federal Corporate Tax Revenue
Generated By Direct California Beach Spending
Ratio of Excise Tax Receipts to GDP
Estimated 1998 Federal Corporate Tax Revenue
Generated By Direct California Beach Spending
Ratio of Total Tax Receipts to GDP
Estimated 1998 Federal Tax Revenue Generated By
Direct California Beach Spending
$ 12,084,993,135
0.0861
$ 1,041,065,831
$
$
0.0222
268,541,360
0.0073
88,734,893
0.1906
$ 2,303,116,875
10
The Fiscal Impact of Beaches in California
Table 1.7 Total Impact of California Beach Spending on Federal Tax
Receipts: Expenditures Updated for Inflation and Population
Ratios of Tax Receipts to GDP are average values from 1995-1997
Estimated 1998 National Economic Impact of California
Beach Spending : Updated using Inflation $ 63,364,993,135
A. Ratio of Income Tax Receipts to GDP 0.0861
Estimated 1998 Federal Income Tax Revenue Generated By
California Beach Spending $ 5,458,598,815
B. Ratio of Corporate Tax Receipts to GDP 0.0222
Estimated 1998 Federal Corporate Tax Revenue Generated
By California Beach Spending $ 1,408,037,328
C. Ratio of Excise Tax Receipts to GDP 0.0073
Estimated 1998 Federal Corporate Tax Revenue Generated
By California Beach Spending $ 465,261,821
D. Ratio of Tax Receipts from Other Sources* to GDP 0.0749
Estimated 1998 Federal Tax Revenue From Other Sources
Generated by California Beach Spending $ 4,743,986,842
E. Ratio of Total Tax Receipts to GDP 0.1906
Estimated 1998 Federal Tax Revenue Generated By
ss i-j • n i- n -!•California Beach Spending
'Comprised primarily of social insurance and retirement receipts.
Table 1.8 Total National Employment Impact of 1998 California Beach
Spending: Expenditures Updated for Inflation and Population
A. Total Direct National Employment 278,180
B. Indirect and Induced National Employment
Indirect Employment 68,296
Induced Employment 537,067
Total Induced and Indirect Spending 605,363
C. The Combined National Employment Impact 883,543
11
The Fiscal Impact of Beaches in California
In addition to changes in the overall price level and population, California has also experi-
enced significant growth in income per capita, particularly given the recent boom in tech-
nology spending. The numbers calculated in tables 1.1 to 1.8 do not take the increase in household
income into account. Further, economists also have found that spending on beaches and other
recreational activities is highly sensitive to changes in income. In economic parlance, a 5%
increase in income will not necessarily reflect a 5% increase in spending. To correct for the
change in income properly, one must use data on the income elasticity of demand.3 Tables
1.9 to 1.13 are analogous to tables 1.5 to 1.8 except that they take into account the effect of
an increase in Californian's income. As one can see, when this effect is taken into account,
total direct spending at California's beaches increases to $14 billion and direct federal tax
revenues increase to $2.6 billion. The combined national impact is $73 billion and the total
federal tax impact is just over $14 billion.
Table 1.9 Total 1998 California Beach Spending by Expenditure
Category Updated for Income
Category Estimated 1998
Total CA Day
Trip Spending
(adjusted for
pop growth
Estimated Estimated 1998 Total 1998 CA
1998 Total CA Out-of-State Direct Beach
Overnight Trip Beach Spending
Spending Spending ($mil) ($mil)
(adjusted for
pop growth
Gas & Auto
Beach Related Lodging
Parking & Entrance Fees
Food & Drinks from Stores
Restaurants
Equip Rental
Beach Sporting Goods
Incidentals
TOTALS
$944.11
$0.00
$253.65
$1,271.61
$1,391.15
$279.71
$259.81
$466.58
$4,866.63
$671.36
$1,583.05
$83.04
$742.88
$1,048.32
$224.32
$57.62
$232.30
$4,642.88
$655.19
$1,558.93
$81.55
$725.78
$1,019.81
$213.78
$54.91
$224.60
$4,534.54
$2,270.66
$3,141.97
$418.23
$2,740.27
$3,459.28
$717.81
$372.34
$923.48
$14,044.05
3 The data used here was obtained from Falvey, Rodney and Gemmell, Norman "Are Services Income-Elastic?
Some New Evidence" Review of Income and Wealth, 42, No 3,1996.
