California Travel Impacts p

Transcription

1 California Travel Impacts p April 2015 A Joint Marketing Venture of Visit California and the Governor s Office of Business Development (GO-Biz)

2 PREPARED BY Dean Runyan Associates, Inc. 833 SW 11 th Avenue, Suite 920 Portland, Oregon , Fax: for Visit California 555 Capitol Avenue, Suite 1100 Sacramento, CA STATE OF CALIFORNIA Edmund G. Brown, Jr., Governor GOVERNOR S OFFICE OF BUSINESS DEVELOPMENT (GO-BIZ) Mike Rossi, Senior Advisor for Jobs and Business Development, Office of the Governor VISIT CALIFORNIA Caroline Beteta, President & CEO Lynn Carpenter, Vice President of Marketing Dan Mishell, Research Director

3 EXECUTIVE SUMMARY This report provides detailed statewide, regional and county travel impact estimates for California from 1991 to The estimates for 2014 are preliminary. The report also provides an analysis of travel-generated tax revenue and transient occupancy tax receipts for jurisdictions through the 2014 fiscal year CALIFORNIA TRAVEL INDUSTRY SURPASSES PRE-RECESSION LEVEL The California travel industry expanded for the fifth consecutive year following the recession. Real spending, employment, tax revenue and visitation all exhibited strong growth. Spending. Total direct travel spending in California was $117.5 billion in 2014 (preliminary). This represents a 3.6 percent increase over 2013 in current dollars and a 2.7 percent increase in real (inflation-adjusted) dollars. Employment. Direct travel generated employment was 1,027,000 in 2014, a 4.2 percent increase over Travel-generated employment has increased by 4.0 percent per year since Tax Revenues. Travel-generated local tax revenue was $4.2 billion in The 6.9 percent annual increase was driven by lodging sales. State tax revenue increased by 2.1 percent for the year to $5.1 billion. Travel-generated state and local tax revenue represent 4.4 percent of all California state and local tax revenue, equivalent to $710 per resident household. Visitation. Room demand increased by 3.9 percent in Visitor arrivals on domestic flights (32.3 million in 2014) increased by 3.6 percent. Overseas arrivals at Los Angeles and San Francisco ports of entry were 5.4 million. This is a 12.9 percent increase for the year. Overseas arrivals have increased by 9.5 percent per year since Secondary Impacts. The re-spending of travel industry income by businesses and employees produces secondary effects. In 2014, these secondary impacts were 702,000 jobs with earnings of $38.7 billion. Total (direct and secondary) employment was 1.7 million jobs with earnings of $76.8 billion. Gross Domestic Product. The GDP of the California travel industry was $57.6 billion in This represents about two and one-half percent of the total GDP of the state. 1 STR, Inc. DEAN RUNYAN ASSOCIATES

4 County Total Employment TAX REVENUE IMPACTS OF THE CALIFORNIA TRAVEL INDUSTRY The California travel industry contributes more tax revenue to state and local governments than would be expected based on the size of the industry. Whereas the gross domestic product and employee earnings represent about two and one-half percent of the state economy, the travel industry generated 4.4 percent of tax revenue in the 2014 fiscal year. Not only are most travel industry goods and services taxed at the point of sale, but a large share of these commodities (lodging and motor fuel) are taxed at rates that are greater than the general sales tax. Furthermore, a large share of these taxes is not borne by California residents. Production & Import Taxes as a Percent of Gross Domestic Product 2 Information Construction Health Care Manufacturing Retail trade Travel All Industries 0% 5% 10% 15% 20% 25% Percent of Gross Domestic Product THE TRAVEL INDUSTRY BENEFITS ALL REGIONS OF CALIFORNIA Although most travel spending and related economic impacts occur within California s primary metropolitan areas, the travel industry is important throughout California. In general, the counties with less total employment have a bigger share of travel-generated employment. Travel-Generated Employment as a Percent of Total Employment 18 Smallest 31 to to to Largest 0% 5% 10% 15% Travel-Generated Employment 2 Note: Most of the taxes paid by the business firms to local, state and federal governments are included except income taxes. This includes property taxes, licenses and fees and the sales and excise taxes collected from consumers. See page 15 of full report. DEAN RUNYAN ASSOCIATES

5 TABLE OF CONTENTS List of Tables and Figures ii Preface iii I State Travel Impacts 1 Impacts of Travel in California: A Summary 1 Recent Travel Trends in California 2 Gross Domestic Product of California Travel Industry 4 Direct, Secondary and Total Impacts 5 II U.S. Travel 11 III State and Local Government Revenue 15 Industry Gross Domestic Product and Taxes 15 California Tax Structure 16 Travel Industry Tax Revenue 17 Summary 18 IV Regional Travel Impacts 23 V County Travel Impacts 39 VI Transient Occupancy Tax Receipts 107 Appendices 127 A 2014 Travel Impact Estimates 129 B Key Terms and Definitions 133 C Regional Travel Impact Model 134 D Travel Industry Accounts 135 E California Earnings & Employment by Industry Sector 146 F Industry Groups 147 DEAN RUNYAN ASSOCIATES PAGE I

