Airport Redevelopment Construction

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  • Official comment
    Avatar
    LHATT
    • Activity:
      • What activity type should I use? Does it stay an industry change? Do I need to change the activity level?

    For most construction analyses, a standard industry change is all that's needed. However, you may decide otherwise based on the level data you can bring to the model (see below for more).

     

    • Per event:
      • As I understand it, I will be inputting, in the industry sales category, the total budget of that section of the program for that year (setting the event year to the year that the data is for). If I have the number or employees I would enter that as well. 

    All the relationships in the multipliers are based on model year prices, so the direct effect applied to those multipliers also needs to be in model year dollars - this is accomplished via the deflators (adjusted by setting the Event Year). The value applied to the multipliers = user-entered value divided by the deflator. The deflators also allow impact results to be viewed in dollar years other than the model year. IMPLAN's deflators are indexes of inflation for each commodity, with the current data year index set at 1.00. The deflators are not used to create the social accounts or multipliers but are necessary for impact analysis whenever the Event Year differs from the model year. The same model year multipliers are used regardless of the Event Year; it is the value applied to those multipliers that changes when Event Year changes.

     

    All of this is to say, your event year needs to match the year of the input. If the dollar is a 2015 dollar representing activity in 2015, then use 2015 as the event year. If the value represents the cost of construction in 2020 but the value is a 2018 dollar, then use event year 2018.

     

    Also, industry sales for the construction sector is the total cost of the construction (not just a budget amount that represents labor and input purchases). In other words, the Industry Sales value includes the total construction budget (payroll + input purchases) plus any profits and indirect business taxes (i.e., taxes on production) paid by the construction firm.

     

    Also, the construction sector includes in its production function equipment that is integral to the building - which would include the fire sprinklers, elevators, HVAC, built-in lighting - essentially things that would be sold with the building. It would not include furniture or industrial machinery, commonly referred to as Furniture, Fixtures, and Equipment (FFE).

     

    Once you've entered industry sales, you can then modify the event with your known employment. Do know that, unlike other sectors, construction sector employment includes contract proprietors (see below response for more).

     

    • What should I be doing, if anything, with the proprietor income section?

    The construction sectors are special in that a significant portion of the employment is made up of contract proprietors (electricians, roofers, plumbers, etc.). Therefore, we do not recommend adjusting proprietor income without specific reason.

     

    • As the project spans from past years to future years, how do I find results for future project sectors?

    For future years, use the most recent data (currently 2016). As mentioned above, event year selection allows for proper deflation of non-model year values. Event year selection does not generate a new set of multipliers for the model (i.e., the model does not forecast economic changes). For this reason, we do not recommend analyzing future impacts beyond five years.

     

    • What years should I purchase? 
      • I believe, with the project having started in 2013, I will be purchasing years 2013 - 2017 (or whatever is most recently available) excluding 2015 due to already having purchased that year for a previous project.

    This will come down to personal preference. If you want the analysis of prior years to use a model that best represents the year in which the construction takes place, then you want access to data from 2013 - 2016.* If you subscribe to IMPLAN Online, you get access to multiple data years instead of a single data year when purchasing data for the IMPLAN Pro system. If you would like more information, please contact us at Info@implan.com.

     

    *Note that we do update our methodology every year, so there will be variances in how the data was generated between the data years. However, we feel that the accuracy you gain from using a model that best reflects the economy of the year outweighs such variances.

     

    **When comparing results across models and scenarios, always make sure to use the same Monetary Year (Dollar Year for View).

     

    • For estimating impacts of project sections occurring in future years do I simply set the event year to the year that I expect that section of the project to be taking place? What dollar year for view should I be setting my results to as I go from past to current to future?

    See the above response. Use dollar year for view to adjust your results to the dollar year you prefer to present your results in. Most users stick with current year as clients understand what a current year $1 represents.

     

    • If I am able to get hard and soft cost spending broken out by my client, is the process different setting up activities and events for them (besides changing the sector)?

    As IMPLAN construction sectors include both hard and soft costs, you will need to undertake a more complicated analysis approach if you want to account for them separately. Before deciding which approach to take, we recommend comparing the ratio of hard to soft costs in the commodity demand tab for the construction sector you would choose for a standard industry change analysis. If the rate of soft cost commodity purchases for the industry are within acceptable ranges to your known values, then you can save yourself the extra work required for the more advanced analysis by simply sticking with impacting the construction sector.

    Social Accounts > Balance Sheets > View By: Industry Balance Sheet > Select construction sector > Commodity Demand Tab

     

    If the values are not within an acceptable range, then you can consider an Analysis-by-Parts (ABP) approach, in which you split the analysis into two parts:

    • A series of events representing input purchases (in which you can specify your known spending).
      • This can be achieved a few different ways depending on the detail level of your input data.
    • A labor income change to represent the construction sector's labor income.