12
The Fiscal Impact of Beaches in California
Table 1.10 Impact of California Beach Direct Expenditure on
Federal Tax Receipts, Updated for Income
Ratios of Tax Receipts to GDP are average values from 1995-1997
Estimated 1998 California Beach Direct Expenditure:
Updated using Elasticities
A. Ratio of Income Tax Receipts to GDP
Estimated 1998 Federal Income Tax Revenue
Generated By Direct California Beach Spending
B. Ratio of Corporate Tax Receipts to GDP
Estimated 1998 Federal Corporate Tax Revenue
Generated By Direct California Beach Spending
C. Ratio of Excise Tax Receipts to GDP
Estimated 1998 Federal Corporate Tax Revenue
Generated By Direct California Beach Spending
D. Ratio of Total Tax Receipts to GDP
$ 14,044,049,092
0.0861
$ 1,209,829,370
0.0222
$ 312,073,661
0.0073
$ 103,119,396
0.1906
Estimated 1998 Federal Tax Revenue
Generated By Direct California Beach Spending
$ 2,676,467,094
Table 1.11 Total National Economic Impact of Beach Spending
in California in 1998: Updated for Income
A. Spending by California Households on Day Trips
Spending by California Households on Overnight Trips
Spending by Out-of-State Tourists
Total Direct Statewide Spending
B. Indirect Spending
Induced Spending
C. Combined National Economic Impact of Beach Spending
$
$
$
4,866,630,047
4,642,877,898
4,534,541,147
$ 14,044,049,092
$ 7,718,000,000
$ 51,786,000,000
$ 73,548,000,000
13
The Fiscal Impact of Beaches in California
Table 1.12 Total Impact of California Beach Spending on Federal
Tax Receipts: Updated for Income
B.
D.
Ratios of Tax Receipts to GDP are average values from 1995-1997
Estimated 1998 National Economic Impact of California Beach $
Spending: Updated using Income Elasticities
Ratio of Income Tax Receipts to GDP
Estimated 1998 Federal Income Tax Revenue Generated By $
California Beach Spending
Ratio of Corporate Tax Receipts to GDP
Estimated 1998 Federal Corporate Tax Revenue Generated By $
California Beach Spending
Ratio of Excise Tax Receipts to GDP
Estimated 1998 Federal Corporate Tax Revenue Generated By $
California Beach Spending
Ratio of Tax Receipts From Other Sources* to GDP
Estimated 1998 Federal Tax Revenue From Other Sources $
Generated By California Beach Spending
Ratio of Total Tax Receipts to GDP
73,548,000,000
0.0861
6,335,817,394
0.0222
1,634,314,537
0.0073
540,031,249
0.0749
5,506,364,430
0.1906
Estimated 1998 Federal Tax Revenue Generated By California $
Beach Spending
14,016,527,609
* Comprised primarily of social insurance and retirement receipts.
Table 1.13 Total National Employment Impact of 1998 California
Beach Spending; Updated for Income
A. Total Direct National Employment
B. Indirect and Induced National Employment
Indirect Employment
Induced Employment
Total Induced and Indirect Spending
C. The Combined National Employment Impact
321,647 jobs
79,793
622,264
702,057
1,023,704 jobs
14
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m The Fiscal Impact of Beaches in California
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2. How does Delaware compare to California?
As shown in Table 2.1, although California has the longest coastline of the twelve states
receiving funds and the second longest shoreline (after Florida), it ranks eight overall in
federal appropriations for shoreline protection. In terms of overall spending per mile of
shoreline, California again ranks second to last. If one includes only coastline, the compari-
son is even starker. California receives just under $12,000 per mile of coastline compared to
over $800,000 for New York and New Jersey. In other words, New York and New Jersey
receive over 75 times more federal dollars per mile of coastline than California.
Given the substantial revenues generated by California's beaches, a useful point of compari-
son might be another state that receives substantial assistance from the federal government.