6 LIST OF TABLES AND FIGURES State Travel Impacts California Direct Travel Impacts, p (summary) 2 California Travel Spending in Current and Real Dollars 3 Domestic Air Passenger Visitor Arrivals at California Airports 3 Overseas Arrivals at Los Angeles and San Francisco Ports of Entry 3 Travel Spending and GDP of California Travel Industry, 2014p 4 Total Employment and Earnings, 2014p 5 Direct and Secondary Employment, 2014p 7-8 Travel Impacts, p (detail) 9-10 U.S. Travel Annual Direct Travel Spending in U.S., p 12 Spending by Foreign and Resident Travelers in U.S. 12 Foreign Share of U.S. Internal Travel 13 Overseas Arrivals 13 Relative Value of Selected Foreign Currencies compared to U.S. Dollar 13 U.S. Travel Industry Employment 14 Components of US Travel Industry Employment 14 State and Local Government Revenue Production and Import Taxes as a Percent of Gross Domestic Product 15 California State and Local Government Tax Revenues 16 California Travel Industry State and Local Government Tax Revenues 17 California State and Local Tax Revenues 18 Local and State Travel-Generated Tax Revenue per Household by County Total and Visitor-Generated Taxable Sales by County Regional Travel Impacts Summary Tables Detailed Tables County Travel Impacts Summary Tables Total and Travel-Generated Employment and Earnings Detailed Tables Transient Occupancy Tax Receipts California TOT Receipts, Fiscal Years 107 TOT Receipts by County, Fiscal Years TOT Receipts by Jurisdiction, Fiscal Years PAGE II DEAN RUNYAN ASSOCIATES

7 PREFACE The purpose of this study is to document the economic significance of the travel industry in California from 1992 through These findings show the level of travel spending by those traveling to and through the state, and the impact this spending has on the economy in terms of earnings, employment and tax revenue. This study was prepared for Visit California. Special thanks are due to Dan Mishell, Research Director, Research, for his support and assistance. Dean Runyan Associates, Inc. 833 SW 11th Ave., Suite 920 Portland, OR (503) DEAN RUNYAN ASSOCIATES PAGE III

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9 I. STATE TRAVEL IMPACTS The multi-billion dollar travel industry in California is a vital part of the state and local economies. The industry is represented primarily by retail and service firms, including lodging establishments, restaurants, retail stores, gasoline service stations, and other types of businesses that sell their products and services to travelers. The money that visitors spend on various goods and services while in California produces business receipts at these firms, which in turn employ California residents and pay their wages and salaries. State and local government units benefit from travel as well. The state government collects taxes on the gross receipts of businesses operating in the state, as well as sales and use taxes levied on the sale of goods and services to travelers. Local governments also collect sales and use taxes generated from traveler purchases. IMPACTS OF TRAVEL IN CALIFORNIA: A SUMMARY Total direct travel spending in California was $117.5 billion in 2014(preliminary). This represents a 3.6 percent increase over 2013 in current dollars and a 2.7 percent increase in real (inflation-adjusted) dollars. Direct travel generated employment was 1,027,000 in 2014, a 4.2 percent increase over Travel-generated employment has increased by 4.0 percent per year since Travel-generated local tax revenue was $4.2 billion in The 6.9 percent annual increase was driven by lodging sales. State tax revenue increased by 2.1 percent for the year to $5.1 billion. Visitor arrivals on domestic flights (32.3 million in 2014) increased by 3.6 percent. Overseas arrivals at Los Angeles and San Francisco ports of entry were 5.4 million. This is a 12.9 percent increase for the year. Overseas arrivals have increased by 9.5 percent per year since The Gross Domestic Product (GDP) of the California travel industry was $57.6 billion in This represents about two and one-half percent of the total GDP of the state. The re-spending of travel industry income by businesses and employees produces secondary effects. In 2014, these secondary impacts were 702,000 jobs with earnings of $38.7 billion. Total (direct and secondary) employment was 1.7 million jobs with earnings of $76.8 billion. DEAN RUNYAN ASSOCIATES PAGE 1

10 RECENT TRAVEL TRENDS IN CALIFORNIA Spending, employment and tax revenue all increased again for the fourth consecutive year. Travel-generated employment has increased by 4.0 percent per year since This is the most sustained period of employment growth in the travel industry over the past two decades, although much of this growth reflects recovery from the recession. Local tax revenue increased by 6.9 percent, largely due increased transient occupancy tax receipts. California Direct Travel Impacts, p Spending Earnings Employment Tax Receipts ($Billion) ($Billion) ($Billion) (Thousand) Local State Federal Total p , Annual Percentage Change 13-14p p Estimates for 2014 are preliminary. Earnings include payroll, other earned income and proprietor income. Employment includes payroll employees and proprietors. *Annual Change for p is the average annual percentage change. Detailed direct travel impacts for 2002 through 2014p are shown on pages 9 and 10. PAGE 2 DEAN RUNYAN ASSOCIATES

