THE ECONOMIC IMPACT OF THE MARDI GRAS SEASON ON THE NEW ORLEANS ECONOMY AND THE NET FISCAL BENEFIT OF

STAGING MARDI GRAS FOR THE CITY OF NEW ORLEANS

AN UPDATE OF THE 2009 ECONOMIC IMPACT STUDY

2011

Prepared for the Carnival Krewe Civic Foundation, Inc.

Toni Weiss Senior Professor of Practice Department of Economics Tulane University

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EXECUTIVE  SUMMARY    

Total direct economic impact of Mardi Gras on the New Orleans economy

$144,091,533

Total direct and indirect impact of Mardi Gras on the New Orleans economy

$300,656,546

Percentage of New Orleans GDP 1.5%

Net fiscal benefit accrued to the City of New Orleans as a result of staging Mardi Gras including franchise value $13,108,538

Return on City’s investment in Mardi Gras $8.45  

 

 

 

 

 

 

 

 

 

 

   

 

 

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Table  of  Contents    

I.   INTRODUCTION.................................................................................................................................... 3  

II.   METHODOLOGY ................................................................................................................................... 4  

III.   THE  NEW  ORLEANS  ECONOMY............................................................................................................ 6  

IV.   AGGREGATE  DIRECT  EXPENDITURES ................................................................................................... 8  

A.   Lodging  and  Non-­‐Lodging  Expenditures .......................................................................................... 9  

B.   Food  and  Alcohol ........................................................................................................................... 11  

C.   Merchandise  and  Services ............................................................................................................. 12  

D.   Mardi  Gras  Krewes......................................................................................................................... 13  

E.   Krewe  Members............................................................................................................................. 14  

F.   Government................................................................................................................................... 15  

G.   Summary........................................................................................................................................ 16  

V.   Incremental  Tourism  and  Brand  Value .............................................................................................. 17  

VI.   NET  FISCAL  BENEFIT ........................................................................................................................... 18  

VII.   CONCLUSION...................................................................................................................................... 20  

 APPENDIX  A  –  KREWE  CAPTAINS’  SURVEY................................................................................................. 22  

 

 

 

   

 

 

 

 

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I. INTRODUCTION  

The Carnival Krewe Civic Foundation, Inc. has commissioned this report in order to evaluate

the economic effects of the 2011 Mardi Gras season on New Orleans. This is an update on the

2009 economic impact study that was completed two years ago. At that time, a tremendous

amount of data was collected and analyzed as it was the first time the study had been done in

many years and the first since Hurricane Katrina. This year, the data was revised using a

combination of new data and multiple interviews in order to assess the changes that have

occurred.

The interesting question this year was whether the current economic situation nationally and to a

smaller degree locally would affect the ability of Mardi Gras to generate the amount of

expenditures and the fiscal impact on both the City and the local economy as it had previously.

The answer is both yes and no. Local expenditures on parading, parties, food, alcohol, etc. were

stronger in 2011 than in 2009 and this created, obviously, a very positive movement in the

economic impact of Mardi Gras. Unfortunately, this positive impact was not enough to offset

the influence that the national economy has on tourist expenditures. Hotel room revenue, while

achieving enviable occupancy rates, was down 5% from 2009 due to a decrease in average room

rates of 7%. While this reduction in lodging expenditures was too great to overcome increases in

local spending the good news is that the overall decline in direct economic impact was minimal.

Additionally, once tourist dollars rebound there is every reason to believe that future Mardi Gras

seasons will be stronger than ever.

While the decrease in average hotel room rates created a downward pressure on the economic

impact of Mardi Gras there were three positive factors that helped keep the numbers strong.

First, Mardi Gras day was March 8th; the latest it has been in over 60 years. The later Mardi

Gras is the better for the economy. The king cake season is longer; people have recovered from

the Christmas season; Valentine’s day, traditionally a very strong day for jewelers and florists in

other parts of the country but often overlooked here, is less marginalized; and the excitement and

therefore the willingness to spend money has time to build. Second, though related to the first, is

that the 12 day season corresponded with student’s spring breaks around the country allowing

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people to not only come to town but to stay for a longer period of time. Because of this

occupancy rates were very high especially in the middle of the week between the two main

weekends and on the evening of Fat Tuesday. Third, Krewes and individual members of Krewes

increased their aggregate expenditures on throws, events, parties, gifts and balls.