To make an accurate comparison, we chose a state that has performed a similar study to the
one completed in Section l.The most comprehensive study has been performed by the state
of Delaware, prepared by Jack Faucett Associates.4 Although at first glance Delaware, a
small state, might seem to be a strange comparison with California, in terms of federal
funding, the two states rank eighth and ninth, as one can see from Table 2. l.The two states
also rank tenth and eleventh in terms of federal appropriations per mile of shoreline.
Table 2.1 Federal Appropriations for Shoreline Protection by State
Total Federal
Appropriations
FY 95-99
State (millions of $)
New Jersey
New York
Florida
South Carolina
Virginia
Illinois
North Carolina
California
Delaware
Pennsylvania
Maryland
111
104
90
46
45
30
18
10
5
2
2
Coastline*
130
127
770
187
112
0
301
840
28
0
31
Appropriations
per mile of
Coastline
Shoreline*
1792
1850
5095
2876
3315
3375
3427
381
89
3190
* Source: National oceanographic and Atmospheric A (ministration; U.S.
$
$
$
$
$
$
$
$
$
853,846.15
818,897.64
116,883.12
245,989.30
401,785.71
N.A
59,800.66
11,904.76
178,571.43
N.A.
64,516.13
Appropriations
per mile of
Shoreline
$
$
$
$
$
$
$
$
$
$
61,941.96
56,216.22
17,664.38
15,994.44
13,574.66
N.A.
5,333.33
2,918.00
13,123.36
22,471.91
626.96
Department of Commerce
4 Jack Faucett Associates, "The Economic Effects of a Five Year Nourishment Program for the Ocean Beaches
of Delaware", Final report, March 1998.
fty
15
The Fiscal Impact of Beaches in California
The survey data contained in the Delaware study was remarkably similar in scope and meth-
odology to the one conducted through PRI. Consequently, it was relatively straightforward
to update the data. As in Section 1, the data was updated for changes in the price level, in
incomes and in population. The national impact figures were calculated using IMPLAN
software and the same methodology used as in Section 1. In short, the comparison of the
economic impacts in the two states should be quite appropriate given that the same meth-
odologies were applied. Tables 2.2 to 2.5 provide information on spending in Delaware
comparable to the tables in Section 1. In all cases, we have updated for inflation, for popu-
lation increases and for increases in income as we did in Section 1. Table 2.6 provides a
breakdown of out-of-state spending at Delaware's beaches.
As one can see, the differences are quite dramatic, reflecting the differences in the size of the
state. While California receives only twice as much in shoreline protection as Delaware, the
total direct spending by beach visitors in Delaware is $652 million, compared to $14 billion
in California. If one accounts for indirect and induced effects, Delaware's beaches contrib-
ute $3.7 billion to the national economy, but California's total impact is over $73 billion.
The revenue impact tells the same story: Delaware's total economic impact from beach
tourism contributed $715 million in federal tax revenues, while California contributed $14
billion.
In sum, California's beaches contribute roughly twenty times more to the national economy
and to federal tax revenues than Delaware Beaches, while receiving only twice as much from
the federal government in shore protection appropriations. Another way of thinking about
this difference is: California's beaches generate approximately 10 times the federal tax ben-
efit per dollar spent by the federal government in shore protection.