11 Millions Millions Billions $130 $120 $110 $100 $90 California Travel Spending in Current & Real Dollars Real Current Inflation-adjusted (real dollar) travel spending increased by 2.7 percent from 2013 to 2014(preliminary), following a 2.2 percent increase the preceding year (see top graph, left). $80 $70 $ p Domestic Air Passenger Visitor Arrivals at California Airports Sources: Real dollar travel spending was adjusted with a composite of price indices for the West Urban CPI, California room rates reported by Smith Travel, California gasoline prices reported by the Energy Information Administration, and airfares to California airports reported by the U.S. Department of Transportation Origin and Destination survey p Overseas Arrivals at Los Angeles and San Francisco Ports of Entry Visitor air travel on domestic flights to California destinations (32.3 million) increased by 3.6 percent in Sources: Dean Runyan Associates, Inc. and Bureau of Transportation Statistics (U.S. Dept. of Transportation). Note: These estimates are for visitor arrivals only. They do not include return travel of California residents or connecting flights normally reported in air passenger statistics. Overseas arrivals at Los Angeles and San Francisco (5.4 million) increased by 12.9 percent in The annual rate of increase since 2010 has been 9.5 percent. Source: Office of Travel and Tourism Industries, U.S. Department of Commerce. DEAN RUNYAN ASSOCIATES PAGE 3

12 Billions GROSS DOMESTIC PRODUCT OF CALIFORNIA TRAVEL INDUSTRY Gross Domestic Product (GDP, also referred to as value-added) is a measure of economic activity that reflects the market value of the labor and capital used to produce goods and services. The GDP for a particular industry within a state excludes the intermediate inputs purchased by businesses from other firms in the production process. It includes payments to individuals in the form of earnings, indirect business taxes to government, and other payments to individuals and corporations. 1 The relationship between travel spending and the GDP of the California travel industry is shown below. 2 California travel industry GDP of $57.6 billion represents approximately two and one-half percent of total California GDP. Travel Spending and Gross Domestic Product of California Travel Industry, 2014p ($ Billions) $140 $120 $100 $80 $59.9 $59.9 Intermed. Inputs $19.4 Other Value-Added $38.1 Earnings $60 $40 $20 $0 $19.4 $19.4 $38.1 $38.1 Spending ($117.5) GDP ($57.6) The above estimates represent only the direct impacts of travel spending. A portion of the inputs purchased by travel businesses in California will be delivered by other California firms that are not strictly part of the travel industry. Restaurants, for example, will purchase agricultural products from other California businesses. These inputs are sometimes referred to as indirect effects. 1 Indirect business taxes are primarily excise taxes, often paid by consumers as a sales tax. Income taxes are not included. Other payments include retained earnings, dividends, interest and rent payments. 2 The travel industry is actually a combination of parts of other industries including lodging, food services, recreation businesses, retail businesses and transportation. PAGE 4 DEAN RUNYAN ASSOCIATES

13 DIRECT, SECONDARY AND TOTAL IMPACTS Travel spending in California brings money into many communities in the form of business receipts. Portions of these receipts are spent within the state for labor and supplies. Employees, in turn, spend a portion of their earnings on goods and services in the state. This re-spending of travel-related revenues creates indirect and induced impacts. To summarize: Direct impacts represent the employment and earnings attributable to travel expenditures made directly by travelers at businesses throughout the state. Indirect impacts represent the employment and earnings associated with industries that supply goods and services to the direct businesses (i.e., those that receive money directly from travelers throughout the state). Induced impacts represent the employment and earnings that result from purchases for food, housing, transportation, recreation, and other goods and services made by travel industry employees, and the employees of the indirectly affected industries. Total Employment and Earnings Generated by Travel Spending in California, 2014p Employment Earnings Indirect 235 Induced 467 Direct 1,027 Induced $24.7 Indirect $14.0 Direct $38.1 Note: Indirect and induced impacts estimated by Dean Runyan Associates with an IMPLAN model (IMPLAN Group, LLC.). Total employment was 1,729,000. The employment multiplier for 2014 is 1.68 (1,729/1027). Total earnings were $11.1 billion. The earnings multiplier is 2.01 (($76.8/$38.1). DEAN RUNYAN ASSOCIATES PAGE 5

14 The impacts in this section are presented in terms of the employment and earnings of eleven major industry groups. These industry groups are similar, but not identical to the business service (or commodity) categories presented elsewhere in this report. (The specific industries that comprise these major groups are listed in Appendix D.) Direct travel impacts, such as those discussed in the first part of this section and the regional and county impacts presented elsewhere in this report are found in the following industry groups: Accommodations & Food Services Arts, Entertainment and Recreation Trade Transportation As is indicated in the following tables and graphs, the total direct employment and earnings of these four industry groups is identical to the total direct employment and earnings shown in the first part of this section. The only difference is that these industry groups represent industry groupings (firms) rather than commodity or business service groupings. The indirect and induced impacts of travel spending are found in all thirteen industry groupings shown in the following tables and graphs. To summarize the primary secondary impacts: Professional and Business Services (136,000 jobs and $8.6 billion earnings). A variety of administrative services (e.g., accounting and advertising) are utilized by travel businesses (indirect effect). Employees of these firms also purchase professional services (induced effect). Education and Health Services (100,000 jobs and $5.9 billion earnings). The secondary effects are primarily induced, such as employees of travel-related businesses use of medical services Financial Activities (81,900 jobs and $4.5 billion earnings). Both businesses and individuals make use of banking and insurance institutions. Other Services (50,400 jobs and $2.2 billion earnings). Employees of travel-related businesses purchase services from various providers, such as dry cleaners and repair shops. It should be emphasized that the estimates of indirect and induced impacts reported here apply to the entire state of California and do not necessarily reflect economic patterns for individual counties, regions or sub-regions within the state. While total economic impacts can be calculated on a county or regional level, such a detailed analysis is not included in this study. In general, geographic areas with lower levels of aggregate economic activity will have smaller secondary impacts within those same geographic boundaries. PAGE 6 DEAN RUNYAN ASSOCIATES

