Methodology

Conduct Of The Analysis

This analysis was conducted by Impact DataSource and completed using community data, rates and information provided by the Texoma Council of Governments. In addition, the model uses certain estimates and assumptions.

Using this data, the economic impact of the Texoma Council of Governments was calculated for the Cooke-Fannin-Grayson County Region and the State of Texas. In addition, the analysis estimated local tax revenues supported by the organization in the three-county region during FY 2021.

Regional Input-Output Modeling System (RIMS II)

The economic impact estimates in this report are based on the Regional Input-Output Modeling System (RIMS II), a widely used regional input-output model developed by the U. S. Department of Commerce, Bureau of Economic Analysis. The RIMS II model is a standard tool used to estimate regional economic impacts. The economic impacts estimated using the RIMS II model are generally recognized as reasonable and plausible assuming the data input into the model is accurate or based on reasonable assumptions. The RIMS II model is described in basic detail below.

Generally speaking, input-output modeling attempts to estimate the changes that occur in all industries based on a change in the demand for the output of an industry. An input-output model allows an analyst to identify the subsequent changes occurring in various industries within a regional economy in order to estimate the total impact on the economy. Total economic impact is the sum of three components: (1) direct, (2) indirect, and (3) induced impacts.

If the demand for the output of an industry, measured by industry sales or revenue, increases by $1 million, total regional output increases by $1 million. This initial change in output is called the change in direct economic output and also referred to as the direct expenditure effect. The change in total economic output in the region resulting from the initial change does not stop with the change in direct economic output. Businesses in a variety of industries within the region will be called upon to increase their production to meet the needs of the industry where the initial increase in demand occurs. Further, other suppliers must also increase production to meet the needs of the group of initial supplier firms to the industry. This increase in expenditures by regional suppliers is considered the indirect economic impact of the initial $1 million in sales, and is classified as indirect expenditures of the total economic impact or the change in indirect economic output.

The total economic impact of the $1 million in sales includes one more component, the induced impact. All economic activity, whether direct or indirect, that results from the initial increase in demand of $1 million, requires workers, and these workers must be paid for their labor. This means that part of the direct and indirect expenditures is actually in the form of wages and salaries paid to workers in the various affected industries. These wages and salaries will in turn be spent in part on goods and services produced locally in the region. This spending is another part of the regional economic impacts referred to as induced impacts and is classified as induced expenditures or the change in induced economic output.

Based on the initial direct impact, the RIMS II model can be used to estimate the direct, indirect and induced impacts on economic output, value added, earnings and employment in a given region. Economic output is gross output and is the sum of the intermediate inputs and final use. This is a duplicative total in that goods and services will be counted multiple times if they are used in the production of other goods and services. Value added is defined as the value of gross output less intermediate inputs. Workers’ earnings or earnings consist of wages and salaries, employer provided benefits and proprietors’ income. Employment consists of a count of jobs that include both full-time and part-time workers.

The RIMS II model is based on regional multipliers, which are summary measures of economic impacts generated from changes in direct expenditures, earnings, or employment. Multipliers show the overall impact to a regional economy resulting from a change in demand in a particular industry. Multipliers can vary widely by region. Multipliers are higher for regions with a diverse industry mix. Industries that buy most of their materials from outside the state or region tend to have lower multipliers. Multipliers tend to be higher for industries located in larger areas because more of the spending by the industry stays within the area.

The RIMS II model generates six types of multipliers for more than 400 industrial sectors for any region in the United States. The multipliers include four “final-demand” multipliers and two “direct-effect” multipliers. Final demand multipliers indicate the impact of changes in final demand for the output of a particular regional industry on total regional output, earnings, employment and value added. Direct-effect multipliers indicate the impact of changes in regional earnings or employment within a particular industry on total employment or earnings within a region.

