Murray, Thomas J.

English

College of William & Mary: W&M Publish

W&M ScholarWorks Reports 7-1-2015 Aberdeen Creek Dredging Project – Restarting an Economic Engine Thomas J. Murray Virginia Institute of Marine Science Follow this and additional works at: https://scholarworks.wm.edu/reports  Part of the Aquaculture and Fisheries Commons Recommended Citation Murray, T. J. (2015) Aberdeen Creek Dredging Project – Restarting an Economic Engine. Marine Resource Report No. 2015-09. Virginia Institute of Marine Science, College of William and Mary. http://dx.doi.org/doi:10.21220/m2-vdyc-cw18 This Report is brought to you for free and open access by W&M ScholarWorks. It has been accepted for inclusion in Reports by an authorized administrator of W&M ScholarWorks. For more information, please contact scholarworks@wm.edu. Aberdeen Creek Dredging Project –Restarting an Economic EngineJuly 2015Thomas J. MurrayVirginia Institute of Marine ScienceVirginia Sea Grant-Affiliated ExtensionVIMS Marine Resource Report No. 2015-9VSG-15-02Additional copies of  this publication are available from: Thomas J. MurrayMarine Advisory ServicesVirginia Institute of  Marine ScienceP.O. Box 1346Gloucester Point, VA 23062804/684-7190tjm@vims.eduwww.vims.edu/advCover Photo:  Overhead aerial view from Google Earth.This work is a result of  research sponsored in part by, under Grant No. NA13NOS4190135, to the Vir-ginia Department of  Environmental Quality through the Virginia Coastal Zone Management Program. The views expressed herein do not necessarily reflect the views of  any of  those organizations. In addition, this work is affiliated with the Virginia Sea Grant Program, by NOAA Office of  Sea Grant, U.S. Department of  Commerce, under Grant No. NA10OAR4170085.  The views expressed herein do not necessarily reflect the views of  any of  those organizations. 1Overview and Purpose of the Study This study was performed to illustrate and quantify how much working waterfronts in this case, a small waterway serving seafood unloading and processing facility, contribute to the local and regional economy.  Gloucester commercial workboats returning from harvesting trips face an often dif-ficult navigation of  Aberdeen Creek to unload at what once was the Gloucester Seafoods was a significant landing and processing facility.  Aberdeen Creek is a classic example of  a working waterway representing a critical nexus between the marine fisheries and the community; providing one of  the few remaining commercial fishing unloading points in Gloucester.  In view of  this, the facilities economic place in the commu-nity once unique, may again be fiscally important.This study estimates the economic impact (i.e., expenditures, economic output, incomes, and jobs) of  Aberdeen Creek’s commercial fisheries landings, processing/packing industry to the local economy.  Gloucester’s commercial fisheries industry has historically represented an important compo-nent of  the Commonwealth’s commercial seafood indus-try.  The off-loading of  fishery products at the Gloucester landing facility sets in motion a number of  economic activi-ties that results in the sale of  fresh and frozen value-added seafood products outside of  Gloucester.  These economic activities include spending and re-spending of  dollars, which creates incomes and jobs within several associated industries and markets.  The amount of  economic activity associated with the Gloucester landings is directly related to the volume of  seafood off-loaded into the local processing facilities.  The volume harvested is determined by the number of  water-men unloading at the facility which is also determined by a number of  factors such as availability of  competitive unload-ing facilities, stock abundance and fishing effort, which are in turn affected by environmental conditions in the regions, short-term weather conditions, and the general market for seafood specific fishery products such as flounder.  2Methodology Collecting the Necessary Data In order to understand the linkages with related industry sectors associated with off-loading, processing and packing seafood in Gloucester, interviews were conducted with the owners of  seafood facilities in Gloucester and  the middle peninsula who have recently begun to  use Aberdeen Creek as an loading and unloading point primarily for hard crabs and oyster production.  Economic Impact Estimation The fishery landing information collected is utilized in estimating the beginning economic activities in the Glouces-ter Economy.  These economic activities take the form of  initial expenditures, economic output, wages and salaries, and employment. Values for each of  these are estimated by employing the IMPLAN model, a computer software and database package designed for regional economic impact analysis in the United States at the county level (Minnesota Implan Group, Inc., 1997).  The analytical framework for IMPLAN is the “input-output” economic modeling approach originally described by Leontief  (1959).  The model utilizes databases consisting of  a set of  social/economic accounts which describe the struc-ture of  the US economy in terms of  transactions between households, governments, and over 500 standardized indus-try sectors classified on the basis of  the primary commodity or service produced. Regional models may be constructed in IMPLAN for any county, group of  counties, or state or territory in the United States.  Economic impacts and activities for a given region are specified in IMPLAN as a change in final demand, output, or employment for a particular industry sector or social institution (e.g., households, government).  