Indian Tribes: Considerations for Native American Impacts

INTRODUCTION

There are 1.9 million American Indians and Alaska Natives belonging to 574 federally recognized American Indian tribes and Alaska Native Villages in the U.S. Not only are Native Americans an important part of our national identity, but they are also a large part of the national economy.

 

TRIBAL GOVERNMENTS 

Generally, Tribal Governments are covered by QCEW (from the BLS, our main source for wage & salary employment) and BEA (another source for employment), and both sources classify tribal establishments as local government.  Therefore, they are included in IMPLAN data. However, some tribal authorities are not subject to Federal/State employment security (ES-202) laws. Those who are must report employment and income.  It is optional for those who are not. 

If they are covered and included, there is unfortunately no way to identify in the data sets which employment is Tribal vs. other Local Government.  You could ask employment security for your state if the reservation reports.  If it does, their information will be included in the county data – if not, it probably is not included. It is best to work with Tribes to get detailed data or use proxies based on related IMPLAN spending patterns like Institutional Spending Pattern 12001 – State/Local Government Other Services.

Tribal Government can potentially be found in:  

  • 532 – Local Government Passenger Transit 
  • 533 – Local Government Electric Utilities 
  • 534 – Other Local Government Enterprises 
  • 542 – Employment and payroll of local govt, education
  • 543 – Employment and payroll of local govt, hospitals and health services
  • 544 – Employment and payroll of local govt, other services

 

BUSINESSES

Tribes operate many businesses and enterprises. While Tribal data falls into the above mentioned Industries, determining the effects of a specific Tribal business operations is often better achieved through using the appropriate Industry for each business, working with the Tribe to determine appropriate inputs, and applying some modifications to the results as required.

For example, many casinos are owned by Tribes, in which case these establishments will be captured in the region’s data for Industry 534 – Other local government enterprises. Unfortunately, in such a case there’s no way to determine how much of Industry 534 belongs to the Tribal government, and of that, how much belongs to Tribal casino operations. If we want to analyze the operations of a Tribal casino, working with the Tribe to determine the scale and specifics of their casino operations is recommended. With those initial findings, we can utilize the methods described in the article Casinos: Acing the Impact to run our analysis.

 

INTERNALIZING TRIBAL GOVERNMENT

Let’s take an example where a Tribal casino makes a payment to the Tribal government (like a tax). By default, IMPLAN will treat this payment as a leakage, as it treats all tax payments. If we want to look at how that government payment ripples through the economy, we can add an Institutional Spending Pattern 12001 – State/Local Government Other Services Event in the amount of the payment, being sure to set the LPP to 100% in the Menu by unclicking the SAM checkbox. Because this is not a Direct Effect (or even an Indirect one), all of the Results of the Institutional Spending Pattern (Direct + Indirect + Induced) should be moved to the Induced line. Then the Results from the casino can be added to the Results from the Tribal Government.

 

FEDERAL PROGRAMS

There are many federal programs specifically designated for Tribes like the Tribal Transportation Program and the Indian Health Service. Through various programs, federal dollars are invested in local economies on everything from healthcare to bridge construction. To best model this funding, the Industry receiving the grant should be utilized. So, if you are modeling the construction of a new school, Industry 53 – Construction of new educational and vocational structures should be used. 

 

OTHER RESOURCES

Federally Recognized Indian Tribes and Resources for Native Americans

National Congress of American Indians

U.S. Department of the Interior Bureau of Indian Affairs

 

RELATED ARTICLES

Casinos: Acing the Impact

Electric Vehicles: Industry on the Move

INTRODUCTION

According to Bloomberg New Energy Finance, more than half of the cars produced by 2040 could be electric. This poses a huge change for traditional gasoline combustion engine production that has dominated the U.S. landscape. Currently, electric vehicles make up only a small portion of the market, representing only 3% in 2020. Because this industry is both relatively new and still small, it isn’t represented well in the automobile manufacturing industry.

 

PRODUCTION

The production of new vehicles of any type will fall under Industry 340 – Automobile manufacturing, 341 – Light truck and utility vehicle manufacturing,  and 342 – Heavy duty truck manufacturing. However, these will be based on the status of the total Industry in the Data Year. That means that it includes all types of vehicles regardless of engine type.

The best way to model the production of new electric vehicles is using Analysis-by-Parts (ABP). To use ABP, you would need to know detailed spending. Let’s take a look at an example of a new facility that will be built in Illinois by Varnado Motorcars, which will produce electric automobiles. We know they will spend $2.5M on labor and $15M on supplies. We also know that a full 5% of their supply spending will be on batteries sourced from within Illinois. So we will set up one Labor Income Event for $2.5M and one Industry Spending Pattern Event for $15M. Because Varnado Motorcars is a corporation, the $2.5M of Labor Income is all Employee Compensation earned by Wage and Salary workers. For our Industry Spending Pattern, we’ll specify the Industry most similar to the facility opening, Industry 340 – Automobile manufacturing, and then make the appropriate modifications. 

