The Importance of the Arts to New York City’s Economy
by: Rosemary Scanlon

Statement of Rosemary Scanlon, Associate Professor, Real Estate Institute, New York University SCPS, to New York City Council Committees on Monday, February 24th, 2003.

THE ARTS ARE A VITAL ASPECT OF THE NEW YORK ECONOMY

Good Morning. My name is Rosemary Scanlon, and I am an Associate Professor of Economics at the Real Estate Institute of New York University.

I have spent most of my career as an economist studying the New York City and metro area economy, including studies of the Arts as a major industry in this great economy. I am pleased to share with you today some key findings of those studies, which demonstrated for the first time that the Arts are a vital aspect of the New York City economy.

This economy of New York City is a great economy, the most powerful and important urban economy in the US and indeed the Western Hemisphere; and New York City in its economic power shares a leading global status with perhaps two or three other cities in the world – London surely, and Tokyo for most years of the past three decades.

And while there are many industries and great diversity of occupations in New York City, we know that its economy – like that of London – is driven by just a handful of industries: Finance, Exchanges and Investment Banking sectors; the great Business Services such as Law or Advertising or Management Consulting; Media and Communications; Tourism; and The Arts and Culture. These are the major engines of the economy – industries that sell their services to the rest of the country and to the rest of the world, that ‘export’ their skill and knowledge and thereby bring back the revenues to support our local economy, our governments, and our public sector investment.

No doubt our public officials and business leaders always believed that the Arts played a major economic role, as well as cultural role, in the life of our City. For the first time, in 1983, when Martin Segal asked the Port Authority and the Alliance for the Arts (then called the Cultural Assistance Center) to conduct the study measuring the economic importance of the Arts, we were able to quantify that role.

We found then, in 1983 dollars, that the Arts were a $5.6 billion industry in this metro area. We also found that:
* most of that economic value was created in New York City;
* the Arts were a larger industry than advertising
* the Arts were a major factor in attracting tourists to New York City
* the Arts were an export industry for New York City
* and that the Arts were a significant employer in the City, not only of professional actors and dancers, musicians and curators; but also of skilled craftsmen, technicians, insurance brokers and transportation workers.

What is more, it was possible in that analysis to calculate the total amount of city and state operating support to the city’s arts institutions, and then, in measuring the taxes generated by the entire profit and non-profit arts, both aspects, to conclude that the total tax return of just personal income and sales taxes was greater than the volume of public sector grants.

Ten years later I had the opportunity to conduct this study again, with the collaboration of the Alliance for the Arts, and with the assistance of most of the same team of analysts. We found that by 1993 the Arts had grown to be a $9.8 billion industry in the region, of which $9.2 billion was centered in New York City. Adjusted for inflation, the arts had grown by a robust 14 percent in that ten-year period.

That 1993 study followed the same methodology and the same definition of the industry, to include:

* Broadway and Off-Broadway theatre, which generated almost $1 billion.

* The operations of the Art Auction houses and the Art Galleries, which had a total impact of $840 million.

* The great and small non-profit Cultural Institutions (museums and orchestras, the opera and dance, the natural history and science institutions, the zoos and botanical gardens), which together had an economic impact of $2.7 billion.

* Film and Television Production, the largest segment, at a total of $3 billion.

* And visitors to the region who came specifically for the Arts, or who extended their stay to attend an arts function, who generated $2.3 billion in economic activity.

In a companion study on the economic impact of Tourism that was conducted by the Port Authority and published in 1994,("Destination New York-New Jersey: Tourism and Travel to the Metropolitan Region"), New York City’s cultural attractions ranked first as the reasons given for visitors from Canada and the rest of the US as well as all international visitors in choosing to visit New York; similarly, travel industry representatives and industry leaders ranked the City’s performing arts as the leading reason for their choice as a tourism destination.

We also found that over 107, 000 jobs were generated either directly or indirectly; that wages and salaries totaled $3.5 billion; and that taxes generated in the metro area from just personal income and sales tax and totaled $325 million.

Several years later my colleagues on both the earlier Arts studies, Randy Bourscheidt and Catherine Lanier, updated this study to 1995, and estimated that the total economic impact of the arts had grown to $11 billion in New York City, up from the $9.2 billion of three years earlier.

Lessons We Continue to Learn on the Economic Importance of the Arts:

Every indication we have on the economic viability of the Arts in New York during the rest of the 1990’s, through to the peak reached in the City’s economy by the summer of 2000, suggests that the Arts have continued to grow strongly, and were a significant contributor during the 1990s to business and job growth in the City:

* Our museums and music halls, the Broadway and Off-Broadway theatres were filled with patrons; more TV productions and movies were being made here; the art galleries were flourishing; and the added dimension to the range of offerings by new investments in the major arts facilities such as the Rose Center at the American Museum of Natural History, proved a major factor in drawing new tourist and business visitors to the City. ( If we were to conduct a third ten-year cycle economic study to capture those component sectors in the year 2000, we would likely have found that the total economic activity of the industry had grown substantially , perhaps to the $12-15 billion range).

* That visitors were important – visitors from overseas, but also from the metropolitan region and from residents of the City itself --- became all too obvious in the painful aftermath of September 11, when the City’s great museums, theaters, and concert halls were bereft of customers. We were able to see, all too graphically, how important the Arts are to the City’s hotel and restaurant industries, to retail and local transportation demand.

We have also learned through these studies just how important public sector support is to the Arts in New York City. Our studies have shown that New York City’s funding support to each year’s operations of the non-profit cultural sector ripples through to the for-profit sectors of film and television production, and together with the other components and the spending of visitors to the Arts, yields a return in tax generation that far outweighs the volume of subsidies. The 1993 study showed that the operating support to the non-profit arts from New York City and other local governments totaled $155 million, yet the taxes generated just from personal and sales taxes totaled $325 million.

New York, along with London and Paris, are the great centers of the Arts, and visitors to the Arts. We can judge by the recent major investments to provide major cultural Arts centers in such cities as Singapore, Hong Kong, Shanghai, or in Balboa, that the Arts are recognized as necessary, not only for their residents, but to bolster the vibrancy of their economy and their attraction of new visitors and businesses. Our studies have shown that the support of New York City government, together with that of individuals, forms the major sources of funding support in the non-profit sector. This sector, in turn anchors the entire Arts industry.

I believe firmly that New York City must maintain and enhance the position and the vibrancy of its great Arts institutions, its growing film and TV production industry, its art galleries; that it must nourish the small and innovative groups as well as support the great and proven institutions. As a society, as well as to ensure the development of the next generation and to help unlock the creative potential of our many new immigrant groups, I believe that it is very important for New York City to continue support of its Arts, even in these difficult days.

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The Author was formerly Chief Economist of the Port Authority of NY&NJ, and from 1993-97 served as Deputy State Comptroller for New York City

SOURCES CITED IN THIS TESTIMONY:

"The London-New York Study: The economies of two great cities at the Millennium." Scanlon, Travers et al., published by the Corporation of London June 2000.

"The Arts as an Industry: Their Economic Importance to the New York-New Jersey Metropolitan Region." The Port Authority of New York and New Jersey and the Cultural Assistance Center 1983.

"The Economic Impact of the Arts on New York City and New York State," Bourscheidt & Lanier, The Alliance for the Arts 1997.