Table 2.2 Delaware Overnight Trip Beach Expenditures by Category
Updated for Income and Population Growth
Category
1996
Expenditure
per Overnight
Trip by
Category
Total 1996
Expenditure on
Overnight Trips
Income
Elasticities
Estimated 1998
Expenditures on
Overnight Trips
Lodging
Restaurants
Entertainment
Food Shopping
Non Food Shopping
Transportation
$179.37
$106.20
$59.00
$45.30
$68.18
$17.65
$167,616,555.35
$99,236,114.47
$55,131,174.70
$42,326,514.77
$63,712,075.28
$16,494,891.79
Totals $475.69 $444,517,326.36
0.7115 $183,805,410.58
1.6126 $117,872,448.27
2.1498 $68,482,665.62
1.2735 $48,822,448.95
3.7162 $89,243,926.39
1.3572 $19,166,151.16
$527,393,050.98
16
The Fiscal Impact of Beaches in California
Table 2.3 Delaware Day Trip Beach Expenditures by Category
Updated for Income and Population Growth
Category
Lodging
Restaurants
Entertainment
Food Shopping
Non Food Shopping
Transportation
Totals
1996 Expenditure
per Day Trip by
Category
$0.00
$19.95
$9.28
$11.74
$22.69
$6.44
$70.11
Total 1996
Expenditure on
Day Trips
$0.00
$ 36,621,044.43
$ 17,036,634.86
$ 21,553,144.56
$ 41,652,256.08
$ 11,825,277.52
$128,688,357.45
Income
Elasticities
0.7115
1.6126
2.1498
1.2735
3.7162
1.3572
Estimated 1998
Expenditures on
Overnight Trips
$0.00
$ 43,498,399.63
$ 21,162,512.40
$ 24,860,948.40
$ 58,343,898.85
$ 13,740,317.88
$161,606,077.17
Table 2.4 National Impact of 1998 Delaware
Beach Spending
A. National Spending Impacts
Direct Spending
Indirect Spending
Induced Spending
Total Impact
B. National Employment Impacts
Direct Employment
Indirect Employment
Induced Employment
Total Employment
$ 652,030,302.00
$ 381,424,442.00
$ 2,722,655.693.00
$ 3,756,110,438.00
17,060
4,046
32,716
53,821
17
The Fiscal Impact of Beaches in California
Table 2.5 Total Impact of Delaware Beach Spending
on Federal Tax Receipts
Ratios of Tax Receipts to GDP are average values from 1995-1997
Estimated 1998 National Economic Impact of Delaware
Beach Spending : Updated using Inflation $3,756,110,438
A. Ratio of Income Tax Receipts to GDP 0.0861
Estimated 1998 Federal Income Tax Revenue Generated By
Delaware Beach Spending 323,571,407
B. Ratio of Corporate Tax Receipts to GDP 0.0222
Estimated 1998 Federal Corporate Tax Revenue Generated
By Delaware Beach Spending 83,464,756
C. Ratio of Excise Tax Receipts to GDP 0.0073
Estimated 1998 Federal Corporate Tax Revenue Generated
By Delaware Beach Spending 27,579,499
D. Ratio of Total Tax Receipts to GDP 0.1906
Estimated 1998 Federal Tax Revenue Generated By
Delaware Beach Spending $715,826,748
Table 2.6 Estimated 1998 Expenditures on Overnight
Trips to Delaware Beaches by State of Residence of
Beach Visitors
Estimated 1998 Estimated 1998
Number of Overnight Overnight Trip Direct
Trips by State of Expenditure by State
State of Residence Percent of All Visitors Origin of Origin
Maryland
Pennsylvania
New Jersey
New York
Virginia
Delaware
Connecticut
Massachusetts
Florida
West Virginia
Other
22.6
19.59
19.28
9.71
8.3
8.24
1.93
1.53
1.05
1.04
6.73
2,930,994 $
2,540,627 $
2,500,423 $
1,259,290 $
1,076,427 $
1,068,646 $
250,302 $
198,426 $
136,175 $
134,878 $
872,814 $
12,969,000 $
119,190,830
103,316,299
101,681,380
51,209,865
43,773,623
43,457,187
10,178,686
8,069,114
5,537,627
5,484,888
35,493,552
527,393,051
18
The Fiscal Impact of Beaches in California
3. A Case Study of Huntington Beach
In many ways, Huntington Beach is a typical beach community in Southern California.
Huntington Beach is a small to medium sized city (population about 190,000) city just 35
miles southeast of Los Angeles. One issue of concern to many policy makers is the extent to
which tax revenues generated by local governments benefit the locality itself, as opposed to
the state or the federal government. This case study examines the revenues generated by
federal taxes, by state sales taxes and by parking revenues (some go to the state and some go
to the city). The purpose is to estimate the tax revenue impact of beach spending from one
specific community. Although Huntington Beach represents only one community, it is quite
likely that spending patterns in other Southern California beach communities will be similar,
so that the relative ratios between state, local and federal tax dollars generated will likely be
similar.
