Study: Stanford spent more than $2.1 billion in Santa Clara, San Mateo counties in 2006

A new economic impact study prepared by an independent consulting firm shows that Stanford, the largest employer in Silicon Valley in 2006, made $3.8 billion in direct expenditures that year, and spent more than half that sum in neighboring Santa Clara and San Mateo counties.

The report released Thursday said Stanford spent more than $2.1 billion in those two counties on salaries and wages, goods and services, and construction and capital equipment.

Since most of Stanford's more than 20,000 faculty and staff lived in those two counties, salaries and wages accounted for the lion's share—$1.4 billion—of the spending.

The university also spent $447 million to purchase goods and services, and $299 million to buy construction and capital equipment in Santa Clara and San Mateo counties, the study said.

In a letter included in the study, President John Hennessy said that while much has been written about Stanford's education and research programs, the story of its economic impact on individuals and entities in nearby cities and counties remains largely unknown.

"This study shows the enormous economic benefits for local communities from this economic activity," Hennessy wrote. "In the operation of its education and research programs—the vital purpose for which the university exists—Stanford is a large economic entity involving millions of transactions and the flow of funds in and out."

The 35-page report, which was prepared by The Pacific Partners Consulting Group Inc. in Saratoga, is an update to a similar economic impact study released in 1995.

The new study covers four Stanford entities: the university, Lucile Packard Children's Hospital, Stanford Hospital & Clinics and the Stanford Linear Accelerator Center.

"Each year, Stanford brings in revenue from a variety of local, national and international sources, and expends those funds largely in its local region," the report said. "In 2006, Stanford received $4.5 billion in revenue from around the world and spent more than $2.1 billion in direct expenditures in Santa Clara and San Mateo counties."

An aerial view of the 8,180-acre campus included in the report shows Stanford—its borders outlined in red—surrounded by the residential neighborhoods of Palo Alto, Menlo Park, Woodside, Portola Valley and Los Altos Hills.

The campus straddles two counties, with 5,178 acres in Santa Clara County and 3,002 acres in San Mateo County. About 60 percent of its acreage is open space.

In addition to Santa Clara and San Mateo counties, the study provides data on spending in Alameda, Contra Costa and San Francisco counties, in California and outside the state.

Of the $1.4 billion spent on goods and services in 2006, Stanford disbursed $974 million in California and $461 million outside the state. Locally, Stanford spent $389 million in Santa Clara County, $231 million in San Francisco County and $58 million in San Mateo County.

Of the $622 million spent on construction and capital equipment in 2006, Stanford expended $481 million in California and $141 million outside the state. Locally, Stanford spent $259 million in Santa Clara County, $40 million in San Mateo County and $27 million in San Francisco County.

One of Stanford's greatest contributions to the local economy is its role as a stable employer, the report said.

"Stanford, with an average annual growth rate of 1 percent since 1984, including the addition of Lucile Packard Children's Hospital [which opened in 1991], has remained a stable source of jobs for area residents, even during the turbulent dot-com boom and bust," it said.

Stanford employed 20,450 people in 2006, compared with 16,500 people in 1984.

According to the study, Stanford was the largest employer in Silicon Valley in 2006, followed by Cisco Systems Inc. (16,500 employees), AT&T Inc. (15,500 employees), Santa Clara County (15,012 employees), and Kaiser Permanente (9,845 employees).

That year, 76 percent of Stanford's employees, or 15,630 people, lived in Santa Clara and San Mateo counties. Most of the rest resided in Alameda and San Francisco counties.

While the vast majority of Stanford faculty and staff lived in the immediate vicinity of campus, a growing percentage resided in some of the more distant Bay Area counties, including Santa Cruz, Contra Costa, Solano, Sonoma, Napa and Marin counties, the report said.

The report devotes one of its nine chapters to a detailed look at 2006 spending by Lucile Packard Children's Hospital and Stanford Hospital & Clinics, whose buildings are located in the northwest corner of the campus on land the hospitals lease from the university.

Each hospital is a separate nonprofit entity. Each has its own board of directors. In 2006, the hospitals spent $609 million in Santa Clara and San Mateo counties on salaries and wages, goods and services, and construction and capital equipment.

Salaries and benefits represent the largest direct expenditure for the hospitals—$436 million—in those two counties. Most of people working at the two hospitals—5,720 of their 8,060 employees—lived in Santa Clara and San Mateo counties that year, including 1,160 who lived in Stanford, Palo Alto, East Palo Alto and Menlo Park.

The total local payroll for the hospital, which included employees living in Alameda and San Francisco counties and elsewhere, totaled $616 million in 2006.

The hospitals spent $114 million on goods and services purchased in Santa Clara and San Mateo counties in 2006. Total expenditures were $596 million that year, including $137 million in San Francisco and $204 million outside California.

In 2006, the hospitals spent $198 million in expenditures for construction, capital equipment and other capital-related expenses, including $30 million in Santa Clara County, $29 million in San Mateo County and $12 million in San Francisco County.

Based on federal Department of Labor formulas, the study estimated that employees spent $1 billion of their after-tax income in 2006 in four counties: Santa Clara ($596 million), San Mateo ($263 million), Alameda ($105 million) and San Francisco ($56 million).

To estimate student spending in the surrounding communities, the study used model cost-of-living budgets prepared by the university's Financial Aid Office.

"Because these budgets assume frugal spending patterns, using them to determine student spending results in a conservative estimate of likely expenditures," the report said.

The study estimated that students spent $156 million in nearby communities in 2006, including $52 million in Palo Alto, $29 million in Menlo Park and $14 million in San Francisco.

The study also used a conservative approach and standard statistical formulas to estimate spending by out-of-town visitors to Stanford in 2006. For instance, the study excluded visitors to Stanford Research Park—which is located on Stanford property and houses 150 companies—from the calculation, and included only a small percentage of hospital visitors.

The study estimated that out-of-town visitors spent $100 million in local communities in 2006, including $35 million in Palo Alto, $10 million in Menlo Park and $1 million in East Palo Alto.

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