CHAPTER 7

ECONOMIC FACTORS

Closely and systematically related to social and land use impacts, project / activity economic impact can be a key element in environmental assessment

HUMAN IMPACTSECONOMIC IMPACTSLAND USE IMPACTS

[remember back to Rough Side of the Mountain video… this idea was well illustrated]

Economic data collected may include:employment incomeland value taxesrevenueviability of existing business communityproposed economic development plans /

projects / activities

Text: as with the examination of human impact & land use impact, the scope of examination of economic impact should match the importance of the element in the environmental assessment study--- if a particular genre of data adds nothing to analysis / final understanding, and the proposed project / activity will not affect regional economic system – skip it!

7.1 Employment and EducationAffected Environment section of the EIS (as

well as a EA/EIS) should include local employment data and work force composition information--- The State Route 374 (North Parkway Extension) EA/FONSI that we looked at earlier describes the Economic Setting as:

The project transverses primarily residential and agricultural areas with some strip businesses primarily along Route 12. Because of the relatively large number of residences compared to the number of businesses, it is believed few residents derive their living in the area. The exception is the agricultural activities in the more rural areas of the project.

… normally included in this economic profile are:

overall work forcelabor force by employment sectoraverage earnings by sector and / or

per job… employment forecasts, and more

importantly, unemployment forecasts, should be described

Impact of proposed project / activity(1) Direct – are caused by the action (project /

activity) and spatially and temporarily occur in conjunction; those that are

short- term during the construction / activation phase;

where the proposed project or action after construction / activation will not provide a significant number of jobs to the local / regional labor force

(2) Indirect – caused by the action (project / activity) and occur temporally later in

the project / activity or are spatially removed from the project / activity;

are reasonably foreseeable;may include growth inducing effects; induced change; related effects on air

and water and other natural systems;

multiplier effect employment andearnings – project labor funds are spent on goods and services

(2) Indirect, etc – multiplier effect employment andearnings – project labor funds are spent on goods and services inducing the need for additional commodity production / processing fabrication

specific multipliers for the particular types of jobs within the particular project area based on estimated total expenditures

Text in Figure 7.1 attempts a sample illustration of construction generated employment (short- and –long-term) based on a value for the project budget and a couple of employment compensation assumptions

I tried to follow their methodology for the State Route 374 alternatives

Project Labor MaterialAlternative Cost Construction Cost(1) Cost(2) Jobs/yr(3)

A $9,354 $8,455 $5,918 $2,536 169 B $11,424 $10,325 $7,227 $3,097 206Preferred $9,920 $8.910 $6,237 $2,673 178

(1) Project construction Cost x 70% (70/30 split in text) (2) Project Construction Cost – Labor Cost(3) Assumed at $35,000 salary/worker (text)

(cost values in ,000s)

When looking at project labor estimates, need to account for skilled labor “imported” because of unavailability in project community

(Total Labor - Imported Labor = the Local Employment Capture in Fig. 7.1)[Clarksburg, WV and the Harrison Co. Development Authority got

surprised on “imported” labor with FBI Fingerprint Center]

Location Quotients

Location Quotients are a technique for assessing a region’s specialization in an industry… compares (ratio of) local industrial structure in an employment sector to that sector’s role in the national employment mix… a popular technique for comparing the

size of a local industry to that industry’s importance in the national economy

The State Route 374 employment is a direct short-term with no operational employment aspect

Predictions of employee in-migration, and so increases in population, can be offset by early planning (including ordinances and zoning to direct growth spatially) for predicted population increase… a chance for project / activity sponsoring

agency to participate in this facilities planning

7.1.3 Direct long-term effectsViewed against the ease at which we can see

impacts on the physical landscape, frequently difficult to conceptualize in a project / activity … especially if the economy is perceived as

“set against” the environment and viewed as equal in importance

… can be easier to present the regional “economy” as having two distinct but inter-connected and interacting parts

