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The Economic Impact of Charity in Door County

“Charity is more important to Door County than to any other community in Wisconsin.” We’ve been saying that for several years now at the Door County Community Foundation. It’s the fundamental belief that shapes our work and influences our every activity.

The Community Foundation set forth a mission “to inspire people to give back to sustain the community we love” because a gift to charity in Door County is more than just a contribution, it’s also an investment in our economic development.

The logic of the argument is simple enough to follow, but until now, that’s all we’ve had – the logic. Our friends at Door County Living recently challenged us to go beyond the rhetoric and actually measure the economic impact of nonprofit organizations in Door County. So that’s exactly what we did.

The Economic Importance of Nonprofit Organizations

The Door County Community Foundation just completed a comprehensive review of the tax returns filed between 2006 and 2010 by tax-exempt nonprofit organizations based in Door County. We wanted to measure the total revenue (contributions, program fees, ticket sales, etc.) and expenditures (salaries, supplies, utilities, etc.) by our local nonprofit community.

The first thing that struck us is the sheer number of nonprofits in our community. The national average is one tax-exempt organization (regardless of size) for about every 300 Americans. Applying this ratio to Door County’s population of roughly 28,000 residents, our community would be expected to have 93 nonprofit organizations. Our review of tax returns, however, documented a surprising 351 tax-exempt nonprofits based in Door County!

Now there are a couple of things we should acknowledge before going any further. First, the 351 organizations only include those which are based in Door County. Some charities with very large operations in our community are not based here. For example, Scandia Village is just one part of the enormous Evangelical Lutheran Good Samaritan Society of Sioux Falls, South Dakota. Björklunden is owned and operated by Lawrence University in Appleton, Wisconsin, which is also home base for the Boy Scouts Bay-Lakes Council. Green Bay is home for the Girl Scouts of the Northwestern Great Lakes, Unity Hospice and Family Services of Northeast Wisconsin. The economic impact of these and many other small organizations are not included in our analysis here because their activities are reported as a part of the consolidated tax returns of their much larger non-Door County parent organizations.

Second, while the IRS rules have changed in recent years, generally speaking only organizations with revenue of at least $25,000 were required to file IRS Tax Return Form 990 during the years 2006 to 2010. Of the 351 organizations based in Door County, only 129 of them had that level of revenue at least once between 2006 and 2010. This means that the following research results do not encompass anywhere near all of the charity dollars impacting our community.

And third, churches are generally exempt from filing a tax return with the IRS so there is nothing to review. To account for our local churches, we adjusted the total revenue (contributions, program fees, ticket sales, etc.) of Door County organizations by a factor of 0.9% which is consistent with national models.

Even with these acknowledgments in mind, it is remarkable that the 129 organizations that were required to file a tax return had a collective annual revenue of slightly more than $105 million per year.

That is an enormous number when you consider the overall size of Door County’s economy. To give you some perspective of the relative importance of our local nonprofit sector, we looked at the 2007 Economic Census that was provided to us by the Door County UW-Extension Office. If you take the annual revenue for all hotels, resorts, bed and breakfasts, and RV parks, and add to that the revenue of every restaurant, bar and tavern in Door County, you get a combined annual revenue of about $130 million.

But, in contrast with the for-profit sector, federal law requires Door County’s nonprofit organizations to use every penny of their $105 million to further charitable and civic causes. That revenue does things like celebrate our history, purchase and protect our environmentally important lands, feed our less fortunate neighbors, educate our children, care for our sick, protect the abused, and ennoble our community with the arts.

Impact of Spending by Arts Audiences

Out of that $105 million, arts and culture organizations comprise 8.6%. Arts groups are by no means the dominant factor in our economy, but of all the sectors in the charitable world, it is probably the one that has been the most exhaustively studied. Because of that extensive research, a closer look at Door County’s arts and culture organizations can perhaps give us better understanding of our nonprofit sector as a whole.

In 2007, Americans for the Arts published Arts & Economic Prosperity III:  The Economic Impact of Nonprofit Arts and Culture Organizations and Their Audiences. This was their third comprehensive study of the way arts organizations affect the communities in which they operate. The thoroughness of their research makes their conclusions probably the most widely cited in the nonprofit world.

It’s very common for someone who attends an arts or culture event to make an evening of it. That might include going out to dinner before the event and strolling through stores to pick up a souvenir or make another kind of retail purchase immediately after it. If the person attending the event is a visitor to our community, lodging might also be needed.

The impact of the arts is amplified significantly when involving tourists, as it does in Door County. The Americans for the Arts study explains, “When a community attracts cultural tourists, it harnesses even greater economic rewards. Non-local audiences spend twice as much as their local counterparts. Arts and culture is a magnet for tourists, and tourism research repeatedly shows that cultural travelers stay longer and spend more. Whether serving the local community or out-of-town visitors, a vibrant arts and culture industry helps local businesses thrive.”

