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Northwestern Boosts Evanston Economy by $145 M

May 18, 2006

Study examines revenue for City and spending at local businesses

Northwestern University generates more than $145 million in revenues for the Evanston economy on a yearly basis, according to the first comprehensive economic impact study of its kind.

The study examined revenues paid directly to the city by Northwestern and University-generated purchases at businesses.

The study by Bay Area Economics, a national urban economics consulting firm, analyzed information from the 2004 fiscal years of the University and City of Evanston.

The study found the overall annual economic impact of Northwestern University on Evanston is at least $145 million and could be as much as $175 million. (Ranges reported in the study are based on hard data and estimates of revenue from comprehensive surveys.)

The economic impact is based on:

• University payments to Evanston businesses and the City of Evanston

• Spending in Evanston by students, faculty, staff and visitors to campus

The study also examined related contributions by Northwestern, including real estate taxes from properties sold by Northwestern to private owners, contributions to School Districts 65 and 202, financial support for non-profit agencies and funds for economic development.

Overall Economic Impact

The overall impact of North-western on the local economy includes University expenditures of $17.4 million in fiscal year 2004 — $4.87 million in direct payments to the City government and $13.5 million in purchases from 390 businesses — and between $127 million and $155 million spent annually by faculty, staff, students and visitors on restaurants, entertainment and other retail purchases; housing rentals; and hotel expenditures.

The estimate of spending showed the major impact that undergraduate and graduate students have on the Evanston economy. Based on interviews with students, the study found that they accounted for approximately $28.2 million of restaurant and entertainment spending and for a major share of purchases from retailers — more than $26.8 million.

Out-of-town-visitors attended 200 conferences and meetings at North-western, resulting in 425,000 “visitor days” in Evanston. Family and friends who visited faculty, staff and students, including those who visited the Office of Admission, accounted for an additional 38,300 visitor days. Those visitors spent an estimated $4.7 million at restaurants, more than $2 million at retail outlets and more than $3 million at hotels.

The study of spending by University students, employees and visitors determined that the City of Evanston received more than $2 million annually in sales tax revenue for its general operating fund.

The Bay Area Economics study also looked at other significant financial support generated by Northwestern for the local economy.

Real estate taxes from properties sold by Northwestern to private owners since 1972 now generate more than $4 million annually for Evanston taxing bodies. (See related story on page 4.) The University, authorized to own 2,000 acres under its State of Illinois charter, now owns only 4.9 percent of all land in Evanston — 242.8 acres, 84 of which was created in the 1960s by filling in a portion of Lake Michigan.

Northwestern was a partner with the City of Evanston in development of the Northwestern University/ Evanston Research Park, contributing seven acres and $4 million in operating funds. The Park attracted businesses to the development that has grown into a mixed-use urban entertainment center, adding to the city’s real estate and sales tax revenue.

Northwestern also invested $44.7 million in new construction on its campus in 2004, paying the city $531,380 in permit fees, and has an additional $186 million planned for projects through 2008.

Northwestern employs 1,850 staff members and 1,200 faculty members in Evanston, making the University the largest employer in the city. An estimated additional 1,451 jobs in Evanston businesses are directly related to expenditures by University, faculty, staff, students and visitors, according to the study.

Northwestern has supported new educational initiatives in both school districts. It contributed more than $300,000 to the District 65 Lighthouse Partnership to enhance science and mathematics education and the bilingual language program. The University has contributed $500,000 and provided faculty assistance to Project Excite, a District 65-202 program to develop math and science skills of students in preparation for higher-track classes in high school.

Volunteers from the University community — including more than 1,200 students — provided more than 164,000 hours of service to nonprofit groups.

Impact on City Government

The Bay Area Economics study compared revenue generated directly by the University to the City government and the city’s cost of services to Northwestern. It noted that the City pays some of the costs of services it provides to the University, the most costly of which is fire protection. But the study also pointed out that Northwestern pays for many of its own “municipal” services at no cost to the City, such as police protection and waste removal.

In analyzing the cost-benefit impact for the two institutions, the study reported that in fiscal year 2004 the City of Evanston revenues generated by Northwestern’s presence exceeded total costs attributable to the University by $2.8 to $4.4 million.

The consulting firm said Northwestern generated about $8 million in revenue to the City government, the largest portion from water and sewer fees ($1.9 million), and these direct taxes: parking ($657,332); athletic event ($531,380); electricity ($348,590); gas ($293,600); and liquor ($33,555).

Other revenue came from sources that include fees paid by fraternities, sororities and food contractor (Sodexho); sales taxes and hotel taxes from students, employees and visitors; and state and federal grants based on the number of students living on campus.

The City costs attributable to the University were estimated at $4 million to $5 million. In determining the portion of the City of Evanston budget that could be attributed to Northwestern, the study by Bay Area Economics determined Northwest-ern’s share of “costs” for city services, including water and sewer service; street and sidewalk maintenance; fire protection and ambulance services; public library expenses; parks, beaches and recreational programs and facilities; and building, food and housing inspection services. A 13 percent factor was added to many of the costs for administrative overhead.

Northwestern provides many municipal services to the campus that would otherwise be borne by the City. It operated its own police department at a cost of $5.3 million in 2004. University Police and Evanston Police have a mutual aid agreement that authorizes University Police to make arrests for traffic violations and other offenses in the areas adjacent to the campus. Evanston Police provided traffic assistance for athletic events, and the City was reimbursed $22,578 for those costs.

Northwestern pays for its own infrastructure maintenance. Although it paid $1.9 million in water and sewer fees to the city, it bore the $88,192 cost of water distribution and sewer lines on campus. The University also paid the $42,076 cost to maintain streets and sidewalks and $844,858 for waste collection.

The city did not pay any costs of Northwestern’s police protection, water and sewer line maintenance, street and sidewalk maintenance and waste collection.

Bay Area Economics has conducted similar studies on the economic and fiscal impact of universities for the University of Notre Dame, the Johns Hopkins University and the Maryland Independent College and University Association. It has prepared fiscal impact analyses for state and local governments, including the District of Columbia, the City of Atlanta, the State of Oregon, Montgomery County in Maryland, and Berkeley, Calif.

The study is online at http://www.northwestern.edu/communityrelations/Economic_Impact_Report.pdf. Copies will be available for viewing at Northwestern University Library and the Evanston Public Library. To obtain a copy, contact Lucile Krasnow, community relations specialist, at l-lrasnow@northwestern.edu.