II. METHODOLOGY  

This report answers two questions. First, what is the net fiscal benefit to the City of staging

Mardi Gras? And second, what is the contribution of Mardi Gras —the event and the “franchise”

-- to the aggregate economic activity of New Orleans. The first question is the narrower, and

slightly easier to answer of the two. Net fiscal benefit is the difference between the increase in

City revenues induced by the happening of some event and the increase in City expenditures

associated with the same event. In this case specifically, the City of New Orleans incurs

substantial costs, but also collects additional taxes, due to the staging of Mardi Gras. The largest

and most visible expenditure is the overtime payment to the Police Department for traffic control

and public safety during parades. But there are also substantial expenses involving, for example,

the Emergency Medical Services, Department of Public Works, the Sanitation Department and

the Judicial System. This report will show that increases in tax revenues generated by Mardi

Gras and its associated industry more than offsets these costs, resulting in a net fiscal benefit for

the City. The increases in tax revenues are generated by tourist dollars that flow in as people

visit during Mardi Gras as well as those that are attracted to New Orleans year-round by the

appeal of the City that Mardi Gras helps to create and by large amounts of local dollars that are

spent on Mardi Gras related items during the season as well as throughout the year.

The question regarding economic activity is broader and tougher to answer precisely. The

annual Gross Domestic Product (GDP) of New Orleans is approximately $20 billion.1 This

report will quantify what percentage of this figure can be attributed to Mardi Gras. There are

two ways to measure GDP. In the expenditure approach, GDP is the sum of final spending by                                                                                                                          1In 2010, the GDP for the greater New Orleans metropolitan area was estimated by the US department of Commerce to be 64.6 billion. I estimate that about 30% of this is generated in the City of New Orleans. This figure was not changed from the 2009 report because there are better population numbers available due to the completion of the 2010 census.

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consumers, businesses, government, and net exports.2 In the income approach, GDP is measured

as the sum of the incomes of all the economy’s participants. I use the expenditure approach to

both calculate the net fiscal benefit to the City and the economic impact on the City.

Mardi Gras is unique compared with other festivals in New Orleans, and others around the world,

in the way that the event and the city are so closely linked in people’s perception. This linkage is

particularly pronounced among people outside of New Orleans. If a restaurant in, say, Colorado,

is going to have a New Orleans theme it likely will be decorated in purple, green and gold – the

colors of Mardi Gras. If a tourist is thinking of some place fun to travel, he or she will be

reminded of Mardi Gras even if it is June as can be evidenced by the sight of tourists wearing

Mardi Gras beads in the French Quarter during even the summer months. When conventions

come to town they often participate in “mini Mardi Gras” celebrations regardless of the time of

year. Mardi Gras World stages Mardi Gras parades all over the country and people tour their

facility here in New Orleans year-round. All of these activities are linked to Mardi Gras in New

Orleans and are part of the economic activity that it generates.

In assessing the economic impact of an event, the issue of displacement must be addressed.

Displacement occurs when expenditures associated with an event displace, or substitute for,

expenditures that would otherwise have occurred. For instance, if a man buys a piece of jewelry

to be given to his wife at a Mardi Gras Ball, those dollars would be included in the overall

economic activity attributable to Mardi Gras and the sales taxes paid on the purchase would be

included in the calculation of the net fiscal benefit. However, the man’s Mardi Gras purchase

may displace a purchase that he would otherwise have made for Valentine’s Day. If so, then

including his jewelry purchase in assessing the economic impact of Mardi Gras would overstate

the impact of Mardi Gras because that expenditure would have been made anyway.

Unfortunately, it is impossible to adequately measure displaced expenditure because it involves

assessing what would have happened if Mardi Gras had not been held. But just as I said earlier

that New Orleans and Mardi Gras are so intertwined within the minds of those outside of New

Orleans, Mardi Gras is so deeply embedded in the fabric of people’s lives within New Orleans

                                                                                                                         2Net exports will not be included in this study  

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culture that imagining what a New Orleanian would do if there were no Mardi Gras is impossible.