15 Direct and Secondary Employment Generated by Travel Spending in California, 2014p Accomm. & Food Serv. Arts, Ent., & Rec. Trade Prof. & Bus. Services Transport Educ. & Health Services Financial Activities Other Services Manuf. & Utilities Information Public Administration Construction Nat. Resources Direct Secondary Direct and Secondary Employment (000) Direct and Secondary Earnings Generated by Travel Spending in California, 2014p Accomm. & Food Serv. Arts, Ent., & Rec. Trade Prof. & Bus. Services Transport Educ. & Health Services Financial Activities Other Services Manuf. & Utilities Information Public Administration Construction Nat. Resources Direct Secondary Direct and Secondary Earnings ($Billion) See notes at end of table on page 20. The data represented by these graphs are shown in the following tables. DEAN RUNYAN ASSOCIATES PAGE 7

16 Direct and Secondary Travel-Generated Employment in California, 2014p (thousand jobs) Secondary Grand Industry Group Direct Indirect Induced Total Total Accommodation & Food Services Arts, Entertainment & Recreation Retail Trade Professional & Business Services Transportation Education & Health Services Financial Activities Other Services Manufacturing & Utilities Construction Information Public Administration Natural Resources & Mining All Industries 1, ,728.6 Direct and Secondary Travel-Generated Earnings in California, 2014p ($Million) Secondary Grand Industry Group Direct Indirect Induced Total Total Accommodation & Food Services 19, ,520 2,090 21,100 Arts, Entertainment & Recreation 9,150 1, ,610 10,770 Professional & Business Services 1,680 5,020 3,550 8,570 10,250 Retail Trade 2, ,220 4,830 7,710 Transportation 5, ,760 7,180 Education & Health Services 60 5,820 5,880 5,880 Financial Activities 1,560 2,900 4,450 4,450 Manufacturing & Utilities 1,050 1,260 2,300 2,300 Information 1, ,260 2,260 Other Services 570 1,610 2,190 2,190 Construction ,200 1,200 Public Administration ,090 1,090 Natural Resources & Mining All Industries 38,130 13,970 24,700 38,670 76,800 Source: Dean Runyan Associates and Minnesota Implan Group. Note: These industry groups are not equivalent to the categories used in the direct impact tables used in this report. See Appendix D. Details may not add to totals due to rounding. Detailed direct travel impacts for 2002 through 2014p follow. PAGE 8 DEAN RUNYAN ASSOCIATES

17 Total Direct Travel Spending ($Billion) Destination Spending Other Travel* Total Direct Spending Visitor Spending by Type of Traveler Accommodation ($Billion) Hotel, Motel Private Home Campground Vacation Home Day Travel Destination Spending Visitor Spending by Commodity Purchased ($Billion) Accommodations Food Service Food Stores Local Tran. & Gas Arts, Ent. & Rec Retail Sales Visitor Air Tran Destination Spending Industry Earnings Generated by Travel Spending ($Billion) Accom. & Food Serv Arts, Ent. & Rec Retail** Ground Tran Visitor Air Tran Other Travel* Total Direct Earnings Industry Employment Generated by Travel Spending (Thousand Jobs) Accom. & Food Serv Arts, Ent. & Rec Retail** Ground Tran Visitor Air Tran Other Travel* Total Direct Employment Government Revenue Generated by Travel Spending ($Billion) Local Tax Receipts State Tax Receipts Federal Tax Receipts Details may not add to totals due to rounding. California Travel Impacts, *Other Travel includes resident air travel, travel arrangement & reservation services, and convention & trade show organizers. **Retail includes gasoline. DEAN RUNYAN ASSOCIATES PAGE 9

18 p Total Direct Travel Spending ($Billion) Destination Spending Other Travel* Total Direct Spending Visitor Spending by Type of Traveler Accommodation ($Billion) Hotel, Motel Private Home Campground Vacation Home Day Travel Destination Spending Visitor Spending by Commodity Purchased ($Billion) Accommodations Food Service Food Stores Local Tran. & Gas Arts, Ent. & Rec Retail Sales Visitor Air Tran Destination Spending Industry Earnings Generated by Travel Spending ($Billion) Accom. & Food Serv Arts, Ent. & Rec Retail** Ground Tran Visitor Air Tran Other Travel* Total Direct Earnings Industry Employment Generated by Travel Spending (Thousand Jobs) Accom. & Food Serv Arts, Ent. & Rec Retail** Ground Tran Visitor Air Tran Other Travel* Total Direct Employment ,027 Government Revenue Generated by Travel Spending ($Billion) Local Tax Receipts State Tax Receipts Federal Tax Receipts Details may not add to totals due to rounding. California Travel Impacts, p *Other Travel includes resident air travel, travel arrangement & reservation services, and convention & trade show organizers. **Retail includes gasoline. PAGE 10 DEAN RUNYAN ASSOCIATES

