What Economic Impact Analysis Can Do for Your Municipality

From Saint John to Windsor to Calgary, Canadian cities are directly and indirectly vulnerable to U.S. tariffs. Trump-induced uncertainty has served as a powerful economic call-to-action.  

Across Canada, municipalities are exploring ways to increase economic resilience by supporting and diversifying their local economies in both goods and services producing industries. Many municipalities are also looking to upgrade and expand local infrastructure to support growth, improve the investment climate, and enhance regional productivity.    

For municipal councils and officials, the challenge often lies in deciding which public investments will generate the best return on the taxpayer’s dollar and contribute most to sustainable economic growth. Competing claims of community benefits can be difficult to differentiate, quantify, and verify. 

Economic impact analysis (EIA) can help local governments cut through the noise and maximize the value of their decisions and investments.   

What is Economic Impact Analysis? 

The economic impacts of a project or a new industry in a community go well beyond just the initial investment, job creation, and tax revenues. 

EIA uses inter-industry linkages and spending patterns to calculate the impacts across the economy of a change in economic activity. It provides insight at the provincial and national levels into how gross domestic product (GDP), employment, labour income, and tax revenues may change as a result of a variation in industry output (sales or production) and/or in household or government spending.  

EIA provides a comprehensive assessment of impacts by considering the effects at three levels: 

• Direct impacts from the change in output 

• Indirect impacts from business-to-business transactions in the supply chain 

• Induced impacts from households spending the labour income generated by the direct and indirect impacts 

Some impacts are one-off if the change in output is timebound (e.g., construction of a building). In this case, the impacts (e.g., jobs supported) disappear once the project is completed. Other impacts are recurring if the new economic activity continues. For instance, the opening of a long-term care home creates new jobs in the first year. These positions are then maintained in subsequent years.  

How EIA Can Be Used by Municipal Officials  

Economic impact data can play an important role in informing municipal decisions on infrastructure spending, economic development, and tourism.  

ASSESSING THE IMPACTS OF INFRASTRUCTURE SPENDING 

Local officials are routinely asked about the benefits arising from investing public funds to build and repair municipal infrastructure. Quantifying the economic impacts of this spending can assist decision-makers in prioritizing projects and articulating the benefits to build community support.  

For an infrastructure investment for which provincial and/or federal grants or policy changes are requested, EIA can help municipalities make the case for enabling additional economic activity. This can benefit the provincial and federal taxpayer and advance the priorities of senior governments. 

Using IMPLAN, a widely recognized EIA platform, we can model the impacts of a new water treatment plant in a community in Ontario. We assume construction would take place over the course of three years (2026-2028) at an annual cost of $1 billion. Once completed, the cost of operating the water treatment plant would be $75 million per year starting in 2029. Based on this information, we can calculate the economic benefits in Ontario generated by both the construction and operations of the plant: 

Total Construction Impacts (Based on 2025 Dollars) 

Total Annual Operations Impacts (Based on 2029 Dollars) 

SELECTING INDUSTRIES TO ATTRACT AND HELP EXPAND 

Business attraction and expansion is a core component of economic development strategies. In preparing and executing these strategies, local economic development officers must weigh in several considerations to determine which industries to focus their efforts and limited resources on. Potential benefits to the economy are ultimately one of the most important factors to consider.  

For the same output value, industries generate very different levels of impact depending on their economic inter-linkages. Understanding the magnitude of economic impacts can help municipal officials target specific industries and determine whether to deploy incentives to attract a company and/or stimulate its growth. 

As an example, we consider an Ontario municipality looking to decide whether to attract a household appliance manufacturing plant, a medical equipment and supplies manufacturing facility, or a building material and supplies merchant wholesaler. We assume the company would move into an existing vacant building and would have an output of $5 million per year.  

Using this information, we can uncover that the medical equipment and supplies manufacturer would have the largest total impacts (i.e., direct, indirect, and induced impacts combined) on the economy of Ontario in its first year of operation (2027). 

DETERMINING THE BENEFITS OF TOURISM PROMOTION AND EVENT ATTRACTION 

Most municipalities seek to promote their communities as tourism destinations and locations for major events (e.g., sporting competitions and conventions). Leisure and business tourism brings in out-of-province and international travelers who inject fresh new money into the economy through their spending.  

EIA helps evaluate the benefits of attracting visitors to a community. This information can enable municipal officials to assess the potential return on investment associated with initiatives like a tourism promotion campaign, an event sponsorship, and other public spending required to host an event (e.g., infrastructure spending and overtime pay for municipal employees). 

As an example, we consider an Ontario community hosting a four-day national sporting championship in 2025. We assume the event would bring in 1,000 people (athletes, coaches, families, and spectators), 80% of whom are from outside Ontario.  

For this example, we conservatively focus on the 800 out-of-province visitors who would spend new money in the economy of the province. While many people would also likely spend money on gas and retail items, we only model here the total impacts associated with their spending on accommodation ($213,600) and food ($144,000). 

Unlocking Valuable Insight 

StrategyCorp’s 2024 Chief Administrative Officer Survey noted that municipalities’ “resources are stretched to the max, be they financial or human.”  

Economic impact analysis can empower local officials to make informed decisions and maximize resource allocation. Amid a period of socioeconomic uncertainty, reliable and rigorous insight is more valuable than ever to build economic resilience in Canadian communities. 

Source 

All economic impact calculations in this article were calculated using the IMPLAN platform. See IMPLAN® model, 2021 Data, using inputs provided by the user and IMPLAN Group LLC, IMPLAN System (data and software), 16905 Northcross Dr., Suite 120, Huntersville, NC 28078 www.IMPLAN.com