I could not think of any other single event that is so closely tied to the location of that event as to

define its “personality” and in which the lives of the community’s citizens are so connected to

it.3

The body of this report is organized as follows. In the first section, describes the current New

Orleans economic statistics as they relate to the state and national statistics. The second section

describes the aggregate expenditures associated with Mardi Gras. The third section estimates the

net fiscal benefit of Mardi Gras to the City of New Orleans. The fourth and final section is the

conclusion.

III. THE  NEW  ORLEANS  ECONOMY  

In 2008, The United States economy fell into a deep recession with the Gross Domestic Product

falling four consecutive quarters. In 2007, the US real GDP was $13,206.4 trillion. By 2008, it

had fallen to $13,161.9 trillion and by 2009 it had fallen even further to $12,703.1 trillion.

However, the 2009 Mardi Gras season saw record breaking expenditures and an economic

impact of $262 million. The reason that was hypothesized at the time as to why, amidst an

economic downturn, there was not a corresponding downturn as it related to Mardi Gras was

because of the Mardi Gras cycle. While the official season runs from the second Friday before

Fat Tuesday through the end of Fat Tuesday, Mardi Gras is actually a year-round event in New

Orleans. As soon as one year’s season is over, Krewe Captains begin planning their themes for

the following year, float designers begin working on those themes, and jewelers begin designing

the gifts that have been commissioned. Thus, before the recession was acknowledge by the

general public, major economic commitments had already been made.

                                                                                                                         3I am not implying that New Orleans is ONLY Mardi Gras, but that the line where Mardi Gras ends and the rest of what New Orleans has to offer, wonderful food, great music, unique culture is impossible to draw. The existence of Mardi Gras helped to create those other assets and those other assets helped to shape Mardi Gras.  

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In order to truly assess how successful the 2011 Mardi Gras season was it is important to put it into the context of the local economy as a comparison of the national economy. The following tables provide a quick glimpse of the New Orleans economy as a comparison to both the Louisiana and National economies

As can be seen by the tables above, the Greater New Orleans Metropolitan is faring substantially

better than the nation as a whole in terms of our employment figures. Additionally, both in terms

of GDP and Personal Income, the New Orleans share as a percentage of the national numbers

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increased from 2008. However, the growth in GDP and Personal Income in 2010 was not on par

with national growth though, the growth in both in 2009 was substantially greater.

While there is not yet reliable local economic data for 2011, as has been mentioned previously, a

significant amount of expenditures for the 2011 Mardi Gras season are committed in 2010. Thus,

at a minimum, it would be expected that the economic impact of Mardi Gras would grow

between 2 ½ to 3%. When looking at just local expenditures, that goal was achieved, however,

despite moderate growth in GDP and Personal Income both at the state and nationally, there was

not a sufficient increase in demand to allow local hotels, motels, inns etc. to increase room rates

and still experience high occupancy rates.

IV. AGGREGATE  DIRECT  EXPENDITURES  

The impact of Mardi Gras on the City’s Gross Domestic Product (GDP) can be measured as the

increment to aggregate consumption spending plus business fixed investment plus government

expenditure plus net exports associated with Mardi Gras.4 As a practical matter, measuring this

impact involves enumerating and summing up expenditure data from a variety of sources. A

natural division is to sort expenditures into those occurring during the Mardi Gras season and

those occurring outside the Mardi Gras season. Again, increases and decreases in each of these

areas have been calculated by adjusting the 2009 figures.

I first estimate expenditures directly associated with Mardi Gras with an emphasis on those that

occur during the Mardi Gras season (i.e., the 12-day period beginning with the second Friday

before Mardi Gras and ending with Fat Tuesday.) I consider expenditures by five categories:

Lodging and Non-Lodging, Food and Alcohol, Merchandise, Mardi Gras Themed Tours Krewes,

Krewe Members, and City Government.