19 II. U.S. TRAVEL DEAN RUNYAN ASSOCIATES PAGE 11

20 Output (Year 2000 = 100) Output (Billions) The national level data in this section focuses on visitor spending trends in current and real dollars, resident and foreign visitor spending in the U.S., and trends in travel-generated employment. The following two graphs are derived from the Bureau of Economic Analysis Travel and Tourism Satellite Accounts. 1 Both graphs show direct tourism output for the United States spending by resident and foreign visitors. Annual Direct Travel Spending in U.S., p $1,000 $900 Real $800 $700 Current $600 $500 $ p Spending by resident and foreign visitors was $894 billion in 2014 in current dollars. This represents a 4.5 percent increase over When adjusted for changes in prices (real dollars), spending increased by 2.5 percent compared to a 3.6 percent increase from 2012 to Spending by Foreign* and Resident Travelers in U.S (Current Dollars; Year 2000=100) Foreign Resident p *Note: Foreign visitor spending does not include expenditures on health and educational services or expenditures by short term seasonal workers. The bottom chart compares the change in current dollar spending by resident and foreign visitors since In 2014, the increase in spending by resident visitors (5.1 percent) exceeded the increase in foreign visitor spending (1.0 percent). This is the first time that resident spending growth was greater than foreign since the recesssion. 1 See PAGE 12 DEAN RUNYAN ASSOCIATES

21 The top left chart shows that the foreign share of U.S. internal travel declined in 2014 because of the lower rate of growth of foreign visitor spending (shown in preceding chart). 2 However, as the graph on the right indicates, overseas arrivals to the U.S. (34.4 million in 2014) continued to increase 7.4 percent in 2014, following a 7.6 percent increase in Rather, much of the explanation for the declining foreign share of internal travel in the U.S. is due to the increasing value of U.S. currency (see bottom left chart). As the value of foreign currencies fall relative to the U.S. dollar, foreign visitors have less money to spend on U.S. goods and services. Foreign Share of U.S. Internal Travel Overseas Arrivals (Millions) 18% 16% 14% 12% Other Latin America Europe Asia 10% 10 8% p Relative Value of Selected Foreign Currencies compared to U.S. Dollar Monthly Averages, 2014 Sources: China Canada Euro Foreign Share of U.S Internal Travel: Bureau of Economic Analysis Travel & Tourism Satellite Accounts and International Transactions. Overseas Arrivals: Office of Travel and Tourism Industries, U.S. Department of Commerce. Relative Value of Selected Foreign Currencies: USForex, Inc. ( 85 JAN JUN DEC Japan 2 Internal travel does not include spending on international airfares to U.S carriers. DEAN RUNYAN ASSOCIATES PAGE 13

22 Employment (Millions) Employment (Millions) The following two graphs show employment trends since The first graph shows that travel-generated employment has increased at a steady rate since 2010, although it is still below the level attained prior to the recession. The second graph shows the employment trends of different types of businesses within the travel industry. The only industry that has exhibited substantial growth has been food services. U.S. Travel Industry Employment p Source: Bureau of Economic Analysis Travel & Tourism Satellite Accounts. Components of U.S. Travel Industry Employment All other industries Transportation Rec., Entertain., Shopping Food Services Accommodations p PAGE 14 DEAN RUNYAN ASSOCIATES

23 III. STATE AND LOCAL GOVERNMENT REVENUE This section is concerned with the contribution of the California travel industry to state and local government finance. The first part of the report compares the travel industry to various other sectors of the state economy. The remainder provides an overview of state and local finance and the revenue contribution of the travel industry. INDUSTRY GROSS DOMESTIC PRODUCT AND TAXES One way to consider the tax contributions of various sectors of the economy is to express the tax payments of businesses to government as a percentage of Gross Domestic Product. The bar chart and accompanying table show these tax payments (taxes on production and imports or TOPI) for major sectors of the California economy, including travel. TOPI include most of the taxes paid by the business firm to local, state and federal governments except for income taxes. This includes property taxes, licenses and fees and the sales and excise taxes collected from consumers. It is because of these later taxes that retail trade and travel have relatively high proportions of tax payments in relation to their gross domestic products. Production & Import Taxes as a Percent of Gross Domestic Product Selected California Industry Sectors, 2013 Calendar Year Information Construction Health Care Manufacturing Retail trade Travel Sources: Bureau of Economic Analysis and Dean Runyan Associates. *TOPI denotes taxes on production and imports, less subsidies. All Industries 0% 5% 10% 15% 20% 25% Percent of Gross Domestic Product GDP *TOPI Percent Information % Construction % Health care and social assist % Manufacturing % Retail trade % Travel % All Industries 2, % DEAN RUNYAN ASSOCIATES PAGE 15

24 The remainder of this report will focus on the travel industry and the specific tax contributions made to state and local government in California. In addition to the taxes on production discussed in the previous section, the tax payments of travel industry employees derived from the income earned from travel industry businesses will be included. 1 The three primary sources of tax revenue generated by the travel industry are: Sales tax receipts generated by visitor spending. This includes local and state sales taxes, lodging taxes, alcoholic beverage taxes, motor vehicle rental taxes and motor fuel taxes. Taxes paid by travel industry businesses attributable to travel generated business receipts (property and income taxes). Taxes paid by travel industry employees attributable to travel generated earnings (sales and property taxes). CALIFORNIA TAX STRUCTURE The pie chart below, adapted from the Bureau of the Census State and Local Government Finance and other data sources, shows the main categories of tax revenue in California. More than one-third of tax revenue is derived from the state income tax. Slightly less than one-third of all state and local tax revenue in the state is derived from sales or gross receipts taxes. About three-fourths of these sales and gross receipt taxes are collected by the state. Property taxes, paid primarily by homeowners and businesses to local governments, constitute one-fourth of all tax revenue. 2 California State and Local Government Tax Revenues Fiscal Year (Billions) Sales & Gross Receipts $ % Property $ % Income $ % License & Other $14.1 7% Sources: The fiscal year estimates of state and local tax revenues in California were prepared by Dean Runyan Associates from various sources, including the Bureau of the Census (State and Local Government Finance), the California State Board of Equalization, the California State Controller, the Bureau of Economic Analysis and a selection of annual financial reports for cities and counties. Sales and gross receipts taxes include the general sales tax and a variety of selective taxes, such as those on motor fuel and lodging. State tax receipts comprise more than 60 percent of all state and local tax receipts. 1 In effect, this means re-allocating some of the sales and excise payments made by other industries to the travel industry because the payments are ultimately made by consumers that earned their income in the travel industry. 2 Businesses pay 56 percent of all property taxes in California according the the Tax Foundation (Fiscal Fact No. 342, November 21, 2012). PAGE 16 DEAN RUNYAN ASSOCIATES

25 TRAVEL INDUSTRY TAX REVENUE The distribution of taxes generated by the travel industry for the fiscal year is shown in the following pie chart. The categories are the same as the preceding figure, with the exception that sales tax receipts are also distinguished between those that are generated by visitor spending and those that are generated by the spending of travel industry employees. California Travel Industry State and Local Government Tax Revenues Fiscal Year (Million) Property $1,040 11% Other $140 2% Income $330 4% Employee Sales $1,130 12% Visitor Sales $6,570 71% Source: Dean Runyan Associates. Other travel-generated tax revenue includes the franchise tax and passenger facility charges for visitors who travel to California airports. Whereas slightly less than one-third of all state and local tax revenue in California was attributable to sales tax collections in the fiscal year, 83 percent of all travel industry tax revenue was attributable to sales tax receipts from visitors (71 percent) and the purchases of employees in the travel industry (12 percent). Travel industry state and local tax revenues are compared to total California state and local tax revenues in the following table. Because the travel industry generates a relatively high proportion of sales tax revenues, it is associated with proportionately more tax revenues than would be expected given the size of the industry, as measured by earnings or gross domestic product. Whereas the earnings and GDP of the travel industry are in the range of two and one-half percent of the state totals, travel industry tax revenues represent 4.4 percent of all state and local tax revenues in California. This is consistent with the initial analysis that compared different industries within the state. DEAN RUNYAN ASSOCIATES PAGE 17

26 California State and Local Tax Revenues Fiscal Year ($Million) Travel Percent Total Generated Travel Sales & Gross Receipts $64,280 $7, % Property $53,500 $1, % License & Other $14,080 $ % Income $76,630 $ % Total $208,480 $9, % Source: Dean Runyan Associates and Bureau of the Census, State and Local Government Finance. SUMMARY This analysis of the tax revenue generated by the California travel industry can be summarized as follows: The California travel industry contributes more tax revenue to state and local governments than would be expected based on the size of the industry. Whereas the gross domestic product and employee earnings represent about two and onehalf percent of the state economy, the travel industry generated 4.4 percent of tax revenue in the 2014 fiscal year. Over eighty percent of all travel-generated tax revenue is attributable to sales and gross receipts taxes. The travel industry share of the state total is 12 percent. Not only are most travel industry goods and services taxed, but a large share of these commodities (lodging and motor fuel) are taxed at rates that are greater than the general sales tax. A large share of these tax revenues are borne by visitors who reside in other states and countries. The revenue contributions of California s fifty-eight counties are detailed in the following two tables. PAGE 18 DEAN RUNYAN ASSOCIATES

27 Local and State Travel-Generated Tax Revenue per Household 2013 Calendar Year Tax Revenue (Millions) Households Tax Revenue Local State Total (thousands) per Household Alameda $127.7 $156.9 $ $500 Alpine $0.8 $0.9 $ $3,600 Amador $3.3 $5.8 $ $650 Butte $6.7 $17.0 $ $270 Calaveras $3.7 $7.2 $ $590 Colusa $0.9 $2.3 $ $450 Contra Costa $40.1 $85.3 $ $320 Del Norte $3.4 $5.5 $ $920 El Dorado $22.9 $29.5 $ $740 Fresno $34.4 $72.3 $ $360 Glenn $1.7 $3.0 $ $480 Humboldt $11.8 $18.3 $ $540 Imperial $9.1 $18.1 $ $550 Inyo $8.7 $8.2 $ $2,110 Kern $28.1 $75.1 $ $390 Kings $2.5 $9.4 $ $290 Lake $3.0 $7.5 $ $400 Lassen $1.5 $3.4 $ $520 Los Angeles $957.9 $1,048.8 $2, ,304.2 $610 Madera $8.1 $13.8 $ $500 Marin $32.1 $33.1 $ $620 Mariposa $18.4 $13.0 $ $4,200 Mendocino $14.0 $17.4 $ $910 Merced $4.1 $14.2 $ $240 Modoc $0.6 $1.3 $ $500 Mono $29.3 $16.9 $ $8,120 Monterey $98.1 $119.9 $ $1,680 Napa $58.4 $48.7 $ $2,140 Nevada $8.7 $15.0 $ $570 Sources: U.S. Bureau of the Census and Dean Runyan Associates. Households calculated from 2013 population and 2010 household size. DEAN RUNYAN ASSOCIATES PAGE 19