The data used for this study was obtained from several sources. Information on total beach
attendance was obtained from the City of Huntington Beach, which maintains monthly
and yearly statistics on beach attendance at its state and city beaches. In addition a survey of
beach visitors was undertaken by Kim Sterret and Philip King on July 9,1999. Care was
taken to get a full, representative sample throughout all portions of both the city and state
beaches. A Friday was chosen as the most representative day since it on the cusp between a
weekday and a weekend day. Respondents were given a brief survey about their spending
habits, in particular how much they spent and where the money was spent. As one can see in
the tables below, a substantial amount of the beach spending occurred in inland
communities—not at Huntington Beach. In addition, visitors were asked how far away
from Huntington Beach they lived (including out-of-state and foreign visitors). Overall,
the spending percentages conformed closely to those in our survey from 1995, and the
relative spending percentages from this study were used with one exception; parking was a
significantly larger proportion of overall expenses for day-trippers in our July 9th survey
than in the 1995 telephone survey. This result is not surprising since Huntington Beach
requires visitors to pay for parking and some other beaches do not.
The results of the survey are presented in Table 3.1. The overall breakdown of visitors is also
consistent with the percentage breakdown provided by the City of Huntington Beach from
their records of people needing medical attention at the beach. For a more detailed breakdown
of survey results, the reader may consult the appendix.
19
The Fiscal Impact of Beaches in California
Table 3.1 Results of the Huntington Beach Survey
Category
Local
Less Than 60 Miles
In-State, > 60 Miles
Out of State
Out of Country
Number
of Parties
18
54
10
23
4
Number
of People
53
274
39
86
8
Percent
of Total
Number
of
People
12%
60%
8%
19%
2%
Ayg. Daily
Expenditure
$
$
$
$
$
per Party
11.93
54.46
102.30
109.61
70.75
$
$
$
$
$
Aug. Percent
A\g. Daily of Expenditure
Expenditure
per Person
4.05
10.73
26.23
29.31
35.38
in Huntington
Beach
68.33%
42.43%
48.30%
61.39%
62.00%
Totals 109 460 100% $ 64.06 $ 15.18 49.80%*
'Average, weighted by number of people in each category.
Please note that only about half (49.80%) of all spending that results from trips to Huntington
Beach actually occurs in Huntington Beach. Most of the other spending occurs within a 60-
mile radius of Huntington Beach. For example, note that by far the largest category of
beach attendees come from Orange county and neighboring counties, but do not reside in
Huntington Beach. A substantial portion of their spending occurs outside of the city. In
addition, many people visiting Southern California (e.g., Disneyland) plan to attend Hun-
tington Beach for a day, but the majority of their expenditures for that day lie outside city
limits.
Given the information from Table 3.1, it is possible to estimate the total impact of beach
spending generated at Huntington Beach. This is presented in Table 3.2. The total direct
yearly expenditure by all visitors is estimated to be $139 million.
Table 3.2 Estimated 1998 Direct Beach Expenditure
Generated by Huntington Beach Tourists
Category
Local
Less Than 60 Miles
In-State, > 60 Miles
Out of State
Out of Country
Percent
11.5
59.6
8.5
18.7
1.7
1998
Estimated
Attendance
1,055,109
5,454,713
776,401
1,712,063
159,262
Avg. Daily
Expenditure
per Person
$4.05
$10.73
$26.23
$29.31
$35.38
Total 1998
Direct Exp.
$4,276,176
$58,548,578
$20,365,588
$50,187,339
$5,633,882
Totals 100 9,157,547 $139,011,563
20
The Fiscal Impact of Beaches in California
Tables 3.3 and 3.4 estimate the national impact of these expenditures using the same meth-
odology applied in Sections 1 and 2. As before, the indirect and induced effect implies that
the total national impact is substantially greater than the direct impact. In this case, the
total national impact is $711 million. The total amount of federal taxes generated by this
activity is $135 million.
Table 3.3 National Impact of 1998 Huntington Beach Expenditures
Direct Expenditure $ 130,391,325
Indirect Expenditure $ 73,785,749
Induced Expenditure $ 507,158,111
Total $ 711,335,183
Table 3.4 Impact of 1998 Huntington Beach Direct, Indirect and Induced
Expenditure on Federal Tax Receipts
Ratios of Tax Receipts to GDP are average values from 1 995-1 997
A.
B.
C.
D.