 

Electric_Car_-_2_Events.jpg

 

Because we are told that 5% of the spending on Intermediate Inputs from local supplier Garrett’s Gadgets on batteries, we can open up the spending pattern to make the change.

 

Electric_Car_-_ISP_Open.jpg

Scroll down to Commodity 3333 – Storage Batteries and change the given percentage to represent the 5% that will be spent on batteries from Garrett’s. Then unclick the SAM setting the LPP to 100% as we know these batteries will be sourced from Illinois. You can see the total sum of percentages is now 104.73%. To reset this to 100%, click Normalize in the upper right. Learn more about editing Industry Spending Pattern Events for other necessary changes, such as deleting Commodities not purchased as an Intermediate Input for electric vehicle manufacturing or adding Commodities that are unique to the electric vehicle production process.

 

Electric_Car_-_ISP_Normalized.jpg

 

Now the sum of percentages is 100%. Click Save, Drag and Drop the 2 Events into the Illinois Region, and Run your Impact. With just a Labor Income Event and an Industry Spending Pattern Event in this ABP analysis, we have no Direct Effects in our Results.

 

Electric_Car_-_Results.jpg

 

To calculate our Direct Effects of Varnado Motorcars, the only other piece of information we need is Output/worker, which can be found:

Behind the i

     > Study Area Data 

          > Industry Averages

Then we can use the Excel template to calculate the Direct Effects.

Electric_Car_-_Results_with_Direct.jpg

If this facility is being built instead of a traditional automotive plant, you might consider the opportunity cost of a combustion engine plant not being built. If the new facility is replacing the demand for combustion engine cars which may cause an old manufacturing plant to close, consider a Net Analysis to show how the electric vehicle production facility will differ from a combustion engine manufacturing facility.

 

CHARGING

In terms of construction of charging stations, if you don’t have the necessary details to conduct an ABP, the construction would fall under Industry 55 – Construction of new commercial structures, including farm structures. The operations of those facilities would usually fall under Industry – 408 Retail – Gasoline stores or whatever business is operating the station. If you have detailed information, however, ABP is suggested as this type of construction and operations represents such a small portion of these Industries in the current data and therefore any details you have on specific spending will yield a stronger analysis.

Charging stations do not take a lot to set up for operations. Treehugger notes that an electrician can install the unit and then it’s ready to go. Some of these charging stations are built in the U.S. and if they are being sourced from within your Region, this can be modeled as an Industry Event in 339 – All other miscellaneous electrical equipment and component manufacturing. Coupling this with associated costs to a local electrician in Industry 55 will round out the impact for installing charging stations. Here we see the addition of $4M in charging stations and $250K in electrician installation costs.

 

Electric_Car_-_Impacts_with_Charging.jpg

After running the analysis with these additional Events added to the Illinois Group, use the Filter on the Results screen and choose only the Charging Station and Electrician Events and click Run to see the Results from these two Events.

Electric_Car_-_Results_of_Charging.jpg

 

SUBSIDIES & SAVINGS

Many states offer rebates to people purchasing electric vehicles which can result in savings of thousands of dollars. These savings can be modeled using Household Income Events. Again, think through if the rebate is enough to offset the potentially higher cost of the electric car in the first place. For example, if I purchase an electric car for $45K instead of a combustion car for $40K and I get a rebate of $2K, I still paid $3K more for the electric vehicle. Obviously there will be tradeoffs in terms of the environmental impact as well, but that’s a whole other dataset.

There could be savings to consumers because the price to power your electric car is lower than purchasing gasoline. This can also be modeled using Household Income Events. There could also be overall savings to the economy from a switch from reliance on one type of energy, say fossil fuels that are imported, to wind energy that is produced locally. This switch is also perfect for a Net Analysis.

If we know that higher income Households will see significant savings, this can be modeled by a few Household Income Events. In this example, we are told that Households that earn between $100-150K will save $500K, Households that earn between $150-200K will save $750K, and Households that earn more than $200K will save $1.25K, we create one Event for each earning level.

 

Electric_Car_-_Impacts_HH.jpg

Again using the Filter on the Results screen, once these additional Events have been analyzed, and choosing only the three Household Events and clicking Run, we see the Results from the Household savings.

Electric_Car_-_Results_HH.jpg

 

RELATED RESOURCES

National Economic Value Assessment of Plug-In Electric Vehicles

 

RELATED ARTICLES

ABP: Introduction to Analysis-By-Parts

Environmental Data

Net Analysis: Considering Both Sides of an Impact

All Aboard! Modeling Public Transit

INTRODUCTION

Public transit in the form of buses and rail lines are essential to functioning cities. Governments make huge investments in infrastructure ensuring access for all residents. This article looks at how these investments look in IMPLAN.

