RETURN ON INVESTMENT STUDY

Transcription

1 RETURN ON INVESTMENT STUDY SUBMITTED TO KEEP TEXAS BEAUTIFUL MARCH 2016 FINAL

2 Executive Summary Keep Texas Beautiful (KTB), a state affiliate of Keep America Beautiful (KAB), retained Burns & McDonnell (BMcD) to conduct a return on investment (ROI) study for the annual funding KTB receives from the Texas Department of Transportation (TxDOT). TxDOT acknowledges the benefits of its litter prevention and abatement partnership with KTB and Texas affiliates, and has expressed an interest in better understanding the ROI received from the funding provided to KTB. BMcD developed this study to provide TxDOT, as well as the affiliates, with important economic information in an effort to communicate the value KTB s programs provide to the State of Texas and its communities. Background Section 1 provides a historical overview of KTB and TxDOT funding. The section also details the services KTB provides to TxDOT and affiliates. Based on those services, the section summarizes the historical economic value and resulting ROI created by KTB and affiliates. In 1985, TxDOT highway maintenance costs were $20 million per year. Recognizing the need to reduce litter along state highways, TxDOT appropriated $300,000 for KTB to operate as the statewide umbrella organization over all accredited community anti-litter programs. This was formally approved by TxDOT via Minute Order (the Order). 1 KTB serves to: 1. Reduce state spending on cleanup of state roads due to local level initiatives. -Minute Order At the time, 48 KTB affiliates 2 served approximately 70 percent of the state s population, or 11.4 million Texans through beautification and litter prevention and abatement programs 3 to improve local environments. Presently, KTB supports the nearly 400 affiliates that serve over 21 million Texans with these programs. It does so with $400,000 per year in aid from TxDOT in addition to other funding 1 A Minute Order is a binding legal document prepared for TxDOT Commission meetings. 2 Some KTB affiliates hold dual certification as KAB affiliates 3 In addition to TxDOT-related litter prevention and abatement programs, KTB offers other waste reduction programs such as Recyclemania, Keep Texas Waterways Clean, etc. ES-1 Return on Investment Study Final

3 sources. Figure ES-1 presents TxDOT funding for KTB and the number of affiliates since As the graph indicates, funding has plateaued while the number of affiliates continues to grow. Figure ES-1: Texas Affiliates and TxDOT Funding From this funding, KTB provides TxDOT and the affiliate network with the following services: Promoting and administering youth education programs on litter prevention Supporting additional TxDOT litter prevention and beautification programs through KTB public information and public affairs, community certification and grassroots volunteer service programs Administering and promoting the Governor s Community Achievement Awards (GCAA) competition and program Administering and promoting the affiliate state certification program and KAB system affiliation Helping to administer and promote cleanup programs Creating affiliate networking, development and training opportunities ES-2 Return on Investment Study Final

4 The economic value of KTB and subsequent affiliate services is much greater than current TxDOT funding levels of $400,000 annually. KTB has historically reported its economic value estimate as Return on Investment Range: a range based on KTB created Economic Value of KTB Created Value / TxDOT Revenue value (includes services such TO as volunteer hours, in-kind Economic Value of TxDOT Avoided Costs / TxDOT Revenue donations, and trees planted 4 ) to TxDOT avoided costs (includes services such as miles of TxDOT maintained roadways cleaned by affiliate volunteers). The FY2016 KTB Annual Marketing Plan (AMP) reports a value ranging from approximately $9.2 million in created value to $37.4 million in avoided costs based primarily on volunteer hours worked and miles of TxDOT highway cleaned. 5 This results in an ROI of $23.18 to $93.43 per $1 funded by TxDOT. Figure ES-2 presents these created values and cost avoidances over the past six years. 4 Not part of TxDOT services contract. One goal of this study is to help KTB more accurately report its economic value for TxDOT. 5 Rates based on a national volunteer hourly rate and the TxDOT Litter Expenditures spreadsheet. ES-3 Return on Investment Study Final