Economic structure is a mix of:employment by industry;public vs. private sector income;economic activity by industry / commercial center; income distribution

Economic conditionsincome per capitaemployment levelchanges in wealthlevels of production by sector

Project Activity

Economic Model

Estimates of Impacts Estimates of ImpactsOn Economic Structure on Economic

Condition

Estimates of Impact onEnvironmental Attributes

Notable:(1) where long-term employment

or(2) the creation of significant new employment is

associated with a project / activity, that proposed action will likely result in:(aa) increased population retention(bb) net in-migration(cc) potentially impact target wages and target

labor force(dd) potentially alter employment mix(ee) change unemployment rates

Probability of these impacts occurring, and the strength of any impact is directly related to the type (specialty / non-specialty; unskilled / semi-skilled / skilled)

Project / activity planning and review of area historical economic trends should be indepth enough to estimate:(1) split between transferred workforce (imported labor) and demand for new labor (2) type of job demand created(3) historical data from previous facilities, detailing

ability of local areas to provide required labor

Like short-term construction employment, expected long-term or operational, jobs created, and the percentage expected to originate in the local areas, can be estimated

A number of modeling methodologies have been developed and operationalized for estimating and projecting effects of a project on the regional human-physical environment, including: input-output; economic base modeling; dynamic simulation; benefit-cost analysis [used more for justification]

7.1.4 Indirect short-term and long-term regional economic effects

Indirect employment and earnings are created by a multiplier effect as funds are re-spent within the project / activity area

Secondary economic effects are also determined using established multipliers:… for particular types of jobs

… within a particular study area… based on estimated total expenditures

Text notes that project planners can take direct employment and expenditures, and using multipliers, can calculate indirect economic benefit[many multipliers have been standardized into input-output matrices by the U.S. Department of Commerce, Bureau of Economic Analysis]

Carried out correctly, these methodologies can derive an overall estimate of economic benefit across the major aspects of a project / activity… planners can create estimates of how much economic benefit will remain in the region / how much will be “exported”

Purchase of MaterialsIn addition to the direct payroll impacts of Section 7.1,

direct-construction and long-term operational impacts occur through material purchases… in a multiplier effect, this in turn creates jobs in

materials production, exchange services and business-serving sectors

Depending on the nature of needed materials and their geographic accessibility, monetary and employment estimates of project / activity benefit may be spatially derived

In the State Route 374 situation:(1) materials would largely be confined to

gravel, culverts, concreter, asphalt, etc(2) products can be derived locally(3) (realistically) little materials support employment / revenue would be generated over a reasonably long time frame

• I don’t know much about highway materials construction cost… so I am only guessing that the State Route 374 values I derived are reasonable as the materials aspect of project cost *

Alternative Distance Material Cost Cost/Mi

A 4.0 mi $2,536,500 $634,125 B 5.0 mi $3,097,500 $619,500

Preferred 4.3 mi $2,673,000 $621,628

Availability of materials locally can be established through derived location quotients

7.2 Taxes, Revenues and ExpendituresProposed actions that create jobs and induce

growth will positively affect the local tax base [a little too much of a blanket statement]

“+” … new residents pay taxes; generate revenue through permits, local licensing, vehicle registration; etc

… sales revenue and taxes; local trade; jobs; etc“-” … private, property-tax-earning land made exempt as

govt land … projects given utility exemptions … projects requiring expanded transportation

(r.r. spur / siding; road systems) … projects potentially exposing the community to toxins

or pollution … greater traffic / heavy trucks; etc … expansion of necessary services – schools, hospitals,

water and sewage; etc … relocation of tax generating businesses

Assessment of economic factors should include potential fiscal impacts on the municipality / county where project / activity is proposed--- including: total revenues; property taxes; sales tax; fees; permits; etc

Loss of government revenue can be offset and mitigated through payments to municipalities

Aside

Cleveland, OH, I-480 sharply decreased local vehicle traffic through Streetsboro, Solon, and Twinsburg, decreasing revenue from traffic infractions --– the cities sued to share “policing” duties with Ohio Highway Patrol to get back monies

7.3 Land ValuesProject / activity impact on land values often

becomes a point of public concern --- certain actions clearly have negative public perceptions and negative impact on adjacent land values

ex: landfills; prisons; highways; power lines; etc … [what else?]