In addition to the national statistics, Americans for the Arts also took the substantial data set they accumulated and divided it into state specific numbers. In Wisconsin, for instance, they found that the average person attending an arts performance spent an additional $22.51. That’s spending above and beyond the price of admission to the arts and culture event itself. This is how the $22.51 breaks down:

Average Per Person Event-Related Spending by All Arts and Culture Event Attendees in the State of Wisconsin

(EXCLUDING the cost of event admission)

Total Spending Per Person: $22.51

SpendingPerPerson

 

 

 

 

 

(blue) Refreshments/Snacks During Event – $1.74

(red) Meals Before/After Event – $9.47

(yellow) Souvenirs and Gifts – $2.49

(green) Clothing and Accessories – $1.13

(purple) Ground Transportation – $2.30

(orange) Event Related Child Care – $0.29

(maroon) Overnight Lodging (one night only) – $3.82

(gray/green) Other – $1.27

Source:  Arts & Economic Prosperity III:  The Economic Impact of Nonprofit Arts and Culture Organizations and Their Audiences in the State of Wisconsin, 2007

This spending is the hidden benefit of arts and culture organizations because the expenditures often have no direct link to the charities themselves. These are dollars generally spent at the for-profit businesses in close proximity to the nonprofit arts organization. And, of course, every one of these for-profit transactions also generate sales taxes and other kinds of revenue for government at all levels.

Turning once again to the Americans for the Arts study, we know that for every $100,000 spent by arts audiences on goods and services other than the tickets themselves, you can reasonably expect the following economic impact:

For every $100,000 of Spending by Nonprofit Arts and Culture Audiences in the State of Wisconsin, the following impact is generated:

Full-Time Equivalent Jobs    3.45

Local Government Revenue    $  9,280

State Government Revenue    $  11,576

Source:  Arts & Economic Prosperity III:  The Economic Impact of Nonprofit Arts and Culture Organizations and Their Audiences in the State of Wisconsin, 2007

To take this concept further, the Door County Community Foundation contacted the largest nonprofit performing arts companies and venues in Door County and asked them to provide attendance numbers for their previous year. While this isn’t an exhaustive list, it does reflect the overwhelming majority of people who attended an “arts and culture event” (as defined by the Americans for the Arts study) last year:

Total Attendance at Door County Charities in 2010: 131,620

Chart-Attendance2

 

 

 

 

 

(blue) American Folklore Theatre – 45,000

(red) Birch Creek Music Performance Center – 11,465

(yellow) Door Community Auditorium – 8,587

(green) Door Shakespeare – 3,445

(purple) Isadoora Theatre Company – 1,540

(orange) Midsummer’s Music – 2,231

(maroon) Peninsula Music Festival – 4,550

(gray/green) Peninsula Players – 46,502

(teal) Third Avenue Playhouse – 8,300

Source:  The respective organizations listed above.

When combining these attendance numbers with the average spending ratios calculated by the Americans for the Arts study, here’s the collective spending by those who attend one of the big arts venues or events in Door County:

Annual Event-Related Spending by All Attendees at Selected Performing Arts Charities in Door County

(EXCLUDING the cost of event admission)

Total Spending: $2,963,000

TotalSpending

 

 

 

 

 

(blue) Refreshments/Snacks During Event – $229,000

(red) Meals Before/After Event – $1,246,000

(yellow) Souvenirs and Gifts – $328,000

(green) Clothing and Accessories – $149,000

(purple) Ground Transportation – $303,000

(orange) Event Related Child Care – $38,000

(maroon) Overnight Lodging (one night only) – $503,000

(gray/green) Other – $167,000

Source:  Arts & Economic Prosperity III: The Economic Impact of Nonprofit Arts and Culture Organizations and Their Audiences in the State of Wisconsin, 2007; Most recent one-year audience statistics provided by the respective charities listed in the previous table.

It should be noted that the $22.51 is based on the normal Wisconsin arts event audience ratio of 17 residents for every 3 tourists. The average resident spends $17.76 on activities related to arts and culture events while the typical tourist spends $48.95 – more than twice as much! Given that the audiences at events in Door County almost always have a far greater proportion of tourists than the Wisconsin average, real spending is probably considerably higher than $22.51 per person per event.

But working off that number of $22.51 per person per event, and combining with a total of 131,620 attendees at our largest arts and culture organizations, that translates into at least $2,963,000 of spending in Door County each year.

When pulling all of these numbers together, the total impact of spending (excluding ticket purchases) by arts and culture audiences at these largest Door County nonprofit organizations is as follows:

Impact of Spending by Selected Nonprofit Arts and Culture Audiences in Door County

Full-Time Equivalent Jobs    103

Local Government Revenue    $ 267,000

State Government Revenue    $ 367,000

Sources:  Arts & Economic Prosperity III:  The Economic Impact of Nonprofit Arts and Culture Organizations and Their Audiences in the State of Wisconsin, 2007; Door County Community Foundation Review of 2006 – 2010 Tax Returns of Charities Based in Door County.

We used these statistics that refer exclusively to arts and cultural audiences because this is the part of the charitable economy that has been most studied. But many of the same kinds of economic impacts can often be seen at environmental and educational nonprofit organizations. The visitor who spent the morning walking the trails of The Ridges Sanctuary is likely to have lunch in Baileys Harbor. The guest who studied at The Clearing for a week probably will stop by the stores of Fish Creek on the way out of town to pick up a few souvenirs.