28 Local and State Travel-Generated Tax Revenue per Household 2013 Calendar Year Tax Revenue (Millions) Households Tax Revenue Local State Total (thousands) per Household Orange $387.9 $450.3 $ ,024.5 $820 Placer $26.6 $46.1 $ $520 Plumas $2.6 $4.9 $ $880 Riverside $192.4 $334.8 $ $740 Sacramento $88.4 $148.4 $ $450 San Benito $1.8 $5.0 $ $390 San Bernardino $100.6 $219.5 $ $510 San Diego $474.1 $600.5 $1, ,124.4 $960 San Francisco $621.0 $416.8 $1, $2,890 San Joaquin $15.7 $44.2 $ $270 San Luis Obispo $55.8 $69.0 $ $1,200 San Mateo $195.8 $176.8 $ $1,390 Santa Barbara $76.3 $88.6 $ $1,130 Santa Clara $161.5 $198.0 $ $570 Santa Cruz $26.2 $37.9 $ $660 Shasta $11.2 $20.8 $ $450 Sierra $0.6 $0.7 $ $880 Siskiyou $5.5 $8.8 $ $750 Solano $16.3 $35.4 $ $360 Sonoma $65.3 $78.7 $ $760 Stanislaus $9.1 $31.3 $ $240 Sutter $1.4 $5.3 $ $210 Tehama $2.9 $6.7 $ $410 Trinity $0.9 $2.1 $ $510 Tulare $11.9 $25.0 $ $280 Tuolumne $5.8 $9.2 $ $690 Ventura $41.5 $84.0 $ $460 Yolo $7.5 $16.7 $ $340 Yuba $1.5 $5.1 $ $270 California $4,148.2 $5,038.2 $9, ,914.5 $710 Sources: U.S. Bureau of the Census and Dean Runyan Associates. Households calculated from 2013 population and 2010 household size. PAGE 20 DEAN RUNYAN ASSOCIATES

29 Total and Visitor-Generated Taxable Sales 2013 Calendar Year (amounts in $Millions) Taxable Sales Total Visitor Percent Alameda 26,625 1, % Alpine % Amador % Butte 2, % Calaveras % Colusa % Contra Costa 14, % Del Norte % El Dorado 1, % Fresno 12, % Glenn % Humboldt 1, % Imperial 3, % Inyo % Kern 15, % Kings 1, % Lake % Lassen % Los Angeles 140,080 8, % Madera 1, % Marin 4, % Mariposa % Mendocino 1, % Merced 2, % Modoc % Mono % Monterey 5,911 1, % Napa 2, % Nevada 1, % Sources: California State Board of Equalization and Dean Runyan Associates. DEAN RUNYAN ASSOCIATES PAGE 21

30 Total and Visitor-Generated Taxable Sales 2013 Calendar Year (amounts in $Millions) Taxable Sales Total Visitor Percent Orange 57,591 3, % Placer 7, % Plumas % Riverside 30,065 3, % Sacramento 20,097 1, % San Benito % San Bernardino 31,178 1, % San Diego 50,297 5, % San Francisco 17,094 4, % San Joaquin 9, % San Luis Obispo 5, % San Mateo 14,612 1, % Santa Barbara 6, % Santa Clara 37,622 1, % Santa Cruz 3, % Shasta 2, % Sierra % Siskiyou % Solano 6, % Sonoma 8, % Stanislaus 7, % Sutter 1, % Tehama % Trinity % Tulare 5, % Tuolumne % Ventura 12, % Yolo 3, % Yuba % California 586,477 42, % Sources: California State Board of Equalization and Dean Runyan Associates. PAGE 22 DEAN RUNYAN ASSOCIATES

31 IV. REGIONAL TRAVEL IMPACTS SHASTA CASCADE NORTH COAST GOLD COUNTRY SAN FRANCISCO BAY AREA HIGH SIERRA CENTRAL VALLEY CENTRAL COAST THE DESERTS LOS ANGELES COUNTY ORANGE COUNTY INLAND EMPIRE SAN DIEGO COUNTY DEAN RUNYAN ASSOCIATES PAGE 23

32 2014 Region Direct Travel Impacts Spending ($Million) Earnings Employment Tax Revenue ($Million) Region Total Destination ($Million) (Thousand Jobs) Local State Total North Coast 2,762 2, Shasta Cascade San Francisco Bay Area 29,987 26,056 10, ,330 1,180 2,510 Central Valley 6,488 5,928 1, Gold Country 4,288 3,644 1, High Sierra 2,613 2, Central Coast 7,777 7,429 2, Los Angeles County 25,034 20,736 9, ,075 2,062 Orange County 10,829 9,645 3, San Diego County 14,654 13,485 4, ,097 The Deserts 6,323 5,969 1, Inland Empire 5,785 5,387 1, California 117, ,412 38,132 1,027 4,239 5,146 9,385 PAGE 24 DEAN RUNYAN ASSOCIATES

