Park University - Annual Economic Impact On The Kansas City Metropolitan Area ID: 12333

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Park University

Annual Economic Impact on the Kansas City Metropolitan Area

Park University Economic Impact Statement

Summary of Results

Based on data provided for its 2013-14 fiscal year, Park University annually generates an average of 3,000 jobs, $242 million in real total economic output, $158 million in real Gross Domestic Product (GDP) and $100 million in real after-tax personal income for the Kansas City metropolitan economy, according to figures prepared by the Mid-America Regional Council. These results represent an estimate of the net contribution of Park University to the area economy. Without Park University, MARC estimates the Kansas City regional economy would be smaller by the above amounts.

All dollar values are expressed in constant 2014 dollars. While "output" and "GDP" are often used interchangeably, they have distinct meanings in the context of an economic impact study. The output figure above represents the increase in the total sales of goods and services in the region generated by Park University. However, the sales price of a good or service includes both the value added by local firms plus the cost of all prior inputs. The cost of supplies and raw materials, though, often reflects the value added elsewhere, not valued created by the Kansas City area economy. GDP takes this into account, and is an estimate of the value added by the Kansas City economy only. While GDP is a superior measure of economic contribution, many economic impact studies report their results in terms of output. Hence, we provide both to ease comparisons with other studies.

The above figures are conservative estimates of Park University's importance to the Kansas City area's economy. The methodology used only counts the dollars Park University derives from selling educational services to the rest of the world. The dollars it receives from local students and businesses is not counted since those dollars would remain in the region even if Park did not. The discounting of local dollars is required to produce an estimate of the net, rather than gross, economic impact of the University.

More importantly, however, the figures are conservative because they treat Park University as a business like any other business that buys and sells products or services. But the product of Park University - students with enhanced capabilities - can now themselves produce at a higher level than before their encounter with Park. The impact of graduating cohort after cohort of individuals with higher productivity has a cumulative effect on the region's productive potential. It is the utilization of that increased potential in the service of area businesses, governments and non-profits that produces Park University's greatest impact on the regional economy. Unfortunately, estimating the value of that increased productivity is beyond the scope of this study.


To help communicate its value to the Kansas City community, Park University hired the Mid-America Regional Council to estimate its economic impact. MARC has significant expertise in this area, having estimated the impact of entities and initiatives such as expanding Bartle Hall, retaining the Chiefs and Royals, increasing the region's capacity for life sciences research and the University of Missouri-Kansas City creating an arts campus in Downtown, Kansas City, Missouri.

In essence, the question an economic impact study of Park University attempts to answer is, "How much bigger is the Kansas City economy because of Park University is here?" Equivalently, one can ask the question in reverse: "How much smaller would the Kansas City economy be if Park University were to move or close?"

Among universities whose main campus is in the Kansas City area, Park University is, perhaps, a bit unusual. This is largely due to the type and breadth of its revenue streams. Not only does it provide a residential setting for traditional students, it also offers extensive distance learning opportunities and a corporate seminar and training operation. Additionally, it runs an underground warehouse and a mining operation.

Park's additional operations are important because of an economic impact study's focus on net benefits. If Park University were to move out of the region or close, the revenue it receives from local students would, more than likely, simply shift to some other local higher education option. Because these dollars would still be spent locally, they would continue to contribute to the Kansas City area economy even in Park's absence. Therefore, while a key part of Park's mission and a significant portion of its revenues, the spending of local students unfortunately can't be included when estimating Park's net economic impact.

On the other hand, the revenue Park University attracts from sources outside of the Kansas City area could easily disappear from the regional economy in the university's absence. Park's traditional student body is exceptionally diverse as its campus attracts students from around the country and, indeed, around the world. In essence, Park is exporting educational services, but the students move rather than the product. The export nature of the University's educational services is even more clearly the case with regard to Park's distance learning operations and its training and seminar business, where the services originate here but are provided to people located in other parts of the country. In addition, the warehouse services provided by the University's commercial underground operation attract industrial users who serve national and international markets. Revenue from these activities are dollars that Park University is responsible for bringing to the KC economy, and therefore net additions to the Kansas City metropolitan economy.

How economic impact is estimated

Conceptually, an economic impact study conducts an experiment where the Kansas City economy grows first with Park University, then without it, and the difference is then the impact of Park. Of course, in real life, there is no way to conduct such an experiment. Instead, all economic impact studies must simulate it through the use of a computer model of the local economy. The validity of this kind of simulation, then depends largely on the quality of the economic model employed. The model used in this study is the Policy Insight model from Regional Economic Models, Inc. (REMI), some variation of which MARC has utilized for 25 years.

The REMI model is the current standard for regional economic models, forecasting and policy analysis, used by many states and metropolitan areas for both economic forecasting, budget forecasting and policy analysis. At its core the REMI model utilizes the methodology of input-output models to capture how much an industry purchase from all other industries to produce a dollar's worth of output. As a result, the model is sensitive to the particular industrial structure of a region.

Regional economies are leaky, however. That is, when an industry in the Kansas City area needs a product from another industry, it may not be purchased from another Kansas City area business. Metropolitan areas, by their size and nature, are not economically self-contained. Money flows into and out of them depending on what goods and services they produce and how well they produce them relative to the rest of the world.

When an industry has a demand for another industry's product, the proportion that is bought from local firms is called the regional purchase coefficient (RPC). The quality of a regional economic model depends significantly on the accuracy of the RPC estimates. If they are too large, the model will produce economic impact estimates that are systematically too high, and vice versa. This is because the larger the RPC, the more money has a chance to recirculate within the Kansas City area's economy before leaking out, creating more spinoff jobs and income as it goes. The REMI model's RPC estimates have proven themselves reliable over the years of using it. In part, this is because they are periodically re-estimated based on data from the Census of Transportation, which is released every five years.

Mathematically, the REMI model is a type of computable general equilibrium model. As such, it consists of over 2000 equations that describe the regional economy and that are solved simultaneously each simulated year to ensure that market supply and demand in all industries and in the labor market remain balanced.

MARC has employed the REMI model since 1988 for both long-range (20-year) and short-range (six to eight quarters) forecasting of the Kansas City area economy and has found it to accurately reflect the region's economic performance. It was also the tool used in the economic impact studies listed above.

To estimate the economic impact of Park University, MARC used the REMI model to first forecast how the Kansas City economy could be expected to grow over the 2010 to 2020 time period without any changes to its economic base. This creates a baseline forecast.

Next, MARC simulated subtracting an economic entity with the revenues, employment and types of operations of Park University from the Kansas City economy. The REMI model was again run over the 2014 to 2024 time period. This simulation forecast produces a regional forecast with smaller levels of economic activity. It is smaller by not just the revenues and employment of Park University itself, but also by the spin-off jobs Park creates as dollars circulate and are spent and re-spent throughout the Kansas City economy.

The difference between these two forecasts, then, provides an estimate of the impact of Park University on the regional economy. These differences are averaged over the 2 014-xxxx time period to produce the annual average estimates stated above.

Main Street Parkville Association Officers

Chair: Troy Wilson, Parkville Jewelers

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Vice Chair: Susan Smith

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Treasurer: Ed Bradley, BankLiberty

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Secretary: Art Brown, Colorful Memories Design

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Standing Committee Chairs

Design: Cathy Kline, Cathy Kline Art Gallery

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Economic Restructuring: Mike Emmick, Edward Jones

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Organization: Chris Collins, Capitol Federal®

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Promotion: Tom Hutsler, Old Mille Emporium Banquet Hall

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Special Thanks to Main Street Parkville Premier Sponsor!

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