                                                                                                                         4Again, I have not included net exports  

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A. Lodging  and  Non-­Lodging  Expenditures  

Visitors come from out of town and spend money on lodging, food, transportation within the city,

merchandise purchases, and miscellaneous services. From Smith Travel Services (STR) of

Henderson, Tennessee we obtained New Orleans hotel occupancy data for the 2011 Mardi Gras

season. STR collects daily data on occupancy, room rate, and lodging revenue per room from a

large sample of Orleans Parish hotels. The hotels in the STR sample accounted for 24,303 rooms

(approximately 81% of the total of hotel rooms in Orleans Parish) during the 2011 Mardi Gras

season and were located primarily in the French Quarter, downtown and the warehouse district,

and uptown. No bed-and-breakfast or rooming house enterprises are included in the STR sample.

The information is presented in the table below.

Assuming that the STR sample is unbiased, grossing the figure up to account for the unreported

data implies the total lodging revenue for New Orleans hotels during the 2011 Mardi Gras season

was $53,395,047. A comparison with 2009 shows an increase in room days of 1.8% but a

decrease in average room rate of 7%. Therefore, even though there were more people in town, it

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was not enough of an increase to compensate for the loss of on room rates and the percentage

decrease on total hotel room revenues between 2009 and 2011 was 4.8%.

The STR data does not indicate number of visitors per room or expenditures other than on

lodging. To estimate visitor spending on non-lodging items such as food, drink, transportation

within the city and other services, I combine the STR data with information culled from other

less specific surveys. I estimate the number of visitors per occupied room to be 2.7 and spending

per person on non-lodging expenses at $59.15 per day.5 Together with the STR data, these

figures imply total non-lodging expenditures by visitors staying in hotels of $52,605,718. Thus,

lodging and non-lodging expenditures by visitors staying in hotels totaled approximately

$106,000,765 during the 2011 Mardi Gras season – a 1.6% decrease from 2009.

This estimate is likely to understate visitor expenditure during the Mardi Gras season as it vastly

underestimates the number of out-of-town visitors that come to New Orleans during the 12-day

season. While a significant number of tourists stay in hotels and thus are accounted for in the

figures above, anecdotal evidence suggests that many out-of-town visitors stay with friends in

New Orleans or rent houses or other non-hotel accommodations during the Mardi Gras season.

Additionally, many people attending Mardi Gras celebrations throughout the city come from

surrounding parishes and thus don’t stay the night in New Orleans. They do however spend

dollars in Orleans Parish that they would likely have not spent if it weren’t for Mardi Gras.

Thus, both the expenditures on accommodations and non-accommodations by visitors are greater

than stated in this report. The best way to census those tourists who do not stay in hotels and to

estimate such spending would be to conduct street surveys during the parades. In addition to

determining how many people attending Mardi Gras in New Orleans are from out of town such a

survey could ascertain approximately how much each tourist spends each day while in town.6

                                                                                                                         5 From the Mardi Gras Jefferson Parish 2008 study conducted Hospitality Research Center at the University of New Orleans. This number may have increased, though again, in light of the national economic situation and the low levels of inflation it is unlikely to have increased significantly enough to see a positive change in lodging and non-lodging expenditures by hotel visitors. 6 A study much like the one described here was conducted in Jefferson Parish by researchers at the Hospitality Research Center of the University of Louisiana at New Orleans during the 2009 Mardi Gras season.

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B. Food  and  Alcohol  

Out-of-town visitors are not the only group that spends dollars during Mardi Gras. Locals spend

money on entertaining out of town guests, incremental food and beverage consumption,

incremental transportation within the city, and merchandise purchases including Mardi Gras

themed jewelry, clothing, and household decorations. A survey such as the one briefly described

above would not only more accurately aggregate the dollars flowing into the City from the

outside, but would also provide a better idea of local spending patterns. In the absence of survey

data, I used a proxy variable approach to estimate spending by locals and their guests and day

visitors.

It’s hypothesized that if a household has guests staying with them during Mardi Gras then that

household’s grocery bill would increase. Additionally, many people host parties and open

houses on parade days – events that all require some food and beverage being served. While

some people might have those functions catered by an area restaurant, much of the additional

spending would be done at area grocery stores. Thus, it is believed that a portion of grocery

stores’ revenues during the Mardi Gras season can be directly attributed to Mardi Gras and

therefore can be included in the economic impact that Mardi Gras has on the New Orleans

economy. Additionally the sales taxes collected on those sales would work to offset the costs to

the City of New Orleans of staging Mardi Gras.

