Preservation Economic Impact Model
Preservation Economic Impact Model Overview
NTCIC uses the Preservation Economic Impact Model (“PEIM”)*, created by the Center for Urban Policy and Research at Rutgers University, to forecast the total economic effects of the rehabilitation of commercial historic buildings. PEIM employs a multiplier methodology that calculates job creation, employee wages, and state and local tax benefits generated from a historic rehabilitation investment based on key project characteristics, such as location, total development cost, and type of real estate project (i.e., historic site, commercial property, and multifamily housing). PEIM measures economic impacts up to construction completion but not after the building is placed in service. PEIM calculates the following economic indicators:
- Direct Impact Components – labor and material purchases made specifically for the preservation activity.
- Indirect Impact Components – spending on goods and services by industries that produce the items purchased for the historic preservation activity.
- Induced Impact Components – expenditures made by the households of workers involved either directly or indirectly with the activity.
PEIM has a highly regarded professional reputation and has been selected by the National Park Service as the economic impact model used at the National Center for Preservation Technology and Training. It is used on an annual basis by Rutgers University to project the national economic benefits of the federal Historic Tax Credit program.
PEIM allows you to calculate the economic benefits of historic rehabilitation projects. In addition, it also has components for forecasting the economic benefits of projects for Heritage Tourism, Main Street Programs, and Historic Sites and Museum. However, the instructions presented below are only for historic rehabilitation.
The National Trust Community Investment Corporation and its parent, the National Trust for Historic Preservation recommend the use of this model as an advocacy tool to support adaptive reuse proposals for historic properties.
*Please note the file size (345.09 MB) prior to beginning the download – the large file may take an extended amount of time to download, depending on connection speed.
1. In order to forecast the direct and indirect/induced job creation, state and local taxes, and income generated from historic rehabilitation, you will need to gather the following information about your projects:
- Name of each project
- States in which the projects are located
- Total development costs (costs of acquisition, construction, professionals fees, construction loan interest, closing costs, developer fee, etc.) of each project
If you will be using the model for analysis other than historic rehabilitation, you will need to gather the following information about your projects:
- Total participants
- Total cost per day for all participants
Night Stays - Percent of time spent on each activity and total cost per day for all participants
- Commercial Lodging
Main Street Program
- New Construction
- Public/Private Joint Ventures
Net Gain in Jobs Created
Historic Sites and Museums
- Total Annual Spending
- Total Capital Spending
- Visitors’ Revenue Generated
2. Download a copy of PEIM at the top right of this page or by clicking HERE. You should open the link using Internet Explorer. The file is 345.09 MB.
3. Once PEIM downloads and is saved to your computer, you can begin inputting data. First, open the Model and select “Single Region” for the Type of Analysis. Next, input the project’s name in the text box for Analysis Name and click “New”.
4. Select the state that the project is located, and click “OK”.
5. PEIM is able to generate project reports for Main Street; Heritage Tourism; Historic Sites, Organizations, and Museums; and Historic Rehabilitation. For the purposes of this illustration, choose Historic Rehabilitation and then select “Commercial” and click the building icon.
6. Answer the various questions related to the project’s type of system repair; amount of interior, site and exterior work needed; type of material used; and soft costs. If you are unsure about the rehab work, choose “standard”. Then click “Next”.
7. Input the project’s total development costs (“TDC”) in the box for Total Amount. If you don’t know the percentage of TDC for the various uses of funds, select “Get Default Values”, which gives you the industry standards for the percentages, and click “Next”.
8. Input the percentage of labor dedicated to the various functions. If that information is not readily available, select “Get Default Values”, which gives you the industry standards for the percentages, and click “Finish”.
9. Select the “Reports” icon and then select “Rehab” as the area to analyze. Click “Ok” to continue.
10. Select “Division Level Report” and click “Preview” to see the projected economic impacts of your project.
11. The PEIM report will generate the following data:
- Jobs: Full-time equivalent jobs by industry. All jobs generated at businesses in the region are included, even though the associated labor income of commuters may be spent outside of the region. Rutgers studies have shown however, that approximately 70% of historic rehab related jobs occur within the state where the project is located. This is considered a very high capture rate.
- Income: “Earned” or “labor” income—specifically wages, salaries, and proprietors’ income. Income does not include non-wage compensation (i.e., benefits, pensions, or insurance), transfer payments, or dividends, interest, or rents.
- Gross State Product: Also known as “wealth accumulated” or “value added”—the equivalent at the sub-national level of gross domestic product (GDP). Value added is widely accepted by economists as the best single measure of economic well-being. It is estimated from state-level data by industry. For a firm, value added is the difference between the value of goods and services produced and the value of goods and non-labor services purchased. For an industry, therefore, it is composed of labor income (net of taxes); taxes; non-wage labor compensation; profit (other than proprietors’ income); capital consumption allowances; and net interest; dividends; and rents received.
- Taxes: Tax revenues generated by the activity. The tax revenues are detailed for the federal, state, and local levels of government. Totals are calculated by industry.
- Federal tax revenues include corporate and personal income, social security, and excise taxes, estimated from the calculations of value added and income generated.
- State tax revenues include personal and corporate income, state property, excise, sales, and other state taxes, estimated from the calculations of value added and income generated (e.g., purchases by visitors).
- Local tax revenues include payments to sub-state governments mainly through property taxes on new worker households and businesses. Local tax revenues can also include revenues from local income, sales, and other taxes.
The following is an example of how to interpret a PEIM report.
Based on total development costs of $10 million dollars, the historic rehabilitation of the ABC Project located in the state of Alabama is expected to create the following economic impacts:
- 161 direct and indirect/induced jobs
- $5.08 million in business and household income
- $225,870 generated in state tax revenue
- $130,690 generated in local tax revenue
- $9.21 million in gross state product