 

OPERATIONS 

Public transit comes in the form of two Industries in IMPLAN: 529 – State government passenger transit and 532 – Local government passenger transit. Both of these Industries are government-based and operate by selling goods and services to the public. Generally, they operate like private sector firms; they hire employees and purchase Intermediate Inputs. Other government transportation related spending and investments are captured in IMPLAN within two Institution categories: 12001 – State/Local Government Other Services and 12004  State/Local Government Investment. 

Below shows the two public transit Industries for New York in 2018. Note not all areas will have both local and state run transit.

Behind the i

     > Study Area Data

          > Industry Detail

Public_Transit_-_NY_2018_Industry_Detail.jpg

 

The first thing to notice is that both of these Industries have no Proprietor Income. They also both have negative OPI and TOPI. Negative OPI indicates that the Industry spent more than it brought in as revenue – it ran a deficit. Negative TOPI is due to the given Industry receiving subsidies from the government.

To model an expansion of spending on transit, an Industry Event with the appropriate values is best. To examine how transit contributes to the regional economy as it is funded currently, an Industry Contribution Analysis is best. Note that when any type of analysis is run on one of these Industries (in the New York 2018 Region and many others), the Results will show no Direct Proprietor Income, negative TOPI, and negative OPI. In fact, in the case of this Region, the Negative TOPI and OPI are so significant, the net Value Added for these Industries are negative. This will result in a negative Direct Value Added when these Industries are analyzed. Shown below for the Region of NY 2018, the Value Added Coefficient for the State government passenger transit Industry is about -141%, and -801% for the Local government passenger transit Industry.

Behind the i

     > Social Accounts

          > Balance Sheets

               > Industry Balance Sheet

                    > Value Added

                         > Filter for Industry 539 or 532

INDUSTRY 529 – STATE GOVERNMENT PASSENGER TRANSIT

Public_Transit_-_539_VA.jpg

 

INDUSTRY 532 – LOCAL GOVERNMENT PASSENGER TRANSIT

Public_Transit_-_532_VA.jpg

 

CONSTRUCTION & CAPITAL PURCHASES

The construction of new transit lines falls under IMPLAN Industry 56 – Construction of other new nonresidential structures. When analyzing any construction, the value entered in Industry Output should be the full cost of the structure, and only the structure, including hard costs and soft costs. For further details, visit the article Construction: Building the Analysis.

Capital purchases can be a bit tricky and need to be analyzed separately from construction costs. Perhaps your local authority is purchasing light rail cars or hydrogen fuel cell buses. In today’s global economy, it is unlikely that these are produced within your Region, so the entirety of the cost would be considered a leakage. If the capital purchases are made in your Region, it is typically appropriate to choose the manufacturing Industry that produced the item when analyzing the purchase via an Industry Output Event. For example, if a locally made bus is purchased, choose Industry 343 – Motor vehicle body manufacturing, and enter the cost of the bus. For more information on capital purchases, check out the article Analyzing Capital Investments.

Loans: Banking on It

INTRODUCTION:

As with all Industries in IMPLAN, there are certain considerations to make when examining the complicated world of banking and lending. Generally speaking, to model the operations of a bank, IMPLAN Industry 441 – Monetary authorities and depository credit intermediation would be the correct choice. This Industry includes commercial banks, savings and loans, and credit unions. Total Employment, Employee Compensation, Proprietor Income, and/or Output can be run through this Industry.  But what if you want to examine the economic impact of the loans that were made? Well, that depends on how the money will be spent.

 

CONSIDERATIONS ON LOANS:

Analyzing the economic impact of loans is tricky. The first consideration is that of time. A loan may be spread across multiple years and how it is spent may also cross years. In IMPLAN, each year of spending should be modeled separately. 

Also, if this bank didn’t give the loan, there is a possibility that another bank would give the loan. Be careful in attributing the entirety of the investment solely to the existence of this one bank and loans it provides.

The biggest matter, however, is how the loan will be spent by the borrower. There are no lack of possibilities as to how the money could be used, each having drastically different economic impacts. In order to measure the economic impact of the loans, you have to first know how the loan will be spent. Keep in mind that the loan may be spent across a few categories.

OPERATIONS

If the loan will be spent on operations for the business, this can be analyzed using a standard Industry Output Event. Choose the appropriate IMPLAN Industry and enter the loan amount Value. Note that the operations spending may not just be across the board, it may specifically be for new hires or employee raises. 

If the entirety of the loan is modeled through operations, you are assuming that none of the money will be spent on construction or capital. This means that increasing Output doesn’t require any capital purchases. 

CAPITAL

Construction

The loan may be used to fund new construction. If this is the case, the loan amount should be entered in one of the IMPLAN construction Industries via an Industry Output Event.  Note that new construction is different than repair and maintenance of facilities and needs to be analyzed appropriately. 

Machinery, Equipment, & FF&E

Perhaps the loan will be used for a large capital purchase. This could include an investment in real estate, technology, or machinery, for example. The first consideration with this is whether or not the capital purchase can be made in your Region. Often times, these large items are not produced locally and therefore should be excluded from your analysis.