Aside

While not a land value diminished in the sense the text discussed, anything that diminishes the utilization of your property without altering its classification ex: ranches outside Yellowstone having fences and grazing periodically plagued by elk and bison out of the parkex: diseases and parasites passed to domestic cattle from

elk and bison

ex: re-introduced wolves and grizzly bears preying on domestic stock

ex: think the Fed will allow you to build a mall or apartment complex just outside the park?

The possibility of such impacts must be predicted as objectively as possible

The text reminds that a perceived impact can have just as “real” as affect as an impact that is a concrete fact… effective and continuing interaction with local community leaders is important… public perception, positive and negative, cannot be ignored… especially if the perception of concern is for personal

safety and security… “The area of politics is one of the most powerful of all

contributing factors to the success or failure of a proposed project or action.”

A land value investigation is closely related to evaluation of land use impacts… the project / activity should be assessed in term

of compatibility with adjacent existing and proposed land use

Beyond land use impacts, other factors influence potential effects on land use

Project- and site-specific mitigation frequently involves modification of the project / activity, or attention to surrounding land parcels (trees / barriers; greenbelts; traffic control; odor or noise control… [what else?])

For example:--- location of proposed project relative to surrounding land uses--- values and marketability of properties in the area

prior to establishment of any facilities--- economic forecasts such as interest rates and unemployment

.

.

.--- special incentives for development

7.4 Existing Business CommunityProposed project / activity should be

evaluated for impact on established business community

Text notes that transportation projects in particular can impact business through both construction and operations phase of the project / activity

Evaluate change / disruption for both local and regional trade patterns… short-term disruptions of traffic and trade

patterns [Clarksville after tornado]… permanent re-routing of trade

[circumference highways and beltways]… permanent relocation of significant

customer-base[Clarksville’s legal and govt personnel from downtown; and I have never made a major purchase downtown]

Text lists several points as critical for assessing potential for business impact

… type of business… pedestrian dependence [Clarksville downtown]… size of business… economic stability of the business

[what is downtown now?]

Factors such as these should be evaluated across the duration and characteristics of the project

Construction related mitigation can often be carried out by:

planning construction in stages;efforts to alert public to businesses still operating;providing alternative parking;

conduct construction during non-business hours;

7.5 Proposed Economic Development Plans and Projects

Proposed project / activity should be assessed for compatibility (or conflict) with other proposed economic development projects, or with economic development plans in general[Here was a BIG problem with Mayor Piper’s convention center]

Review needs to cover any potential +/- aspect or perception through both the construction and operational stages

7.6 Cumulative ImpactsAbility to define cumulative impacts (the

contribution of a project’s impact that when added to impacts derived from other projects, constitutes a sum impact greater than its individual)… almost impossible to ascertain without knowledge of other ingoing and proposed projects

Often impacts needing consideration spatially extend beyond the project / activity area[Akron, OH reservoir system on Cuyahoga / Little Cuyahoga Rivers]For example:… cumulative demand for materials and supplies during construction… cumulative demands on utilities and infrastructure… cumulative fiscal impact due to loss or gain of tax base

or federal, state or local municipality revenues… cumulative traffic impacts due to to required detours or

congestion due to construction..

7.7 MitigationBy definition, mitigation is most often project

specific… in all instances, effected community / government agency / etc. should be consulted and informed of preliminary results of impact analysis… from consultation, possible mitigation methodologies are formed and evaluated for predicted effectiveness and feasibility