Only those stores located in Orleans Parish were considered. A few stores graciously provided

revenue figures for the relevant time frame and organized it by department so that sales of

alcoholic beverages could be aggregated separately. From these figures, I computed revenues

per square foot and, using the square footage of other stores, computed total grocery revenue for

the Mardi Gras period. Some adjustments were required. Not all sales during the 12-day season

can be contributed directly to Mardi Gras. Yet, strictly looking at the increase in sales from one

week to another would underestimate the dollars as many households put off doing their “normal”

grocery shopping during the week and most particularly during the weekends of Mardi Gras.

Additionally, I was not able to gather revenue figures on all grocery sales within Orleans Parish.

It is believed that the overestimation on one hand will cancel out the under estimation on the

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other. It is estimated that $2,494,386 in grocery store sales excluding alcoholic beverages can be

directly associated with Mardi Gras in 2011, a 12% increase over 2009.

To obtain information on incremental sales of alcoholic beverages, I contacted a number of beer,

wine and liquor distributors who serve New Orleans. The data they provided indicate that there

is a considerable increase in sales of alcoholic beverages during the Mardi Gras season. Sales of

beer increase the most (more than 20%) with a smaller increase in sales of hard liquor. Most

indicators, however, do not show a significant increase in wine sales during Mardi Gras. Based

on the information provided by distributors and comparing it to estimates made for the 2009

study I estimate a 30% increase in incremental sales of alcoholic beverages during the Mardi

Gras season. Thus the total expenditure on alcohol during the 2011 season is estimated to be

$3,403,752.

C. Merchandise  and  Services    

Mardi Gras themed merchandise, jewelry, publications, and tours generate a huge amount of

economic impact both during the 12-day Mardi Gras season and throughout the year. A

significant amount of expenditures on merchandise that are directly associated with the actual

season have been accounted for in the Krewe and Krewe member survey,7but that still leaves

jewelry, publications and tours to be discussed here.

Information regarding print publications reflects national trends while revenue sales of online

publications were not available. Therefore, the annual total sales in New Orleans of print

publications relating to Mardi Gras were $486,111 representing a 12.5% decrease since 2009.

On a more positive note, however area jewelers do a substantial Mardi Gras business and 2011

was no exception. Krewe organizations commission works based upon their theme and are

presented as party favors at the balls. Further, Krewe royalty also spend money on jewelry to be

                                                                                                                         7For a detailed discussion related to merchandise sold in tourist shops around town see the 2009 study.

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presented to their court. Both of these expenditures are included in the figures to follow. But,

there are additional expenses on jewelry and jewelry related items, that are not be included as

part of the Krewe Captain survey. These expenditures would consist of gifts bought by

individuals both by locals as well as tourists who are in town during the season. Additionally,

Mardi Gras themed items are purchased throughout the year from area jewelers either in person

by tourists in town at times other than Mardi Gras or through jewelers’ internet sites and/or mail

order business. Based on discussions with area jewelers, I estimate that $1,157,143 was spent on

Mardi Gras related items not already included in the Krewe Captains survey. This represents an

8% increase from 2009 based upon an increase in expenditures of individual members of Krewes

on gifts and a decrease in displacement expenditures from Valentine’s Day.

In addition to merchandise related to Mardi Gras, some New Orleans businesses sell Mardi Gras

themed “services.” Blaine Kern’s Mardi Gras World is the most famous of these businesses.

Kern Studios is the preeminent Mardi Gras float builder in the world and own huge warehouses

where the floats, and the tractors needed to pull them during parades, are housed and displayed.

Mardi Gras World is a museum/attraction in which visitors can tour some of the warehouses, see

many of the floats up close and learn about both the history of Mardi Gras and the art of float

building. Additionally, Blaine Kern Studios and Mardi Gras World stage Mardi Gras parade

events all over the United States outside of Mardi Gras season. They also have party spaces

available that can be rented out year-round for Mardi Gras themed parties.

While Blaine Kern’s many businesses are the largest and most well known in this business

segment, other tour operators in town also profit from Mardi Gras related business. I estimate

aggregate expenditures in this industry as a direct result of Mardi Gras to have increased

approximately 2.5% for a total of $4,184,929.