     

    The Basics of Analysis by Parts IMPLAN Pro

    Basics of Analysis By Parts IMPLAN Online

     

     

    • What are my applicable sectors? I believe they are 56 (construction of Highways and streets) for hard costs, and 369? (Upholstered household furniture manufacturing) although neither of them in name seem applicable to airport construction.

    For selecting the appropriate construction sector, review our construction sector descriptions excel. If your construction project includes various types of structures (say a runway and a terminal) you may want to consider splitting the construction value and impacting both sectors.

     

    How are you classifying soft costs? In traditional terms, soft costs are purchases of commodities such as legal services and architectural and engineering services (this is the definition of soft costs used in the previous response). For simple plans (e.g., a house), the contractor (i.e., construction sector) likely provides the engineering, architectural and legal plans. For larger and more complicated projects (e.g., the construction of a sports stadium), such services are purchased at a rate larger than the construction sector would purchase and should be included as additional events.

     

    If the suggestion of sector 369 represents purchases of furniture for the completed structure, then we would classify that as Furniture, Fixtures, and Equipment (FFE), not soft costs. FFEs are not part of the construction sector's spending pattern and should not be included in the as part of your input value for the construction sector. If you know what types of furniture and equipment are purchased, then you can impact the producing sector as you've suggested; however, you will need to know (or allow the model to estimate) a few additional factors. Specifically, was the item purchased locally, and from what type of industry was it purchased (directly from the producer, from a wholesaler, or from a retailer)? See the articles below for more. FFEs are often largely imported, resulting in limited local impact.

     

    Margining When the Item Purchased Is Unknown

    Margining When the Item Being Purchased is Known

     

    • Do I need to be more detailed with my sectors?

    Not necessarily, but see the above responses.

     

    • What am I missing? What other data should I be requesting from my client?

    See above response regarding FFE purchase information and the difference between industry sales and budget.

     

    • How would I run an analysis for an item of the process that occurs over multiple years? What changes about the process if I know the start date of an item but not the end date? Do I aggregate the entire process?

     

    You can combine multi-year impacts in one event so long as the input value is consistent (you can only set one event year per event). Your results would be for the combined number of years (though do note that employment can be tricky to discuss/interpret when looking at multi-year projects - see links below). Assuming spending was equal across the time span, you could divide your results by the number of years to determine the per year impact.

     

    Construction FAQ

    https://implanhelp.zendesk.com/hc/en-us/community/posts/115008272908-Multi-year-Construction-Project

  • Avatar
    SrichGSBS

    Some follow up questions:

    How would I run an analysis for an item of the process that occurs over multiple years?

    What changes about the process if I know the start date of an item but not the end date? Do I aggregate the entire process?

  • Avatar
    SrichGSBS

    Where can I find Social Accounts?

  • Avatar
    LHATT

    Hi,

     

    If you go to the Explore tab on the right hand side in the IMPLAN Pro software, there should be a field for social accounts. If you do not see that, please be sure to go to File>User Preferences>Analysis>Advanced Modeling (check that box and all the boxes beneath it). This should show all the options for Explore and Customization on the left had side of the software.

  • Avatar
    SrichGSBS

    Hi Lynnette,

    Thank you! I was able to do just as you said.I can now see the explore and customize options.

    Another question:

    In reference to this bit here :

    "All of this is to say, your event year needs to match the year of the input. If the dollar is a 2015 dollar representing activity in 2015, then use 2015 as the event year. If the value represents the cost of construction in 2020 but the value is a 2018 dollar, then use event year 2018.

    If all of the data I receive is in, for instance, 2018 dollars, does this mean that I should always have my event year set to 2018?

    If that is the case, what do I need to change to model the fact that the spending will be taking place in a future year, or took place in a past year?

    Where does the model year get set? Is this simply based off of the Implan data year that I am working with?

    Further: "Event year selection does not generate a new set of multipliers for the model (i.e., the model does not forecast economic changes). For this reason, we do not recommend analyzing future impacts beyond five years."

    Considering the above point, what purpose does setting the event year forward of the most current implan data do?

    I suppose I am still a bit unclear on the relationship between changing the event year and the impact that it has on the model's results.

    Basically, what happens if I run the same event for multiple years, representing an ongoing project that extends that number of years and have split the cost evenly between each year, and were to change the event year for each event 
    A) would it actually be necessary to change the event year and run an event for each year?
    B) what changes in my results when I do change the event year?

    Perhaps the answer is in when you say, "You can combine multi-year impacts in one event so long as the input value is consistent (you can only set one event year per event)".

    That would mean that doing what I suggested above would be pointless and that setting a different event year for each yearly portion of the spending does not have any or the wanted impact on the results.

    Where is the model taking in to account the years in which the spending is actually taking or going to take place?

    What are you referring to when you say "the difference between industry sales and budget"? Where does that come in to setting up an event or activity?

