Measuring How Much Economic Change Will Mean to Your Community

EXAMPLES
        In this final section two examples of using the formulas are given. One example is based on economic growth in a county, and the second example uses a situation of economic decline. The examples can serve as models for applying the methodology to specific local cases.

Growth Example
        ABC Industries, which makes ball-bearings, announces the building of a factory in County X in North Carolina. ABC Industries expects to sell $5 million of ball-bearings annually to buyers outside of County X. ABC Industries will build a $25 million factory in County X to manufacture the ball-bearings, and $10 million of this cost will be spent in County X. What will be the economic impact of ABC Industries on County X?
        County X's local property tax rate is $0.006 per $1 of property value. It is estimated that 40% of the new jobs in the county will be filled by new residents and 60% will be filled by local residents. All growth will occur outside of cities. The interest rate for borrowing money is 8%.

A. Annual income and employment impacts: We'll classify ball-bearings as a "machinery, except electrical" industry from Table 1, and use those income and employment multipliers.

(1) initial annual change in $ earned for county     ×     income multiplier     =     total annual change in spending in county     =     $5 million     ×     2.13     =     $10.65 million
(2) initial annual change in $ earned for county, in $ millions     ×     employment multiplier     =     total change in jobs in county     =     5 ×     26.2     =     131 jobs

B. One-time construction impacts
(3) construction cost spent on local inputs     ×     2.28     =     one-time new spending in local community from construction
(4) construction cost spent on local inputs, in $ millions     ×     35.9     =     one-time new employment in count from construction     =     10     ×     35.9     =     359 jobs

C. Local tax revenue impacts
(5) total annual change in spending in county, from formula (1)     ×     0.02     =     annual change in local sales tax revenue     =     $10.65 million     ×     0.02     =     $0.213 million, or $213,000
(6) total annual change in spending in county, from formula (1) × 2 × local property tax rate per $1.00 of property value = annual change local property tax revenue = $10 million × 2 × 0.006 = $0.12 million, or $120,000

D. Local public spending impacts
(7) total change in jobs in county, from formula (2)     ×     proportion filled by new residents     ×     local per capita public spending, exclusive of social services and schools     =     annual change in local public spending, exclusive of social services and schools     =     131     ×     .4     ×     $531 (from Table 1 for counties)
(8) total change in jobs in county, from formula (2)     ×     proportion filled by local residents     ×     local per capita social service spending     =     131     ×     .6     ×     $216 (from Table 1)     =     -$16,978 ("-" because jobs increased)


(9) total change in jobs in county, from formula (2)     ×     proportion filled by new residents     ×     2 children per resident     ×     local school operating spending per student     =     change in annual local school operating
=     131     ×     .6     ×     2     ×     $965 (from Table 1)     =     $101,132

(10) total change in jobs in county, from formula (2)     ×     proportion filled by new residents     ×     2 children per resident     ×     local per student construction cost     =     new annual local spending on school construction     =     131     ×     .4     ×     2     ×     $990 (from Table 1, for 8%)     =     $103,752

In summary, the benefits and costs of ABC Industries building the ball-bearing factory in County X are given below.

Private Sector
Total new annual $ in local economy:$10.65 million
Total new jobs in local economy:131 jobs
One-time new construction spending in local economy:$22.8 million
One-time new employment from construction in local economy:359 jobs
Public Sector
Annual change in local sales tax revenue:$213,000
Annual change in local property tax revenue:$120,000
Total Revenue:$333,000
Annual change in local public spending, exclusive of social services & schools:$ 27,824
Annual change in local social service spending:$-16,978
Annual change in local school operating spending:$101,132
Annual change in local spending on school construction:$103,752
Total Spending:$215,730

Decline
        DEF Company, which makes leather products, announces it will close its facility in County Y in North Carolina. DEF Company has been selling $ 1 million of products to buyers outside of County Y. County Y's local property tax rate is $0.005 per $1 of property value. Eighty percent of the jobs at DEF Company are held by residents in County Y. What will be the economic impact of DEF Company's shutdown on County Y?

A. Annual income and employment impacts.
Use multipliers for rubber and leather products from Table 1.
(1) total annual change in $ earned for county     ×     income multiplier     =     total annual change in spending in county     =     -$1 million     ×     2.42     =     - $2.42 million

(2) initial annual change in $ earned for county in $millions     ×     employment multiplier     =     total change in jobs in county     =     -$1     ×     36.6     =     -37

B .One-time construction impacts.
None

C. Local tax revenue impacts.
(5) total annual change in county, from formula (1)     ×     0.02     =     annual change in local sales tax revenue     =     - $2.42 million     ×     0.02     =     - $0.0484 million, or -$48,400

(6) total annual change in spending in county, in $ millions     ×     2     ×     local property tax rate per $1.00 of property value     =     annual change in local property tax revenue     =     - $2.42 million     ×     2     ×     $0.005     =     $0.0242 million, or -$24,200

D. Local public spending impacts.

(7) total change in jobs in county, from formula (2)     ×     proportion filled by local residents     ×     local per capita social service spending     =     annual change in local social service spending     =     37     ×     .8     ×     $216 (from Table 1)     =     + $6,394 ("+" because jobs decreased)


In summary, the benefits and costs of DEF Company closing in County Y are given below:

Private Sector
Total new annual $ in local economy:-$2.42 million
Total new jobs in local economy:- 37 jobs
Public Sector
Annual change in local sales tax revenue:-$48,400
Annual change in local property tax revenue:-$24,200
Total:-$72,600
Annual change in local social service spending:+$6,394

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