D. Mardi  Gras  Krewes  

Mardi Gras Krewes, the individual organizations, spend money on floats, throws, costumes,

licenses, party venues, decorations, food and a host of other things related to parades and balls. I

include these expenditures here even though much of the spending is done outside the 12-day

Mardi Gras season – float design and storage costs are incurred year round, for example, and

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many balls are held outside the strict time window of Mardi Gras -- because they are so closely

related to events that occur during the season. To estimate expenditures by Krewes, a

questionnaire was designed and distributed to all of the Captains of all of the Krewes that parade

in Orleans Parish.8

Using the information provided in the surveys as well as from anecdotal evidence gathered

through interviews, the aggregate of all expenses are outlined in the table below.

This figure represents a 2.3% increase from 2009.

E. Krewe  Members  

In addition to spending by Krewes, Krewe members separately spend money on balls, throws,

costumes, jewelry, and miscellaneous services such as transportation within the city. In our

survey of the Krewes, I asked the Krewe captains to quantify estimated amounts of spending by

Krewe members on parades, balls, and Krewe social events. An aggregate of the responses are

presented in the table below.

                                                                                                                         8 See Appendix A

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F. Government  

City government spends money during Mardi Gras to maintain public safety and provide public

services. Key expenditures include police and fire department overtime and incremental

property management, parks and recreation, and sanitation expenses. The City of New Orleans

keeps records of the expenditures it makes relating to major events including Mardi Gras as part

of its budget planning and control processes. The table below presents information obtained

from the Chief Administrative Office with in City Hall on expenditures associated with public

services provided during the 2011 Mardi Gras season. The largest city expense, by far, is

overtime payments to police, primarily for maintaining the public safety and traffic control at

parades and on Mardi Gras day. Clean up expenses funded by the sanitation department

represent another large outlay. Also note that some city departments actually make money from

Mardi Gras activities through fees and rental of city-owned resources.

What is most interesting about these numbers are how they compare to the City’s expenditures in

2009; a 29% decrease in City outlays from two years ago. This is obviously a benefit for the

citizens as it illustrates a greater degree of fiscal responsibility. Additionally, it means that every

tax dollar generated as a result of Mardi Gras generates a greater return on the City’s investment.

The table below shows the City’s expenditures and revenues as a direct result of staging Mardi

Gras.

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G. Summary    

The following table outlines the direct expenditures associated with Mardi Gras.9,10

                                                                                                                         9Not all changes in expenditures as a direct result of Mardi Gras are positive – some are negative due to a decrease in business and productivity. For a more detailed explanation, refer to the 2009 study. 10Business Fixed Investment is another component of GDP but is not included in this study. For a more detailed explanation of why, refer to the 2009 study.

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V. Incremental  Tourism  and  Brand  Value  

Mardi Gras has a “franchise” value that extends well beyond the direct incremental spending

associated with the occurrence of Mardi Gras. Mardi Gras has been celebrated in New Orleans

since the early 1700’s and has become nearly synonymous with the city. Throughout its history,

Mardi Gras in New Orleans, like Carnival in Rio de Janeiro, has been an attraction to tourists.

To support such tourism, the city developed an extensive infrastructure of lodging, food and

drinking establishments, retail shops selling themed merchandise, and so forth, from which other

events and businesses, such as conventions, unrelated to Mardi Gras per se, could benefit.

Even outside of the Mardi Gras season, tourists are attracted to New Orleans by the Mardi Gras

brand.

The economic “knock-on,” or spillover, effects of Mardi Gras are difficult to quantify, but likely

to be very large. For the 2011, it was estimated that the range of possible values of an

incremental multiplier, expressed as a multiple of measured expenditures, was between 0.5x to

2.0x, and an un-weighted average was taken. For 2011, given the national economic situation it

would be more prudent to lower the expectations on the size of the brand value be weighing the

average a bit more heavily on the lower end. The weighted average estimate of the aggregate

economic activity in New Orleans associated with Mardi Gras is $300,656,546 as shown below.