The aggre-gate economic impact of  these changes is calculated by a matrix inversion procedure that develops economic multipli-ers, which reflect the direct, indirect and induced impacts. Direct, indirect, and induced impacts are set in motion within Gloucester County by changes in the supply and demand of  raw seafood, which in turn affects the demand for the goods and services associated with producing raw seafood. Gloucester SeafoodThe commercial seafood industry in Gloucester and the Middle Peninsula represents a “basic” industry e.g. producing a product for sale outside the local area. Dollars generated through these out-of-county sales (or consumption locally by non-residents), when re-spent in the community, produce additional countywide economic impacts.  A “basic” indus-try directly affects economic activity in the region when its product is sold outside the local area.  For the commercial seafood industry in Gloucester, this would include sales, jobs, and earnings generated in commercial fishing and other activities related to the preparation of  the seafood for shipping to market.  These direct activities produce addi-tional indirect effects in the local economy as dollars earned through the sale of  seafood are re-spent locally.  Indirect effects represent purchases of  local products by seafood vessels, such as ice, fuel, gear and net repair, groceries, etc.  All the indirect effects are additional economic activity in the community and are indicative of  additional jobs and income generated by the sale of  seafood outside the community. Direct and indirect activities associated with commercial seafood harvesting, processing and the sale of  seafood outside Gloucester then produce additional (induced) local impacts.  These impacts are associated with the spend-ing of  income earned in the direct and indirect activities.  This spending translates into local retail sales, local bank deposits, and the purchase of  a diverse mix of  consumer goods.  An assessment of  the total economic impact of  a basic industry, such as commercial seafood on Gloucester, must consider the sum of  the direct, indirect, and induced activities.  In essence, the sale of  Gloucester landed fishery products outside the community triggers a chain of  local spending, which generates income and leads to additional spending.  This process, however, is not infinite in nature. At each round of  spending, for example, some dollars are lost (leaked) from the local economy.  Leakages are in the form of  savings in non-local institutions, taxes/fees paid to the state and federal governments, and payments for goods and services used in the preparation of  raw seafood for market, which are initially purchased outside the local area.  Thus, the true economic impact from non-local sales of  Gloucester-landed seafood is represented by the new dollars remaining after accounting for the various leaks in the “economic hull” of  the Gloucester economy and the Gloucester seafood processing/packing industry. Total economic activities and impacts to the Gloucester economy associated with off-loading seafood in Glouces-ter are estimated below (Table 1).  The direct, indirect, and induced affects, in terms of  economic output (sales of  seafood), personal incomes, total value added (wholesale margin), and employment is estimated via the IMPLAN model.  The estimates are from actual landings and financial information for 2012. 3Results Gloucester Industry / Economy Linkages The economic linkages between the Gloucester seafood processing/packing industry and other sectors of  the local economy were revealed in part through individual interviews and consultations with members of  the local business community in Gloucester.  The economic activi-ties associated with the seafood industry are set in motion by the landing of  seafood raw seafood flows to the processors/packers as dockside rev-enues flow to the vessels. The raw seafood is then processed (gutted, graded, boxed, iced, etc.) by the processors/packers. To accomplish this task, however, sup-plies are purchased from local suppliers of  goods and services, while labor is purchased from local households. Some seafood is sold to local seafood distributors and retail-ers, but the majority is sold to wholesale firms outside of  the region.  The revenue generated by these “export” sales repre-sents new dollars in the Gloucester economy are then spent again and again within the local economy as earnings by local households are used to purchase goods and services from other local businesses and seafood from local seafood dealers. In addition, dockside revenues initially paid to seafood vessels is used by crewmembers to purchase goods and services from both fishing-related suppliers and other local businesses. Some dockside revenues are used to purchase labor from local households as seafood vessel crewmembers.  Some dockside revenues may also be retained in the local economy by vessel owners who reside in Gloucester households.  Finally, some of  this revenue is used to re-initiate the process by purchasing the next load of  seafood that arrives at the dock. Economic Impacts Associated with Gloucester Seafood Industry The economic impacts associated with the seafood industry on Gloucester were estimated with IMPLAN.  Estimates for only one set of  annual assumptions for a given year or set of  resource/market conditions may be significantly different in the following year.4Findings of the IMPLAN Economic Impact Analysis The magnitude of  the estimated economic impacts is directly related to landings volumes, dockside price, whole-sale markup, and the export percentage.  Thus, the actual economic impacts associated with the Gloucester seafood industry will vary from year to year.  As landings increase, the economic impacts will increase (assuming all other factors remain proportionally constant).  