Final-demand output multipliers indicate the total regional output (direct, indirect and induced expenditures) that results from an increase in direct expenditures for a good produced by a particular regional industry. For example, if an industry in a particular region is said to have a final demand output multiplier of 2, this tells us that a $1 increase in final demand for the good produced by that industry results in a $2 increase in total output or expenditures within the regional economy. Final- demand earnings multipliers indicate the impact of an increase in final demand for the good of a particular regional industry on the total earned income of households within the region. Final-demand employment multipliers indicate the increase in total regional employment that results from a $1 million increase in final demand for the good produced by a particular regional industry. Final-demand value-added multipliers indicate the increase in total regional value added that results from a $1 million increase in final demand for the good produced by a particular regional industry. Direct-effect earnings multipliers indicate the impact of a $1 change in earnings within a particular regional industry on total earnings in all industries within a region. Direct-effect employment multipliers indicate the impact of a change in employment in a particular regional industry on total employment in all industries within a region.

Theoretically, changes in final demand drive the total change in economic output, earnings, and employment. However, these multipliers relationships can be used to estimate impacts in other ways if only limited information is known about a project. For example, the multiplier relationships can be used to estimate the increase in direct economic output based on a given level of employment in a specific industry.

Additional Notes on RIMS II

RIMS II multipliers are based on the average relationships between the inputs and outputs produced in a local economy. The multipliers are a useful tool for studying the potential impacts of changes in economic activity. However, the relative simplicity of input-output multipliers comes at the cost of several limiting assumptions.

• Firms have no supply constraints—Input-output based multipliers assume that industries can increase their demand for inputs and labor as needed to meet additional demand.
• Firms have fixed patterns of purchases—Input-output based multipliers assume that an industry must double its inputs to double its output.
• Firms use local inputs when they are available—The method used by RIMS II to develop regional multipliers assumes that firms will purchase inputs from firms in the region before using imports.

RIMS II, like all input-output models, is a “static equilibrium” model. This means that there is no specific time dimension associated with the results using the model. For the RIMS II model, it is customary to assume that the impacts occur in one year because the model is based on annual data.

Fiscal Impacts

Fiscal impacts were calculated in this study based on taxable spending, taxable property and appropriate tax rates. The steps to calculate these tax revenues are described in the text of the report.

About Impact DataSource

Impact DataSource is a 17-year-old Austin, Texas economic consulting, research and analysis firm. The company has conducted over 2,500 economic impact analyses of firms, projects and activities in most industry groups throughout the U.S.

In addition, Impact DataSource has prepared and customized over 100 economic impact models for its clients to perform their own analyses of economic development projects. These clients include 75 Texas communities as well as the Tennessee Department of Economic and Community Development and the Orlando Economic Partnership.

Impact DataSource’s team includes the following members:

• Jerry Walker, principal/economist, and
• Paul Scheuren, economist

Jerry Walker is an economist and Impact DataSource’s Principal. Over the past 29 years, he has conducted economic and fiscal impact analyses and cost-benefit studies of a variety of firms, facilities, projects and activities. He has also developed several economic impact analysis computer programs for clients to do their own economic impact analyses of firms, projects, activities and organizations.

He also has a background in government accounting and auditing. Prior to his economic consulting career, he had a fifteen-year career as a supervisory auditor with two federal departments – the U.S. Department of Education and the U.S. Department of Health and Human Services. He reviewed federal programs operated by states, local governments, colleges and universities, local education agencies, and nonprofit organizations in a six state area from Austin, Texas. He performed financial audits and operational reviews. During the operational reviews, the operations of the federal programs were reviewed for economy, efficiency and effectiveness. The financial audits included analyzing costs incurred for federal programs and components of indirect cost rates.

He has also served as a part-time accounting instructor at Austin Community College, Austin, Texas.

Jerry has Bachelor of Science and Master of Business Administration degrees in accounting and economics from Nicholls State University, Thibodaux, Louisiana.

Paul Scheuren is an Impact DataSource economist. He has conducted economic and fiscal impact analyses and cost-benefit studies of a variety of firms, facilities, projects and activities.

Paul has a Master of Arts in Economics from Clemson University as well as a Bachelor of Business Administration in actuarial science from Temple University.