Estimated 1 998 Huntington Beach Total Expenditure $
Ratio of Income Tax Receipts to GDP
Estimated 1998 Federal Income Tax Revenue Generated By Total
Huntington Beach Spending $
Ratio of Corporate Tax Receipts to GDP
Estimated 1998 Federal Corporate Tax Revenue Generated By
Total Huntington Beach Spending $
Ratio of Excise Tax Receipts to GDP
Estimated 1998 Federal Corporate Tax Revenue Generated By
Total Huntington Beach Spending $
Ratio of Total Tax Receipts to GDP
Estimated 1998 Federal Tax Revenue Generated By Total
Huntington Beach Spending $
711,335,183
0.0861
61,278,210
0.0222
15,806,622
0.0073
5,223,028
0.1906
135,563,839
21
The Fiscal Impact of Beaches in California
Since the state economy is smaller than the national economy, the total effect of Hunting-
ton Beach spending is smaller. Nevertheless, the total impact on California's economy of
Huntington Beach tourism is $329 million as shown in Table 3.5.
Table 3.5 Impact of 1998 Beach Expenditures at
Huntington Beach on the CA Economy
Direct Expenditure $ 139,939,222
Indirect Expenditure $ 38,956,845
Induced Expenditure $ 160.895.602
Total $ 329,791,669
Tables 3.6 and 3.7 estimate the total sales tax impact from the direct spending ($10 million)
as well as the total sales tax effect ($25.5 million).
Table 3.6 CA Sales Taxes Generated by
Total Huntington Beach Spending
Jurisdiction
State (General Fund)
State (Local Revenue Fund)
State (Local Public Safety Fund)
Local (City and County Operations)
Local (County Transportation Funds)
Orange County (Transportation)
Total
Rate
5.00%
0.50%
0.50%
1 .00%
0.25%
0.50%
7.75%
Revenue Generated
$
$
$
$
$
$
$
16,489,583.45
1,648,958.35
1,648,958.35
3,297,916.69
824,479.17
1,648,958.35
25,558,854.35
Table 3.7 CA Sales Taxes Generated by
Direct Huntington Beach Expenditure
Jurisdiction
State (General Fund)
State (Local Revenue Fund)
State (Local Public Safety Fund)
Local (City and County Operations)
Local (County Transportation Funds)
Orange County (Transportation)
Total
Rate
5.00%
0.50%
0.50%
1.00%
0.25%
0.50%
7.75%
Revenue Generated
$
$
$
$
$
$
$
6,698,488.58
669,848.86
669,848.86
1,339,697.72
334,924.43
669,848.86
10,382,657.29
22
The Fiscal Impact of Beaches in California
As one can see in Table 3.7 the total sales tax revenue generated from direct spending is $7.7
million.5 However, most of the revenue goes to the State of California, not to local authori-
ties. Table 3.8 gives a detailed breakdown of where the money is allocated by the State of
California's Board of Equalization (BOE). In fact, according to the BOE, only just over $1
million goes directly to Huntington Beach. Another $1.7 million is distributed to Orange
County; some of this is distributed to Huntington Beach. In all, we estimate that only $1.1
million in sales tax revenues generated from beach activity goes back to the City of Huntington
Beach.
Table 3.8 California Sales Tax Revenue From Direct Expenditure
Jurisdiction Rate Revenue Generated*
1. State (General Fund)
2. State (Local Revenue Fund, Disbursed to county)
3. State (Local Public Safety Fund, Disbursed to county)
4. Orange County (Transportation)
5. Local (County Transportation Funds)
6. Local (City and County Operations, Disbursed to incorporated
city
Total
5%
0.50%
0.50%
0.50%
0.25%
1%
7.75%
$
$
$
$
$
$
$
5,014,142
501,414
501,414
501,414
250,707
1,002,828
7,771,921
'Revenues are calculated by multiplying direct expenditures subject to sale taxes by the various tax rates. Revenue from Items 2 and 3 are
earmarked for indigent healthcare and general public safety, and are disbursed at the county level. Item 4 is a special district tax imposed
and allocated to Orange County. Items 5 and 6 form the Bradley-Burns Uniform Local Sales and Use Tax. Revenues from Item 6 are
distributed to the location of sale if the transaction took place in an incorporated city, or, otherwise, to the county level.
5 Not all of the direct expenditures are subject to sales tax; for example, some food items are exempt. Our
survey results were used to estimate the total expeditures subject to sales tax.