OTHER USES

Perhaps the loan will actually be used to pay off property taxes. They might also use it to pay off another loan or creditor. If the borrowing is to avert a short term crisis, you may be able to argue that the entire operations of the company was dependent on that loan in order to avoid closing completely.

 

HOUSEHOLDS:

Banks lend money to households for various purposes, as well. It may be for the purchase of a home, student loan, car, or debt consolidation. Just with corporate lending, in order to analyze these loans in IMPLAN,  you must decide how the money will be spent and enter the values in the appropriate Industry. 

 

INTEREST:

A full debt repayment amount should not be run through the banking Industry in IMPLAN. The payment of principle is considered an asset transfer which has no economic impact. However, if the bank that is receiving the payment is within your Region, the interest portion of the debt can be run through the banking Industry. If the bank that is being repaid is out of Region, the entirety of the debt repayment is considered leakage and should not be included.

Interest payments can be thought of as being separated into two parts: interest payments for lending of assets (like cash) and interest payments that are for the value of services provided by financial institutions. Interest for the value of services are not directly measurable and must be estimated as these are included in the Intermediate Expenditure of the bank. The value of the imputed interest would be the difference between the interest income the business could earn were it to lend that money and the interest paid by the bank on the balance of the account. That difference functionally represents a service charge for maintaining the account, providing credit cards, processing information, etc.  

As another example, a business might borrow money from a bank and pay an interest rate of 5%. The bank would give the business various services like loan processing. In this case, the imputed interest would be the difference between 5% and the amount of money the bank could earn were it to lend the same amount of money without providing any services.  The remaining type of interest income, much like interest income that is solely based on returns to lending, is measured on a net basis and is included as a part of Other Property Income (OPI). 

 

FINAL CONSIDERATIONS:

In IMPLAN, an Industry’s Leontief Production Function represents operational spending only. It does not include investment in capital goods and therefore

it does not account for depreciation. Consumption of fixed capital is part of Other Property Income (OPI). Therefore, depreciation is captured as part of Output, but it does not generate Indirect or Induced impacts.

So, we have looked at what the bank did with all that loan money. It’s important, however, to consider the alternatives. If the bank didn’t invest in that million dollar loan to a software company, they might have invested in a multi-family housing structure or personal loans for used car purchases. Perhaps the bank could keep the money in reserves. These examples would obviously have very different effects on the local economy. By investing in the software company, the bank no longer has the capital to fund apartment construction or personal loans. The bank foregoes the potential gain from the alternatives and this is the opportunity cost.

Construction: Building the Right Model

INTRODUCTION:

There are a few special considerations for modeling construction impacts. Not only are all projects different, they need to be carefully considered in IMPLAN.

Construction Industries don’t have a perfect NAICS crosswalk as the other Industries do.  Instead, there is the file Definitions of IMPLAN’s 546 Construction Industries found on our 546 Industries, Conversions, Bridges, & Construction – 2018 Data page. This is where you can find which Industry will be best to use whether you are modeling the construction of a power plant, office, or even a museum.

The value entered in Industry Output for construction should be the full cost of the structure, and only the structure. This includes hard costs and soft costs.  Because Employment, by definition, is based on where the job is located not where an individual resides, Employment should include the full value full-time, part-time and temporary Employment on the job site during the year. Additional considerations of costs attributed to construction are considered below.

 

SQUARE FOOTAGE:

Sometimes rather than construction cost or Employment, only the square footage of the project is known. Calculators to convert square footage to construction costs, by building type, can be found online.

 

EMPLOYMENT & SPECIALIZED SKILLS: 

While all Industries are likely to source some Employment from outside the region, construction Industries are among a group that may be more likely to do so, because in many cases either:

  • The needed skills for a project may not be available in the region
  • Contractors may be sourced from outside the region

In these cases, it is important to remember that Employment is site based in IMPLAN, so even if a worker is brought in from outside the region they still count as “local” employment during the period of their work.

It is sort of unreasonable to assume that these outside workers will spend their income in the same way as residents. Thus, what we will modify is the Labor Income values for the construction Industry. The Employee Compensation and Proprietor Income should be reduced by the amount of payroll that is going to workers outside the region, less the regional commuting rate. But do these outside workers then have no local impacts? That also is unlikely if they are in the region for any period. The best way to capture these impacts is by using per diem spending patterns, ideally from the company’s budget or allowances, but when these are not available government per diems can be used as an estimate. This not only captures a more reflective amount of local spending by these temporary residents, but it also prevents their income from being spent on common resident household expenditures like utilities and the costs of owning a home.

An in-commuting rate is gross regional rates in which local workers commute out of the region to go home. In the calculation of the Induced Effects the in-commuting regional rate reduces the total income before it’s distributed to local households. To avoid underestimating the effects of Labor Income you will want to be sure to account for the commuting rate from the Social Accounting Matrix.

