Education/Research
NEW RIMS II MULTIPLIERS RELEASED MICHAEL KESTER
PARTNER, ECONOMIST, IMPACT DATASOURCE
U
MAGGIE MULLANE
ECONOMIST, IMPACT DATASOURCE
pdated RIMS II multipliers were released by the Bureau of Economic Analysis (“BEA”) in December 2016. The new multipliers replace the prior multipliers released in September 2015 – which, as we discussed early last year, introduced several important revisions to the model that impacted EB-5 job creation estimation (see RIMS II Multipliers Updated for First Time Since 2012: January 2016 Edition of IIUSA’s Regional Center Business Journal). While the December 2016 revision is less substantial, it will again impact job creation in EB-5 economic impact reports.
an Input-Output (“IO”) model like RIMS II depicts inter-industry relationships (i.e., one industry’s output is another’s input) and shows how an impact to one industry affects all the others associated with it. Projects under the EB-5 Regional Center program utilize IO models, such as RIMS II, to estimate the indirect job creation that is projected to result from construction/development and operational activity. Besides job creation, the model may also be used to estimate other economic impacts (such as household earnings and output) a project will have on its surrounding area.
Below, we first briefly review the RIMS II model, and then we discuss the following questions:
The BEA generates the multipliers using two sources: (1) national IO data, which is produced by the BEA for every benchmark year (those ending in -2 and -7) and demonstrates the interindustry relationships of nearly 500 US industries, and (2) regional data, which comes from the BEA’s regional economic accounts and is used to adjust the national IO data to illustrate region- and industry-specific industrial structures and trading patterns. The national data is further “localized” through the use of location quotients with regional wages and earnings data (Bureau of Economic Analysis, Regional Multipliers from the Regional Input-Output Modeling System (RIMS II): A Brief Description).
(1) how job creation for an EB-5 project might be impacted based on this new release, and (2) depending on where an EB-5 application or petition stands in the EB-5 adjudication spectrum, whether the economic study (using now-outdated multipliers) should be updated.
RIMS II & EB-5: WHY ARE THE MULTIPLIERS CHANGING? The BEA’s Regional Input-Output Modeling System, known as “RIMS II”, continues to be most used model utilized in the EB-5 industry to estimate job creation. In short,
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According to press releases, the BEA will update the regional data underlying the multipliers every year – meaning that we should expect new multipliers every year. As dis-
cussed in our previous article, the BEA had been providing regular updates to the RIMS II multipliers for decades until 2012, at which time reduced funding due to sequestration prevented any updates for several years. The BEA revised the model and in 2015 began releasing updated multipliers again according to a slightly revised schedule. The BEA has indicated that they will update the multipliers with new national IO data for every benchmark year but the exact timeline of those releases is unclear. The latest release, in December 2016, introduces multipliers based on 2015 regional data (updated from 2013) and 2007 national data (unchanged). While this release updates the regional data by two full years, it seems reasonable to expect that future releases will only represent a one-year increase. If this newest release is a proper indicator, the BEA should continue to release updated multipliers every year to reflect the newest annual regional data. Substantial updates to the underlying national IO data, currently based on 2007 data, will supposedly be updated only for benchmark years; however, it is unclear when the BEA will actually release new national data, as it was not until 2015 that the 2007 national data was introduced. If the BEA were to continue the same trend, the multipliers would be updated for 2012 national data in 2020 – but it is difficult to speculate exactly when this will actually occur.
VOL. 5, ISSUE #1, MARCH 2017