5 Figure ES-2: Historical KTB Economic Value 6 State of Texas Return on Investment from KTB Programs As detailed in Section 2, BMcD developed an ROI model that incorporates existing and new data to provide a more detailed account of KTB and affiliates economic value for TxDOT to generate an ROI range. To provide an ROI that would be compared to historical amounts estimated by KTB, BMcD quantified the values based on created value from existing KTB and affiliate services and TxDOT avoided costs by having those services performed by KTB and affiliates. In developing the economic value, BMcD Burns & McDonnell estimated an ROI ranging from $51.56 to $ per $1 funded. This range was higher than the historical amounts KTB has provided to TxDOT, which was $23.18 to $93.43 per $1 funded in FY The substantial increase in avoided costs from FY2011 and FY2012 is likely because KTB transitioned affiliate data submission format to the current Wrap-Up Report form. According to KTB, the affiliates found this format much easier to use, which contributed to a higher response rate and corresponding values. ES-4 Return on Investment Study Final

6 independently reviewed the key historical data tracked by KTB in quantifying its economic value. Furthermore, based on research undertaken during the course of this study (as described in Sections 3 and 4 of the study), BMcD identified additional categories to include in the ROI model to capture a more complete economic perspective. Based on input from multiple sources including TxDOT BMcD found that TxDOT directly benefits from affiliate operations across nearly 400 Texas communities. KTB and the affiliate network have made substantial progress in reducing litter on Texas roadways over the past 30 years, which was most recently confirmed from results from the 2009 and 2013 Texas Visible Litter Surveys. In developing the approach for this study, BMcD recognized the importance to account for the value based on miles cleaned and volunteer hours. In addition, this study recognized and sought to quantify the value for TxDOT in the administration of the approximately 400 affiliate operations and services, such as litter prevention educational events and cleanup event promotion. Correspondingly, the ROI model accounts for the created and avoided cost values associated with the KTB affiliates performing TxDOT-related services, which include categories such as annual operating costs (e.g. staffing and indirect costs) and in-kind donations. The KTB economic value has not historically quantified this affiliate-derived value. Based on BMcD s analysis, the annual ROI range for TxDOT-related KTB and affiliate services is $51.56 to $ per $1 funded by TxDOT. This ROI range is based on an annual economic value of $20,624,908 for value created by KTB and affiliates to $49,386,120 for TxDOT avoided costs. In other words, BMcD found that KTB provides close to $20 million in annual created value to TxDOT and that TxDOT would need to spend close to $49 million annually to replace the services provided by KTB and the affiliates. Table ES-1 summarizes the services identified to determine the ROI range. In addition to the values quantified in the ROI model, there are many other services provided by KTB that have tremendous value, but are challenging to quantify in an econometric model. These services include, but are not limited to, the educational and outreach efforts, as well as cleanup event promotion. ES-5 Return on Investment Study Final

7 Table ES-1: FY2015 TxDOT Return on Investment Range Services Valued KTB and Affiliate Created Value TxDOT Avoided Cost TxDOT Contract Execution (by KTB) $546,034 $727,351 TxDOT-Related Affiliate Operations (by Affiliates) $20,078,874 $48,658,769 Total Economic Value $20,624,908 $49,386,120 Annual TxDOT Funding $400,000 $400,000 Return on Investment per $1 of TxDOT Funding $51.56 $ Figure ES-3 presents the differences in economic value based on the ranges developed by KTB, as compared to the value estimated by BMcD. Figure ES-3: Historical KTB Versus BMcD Modeled Economic Value for TxDOT-Related Services $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 Keep Texas Beautiful Annual Marketing Plan Burns & McDonnell Return on Investment Model $10,000,000 $0 Created Value Avoided Cost A key question associated with this study focuses on what KTB could do to further increase the ROI with additional TxDOT funding. With additional TxDOT funding, KTB would be able to offer its affiliates more programs and support services to grow services that the network provides to Texas communities. Based ES-6 Return on Investment Study Final