 

CONTRACTORS:

Construction employment differs between new construction and maintenance/repair. New construction is considered a capital purchase, which is a final demand (not an intermediate demand). Therefore, new construction contractors and subcontractors do not appear in any Industry’s production function. So, in new construction the contractors and subcontractors are found in the Direct Effect as proprietors. Maintenance and repair, however, is not considered a final demand, therefore it can be purchased by Industries. So for maintenance and repair, contractors and subcontractors are found in the Indirect Effect.

 

LAND VALUES:

When construction impacts are being considered, a question that often arises is: “What is the impact of the sale of the land?” The truth is, the sale of the land has very little impact on the economy. The purchase of the land necessary for a construction activity should not be included as Industry Output for the construction Industries. Why? Land sales are considered asset transfers, where one person receives money while the other receives tangible property. Thus, the land sale itself has no value in IMPLAN. Some small impact may be captured however, by creating an Event for real estate fees, and for large commercial projects, legal fees.

 

HARD & SOFT COSTS:

Construction spending patterns in IMPLAN include architectural engineering, legal fees and other common soft costs, so these should be included into the Industry Output value. However, if you want to specify these values or have soft costs that are significantly different than a typical construction project in your selected Industry, these can be modeled separately.

A common question we hear is how to handle interest payments for pre-development or construction loans. If these are to be included in your model, ensure that it is only the interest portion of the loan, not any principle, as that is considered an asset transfer and has no impact. Interest can be input in Industry 441 – Monetary authorities and depository credit intermediation.

 

FURNITURE, FIXTURES, & EQUIPMENT:

Furniture, Fixtures, and Equipment (FF&E) are large, movable investments that businesses make.  FF&E consists of movable furniture, fixtures, and other equipment that is not directly attached to a building.  FF&E should not be modeled through the construction Industry.

Often times, the specialized FF&E will not be produced in your region of study. If you know that everything is being brought in, it is considered leakage and you can omit the spending from your model. Investments like these can be captured but must be modeled separately. You may know that it was purchased through a local retailer or wholesaler, so then you can model the purchases through the appropriate Industry. Maybe you know that some of the purchases will be sourced locally. Then you can again choose the appropriate Industry, like 370 – Wood office furniture manufacturing, and enter the spending.  

You could also consider using an Investment Spending Pattern to model the FF&E expenditures. This file has the general capital investment spending patterns for FF&E alone and for FF&E and construction for consolidated Industries. These spending patterns can be input into IMPLAN by modeling the associated Commodity Events.

 

HOUSING CONSTRUCTION & NEW HOUSEHOLD INCOME:

When new housing developments or multi-family apartments are built, there is obviously an economic impact due to the construction. Just because it is built, however, doesn’t necessarily mean that there will be new income in the area. If the residents of the new development are moving from other locations within the region, there is really no impact due to their spending just because the new houses were built. If you can make the argument that a portion of the buyers are coming from outside of your region and that they will be employed, then you can make the assumption that their spending is new and run it through the appropriate Household Income category.  Remember that Household Income needs to be Employee Compensation less payroll taxes.

 

TEMPORARY AND LONG-TERM IMPACTS:

It is important to distinguish between temporary impacts and long-term impacts. For construction projects, the impact is limited to one time frame. This is unlike the continued operations of a college or a casino that will have yearly impacts.

People love job numbers. It is not uncommon for studies to overstate construction jobs by assuming they are recreated each year. Also, it is not advisable to report rolled-up construction and operational impacts to have job numbers that mix both temporary and ongoing Employment. This is one popular way that input-output analyses overestimate impacts.

The same principles apply to other economic factors as well. The Labor Income, Value Added, and Output of the construction are occurring only over a short period of time and thus have a more limited impact than operational changes. This is best reflected when the two types of impacts are handled separately.

 

CREATED VERSUS SUPPORTED:

Are the construction jobs created or supported? In most impact scenarios, the Direct Employment impact is considered to be created the first year of the project, but with construction this typically not the case. The reason is that construction jobs are usually supported job to job. Thus new construction projects are keeping construction workers employed rather than genuinely creating new jobs in the economy. Of course, there are some cases where construction jobs clearly are created, such as the real estate boom that occurred in North Dakota because of drilling.

Airports: Preparing for Takeoff

DETAILS:
Economic impact analyses of airports are very popular. Venckus and Vaidas (2011) state the main reasons as to prevent an airport closing or relocation, to highlight the ramifications of service additions or cancellations, and to justify spatial expansion. [1]

OPERATIONS
There are two main IMPLAN Industries associated with airports. The first is Industry 414 – Air transportation. This Industry includes both passenger and cargo flights; even space travel. This Industry is the operations of the airlines and would be used for both current services and potential new services (like a new route being added). The second is Industry 420 – Scenic and sightseeing transportation and support activities for transportation. This Industry includes air traffic control, hangar rental, parking, and a few other associated services. Also keep in mind that not all employees working at the airport are employed by the airport. Transportation Security Administration employees are actually paid under the Federal Department of Homeland Security and would fall under Industry 546 – Employment and payroll of federal govt, non-military.