33 1992 through 2012 Annual Change Region North Coast 1,302 1,369 1,507 1,643 1,844 1,876 1,973 2,253 2,392 2,367 2,602 2,708 2, % 3.5% Shasta Cascade % 2.6% San Francisco Bay Area 12,403 13,084 15,172 17,320 20,688 17,385 18,788 21,755 23,162 24,474 27,285 28,651 29, % 4.1% Central Valley 3,113 3,288 3,485 3,734 4,322 4,423 4,934 5,678 6,049 5,891 6,433 6,426 6, % 3.4% Gold Country 2,029 2,077 2,246 2,450 3,033 3,127 3,381 3,868 3,956 3,790 4,117 4,194 4, % 3.5% High Sierra 1,274 1,373 1,405 1,555 1,755 1,900 2,090 2,236 2,269 2,319 2,512 2,555 2, % 3.3% Central Coast 3,634 3,742 4,218 4,665 5,430 5,396 5,760 6,518 6,709 6,536 7,284 7,494 7, % 3.5% Los Angeles County 12,006 11,976 13,160 14,309 17,622 16,883 19,117 21,369 22,471 21,416 23,655 24,165 25, % 3.4% Orange County 5,040 5,229 5,838 6,416 7,648 7,523 8,393 9,527 9,695 9,306 10,100 10,402 10, % 3.5% San Diego County 6,021 5,803 6,827 8,076 9,830 9,451 10,653 12,013 12,768 12,525 13,703 13,996 14, % 4.1% The Deserts 2,767 2,883 3,126 3,446 3,922 4,195 4,679 5,406 5,741 5,582 6,230 6,215 6, % 3.8% Inland Empire 2,505 2,628 2,809 3,052 3,558 3,989 4,475 5,101 5,397 5,311 5,692 5,675 5, % 3.9% California* % 3.7% *($Billions) Region Direct Travel Total Spending, ($Million) DEAN RUNYAN ASSOCIATES PAGE 25

34 Region Direct Travel-Generated Employment, (thousands) 1992 through 2012 Annual Change Region North Coast % 1.0% Shasta Cascade % 0.3% San Francisco Bay Area % 1.5% Central Valley % 1.1% Gold Country % 1.5% High Sierra % 0.9% Central Coast % 1.3% Los Angeles County % 0.8% Orange County % 1.3% San Diego County % 2.1% The Deserts % 1.7% Inland Empire % 1.8% California , % 1.4% PAGE 26 DEAN RUNYAN ASSOCIATES

35 North Coast Travel Impacts, p p Total Direct Travel Spending ($Million) Destination Spending 2,145 2,276 2,258 2,391 2,485 2,592 2,651 Other Travel* Total Direct Spending 2,253 2,392 2,367 2,510 2,602 2,708 2,762 Visitor Spending by Type of Traveler Accommodation ($Million) Hotel, Motel 922 1, ,062 1,131 1,216 1,271 Private Home Campground Vacation Home Day Travel Destination Spending 2,145 2,276 2,258 2,391 2,485 2,592 2,651 Visitor Spending by Commodity Purchased ($Million) Accommodations Food Service Food Stores Local Tran. & Gas Arts, Ent. & Rec Retail Sales Visitor Air Tran Destination Spending 2,145 2,276 2,258 2,391 2,485 2,592 2,651 Industry Earnings Generated by Travel Spending ($Million) Accom. & Food Serv Arts, Ent. & Rec Retail** Ground Tran Visitor Air Tran Other Travel* Total Direct Earnings Industry Employment Generated by Travel Spending (Thousand Jobs) Accom. & Food Serv Arts, Ent. & Rec Retail** Ground Tran Visitor Air Tran Other Travel* Total Direct Employment Government Revenue Generated by Travel Spending ($Million) Local Tax Receipts State Tax Receipts Total Local & State Details may not add to totals due to rounding. *Other Travel includes resident air travel and ground transportation impacts for travel to other California destinations, travel arrangement & reservation services, and convention & trade show organizers. **Retail includes gasoline. DEAN RUNYAN ASSOCIATES PAGE 27

36 Shasta Cascade Travel Impacts, p p Total Direct Travel Spending ($Million) Destination Spending Other Travel* Total Direct Spending Visitor Spending by Type of Traveler Accommodation ($Million) Hotel, Motel Private Home Campground Vacation Home Day Travel Destination Spending Visitor Spending by Commodity Purchased ($Million) Accommodations Food Service Food Stores Local Tran. & Gas Arts, Ent. & Rec Retail Sales Visitor Air Tran Destination Spending Industry Earnings Generated by Travel Spending ($Million) Accom. & Food Serv Arts, Ent. & Rec Retail** Ground Tran Visitor Air Tran Other Travel* Total Direct Earnings Industry Employment Generated by Travel Spending (Jobs) Accom. & Food Serv. 7,430 7,220 6,540 6,510 6,880 7,070 7,310 Arts, Ent. & Rec. 3,690 3,610 2,950 2,900 3,030 2,840 2,870 Retail** 1,300 1,200 1,040 1,020 1,060 1,040 1,070 Ground Tran Visitor Air Tran Other Travel* Total Direct Employment 12,880 12,500 10,950 10,860 11,410 11,390 11,700 Government Revenue Generated by Travel Spending ($Million) Local Tax Receipts State Tax Receipts Total Local & State Details may not add to totals due to rounding. *Other Travel includes resident air travel and ground transportation impacts for travel to other California destinations, travel arrangement & reservation services, and convention & trade show organizers. **Retail includes gasoline. PAGE 28 DEAN RUNYAN ASSOCIATES