Summer 2002

Gauging GW’s Impact on the Local Economy

New Report Shows University Contributions to the Metropolitan Area

By Greg Licamele

GW’s economic impact on the DC metropolitan region continues to resonate throughout pocketbooks, homes, cash registers, schools, and government coffers, according to the latest statistics.

The Consortium of Universities of the Washington Metropolitan Area released a report this month highlighting higher education’s impact on the region. The 12 campuses of the consortium employed 76,000 people in fiscal year 2001, with GW employing a significant share of those people. According to March 2002 data from GW’s Office of Payroll Services, the University writes paychecks to approximately 8,300 employees, which is the most of any private sector employer in the District. These paychecks result in salaries, benefits, direct spending, and tax dollars for DC, Maryland, and Virginia.

“The University has a very large economic impact on the District,” says Jack Evans, DC councilman for Ward 2. “It’s the largest private employer in the District of Columbia, so there are a number of people who work for a living in the city.”

Of the almost $2 billion that area universities spent on salaries, wages, and fringe benefits in fiscal year 2001, GW accounted for nearly 17 percent by paying out more than $330 million. That translates into money employees subsequently spend in the area for housing, food, clothing, transportation, child care, entertainment, and other personal purchases.

According to the consortium report, direct spending alone in 2001 by the 12 area universities totaled almost $4.1 billion. The total economic impact of area universities is estimated to be more than $20 billion.

“Because universities are such major players in the District, there is more of a positive impact on the economic development of the city versus a negative one if they were drawing resources and not paying anything back,” says Herb Tillery, DC deputy mayor for operations.

Stephen Fuller, professor of public policy at George Mason University, says that universities in some metropolitan areas, such as Boston and Washington, are major sources of external funds that help drive local economies.

“Universities are one of the core industries in DC, in addition to the federal government, international operations, and hospitality,” Fuller says. “This is not insignificant money.”

Fuller prepared an economic impact study of GW in 2000. According to the report, GW spent $266 million on payroll distribution in 1998. Three years later, the University spent $330 million on salaries, wages, and fringe benefits, $86 million of which went to District paychecks.

“My mission these past 14 years has been to build a greater University,” says President Stephen Joel Trachtenberg. “In the process, we’ve been trying to pay our faculty and staff more competitive salaries, and that obviously makes them have a greater impact on the community.”

With the addition of the GW Home Program, more employees will spend even more money on goods and services in the District. But GW’s economic impact is not confined to personal paychecks. Purchases of goods and services, construction costs, and other capital expenses help fuel the area’s economy. According to Fuller’s report, the University spent $431 million on goods and services to support its operations in fiscal year 1999, with 61 percent of these vendors based in the immediate region. GW used over 6,000 DC-based services, spending nearly $84 million. Fuller says this is a significant amount, given the District’s relative lack of manufacturer’s.

In addition to operating expenses, significant construction projects throughout campus in the last five years have boosted the local economy. According to 1999 data, GW contributed $156 million in construction costs to hundreds of businesses and vendors.

“We’ve been building facilities and that creates jobs,” Trachtenberg says. “We’ve been maintaining facilities and that involves hiring people. In addition to our payroll, we have all of the University’s expenditures. Given any kind of reasonable multiplier effect, I think our role in the city’s economy is something to be proud of.”

Tillery, who just began his post as deputy mayor June 3 after leading GW’s Center for Excellence in Municipal Management, says the value of construction projects is underestimated.

“People will say that’s a one-time contribution because you build a building, but still, it’s an additional structure that means additional upkeep costs,” Tillery says. “So even though the large cost is a one-shot deal, the long-term implication is that there are more jobs for local folks, which means more taxes.”

One of GW’s major projects rising along 23rd Street is the replacement hospital, scheduled to open this summer. At a cost of approximately $96 million, the facility has already impacted the area economy even before it admits its first patient. Once it opens, the medical center will continue to impact the local economy in another way — $17 million worth of uncompensated care each year. Annually, the hospital hosts free flu shot and stroke screening clinics, a volunteer outreach program in community health centers, Upward Bound for DC teens to improve scholastically, and the GW Mammovan, among many other programs.

