Sport Canada Policy for hosting International Sport Events

APPENDIX II

GUIDELINES FOR COMPLETING ECONOMIC EVALUATIONS

1. Identify and measure all the costs which must be undertaken to host the event
   This step ensures that all costs are considered. Any costs that are going to be written off against the projected revenues should be included, as well as any indirect costs borne by third parties (e.g. municipalities) which constitute hidden parties (e.g., municipalities ) which constitute hidden subsidies. Costs to be considered can include:
   
   
1. development, presentation and promotion of the proposal
   
2. planning the event
   
3. operation of the event
   
4. investment in direct infrastructure (e.g., facilities for the games) and indirect infrastructure (e.g., roadways, increased sewage facilities). Costs for related private investments (e.g. hotels) should not be included, since those costs are note being written off against projected event revenues, but rather will be written off against revenues of their own.
   
5. post-event cost (e.g., to readapt facilities, to dismantle facilities)
   
   

Costs may be reduced by the net value of capital assets which will remain in use after the event. This residual value should not simply be the nominal or book value used for accounting purposes, but should reflect the true utility or market value of the assets.

2. Identify the sources and amounts of funding
   This step determines how the benefits should be attributed to the various sources of funding, or contributors. The basic categories of funders include private investors, corporate sponsors and different levels of government, including those which provide infrastructure development or "in-kind" contributions.
   
   
3. Identify, document, and measure (to the extent possible) the benefits
   This step ensures that all relevant benefits are taken into account.
   
   
1. Direct Benefits
   The first benefit to be taken into account is direct revenue from admissions, television rights, corporate sponsorships, concession fees, licencing logos and use of names, etc. This revenue will help defray costs and will reduce the need for subsidies from government. A comparison of direct revenue and costs will show clearly the shortfall that must be offset with subsidies and other benefits.
   
   Direct revenue from admissions is estimated from visitor projections (see Overview of Economic Impact Assessment, Step Three). Other direct revenues will be estimated based on expectations from negotiations between the bid group and the various sources of revenue (e.g., television networks, corporate sponsors, private entrepreneurs).
   
   
2. Sport, Social and Cultural Benefits
   Sport, social and cultural benefits are described in the Assessment Guide, which requires bid groups to describe the activities that will produce such benefits. This cost-benefit analysis further requires that the bid group demonstrate the effect of their activities and the amount of benefit arising from them.
   
   For easier comparison to costs, these benefits should be measured, where possible, in dollar terms. Where this is not possible, measures such as the target population, the number of recipients, or the duration of the benefit can be used to give some idea of the extent of the benefit.
   
   Identifying Net Benefits from Tourism and Taxes
   Increased economic activity stimulated by the games generates net increases in tourism spending that would not other wise have occurred and, thus, net increases in taxes. This net increase in taxes may be claimed as a benefit to the federal government, if the distinction is made between the spending (and resultant taxes) made by local residents in the normal course of events and new spending by visitors who would have spent their money outside Canada, if not for the event. (See Economic Impact, Steps Three and Five).
   
   Warning: Economic Impacts are Not Benefits
   Increased jobs and economic activity resulting from spending done to host an event constitute an economic impact but, for purposes of the cost-benefit analysis, are not considered a benefit. This type of economic impact may benefit the local community or region which, without the event, would not have had such a level of jobs or economic activity but with respect to the whole Canadian economy, it is only a redistribution of spending from some other part of Canada. An equivalent expenditure anywhere in the economy would also have had the effect of increasing jobs and economic activity (see Economic Impact Assessment, Introduction). However, benefits associated with the increase in economic activity or jobs, such as the reduction of regional disparity. 0r the creation of opportunities to gain experience for the unemployed in a region of chronic unemployment, can be cited in the cost-benefit analysis (see Economic Impact Assessment, Step Five).
   
   Attributing Tax Increases to Subsidy Givers
   When estimating the net amount of taxes to be gained because of net new spending, it is important to recognize that not all increases to federal taxes are attributable to federal government spending. Private investment and subsidies by other levels of government are also responsible for increases spending which helps fill federal coffers. It is important to attribute to the federal subsidy only those tax revenues that it genuinely generated.
   
   
4. Compare the costs and benefits
   This step summarizes the costs and benefits described above so that the benefits can be easily compared to the costs being borne by each contributor, and so that the federal government can know what benefits Canadians are receiving in return for its subsidy.
   The benefits of an event will be produced by combined efforts of many contributors. It is important to attribute the amount of benefit to the contributors in proportion to their level of contribution to the total cost.
   
   

• Appendix 2, part II Guidelines for completing economic impact evaluations
• Hosting Policy
  
• Application and Review Procedures
  
• Appendix 1 Assessment Guide