However, nothing is every that cut and dry, right? Along with the operations of the facility and the air transportation itself, there are often many other businesses affiliated with or connected to airports. There are usually retail tenants on-site, and sometimes rental car companies, hotels, flight schools, and military installments. None of these activities would be captured in Industries 414 or 420 so their operations would need to be modeled in addition to the operations of the airport.

The airport you want to examine might even have a large business associated with it like the 1.2M square foot Boeing aircraft assembly plant in Charleston, SC. [2] Again, this would have to be modeled separately from the airport operations.

CONSTRUCTION
As always, capital improvements need to be analyzed separately from operations. While construction projects may span multiple years, their impact is temporary, unlike ongoing airport operations that happen every year. New construction at airports falls under Industry 56 – Construction of other new nonresidential structures; ongoing upkeep falls under Industry 60 -Maintenance and repair construction of nonresidential structures.

VISITORS
It is a hard case to make that spending of visitors that flew into your region can be counted as part of the economic impact of the airport itself. If all visitor spending is included in an analysis, the assumption is that none of their spending would have occurred in the region but for the existence of the airport. If it weren’t for the airport, visitors would either travel via a different airport in the area, via a different means of transportation or not come at all. For individuals that would visit the region regardless of the airports existence, their spending impact on the region cannot be attributed to the airport. At the very least, a discount rate should be applied to the total visitor spending for air travelers into your region.

When analyzing a tourist event, you may want to include the cost that visitors had for their travel. IMPLAN recommends splitting airfare 50/50 between the origin city and destination city. Basically, half of the price of the ticket would be applied to your region of study. Note that dollars going to travel agents and corporate headquarters are included in the production function for Industry 414 so there is no need to model them separately.

Now, please put your tray table up, ensure your seat is in the upright and locked position, and fasten your seatbelt.

RELATED ARTICLES:
Tourism Spending

OTHER RESOURCES:
Federal Aviation Administration Data

South Carolina Aeronautics Commission Economic Impact Technical Report

SOURCES:
[1] Venckus, A., & Vaidas, G. (2011). A Few Remarks on Assessment of Airport’s Economic Impact. Economics & Management, 16, 437-440.

[2] South Carolina Aeronautics Commission. (2017). Economic Impact Technical Report. Retrieved January 2, 2020. Available: http://www.scaeronautics.com/download/2018_Economic_Impact_Technical_FinalReport.pdf.

Construction: Building Across Years

INTRODUCTION:
Construction is a tricky thing to consider when modeling economic impacts. While the considerations to analyze are outlined in Construction: Building the Right Model, this article will walk through an example of a project that crosses years, as rarely are large-scale developments completed neatly in one calendar year.

EXAMPLE:
Morgan Construction is planning a large-scale industrial development in Omaha. The 100 acre site will be developed in phases over five years. The developer has given us the following spending information.

MORGAN INDUSTRIAL PARK COSTS BY YEAR
Year Description Cost
2020 Site acquisition $495,000
2021 Water, sewer, utility $950,000
2022 Roads and related preparation $500,000
2023 Construction Phase 1 $1,250,000
2024 Construction Phase 2 $2,500,000
2025 Construction Phase 3 $1,250,000
TOTAL $6,945,000

The first year, 2020, contains only $495,000 in site acquisition fees – the purchase of the land. In IMPLAN, land sales are considered to be asset transfers. One person receives money while the other receives tangible property. Thus, the land sale itself has no value in IMPLAN and will not include this in our model.

The five years of construction on Morgan Industrial Park from 2021-2025 can be modeled. As there are different types of construction work being done in each year, we will need to assign the proper IMPLAN Sector to each. For all construction Sectors, there is a bridge to the Definitions of IMPLAN’S 546 Construction Sectors. Using this document, we can search for what type of construction will be happening each year and choose the appropriate Sector.

MORGAN INDUSTRIAL PARK COSTS & IMPLAN SECTORS
Year Description Cost IMPLAN Sector
2020 Site acquisition $495,000
2021 Water, sewer, utility $950,000 56 – Construction of other new nonresidential structures
2022 Roads and related preparation $500,000 54 – Construction of new highways and streets
2023 Construction
Phase 1 $1,250,000 51 – Construction of new manufacturing structures
2024 Construction
Phase 2 $2,500,000 51 – Construction of new manufacturing structures
2025 Construction
Phase 3 $1,250,000 51 – Construction of new manufacturing structures
TOTAL $6,945,000

Now we are ready to set up our project in IMPLAN first by choosing our Region. In this case, we will be looking at the Omaha-Council Bluffs, NE-IA MSA. Our first step on the Impacts screen will be to set up an Event for each year. Note: if we had more detailed information, we could set up multiple Events for each year.

Conx_-_Events.jpg

Next we will create five different Groups; one for each year of the project. Note that they are all identical except for the Dollar Year. The Dollar Year field is changed for each Group so we can model the Event happening in that year.