23
The Fiscal Impact of Beaches in California
Finally, tables 3.9 and 3.10 show the estimated local tax benefits from Huntington Beach
tourism. As one can see, the numbers are quite modest compared to the state and national
totals, and parking fees (on valuable property) generate most of the local revenues. This
result occurs for two main reasons: (1) half of all spending on beach activities occurs outside
of the city, (2) as shown in table 3.9, most of the sales tax revenues go to the state, not to
local governments. Including parking fees, the city receives $3.2 million in revenues. If
indirect and induced effects are added, the number increases to $4.8 million.
Table 3.9 Local Revenues From Direct Expenditures
Direct Sales Tax Revenue to Orange County $ 1,754,950
Huntington Beach Population as a Percentage of Orange County x 0.07
Estimated Sales Tax Revenue to Huntington Beach disbursed $ 122,846
by the county
Direct Sales Tax Revenue to Huntington Beach $ 1,002,828
Revenue from Parking and Entrance Fees $ 2,076.679
Total Local Revenue from Direct Expenditures $ 3,202,354
M Table 3.10 Local Revenues From Total
(Direct and Indirect) Expenditures
«M
Total CA Sales Tax Revenue from Direct and $ 18,702,111
Indirect Expenditures
** Percent of Sales Tax Revenue to County Level x 0.226
Total Sales Tax Revenue to Orange County $ 4,223,057
01 Huntington Beach Population as a Percentage of Orange County x 0.07
Estimated Sales Tax Revenue to Huntington Beach Disbursed from $ 295,614
«» County Level
Proportion of Sales Tax Revenue Allocated to City x 0.129
** Huntington Beach Sales Tax Revenue $ 2,413,176
** Revenue from Parking and Entrance Fees $ 2,076,679
urn
Total Local Revenue from Direct and Indirect Expenditures $ 4,785,469
24
The Fiscal Impact of Beaches in California
4. Conclusion
Our study indicates that the impact that California's beaches has on the state and national
economy, which was substantial in 1995, has grown significantly. California's beaches con-
tribute $73 billion to the national economy and generate $14 billion in tax revenues for the
federal government. In comparison, California only received $10 million in shore protec-
tion appropriations from fiscal year 1995-1999. In terms of overall federal spending for
shoreline preservation, California ranks eighth out of eleven states receiving funds. When
compared with Delaware, a state ranking just behind California in overall federal funding,
California generates twenty times more economic activity per federal dollar appropriated
than Delaware. When compared to New York or New Jersey, the largest recipients of
federal shoreline funding, California receives roughly 75 times fewer dollars per mile of
coastline than New York or New Jersey.
Our study of Huntington Beach indicates that much of the federal and state tax revenues
generated by local beach communities does not go back to local communities. In our survey
in Huntington Beach, one-half of all spending on beach activities occurred outside the city.
Further, many of the tax dollars generated within the city go to state and federal authorities.
Overall, Huntington Beach's beaches generated $135 million in federal tax revenues and
$25 million in sales tax revenues compared to only $4.8 million in local revenues from sales
taxes and parking fees.