8 on input provided by KTB, the following list presents new efforts that could be funded by additional TxDOT funds: Improve Regional Education Efforts: Examples include regional conferences and training, enhancing Don t mess with Texas outreach and customizing campaigns for affiliates Expand Cleanup Efforts: Increase supplies, spend more staff time on coordination with affiliates and promoting events and expanding cleanup efforts during the year Grow GCAA Participation: More effectively recognize winning applications statewide and solicit marketing support to increase future applications Increase Staffing Levels: May include field staff to recruit new affiliates and promote programs and increase staff hours for managing on-going Adopt-A-Highway and TxDOT youth programs Stakeholder Interviews To aid in the comprehensiveness of the study, BMcD interviewed a variety of stakeholders outside of KTB staff. Section 3 presents the results of the stakeholder interviews. The stakeholder interviews were useful in developing the ROI model, documenting the data collection process, and validating the adequacy of the performance measures. Table ES-2 summarizes key interview information. To respect the confidentiality of the stakeholder responses, Section 3 presents the information in an aggregated format. Table ES-2: Key Information from Stakeholder Interviews Stakeholder(s) Affiliate Directors from 11 Texas communities of varying sizes TxDOT Project Manager for the KTB Contract Key Information Generally, the performance measures requested by KTB and KAB capture the data to determine affiliate economic value. The directors tended to be conservative in their reporting. Contract administration and execution are very satisfactory. However, KTB could capture more value created by KTB and affiliates. TxDOT seeks to understand the ROI for services provided to TxDOT through the KTB contract such as what it would cost TxDOT to operate all the affiliates across Texas. ES-7 Return on Investment Study Final

9 Stakeholder(s) KAB State Affiliate Directors from three states KAB CEO Two KTB sponsors Mayor from an affiliate community Key Information Other states use the same performance measures as KTB to determine economic value as some receive funding from their state government. However, none of the state directors interviewed collect data on the costs to run local affiliates. KAB recognizes that there is a need to align national and state data requests from the affiliates. A national working group comprised of state and local affiliates is addressing this issue. The current KTB reporting program with the AMP and one-page infographic conveys the needed performance information. His affiliate has had an impact on reducing local government spending and increasing the tax base. Stakeholder interviews validated significant indirect economic benefits. Multiple stakeholders interviewed communicated the substantial indirect economic benefits KTB and the affiliate network create for the communities they serve. Table ES-3 presents an abbreviated summary of key affiliate services and their impact on their communities based on stakeholder interviews. Table ES-3: Indirect Economic Benefits Affiliate Service Reduction of visible litter (Cleanup events) Graffiti removal and community garden construction Youth litter prevention educational events Impact Increase in business activity and property values 1 Contributes to direct travel spending 2 Decrease in blight Positive anti-littering behavioral changes that influence family members and friends resulting in cleaner communities and improved local economies 1 This observation has been documented in previous litter studies (National Visible Litter Survey and Litter Cost Study [2009]). 2 Texas is a favorite destination for both domestic and international visitors and continues to see direct travel spending increases. The Texas travel industry is the second largest industry in the state behind oil and gas production and manufacturing (The Economic Impact of Travel on Texas [2015]). ES-8 Return on Investment Study Final

10 KTB Data Collection Process The KTB data collection process relies on multiple parties from across the country to collect, aggregate, and report their information. Section 4 documents the KTB data collection process from its origination in the field to AMP publishing. Figure ES-4 summarizes the process. Figure ES-4: KTB Data Collection Process Recognizing challenges with the process, KTB requested that this study examine the entire data collection process and provide recommendations for improvement. This study presents an analysis of each step in the process and provides recommendations for process optimization. Most of the recommendations address the issues with some volunteer and affiliate data submission, capturing the necessary performance measures (detailed in Section 5), and KTB data management. KTB Performance Measures KTB and KAB require their affiliates to submit annual and event-specific performance tracking reports to document affiliate conditions and progress. The performance tracking reports are an affiliate certification requirement for KTB and KAB, and their content is valuable to sponsors and donors seeking to quantify their investment in KTB, KAB, and their affiliates. Section 5 presents the existing and recommended performance measures for affiliates in the KTB and KAB performance tracking reports. BMcD worked with KTB to modify the list of performance measures ES-9 Return on Investment Study Final

11 in the KTB reports and identified performance measures in the KAB reports that could be used for future ROI modeling efforts. KTB and KAB are presently capturing most of the information needed for future ROI modeling efforts and the AMP. The majority of recommendations are rephrasing of existing questions to collect more precise data for the model. Based on the ROI modeling, BMcD did identify several additional categories for KTB to capture going forward. ES-10 Return on Investment Study Final