Construction Pre Development Expenses

Hi Jose. Given that you have a fair amount of detail information about the pre-development phase of your project, we would recommend using an appropriate spending pattern to model these impacts. With the spending pattern, you can edit to reflect your known values in the spending pattern and delete out any coefficients that do not directly relate to pre-development activities in your project. As you know, you would need to make sure that you put all of your vales on a coefficient basis (dividing each expense item by the total of all expenses in your pre-development budget) before entering them into the spending pattern. When finished normalize the pattern to one so the model will spend all of your pre-development budget. You will need a Labor income Change Activity to capture the labor effects of this phase of your project. There may be some of your expenses that you have to use an Industry Change Activity to model their impacts but you will know this after you have modified your spending pattern. Since you know the type of structure(s) that will be built, you are in a better position to determine which of the three sectors you list in your Forum Post would be most appropriate. We forgot to mention that if you have some expenditures that you want to model separately, then you should zero them out of your imported spending pattern to avoid double counting of these expenditures. We hope this helps you in framing your project.

Hello Thanks for your response, it is very helpful. I have a couple of follow up questions: 1) Today I was able to secure pre-development expenditures for one of my projects and I realized that IMPLAN does have sector codes for most of these items. I was wondering if it makes more sense (or if it is similar in terms of accuracy) if I use the sectors as listed in the spreadsheet attached to this message? (please take a moment to review it). 2) Also, it is always required to do a labor income change when one uses an industry spending pattern? (It may be difficult in this case given the information available.) Please advise,

Hi Jose. Using a collection of Industry Change Events is fine except that those reported "Direct" effects are not truly Direct - they are the first round of Indirect. So you would have to move those out of Direct and add them to the rest of the Indirect. No matter which method, you would still have to manually add in your Direct Effects and run a Labor Income Change to get the spending of the direct workers. This is the nature of Analysis-By-Parts, which is explained more fully here: https://www.google.com/url?q=http://implan.com/v4/index.php%3Foption%3Dcom_multicategories%26view%3Darticle%26id%3D730:case-study-analysis-by-parts%26Itemid%3D71&sa=U&ei=zs98U6LaNMKPqAalqoKoDA&ved=0CAUQFjAA&client=internal-uds-cse&usg=AFQjCNHTIB-BP2KKs63Avv4fMuvR451VqA Rather than editing an existing Industry Spending Pattern, you can absolutely just import your expenditures from Excel. However, you'll want to put those expenditures into the "Industry Spending Pattern" tab of the Activity Template file (in the Templates folder) so that it comes in in the right format. As you can see, the process involves identifying an associated industry (NAICS code) for each category of spending (https://www.census.gov/eos/www/naics/) and then matching that NAICS code to one of IMPLAN's 440 sectors (http://implan.com/v4/index.php?option=com_multicategories&view=article&id=633:633&Itemid=71). I think this is the simplest way to go about it, but am curious to see how the review team responds.

A very big THANK YOU!

Thanks Jose. Another (perhaps simpler) way to model pre-development activities is to use a collection of industry change events that already include labor income. This option works if the pre-development work is not done by the construction company itself (i.e., these are not line item expenditures by the construction sector). For example, you could model spending on architecture and engineering services (survey, environmental assessment, architect drawings, etc.) as an impact to industry 369 (architectural, engineering & related services). Insurance fees could be modeled as an impact to sector 358 (Insurance agencies, brokerages, and related activities). Attorney fees and title searches could be modeled as an impact to sector 367 (legal services). Impact fees could be modeled via sector 438 (Employment and payroll for State & Local Govt Non-education). Appraisals could be modeled via sector 360 (Real estate). And market studies could be modeled via sector 380 (All other misc professional, scientific, and technical services). As you can see, the process involves identifying an associated industry (NAICS code) for each category of spending (https://www.census.gov/eos/www/naics/) and then matching that NAICS code to one of IMPLAN's 440 sectors (http://implan.com/v4/index.php?option=com_multicategories&view=article&id=633:633&Itemid=71).

II agree! I find this approach to be more straightforward. I researched all the sector codes and selected the following sectors: 369 - Environmental Engineering Services 369 - Building architectural design services 369 - Construction engineering services 369 - Land surveying services 372 - (Computer Aided Design) System Integration Design Services 369 - Architectural services, landscape 369 - Traffic engineering consulting services 367 - Title search companies, real estate 354 - Commercial Banking 367 - Real estate law offices 367 - Title search companies, real estate 360 - Real Estate Appraisal Services 387 - Protection services (except armored car, security systems), personal or property 357 - Property and casualty insurance, direct 40 - Maintenance and Repair construction of residential structures 387 - Protection services (except armored car, security systems), personal or property 357 - Property and casualty insurance, direct 390 - Environmental remediation services (I will include also sector 380 thanks!) What do you think? Another question about how about developer's fees is that OK to model? Thank you so much for your feedback!