     

    I apologize for the repetitive nature of the questions above.

    Thank you!

  • Avatar
    LHATT

    Hi,

    Please see the responses in BOLD

    In reference to this bit here:

    "All of this is to say, your event year needs to match the year of the input. If the dollar is a 2015 dollar representing activity in 2015, then use 2015 as the event year. If the value represents the cost of construction in 2020 but the value is a 2018 dollar, then use event year 2018.

    If all of the data I receive is in, for instance, 2018 dollars, does this mean that I should always have my event year set to 2018? Yes

    If that is the case, what do I need to change to model the fact that the spending will be taking place in a future year, or took place in a past year?  Changing dollar year for view doesn't change multipliers used by the model; dollar year for view simply deflates/inflates the results to the select year. The economy as represented by the data year is unchanged using either method. The best way to measure historical impacts is to use the model year that matches the year of the activity. For future years, use the most recent data available (currently 2016). Again, this is why we don't recommend analyses of activities scheduled to take place more than five years beyond the year of the data. The model is less representative the further the economic activity is from the data year of the model.

    Where does the model year get set? Is this simply based off of the IMPLAN data year that I am working with? Yes

    Further: "Event year selection does not generate a new set of multipliers for the model (i.e., the model does not forecast economic changes). For this reason, we do not recommend analyzing future impacts beyond five years."

    Considering the above point, what purpose does setting the event year forward of the most current implant data do? Setting event year applies deflators to the input values so that the values applied to the multipliers are in model year dollars. If you had a 2019 dollar value for industry sales, you would set event year to 2019 and the model would apply the appropriate delfator to your industry sales value prior to applying the value to the model multipliers.

    I suppose I am still a bit unclear on the relationship between changing the event year and the impact that it has on the model's results. Event year sets the deflators which then adjust input values so that they are in the same dollar year as the model.

    Basically, what happens if I run the same event for multiple years, representing an ongoing project that extends that number of years and have split the cost evenly between each year, and were to change the event year for each event 


    1. A) would it actually be necessary to change the event year and run an event for each year? Only if you have the dollar values in the other years
      B) what changes in my results when I do change the event year? Let's say you put $5Million as your industry sales value for two different events, both with a different event year (with one event set to event year = to model year). The event with event year set to the model year will have a deflator of 1. Therefore, the industry sales value that would be applied to the model is $5million. For the other event with an different event year, the Output Deflator will not be 1. If you divide the industry sales value by the output deflator (let's say 1.010), then the amount of industry sales applied to the model multiplier will be less ($4,952,750). The portions of VA will also be different (using the GDP deflator). This is why it's important to match the event year to your input value year. If your input value is in 2018 dollars but you select event year 2020, then the value being applied to the model is likely less than the actual full value.

     

    *In IMPLAN Pro, you can see deflators in action by creating an event, setting event year to a year other than the model year, entering industry sales, and then selecting the preview button in the top right of the Setup Activities screen.

     

    Margins Deflators

     

    Perhaps the answer is in when you say, "You can combine multi-year impacts in one event so long as the input value is consistent (you can only set one event year per event)".

    That would mean that doing what I suggested above would be pointless and that setting a different event year for each yearly portion of the spending does not have any or the wanted impact on the results. Yes, and that setting event year for the years in which the activity takes place even though your input value is all in say 2018 dollars would actually negatively affect your analysis as you would be applying the incorrect deflator to your values.

    Where is the model taking in to account the years in which the spending is actually taking or going to take place? All values are applied to model of the economy represented by the data year and region selected at model build. For historical impact analysis, select the data year that matches the economic activity. For analysis of future impacts, use the most recent data year available. In short, the analyst accounts for time frame by selecting the data year that's most appropriate.

     

    *Note: for simplicity, it's not uncommon for analysts to choose to use one single data year for multi-year impacts of short spans under the assumption that the regional economy does not undergo drastic changes during the timespan. The suggestion to use data years that match the year of the economic activity is simply the best practice.

    What are you referring to when you say "the difference between industry sales and budget"? Using an Industry Change is only an option if your Industry Sales value includes profits and taxes (not just the payroll and non-payroll expenditures); Output (Industry Sales) = Intermediate Inputs + Value Added, and Value-Added includes Taxes On Production and Imports (TOPI) and Other Property Income (OPI). You do not want to use a budget value as an input for industry sales if your budget value does not include all of the categories that are included in industry sales.

    Where does that come in to setting up an event or activity? The industry sales value is used to estimate the remaining direct effects - employee compensation, proprietor income, and the other remaining portions of value added (TOPI and OPI). It also determines the total value applied to intermediate expenditures, which is the driver of indirect effects. If your value does not include items such as profits and taxes, then the values applied to labor income and intermediate expenditures will be understated, as the model will have removed values from your input assuming that the input did include those values.

  • Avatar
    SrichGSBS

    Thank you!

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