25
The Fiscal Impact of Beaches in California
Appendix 1: Detailed Results from the Huntington Beach Survey
Table A1 Huntington Beach Pier
Category
Local
Less Than 60 Miles
In-State, > 60 Miles
Out of State
Out of Country
Number of
Parties
5
4
3
7
1
Number of
People
10
15
9
14
1
Percent of
Total
20%
31%
18%
29%
2%
Avg. Daily
Expenditure
per Party
$5.20
$16.25
$36.00
$68.29
$18.00
Avg. Daily
Expenditure
per Person
$2.60
$4.33
$12.00
$34.15
$18.00
Avg. Percent
of Expenditure
in Huntington
Beach
80%
95%
77%
100%
80%
Totals 20 49 100%$34.75 $14.18 89.76%*
Table A2 City Beach
Category
Local
Less Than 60 Miles
In-State, > 60 Miles
Out of State
Out of Country
Totals
Table A3 North of Rer
Category
Local
Less Than 60 Miles
In-State, > 60 Miles
Out of State
Out of Country
Number of
Parties
5
12
3
8
2
30
Number of
Parties
3
10
2
3
1
Number of
People
12
50
12
27
4
105
Number of
People
6
30
13
5
3
Percent of
Total
11%
48%
11%
26%
4%
100%
Percent of
Total
11%
53%
23%
9%
5%
Avg. Daily
Expenditure
per Party
$22.50
$56.33
$198.33
$103.13
$125.00
$81.95
Avg. Daily
Expenditure
per Party
$10.00
$15.60
$55.00
$56.67
$15.00
Avg. Daily
Expenditure
per Person
$9.38
$13.52
$49.58
$30.56
$62.50
$23.41
Avg. Daily
Expenditure
per Person
$5.00
$5.20
$8.46
$34.00
$5.00
Avg. Percent
of Expenditure
in Huntington
Beach
57.50%
64.58%
68.33%
48.75%
34.00%
58.97%*
Avg. Percent
of Expenditure
in Huntington
Beach
33.33%
34.50%
20.00%
36.00%
100.00%
Totals 19 57 100%$25.32 $8.44 34.65%*
26
The Fiscal Impact of Beaches in California
Table A.4 Huntington State Beach
Category
Local
Less Than 60 Miles
In-State, > 60 Miles
Out of State
Out of Country
Number of
Parties
1
14
2
3
0
Number of
People
2
105
5
31
0
Percent of
Total
1%
73%
3%
22%
0% $
Avg. Daily
Expenditure
per Party
$20.00
$49.00
$105.00
$326.00
$
Avg. Daily
Expenditure
per Person
$10.00
$6.53
$42.00
$31.55
-
Avg. Percent
of Expenditure
in Huntington
Beach
100.00%
10.43%
4.00%
36.67%
0.00%
Totals 20 143 100%$94.70 $13.24 17.14%*
Table A.5 City Beach, South End
Category
Number of
Parties
Number of Percent of
People Total People
Avg. Percent
Avg. Daily Avg. Daily of Expenditure
Expenditure Expenditure in Huntington
per Party per Person Beach
Local
Less Than 60 Miles
In-State, > 60 Miles
Out of State
Out of Country
4
14
0
2
0
23
74
0
9
0
22%
70%
0% $
8%
0% $
$12.20
$35.23
$
$35.00
$
$2.12
$6.67
-
$7.78
-
100.00%
46.07%
0.00%
52.00%
0.00%
Totals 20 106 100%$30.60 $5.77 58.28%*
27
The Fiscal Impact of Beaches in California
Appendix 2 : Distribution of Funds Generated by Sales and Use
Taxes in Orange County
The sales tax rate in Orange County is 7.75%, which can be broken down into its compo-
nents of the standard statewide sales tax rate of 7.25%, and the Orange County special
district transactions and use tax of 0.5%.
The standard statewide tax can be further decomposed into the sales and use tax portion
(6%), and the Bradley-Burns Uniform Local Sales and Use Tax (1.25%). The destination of
the funds generated by these components are given in the table below.
Orange County Sales and Use Tax Revenue Distribution
Sales and Use Tax 5% General Fund
0.5% Local Revsnue Fund
0.5% Local Public Safety Fund
Bradley-Bums 1% County and Incorporated City General Fund
0.25% County Transportation Funds
District Transactions
and Use Tax 0.5% Orange County Local Transportation Authority
Total 7.75%
Sources: California State Board of Equalization Annual
Report 1998, Appendix Table 2.
CA Board of Equalization, California City and County
Sales and Use Tax Rates, April 1999.
28
The Fiscal Impact of Beaches in California
m
m
m
m
m
References:
California Department of Finance. California Statistical Abstract, http://www.dof.ca.gov/
html/fs_data/stat-abs/toc.htm, (December 1998).
California State Board of Equalization. Annual Report, 1998.
. California City and County Sales and Use Tax Rates, April 1999.
Falvey, Rodney and Norman Gemmell. "Are Services Income-Elastic? Some New Evi-
dence", Review of Income and Wealth, 42, No 3,1996.
Jack Faucett Associates. "The Economic Effects of a Five Year Nourishment Program for
the Ocean Beaches of Delaware", Final report, March 1998.
King, Philip and Michael Potepan. The Economic Value of California's Beaches, Public Reseach
Institute Report Commision by the California Department of Boating and
Waterways, May 1997.
29