We are impressed. We would think that the new construction profits and labor would cover the developer when you construct. Sector 36 (or another new construction sector) will have a distribution to those sectors in its production function, which you could use to weight your total prep spending if you don't have specific data (Explore>Social Accounts> Balance Sheet>Industry then choose the new construction sector. You may want to do an analysis-by-parts for the actual construction so you can zero out the sectors represented by your preparation expenses and not double-count those expenses. Alternatively you can adjust the coefficients to avoid double-counting. Could you provide a little more information as to the developer's fees? Are these real-estate developers? If so, the real-estate Sector would likely be appropriate for these as well, but with some additional information we could be more specific. Sorry for the delay in responding. Please let us know if you have any additional questions. IMPLAN Support Team

Hi, Sorry for the delayed response, I was out of the office last week. The typical pre-development expenses we receive for analysis are: 1. Bank Inspections 2. Financing Fees 3. Interest (does not include principal payoffs) 4. Legal expenses 5. Title Search 6. Appraisal 7. Insurance 8. Engineering Fees (Civil Engineer, Traffic Engineers, Civil Engineer, Environmental Engineer, Geotechnical Engineer) 9. Architectural Fees 10. Environmental Studies 11. Market Study 12. Construction Permits 13. Consultants (Environmental Chapter 91 Consultant, Project Consultant, Development Consultant 14. Zoning 15. Site Security

thank you for sharing this kind of information... Thanks...

Hi Jose, Thank you for providing this information. It looks like some of these may also be included in the construction spending patterns so you will want to check for that. We have assisted you in this by assigning the categories you have listed below to IMPLAN Sectors. 354 - Bank Inspections 354 - Financing Fees 354 - Interest (does not include principal payoffs) 367 - Legal expenses 367 - Title Search 360 - Appraisal 358 - Insurance 369 - Engineering Fees (Civil Engineer, Traffic Engineers, Civil Engineer, Environmental Engineer, Geotechnical Engineer) 369 - Architectural Fees 369 - Environmental Studies 380 - Market Study 438 - Construction Permits 369 - Consultants (Environmental Chapter 91 Consultant, Project Consultant, Development Consultant 438 - Zoning 387 - Site Security To check for which Sectors are included in the spending pattern you can go to Explore> Social Accounts> Balance Sheet (Tab), and select View By: Industry Balance Sheet and the Commodity Demand tab and compare these Sectors (using the listed code plus 3000 (i.e. 369 architectural services will appear as 3369). For Sectors that you do find overlap in, you will have a couple of options: [ol] [li]Choose not to model these expenditures separately but let the construction spending pattern measure these impacts. The issue here is these coefficients might not match actual numbers that you have, and if you have real expenditure numbers you will likely want to model these.[/li] [li]Choose to adjust the values that you model for these expenditures but reduce the value you enter into Industry Sales for these 'developer' expenditures by the value of coefficient in the spending pattern, so that the resulting expenditure in that Sector will be the total value of you have as developer services (i.e. if the coefficient for 3369 is 0.25 than you would only model 75% of the value you have for 369 as the Industry Sales for this Sector and then add the remaining 25% of the value of 369 into your construction total. Please note for this since method, the assumption is that 369 or any of the other developer services are basically Intermediate Expenditures and thus should have Local Purchase Percentage set to SAM Model Value. [/li] [li]Use Analysis-by-Parts, which is what we would recommend if you are comfortable with this analysis method. With this method you can import the spending pattern for your construction Sector into the Setup Activities screen and delete out any each of your developer Sectors for the spending pattern. You will then want to normalize the spending pattern so that the Sum of Event Values equals 1.00. Your Activity Level should be set to the operational budget (the goods and services value of the building instead of the Total Output value, and you can model your Labor Income Change to capture the Induced Effects of the Direct labor payments. For this method the easiest modeling methodology is to include both Activities into a single Scenario and then add your Direct impact back into the results. With this method you won't have to worry about any double counting when modeling the developer fees separately. However, you may still want to set the Local Purchase Percentage for the developer Events to SAM Model Value unless you are sure these expenditures all occur with firms within your Study Area. Either way be sure to state your assumptions.[/li] [/ol] Please let us know if you have any additional questions.