“The new hospital, particularly its location, is critical to the ward and to the city,” Councilman Evans says. “It serves as a place of first stop for the whole downtown area, the White House, Foggy Bottom, Georgetown, and Dupont Circle. It’s the place people will come.”

Contrary to popular belief, the hospital and the entire University contribute to the tax rolls of local governments. The hospital pays $4 million in sales and property taxes annually. The University adds millions of dollars to the area’s tax rolls, particularly through employee taxes. In 2000, GW withheld more than $70 million in federal income, Social Security, and state taxes for its employees, with the District receiving more than $4 million in withheld income taxes.

“GW pays more in taxes than it receives in services,” Fuller says. “That’s the big question: Does GW pay for its own way? The answer is yes, GW does through food taxes, utility taxes, retail taxes, and income taxes.”

Fuller says GW makes a difference on the local tax rolls, especially through property and land use. Fuller wonders what would happen if the property used by the University were to remain empty, restricted for development, or used for commercial purposes. He has his doubts about the economic impact for local communities if these properties were used primarily for offices and residences.

“The opportunity cost of an office building is not guaranteed,” Fuller says, pointing out the educational and cultural value of universities. “Those are hollow arguments. What if all the churches weren’t here? What about the federal government?”

Another GW benefit for the District can be found in the halls of the School Without Walls (SWW) high school. Dana Bedden, principal, says GW’s impact on his school is measured academically and economically. Each year, GW offers $300,000 worth of college classes to SWW students and faculty, and the University recently agreed to increase this contribution.

“Our ability to offer our students college-level courses has both academic and economic impact,” Bedden says. “Our students have an opportunity to take courses that we can’t offer because of our small size. We have a small student-teacher ratio, but we can’t have as many classes as we’d like.”

Bedden says many of his students, with the combination of GW classes and other programs, walk into college with half of their freshman year complete.

“That’s a direct impact for our parents and residents whose children come here and take classes because they don’t have to pay for it out of pocket when a child goes to college,” Bedden says. “For us, the economic impact is that if we wanted to give it to our students, we’d have to hire an instructor and pay for the materials.”

GW helps SWW and its students in countless other ways, too, such as letting the high school use University facilities. In addition to the classes, GW offers the Trachtenberg Scholars Program. Founded as the 21st Century Scholars Program 13 years ago, the program was renamed in 1998 by GW’s Board of Trustees to celebrate President Trachtenberg’s 10th anniversary at GW. The awards program provides tuition, books, fees, room, and board for accomplished seniors at SWW and at other public high schools in DC. GW’s total commitment since the inception of the program is approximately $8 million. The scholarships, along with other grants and work-study programs, make GW the largest single post-secondary contributor of aid to DC public schools for the last eight years.

“It’s important for any organization, as large as the University is, to be a partner to the city,” Bedden says. “It’s serving the global society as a whole — it’s contributing to educating the population. Somewhere along the line, I will guarantee you that students who have taken classes at GW, who come to School Without Walls, who have been exposed to District of Columbia public schools, have gone on and done something to make society better. The University is able to say it had a hand in it.”

The lessons of these partnerships such as GW and School Without Walls are what Tillery brings to his new position as deputy mayor. He recognizes the value of prosperous partnerships and he experienced it with his Center for Excellence in Municipal Management and GW. CEMM is a public-private partnership, in which the District provides 40 percent of the operating funds and GW and other institutions give the majority of support. Tillery says GW gives $1.4 million a year to the center to train DC middle managers in executive programs. He says the programs cost $8,000 a person, with DC employees paying only a fraction of that cost.

“The ultimate winners are citizens who experience improved service delivery that results from these folks being in this program,” Tillery says. “It goes right back into the community. I believe all of that causes additional people who want to move back into the District, which creates a larger tax base. I think we can attribute some of that success to the training program. Government has to work with the community and the community has to work with the government.”

 

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