Similarly, as landings or market price for seafood decrease, the economic impacts will also likely fall.This is of  interest given the reported constraints on moorage space that confront the seafood processing/packing activities on Gloucester.  Seafood-laden vessels returning from a trip will moor in a parallel fashion at the dock in front of  one of  the facilities.  The seafood is off-loaded by hand or mechani-cally.  This task is time consuming and requires the use of  both vessel deckhands and workersfrom the landside.  Once the vessel is emptied, it will move out of  the way to make room for the next vessel to be off-loaded.  The empty vessel will moor at an adjacent location and begin servicing (i.e., maintenance, refueling, repair, etc.) required for the next trip.  Vessels will be moored three and four abreast for several days as they wait servicing for the next trip.  The logistics of  accepting additional vessels to be off-loaded becomes a problem when there is insuf-ficient room at the docks to moor empty vessels.  When the moorage space within the basin is fully utilized, incoming vessels may need to be off-loaded at other suitable locations which are limited in number and capability.In such an event the economic activity associated with the seafood products that would have been off-loaded in Gloucester is lost to the local economy; as well as the pro-visioning of  the vessels for the next fishing voyage.  These values provide an estimate of  the economic impact that is lost to the local economy if  a seafood vessel is turned away from Gloucester and off-loaded in an alternative port facility out of  the region.Aberdeen Creek Value Added Analysis As an additional inquiry the amount of  locally landed seafood that remains in the County for further processing, handling and distribution at the wholesale and retail levels determine the additional impact of  every dollar of  seafood products landed at Aberdeen Creek.  There is not detailed market channel distribution informa-tion for Gloucester landed seafood to determine how much of  the product adds additional value added levels to the community via processing, secondary wholesale and con-sumption (both retail and food service).  It is known via the interview process that considerable quantities of  crabs and oysters ultimately are consumed in Gloucester County or are subject to further value added distributions.  To address that additional economic activity and for the sake of  exposition it is assumed for additional modelling purposes that 25% or 50% of  the product landed via Aberdeen Creek remains in County for additional value added activity.  The impacts associated with the product flow/mark up assumptions are shown in Tables 2-5.567Conclusions The seafood processing/packing industry on Gloucester represents an important component of  the local economy. Activities associated with harvesting, offloading, processing, packing, and shipping seafood from the Gloucester facili-ties has been shown to be intrinsically linked with several sectors of  the local economy. These activities create positive economic impacts to the local economy as seafood products are sold to buyers located outside of  Gloucester and non-residents purchase seafood locally. The sale of  seafood to both local and non-local buyers results in the purchase of  inputs from a variety of  service and supply firms, and the distribution of  incomes to local employees. These expendi-tures are circulated within the Gloucester economy as these dollars are spent and re-spent. The total economic impact of  the Gloucester seafood industry depends on the amount of  seafood landings and the general economic conditions that exist at any given time. Thus, the actual impact values will vary from year to year. The recent resurgence of  seafood landings at Aberdeen Creek provide a glimpse of  what may be in the future.  The tables above summarized a post dredging build-out in land-ings based upon an average increase of  5% per year.  As summarized below in Table 6, even the existing economic activity is already significant for just the landings at Aberdeen Creek.   As is also shown much of  the product may remain in the County for further processing and distribution adding to the actual economic impacts are significant.These values can also be viewed as the losses associated with an offloading event that may be diverted from Gloucester if  commercial fishing waterfront facilities in Gloucester are in accessible due to water depth or otherwise made unavailable. This study has shown that the seafood processing/packing industry on Gloucester generates positive economic impacts to the local economy. Any decisions to address the water access for commercial seafood operations such as those that currently exist should carefully consider the economic contri-butions associated with the industry, while comparing against the costs of  creating additional moorage space or reconfigur-ing the existing dock space. ReferencesLeontief, W.  1959.  The problem of  quantity and quality in economics. Daedalus, 88(4), 45–57.Kirkley, J. E. and T. J. Murray.  2005.   Economic Contributions of  Virginia’s Commercial Seafood and Recreational Fishing Industries:   A User’s Manual for Assessing Economic Impacts.  VIMS Marine Resource Report No. 2005-9.  Minnesota IMPLAN Group, Inc.  2008.  IMPLAN Professional 3.0, Economic Impact and Social Accounting Software and Data.  2010 IMPLAN State Package for Virginia. Stillwater, MN.  http://www.implan.com.Murray, T. J. and K. Hudson.  2013. Economic Activity Associated with Shellfish Aquaculture in Virginia - 2012.  VIMS Marine Resource Report No. 2013-4. 

Aberdeen Creek Dredging Project – Restarting an Economic Engine

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Aberdeen Creek Dredging Project – Restarting an Economic Engine

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