Measuring the Tax Impacts of an International Festival: Justification for Government Sponsorship

Many large-scale festivals and special events are held in public places, requiring formal authorization and contractual arrangements with government entities prior to operation. Event organizers may require other government services such as traffic control, emergency medical rescue, and refuse collection, with their financial costs either paid by the organizer or waived or discounted by the government provider. The purpose of this study was to assess the state and local tax revenues generated from expenditures attributed to a large-scale staged tourist attraction, the 1993 Kodak Albuquerque International Balloon Fiesta, Inc. (KAIBF, Inc.). Local and state gross receipts sales tax rates were applied to direct expenditure totals to estimate the fiscal impact of the event. In this case, the City of Albuquerque directly received $2,221,720 in gross receipts and lodging tax revenues, and the State of New Mexico received $1,323,237 in gross receipts taxes and $900,041 in gasoline tax revenues. By describing the economic stimulus and local tax revenues generated by the special event, the organizer bargains from a position of strength and may possess considerable "leverage" in subsequent negotiations with local government in the costs for services.