The Dollar Year can sometimes be a tricky thing to determine and in the case of a multi-year construction project, it can be difficult to determine whether each year’s expenditures should be accounted for in that year’s dollars or if they should be accounted for in base year’s dollars. The answer? It depends on how the initial dollars are estimated. Dollar Year should always reflect the year of the Event Values. Therefore, if separate expenditures value ares known that will enter the economy independently in different years these multiple years of expenditures should be analyzed in separate Events and Groups.

Conx_-_Groups_Years.png

Now we will drop the Event for each year of the project into the appropriate year Group. Make sure that each Event only drops into one Group.

Conx_-_Groups_with_Events.png

Now we are ready to hit RUN and check out our Results.

RESULTS:
The default that we are seeing on the Results screen is the combination of the impacts across the five years. Looking at our Results, we see that the total Direct Output is not equal to the $6,450,000 of Direct Output we entered on our Impacts screen. This is because of the deflation. We entered 5 different Dollar Years on the Impacts screen and we are seeing our Results in 2019 dollars. The $5,921,136 in Direct Output accounts for the different Dollar Years and the reporting of the Results in 2019 dollars.

Conx_-_Results.jpg

You can see the yearly impacts by using the FILTERS and choosing the Event you want to see. For example, choosing to FILTER by Event Name “Roads” and Dollar Year “2022” will see the Direct Output of $500,000 that we entered on the Impacts screen.

TOTAL EMPLOYMENT TRAP:
If we look at the summary table, we see a Direct Employment of 55.19 jobs and a Total Employment of 88.83 jobs. However, let’s not forget this represents 5 years of construction.

When multi-year projects are summed it is fine to add the yearly Labor Income, Value Added, and Output components together, but Employment is a little different. We suggest reporting Employment in terms of average annual jobs or jobs/year for the project. We do this because:

If worker is on the job site over the course of the entire project or over several years of the project, that job will be counted in IMPLAN more than once. (i.e. if a worker is on site for all five years of project IMPLAN counts that as 5 jobs). However, we know that this is in fact just one job sustained over 5 years of the project.
As the nature of the construction project changes so do the workers. In our example, the jobs supported in the first year were utility workers, then road construction workers came in year two, and industrial building workers in years 3-5. Since some jobs are sustained and some are lost every year, the net effect is best reflected in the expression of average annual or jobs on the site/ year of the project.
To account for the jobs over the 5 years of construction, export your results to Excel and then divide the Direct, Indirect, and Induced Employment by 5. Then you can report your Results and Average Annual Employment.

Average Annual
Employment Labor Income Value Added Output
Direct 11.04 $2,975,680.23 $2,345,712.02 $5,921,135.58
Indirect 2.57 $885,899.86 $1,426,760.83 $2,679,850.41
Induced 4.16 $1,034,410.11 $1,864,219.71 $3,202,522.51
Total 17.77 $4,895,990.20 $5,636,692.55 $11,803,508.49

Construction: Building the Right Model

INTRODUCTION:

There are a few special considerations for modeling construction impacts. Not only are all projects different, they need to be carefully considered in IMPLAN.

Construction Sectors don’t have a perfect NAICS crosswalk as the other Industries do.  Instead, there is the file Definitions of IMPLAN’s 546 Construction Sectors found on our 546 Sector Industries, Conversions, Bridges, & Construction – 2018 Data page. This is where you can find which Sector will be best to use whether you are modeling the construction of a power plant, office, or even a museum.

The value entered in Industry Output for construction should be the full cost of the structure, and only the structure. This includes hard costs and soft costs.  Because Employment, by definition, is based on where the job is located not where an individual resides, Employment should include the full value full-time, part-time and temporary Employment on the job site during the year. Additional considerations of costs attributed to construction are considered below.

 

SQUARE FOOTAGE:

Sometimes rather than construction cost or Employment, only the square footage of the project is known. Calculators to convert square footage to construction costs, by building type, can be found online.

 

EMPLOYMENT & SPECIALIZED SKILLS: 

While all Sectors are likely to source some Employment from outside the region, construction Sectors are among a group that may be more likely to do so, because in many cases either:

  • The needed skills for a project may not be available in the region
  • Contractors may be sourced from outside the region

In these cases, it is important to remember that Employment is site based in IMPLAN, so even if a worker is brought in from outside the region they still count as “local” employment during the period of their work.

It is sort of unreasonable to assume that these outside workers will spend their income in the same way as residents. Thus, what we will modify is the Labor Income values for the construction sector. The Employee Compensation and Proprietor Income should be reduced by the amount of payroll that is going to workers outside the region, less the regional commuting rate. But do these outside workers then have no local impacts? That also is unlikely if they are in the region for any period. The best way to capture these impacts is by using per diem spending patterns, ideally from the company’s budget or allowances, but when these are not available government per diems can be used as an estimate. This not only captures a more reflective amount of local spending by these temporary residents, but it also prevents their income from being spent on common resident household expenditures like utilities and the costs of owning a home.

