There was a time when the outlook for Maryland’s horse industry was rather bleak. Augmented racing purses in West Virginia, Delaware and Pennsylvania were pulling activity away from Maryland. In 1994, the State authorized slots at four racetracks. Focus groups conducted by Sage in 2015 generated a strong consensus that among Maryland’s neighbors, Pennsylvanians represented the fiercest competitors. From 2007 to 2010, which represents the four years after slots arrived in Pennsylvania, the Commonwealth added 20 Thoroughbred stallions while Maryland lost 29.
The industry’s reemergence as a Maryland growth engine is traceable to the Maryland Slot Machines Amendment, also known as Question 2, which was on the November 4, 2008 ballot as a legislatively referred constitutional amendment. The measure approved the placement of 15,000 slot machines at five locations throughout the state.
This set the stage for augmented Thoroughbred and Standardbred horse racing purses. According to the State of Maryland’s formula, 7 percent of slot machine proceeds are directed toward the Purse Dedication Account and another 2.5 percent is invested in the Racetrack Facilities Renewal Account.
Revenues from table games are not allocated to support purses or the horse industry.
Though delighted by the new formula, many stakeholders remain concerned that policymakers will see fit to alter it. In order to help the industry convey its story, Sage conducted two studies. The first took place in 2015. Given a lack of analyzable data at that time, the Maryland Horse Breeders Association working in conjunction with other organizations sponsored a series of focus groups and interviews. Sage collected qualitative information regarding how various industry participants were spending the money they were receiving directly or indirect from slot machine proceeds. Sage found that many industry participants were taking care of deferred maintenance issues that had developed over the course of decades and were in the initial stages of expanding their operations.
That exercise set the stage for Sage’s 2016 report. Sage conducted a survey of hundreds of industry participants, ultimately generating a survey response rate in excess of seventy percent with the assistance of roughly a dozen organizations. The survey supplied the data used to generate estimates of economic and fiscal impact. Based on its analysis, Sage concluded that:
The project ended with a press conference held at Goucher College. The press event translated into coverage by the Washington Post, Baltimore Sun, Daily Record, Baltimore Business Journal as well as television coverage. Sage announced its findings. The Maryland Horse Breeders Association also announced that it would be shifting its headquarters from Timonium to Goucher College, home of one of the nation’s premier college equestrian programs.
Sage serves the chief economist function for numerous organizations across the nation. One of these organizations is the Construction Financial Management Association, which is headquartered in Princeton, NJ. The Association is largely populated by chief financial officers and other high ranking financial professions who work in or with the construction industry.
One of the ongoing efforts of the Association has been to help members engage in best practices to avoid lawsuits and other hazards of doing business. In support of this effort, Sage was asked to conduct an analysis of the extent to which courts attribute fault to contractors as opposed to government agencies when disputes arise and are adjudicated. Public opinion often concludes that cost overruns and chronic delays are the fault of construction firms, but as with all things, reality is far more nuanced.
In order to conduct this research, Sage Policy Group, Inc. searched for disputes involving federal government agencies and private contractors from administrative court systems across the United States. Among other things, Sage’s CEO is a graduate of the University of Maryland’s School of Law and worked with University students to identify cases susceptible to analysis. Ultimately, Sage’s database included 107 cases.
State and/or local governments are dealing with a host of issues ranging from underfunded pensions and surging Medicaid expenditures to the need to continue to invest in public safety and retain competitive tax structures. Accordingly, communities are often searching for ways to save money, which requires those who receive funding to help policymakers understand the value proposition.
This is also true in the world of public education.
In order to help Howard County policymakers and other stakeholders understand the contributions of its award-winning public school system (HCPSS), Sage deployed a hedonic pricing model to establish the statistical impact of student achievement on assessed property values. To operationalize its model, Sage developed a dataset containing in-depth statistical information for 1,719 randomly selected homes situated throughout Howard County.
To proxy student achievement, the Sage study team utilized results of the 2013 Maryland School Assessment of 4 th grade students. Sage’s model was associated with an R-squared of 0.91, indicating that the model did a good job of explaining sources of variability in home prices. . The coefficient of greatest interest is the one associated with the variable TEST. The variable is statistically significant and has a coefficient of +0.00242.
This means that for each one point advance in average test score at the elementary school level, the average consumer (including families with no school age children) is willing to pay 0.242 percent more for a home. Given the sample average value of $429,005, this means that a one point increase in test score will raise the price of a home by $1,038.19.
This implies a per home difference in value of $56,270 between homes in the top performing school district and bottom performing school district because of higher average 4 th grade test scores. It is quite possible that other school attributes not measured here also impact home values in Howard County, including the perceived safety of schools, technology offered, prestige, and the capacity of area high schools to promote college readiness. All of this inures to the benefit of county revenues and homeowner equity.
But that is only where the economic impacts begin. Higher home prices are associated with greater wealth and income effects. In addition, the operations of the Howard County Public School System support significant levels of economic impact in the county.
To estimate the annual economic impact of Howard County’s public schools, the Sage study team used IMPLAN modeling software that embodies multipliers specific to the local economy. In total, HCPSS provides support for 14,453 jobs, or 12,846 jobs measured in full-time equivalents. Annual employee compensation associated with these jobs is more than $550 million. The system also supports $1.85 billion in local business sales. In other words, the economic impact of HCPSS on Howard County’s economy is equivalent to approximately 8 percent of total annual county output.
HCPSS was so thrilled with the quality of the study that they organized an event to announce study findings. The event took place on January 7, 2016. Sage CEO was one of the headline speakers along with UMBC President Freeman A. Hrabowski III, Ph.D and Howard County Public School System Superintendent Renee A. Foose, Ed.D. A few months later, Sage delivered a report quantifying the economic impact of UMBC on the state’s economy on the occasion of the 50th anniversary of its founding.
The Borough of Middletown is Dauphin County, Pennsylvania’s oldest town and was founded in 1755. Quaint Victorian structures line its main street. Splendid views of the Susquehanna River and Swatara Creek are available along with multiple recreational opportunities. The town is tranquil. It is also proximate to the rapidly expanding Penn State Harrisburg campus.
Despite these myriad sources of advantage, the Borough’s economic performance has been mediocre. Middletown’s population declined 3.4 percent between 1990 and 2012. There is evidence of substantial retail vacancy downtown and many formerly owner-occupied units have been turned into lower cost rentals.
Ultimately, Sage developed four recommendations: