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. 

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.

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.

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.

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.

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.

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.

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.

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.

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

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.

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.

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.