An in-commuting rate is gross regional rates in which local workers commute out of the region to go home. In the calculation of the Induced Effects the in-commuting regional rate reduces the total income before it’s distributed to local households. To avoid underestimating the effects of Labor Income you will want to be sure to account for the commuting rate from the Social Accounting Matrix.

 

LAND VALUES:

When construction impacts are being considered, a question that often arises is: “What is the impact of the sale of the land?” The truth is, the sale of the land has very little impact on the economy. The purchase of the land necessary for a construction activity should not be included as Industry Output for the construction sectors. Why? Land sales are considered asset transfers, where one person receives money while the other receives tangible property. Thus, the land sale itself has no value in IMPLAN. Some small impact may be captured however, by creating an Event for real estate fees, and for large commercial projects, legal fees.

 

HARD & SOFT COSTS:

Construction spending patterns in IMPLAN include architectural engineering, legal fees and other common soft costs, so these should be included into the Industry Output value. However, if you want to specify these values or have soft costs that are significantly different than a typical construction project in your selected Sector, these can be modeled separately.

 

FURNITURE, FIXTURES, & EQUIPMENT:

Furniture, Fixtures, and Equipment (FF&E) are large, moveable investments that businesses make.  FF&E consists of movable furniture, fixtures, and other equipment that is not directly attached to a building.  FF&E should not be modeled through the construction Sector.

Often times, the specialized FF&E will not be produced in your region of study. If you know that everything is being brought in, it is considered leakage and you can omit the spending from your model. You may know that it was purchased through a local retailer or wholesaler, so then you can model the purchases through the appropriate Sector. Maybe you know that some of the purchases will be sourced locally. Then you can again choose the appropriate Sector, like 370 – Wood office furniture manufacturing, and enter the spending.  

Hospitals: Modeling Public & Nonprofit Hospital Impacts with Analysis-by-Parts

Hospitals: Modeling Private Hospital Impacts with Analysis-by-Parts

INTRODUCTION

If the hospital you are modeling is private, you can simply model spending through Industry 490 – Hospitals.  As always, enter as much data for the Industry Event as you have (Output, Employee Compensation, Proprietor Income, and/or Employment).  If you have data for more than one of these elements, you can (and should) override IMPLAN’s estimates with your known values.   

You can also modify the Industry Spending Pattern and couple that with a Labor Income change to account for any known spending differences in the hospital you are modeling.  This technique is known as Analysis-by-Parts (ABP).

 

EXAMPLE

Let’s say a new private hospital is going to open in Mecklenburg County.  We are told they will spend $5M in operations and $1.5M in Employee Compensation (EC) in their first year.  We have no information about Proprietor Income (PI), so we will only enter EC.  Remember, Labor Income = EC + PI.

 

ABP_-_Private_Hospital_Impacts.jpg

 

If we are given any further information on the proposed spending by Commodity, we can click the Advanced button and edit the percentages of the Industry Spending Pattern.  We may know, for example, that they will not be purchasing anything from a retail store; instead using only wholesalers. We can zero out all Retail Services entering zero in the place of the current percentages.  Then, choose Normalize in the Advanced Menu so that the Sum of Percentages is again 100.0%.

 

ABP_-_Private_Hospital_Edit_Spending_Pattern.jpg

 

Now drag the two Events into the Mecklenburg County Group and hit Run.

Our Results give us Indirect and Induced effects, so we will need to add back in the Direct effect from the information we were given by the hospital.

 

ABP_-_Private_Hospital_Summary_Results.jpg 

To calculate our Direct effect for our example, we will examine the Output equation in the model by navigating to the Regions screen, choosing Customize, then selecting Industry 490 – Hospitals.

 

ABP_-_Private_Hospital_Customize_Region.jpg

You can use the template ABP – Recalculating Directs with TOPI and OPI to fill in your data. 

Direct Employment = known Direct Employment. If Employment is unknown, you can calculate it on your own by dividing Direct Output by Output-per-worker.  For this clinic, we know that Output is $5M and Output/Worker is $178,061, so we can divide them and find 28.08 Direct employees.

Direct Output = Intermediate Inputs + Value Added.  In this example, we know the total Output was $5M.

Direct Value Added = Direct Labor Income + Tax on Production and Imports + Other Property Income

    • From the Output equation, we know the average TOPI and OPI per worker
    • Multiply these figures by the total employment
    • Add Labor Income + TOPI + OPI 

Direct Labor Income = EC + PI.

 

ABP_-_Private_Hospital_Output_Equation.jpg

Now we have our final results table below showing our calculated Direct effect and the modeled Indirect and Induced effects.  

TEMPLATE

ABP – Recalculating Directs with TOPI and OPI

 

RELATED TOPICS

Hospitals: Considerations when Conducting Hospital Economic Impacts

Hospitals: Modeling Public & NonProfit Hospital Impacts with Analysis-by-Parts

ABP: Introduction to Analysis-By-Parts

 

CASE STUDY

The Economic Impact of Mayo Clinic: Now, Then & All Points in Between