 

 

This is a 6.7% decrease from 2009 which can be explained by fewer tourist dollars coming into

the city and while the decreases in the City’s expenditures is ultimately a positive, it does

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translate into a lower economic impact for the city as government expenditures are part of GDP.

Thus, using the New Orleans GDP figure of $20 billion stated earlier, this figure represents an

estimated 1.5% of the GDP of New Orleans, again a decrease from 2009. But to restate from

earlier in this report, the GDP of the Greater New Orleans Area is growing faster than the

national GDP and therefore this decrease in the percentage that Mardi Gras constitutes of the

local GDP is completely expected. As perpetuity, the present value of the total economic impact

is about $6 billion at today’s interest rates and adjusting for inflation.

VI. NET  FISCAL  BENEFIT  

The net fiscal benefit of Mardi Gras equals the total increment in City revenues (taxes and fees)

related to Mardi Gras minus the total increment in City expenses associated with Mardi Gras. To

measure net fiscal benefit requires enumerating the incremental City revenue and expense flows

associated with Mardi Gras. As stated above, City expenses can be measured from budget data

and amounted to $1,759,703 for the 2011 Mardi Gras season. Incremental revenues, especially

taxes, on the other hand, cannot be measured directly from City budget data, and so must be

computed indirectly. I use two approaches: In the first approach, I apply statutory tax rates to

direct expenditures associated with Mardi Gras, adjusting, where relevant, for non-taxable

expenditures. This is called the direct expenditure method. A disadvantage of this method by

itself is that it ignores the leverage (economic spillover) effects of Mardi Gras. I correct this

oversight by applying a hypothesized aggregate tax rate to our median estimate of incremental

private spending associated with the franchise value of Mardi Gras and adding the result to the

first figure. This second approach is called the aggregate expenditure method.

As shown in the table below, the direct expenditure method produces an estimated net fiscal

benefit to the City of $7,771,095.In this table, the expenditure figures have been adjusted to

eliminate non-taxable spending. This is a huge increase over the 2009 Mardi Gras season as a

direct result of the decrease in City expenditures. Regarded as a return on investment, the City’s

support for Mardi Gras is clearly a positive project for the City; it returned $5.42for every dollar

spent.

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Augmenting the direct approach using the aggregate expenditure approach, applying a 3%

average tax rate to the weighted average estimate of the incremental spending associated with the

franchise value of Mardi Gras, I obtain an estimated net fiscal benefit of $13,108,538 or a return

of $8.45 for every City dollar spent.

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VII. CONCLUSION  

The main conclusions along with additional relevant information are outlined in the table below.

Using the figures above we can see that the direct expenditures associated with Mardi Gras

account for 0.7% of the New Orleans GDP but when I include the brand value that most certainly

exists, that percentage increases to 1.5%. This may, at first glance, appear to be a small number,

when put it into context it is quite extraordinary. A 12-day festival comprising such a significant

component of a major metropolitan city’s GDP is quite remarkable particularly in light of some

of the other major industries within the City such as the Port of New Orleans, Tulane University

(our major employer) and the health care industry.

Even more impressive is the return on investment that the City enjoys each year. If a comparison

is made between the expenditure of the City to its net fiscal benefit without grossing it up to

account for the brand value, every dollar that the City spends to stage Mardi Gras results in a

$5.42 return. Doing the same calculation but comparing City expenditures to the net fiscal

benefit grossed up to include brand value results in a $8.45 gain for every dollar spent.

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It is important to remember that the figures reported here to measure the economic impact of

Mardi Gras on the New Orleans economy are likely understated because it does not include

incremental restaurant business, airport usage or any business fixed investment, and probably

underestimates Mardi Gras related spending by locals.

I have noted throughout this report that while my estimates make best use of the data I have

accumulated, they could be improved and sharpened by cleaner, better, and more comprehensive

data. The survey of carnival Krewes shows that valuable data can be collected directly from

sources. Other surveys are necessary to gather information on spending by locals and visitors

and sales of Mardi Gras related merchandise, for example. Obtaining high quality information

will be expensive, but valuable.

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APPENDIX  A  –  KREWE  CAPTAINS  SURVEY  Below is the complete questionnaire that was sent to all Krewe Captains.

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