It’s nearly impossible to accurately measure the dynamic impact that results from the confluence of such a large community of charities on one little peninsula. The idea that I can explore the grounds of Crossroads at Big Creek in the morning and attend a play at the Peninsula Players in the evening can only enhance and increase our desirability as a tourist destination. Such a convergence of nonprofit organizations will multiply their positive effect on the overall economy of a community.

Indeed, charities are the essential ingredient in the unique quality of life of Door County which draws visitors here and brings back our seasonal residents every year.

And that’s why we continually say that a gift to charity in Door County is not only a contribution, it’s also an investment in our economic development. It’s helping to build a better future for us all.

Impact of Direct Spending by Arts Organizations

What’s often lost in a discussion of the impact of charity in a community is also their importance as a direct employer and a purchaser of goods and services. The Americans for the Arts study reminds us that “nonprofit arts and culture organizations are active contributors to their business community. They are employers, producers, and consumers. They are members of the Chamber of Commerce as well as key partners in the marketing and promotion of their cities, regions, and states.”

The study highlights the impact of the direct expenditures that arts and culture organizations make in their communities. “This spending is far-reaching:  organizations pay employees, purchase supplies, contract for services, and acquire assets within their community. These actions, in turn, support jobs, create household income, and generate revenue to the local and state governments.”

In Wisconsin, the study found that for every $100,000 in direct spending by arts and culture organizations, 3.73 jobs are generated in the community. These jobs are not limited to employees of the charities themselves, but also in the businesses that serve the arts organizations. For instance, in addition to the salaries paid to the staff of Midsummer’s Music, they also purchase computers, buy office supplies, pay for utilities, and purchase all the other common items and services that are associated with most any business.

The Americans for the Arts study set forth a series of ratios to help local communities determine the impact of arts spending in their own area.

For Every $100,000 of Direct Spending by Nonprofit Arts and Culture Organizations in the State of Wisconsin, the following impact is generated:

Full-Time Equivalent Jobs    3.73

Local Government Revenue    $  4,670

State Government Revenue    $  5,929

Source:  Arts & Economic Prosperity III:  The Economic Impact of Nonprofit Arts and Culture Organizations and Their Audiences in the State of Wisconsin, 2007

The Door County Community Foundation’s review of the tax returns filed by tax-exempt organizations between 2006 and 2010 calculated that almost exactly $8 million is spent annually by the arts and culture organizations of Door County. Here’s what you find when you combine that amount of spending with the Wisconsin ratios set forth in the Americans for the Arts study:

Economic Impact of Direct Spending by Nonprofit Arts and Culture Organizations in Door County

Full-Time Equivalent Jobs    298

Local Government Revenue    $  373,000

State Government Revenue    $  474,000

Sources:  Arts & Economic Prosperity III:  The Economic Impact of Nonprofit Arts and Culture Organizations and Their Audiences in the State of Wisconsin, 2007; Door County Community Foundation Review of 2006 – 2010 Tax Returns of Charities Based in Door County.

Put simply, the direct annual spending by arts and culture nonprofit organizations in Door County results in nearly 300 full-time equivalent jobs, more than $373,000 in tax revenue for local governments, and over $474,000 in tax revenue for the State of Wisconsin.

We must also remember that arts and culture organizations comprise only about 8.6% of total expenditures by local nonprofits in any given year. The spending of all types of nonprofit organizations in Door County is about 12 times higher. Extrapolating, then, one might conclude that the impact of all direct spending by nonprofit organizations Door County is roughly 3,600 full-time equivalent jobs, about $4.5 million in tax revenue to local governments, and nearly $5.7 million in taxes for the State of Wisconsin.

The Challenges of a Seasonal Community

But charity is more than just an economic development tool.

Our community is confronted with unique human service challenges as well. As waterfront land values have soared, so, too, has much of the property of Door County. Those increasing property costs spread out through the community and result in a higher cost of living than what you’d find in less coveted areas of the state.

To exacerbate the problem, the seasonal nature of our community necessarily requires a considerable number of seasonal jobs. That creates stresses for those at the bottom rung of the economic ladder. The same person who could count on year-round employment in Appleton or Milwaukee often must hold multiple part-time jobs in Door County in a continual juggling act to make ends meet.

Our seasonal nature creates unique stresses on many Door County families that simply don’t exist to the same degree in year-round communities. So human service groups in Door County are critically important.

We count on groups like Feed My People to fill a family’s cabinet with groceries during the winter months when the summer’s wages are finally gone. We turn to the Community Clinic to care for those whose jobs don’t offer health insurance. We count on the Women’s Employment Project to offer job training and placement opportunities when a job cannot be found. And when the economic stresses degrade into domestic violence, we know that HELP of Door County is there to provide a safe place. And the list could go on and on.

There are literally hundreds of charities working hard in Door County every day. You can find a listing of them at www.doorcountycommunityfoundation.org or in the back of this magazine. These organizations are nonprofits because there is no profit to be made. So their future is dependent on the generosity of people like you.

And because charity is so important to Door County, our community’s future is also dependent on the generosity of people like you.