MESA ECONOMIC IMPACT STUDY SUMMARY FINAL SEPTEMBER 2020 UPDATE.PDF
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Summary of Estimated Impacts of a Proposed New Steel Mill in Mesa, Arizona June 2020 Economic Impacts During the Construction Period Construction Assumptions $434,000,000 total anticipated investment $324,000,000 investment in personal property $91,000,000 investment in real property $19,000,000 investment in other project related costs NAICS: 331110 242 existing mill employees 186 potential new mill employees $70,000 expected average annual wage (excluding benefits) Operati g Assumptions NEW MILL Substantial economic benefits would be experienced in the State of Arizona during the anticipated construction period of CMC’s new mill facility. The economic bene- fits of construction will end with the completion of the facility. Based on construction investment of $91 million, the anticipated economic impact of the construction activity is reflected in Table 1 on the following page. Direct construction jobs of 576 are projected to result in total creation of 1,039 jobs in the State of Arizona during the construction period. Total Arizona labor income supported by construction activities is estimated to be $62.43 million. Construction activities are expected to ultimately generate approximately $171.45 million in total economic output in the State of Arizona. Study Overview Commercial Metals Company (“CMC”) has directed Strategic Development Group, Inc. (“SDG”) to conduct an Economic Impact Analysis for the purposes of evaluating the positive economic impacts of the construction and operation of a possible new steel mill in Mesa, Arizona, that will produce merchant steel products. The following technical summary is based on assumptions provided by CMC. It should be noted that CMC currently operates a steel mill in Mesa, Arizona. The estimated economic impacts of a new mill, if constructed, would be above and beyond the impacts of the existing mill. Given the elevated economic multipliers inherent to the operation of steel mills, the anticipated economic impacts of the construction and ongoing operations of CMC's facility in Mesa are profoundly positive. Economic Impact Analysis This analysis utilizes 2020 models for Maricopa County and Arizona based on the IMPLAN1 modeling system. IMPLAN is a nationally recognized economic model specifically designed to estimate impacts of new indus- trial locations, plant closures, and construction activity on local economies. The IMPLAN models incorporate the most recent data available; in this case 2020 data which was purchased specifically for this analysis. Note that data presented in this document illustrates estimat- ed impacts in the State of Arizona; additional data, however, is available to show projected impacts specific to Maricopa County. SDG retained Dr. Frank Hefner, a recognized econo- mist from the College of Charleston who specializes in economic impact modelling, to run the IMPLAN model and generate raw data summaries. Economic impact analysis estimates the direct, indirect, and induced effects of new spending or investment. Definitions related to economic impact used in this summary are shown in Attachment A. 1 IMPLAN Group LLC, IMPLAN System (data and software),16905 Northcross Dr., Suite 120, Huntersville, NC 28078 www.IMPLAN.com Impact Type Employment Output* (000's) Direct Effect 186 Indirect Effect 456 Induced Effect 309 Total Effect 951 $15,494 $30,254 $15,377 $61,125 $331,990 $104,037 $48,244 $484,271 Table 2 – Annual Operational Impacts of the New Mill for State of Arizona *Output = the value of all sales of goods and services Anticipated Economic Impacts of the Proposed Mill Operations Table 2 shows new direct employment at the mill is expected to be 186. In addition to direct jobs created by CMC, 765 indirect and induced jobs will be created by the project; total job creation is expected to reach 951. Regarding labor income impacts, approximately $15.49 million in wages are expected to be paid annually to CMC’s employees, ultimately resulting in a total of $61.12 million paid annually in wages in the State of Arizona. Regarding economic output for the State of Arizona, it is estimated that the project along with indirect and induced effects with result in a total annual output of $484.27 million. Overall Projected Economic Impacts of Existing and New Mill Operations During a Ten-Year Period CMC’s proposed merchant mill in Mesa will generate significant positive economic impacts in Arizona and Maricopa County over the long-term. As shown in Table 3, in addition to construction impacts, estimated economic impacts of the proposed new mill operations to the Arizona economy over 10 years will result in the creation of 951 total jobs. Over this same 10 years, $611 million in total labor income and $4.8 billion in total economic output are expected. State of Arizona Total Output $4.8 billion Total Jobs 951 Total Labor Income $611 million Table 3 – New Mill Economic Impacts in Arizona Over 10 Years “ “ Construction activities are expected to ultimately generate approximately $171.45 million in total economic output in the State of Arizona. Impact Type Employment Direct Effect 576 Indirect Effect 173 Induced Effect 289 Total Effect 1,039 $36,803 $11,238 $14,387 $62,428 $91,000 $35,353 $45,099 $171,452 Table 1 – Impacts of Construction Activity to the State of Arizona *Output = the value of all sales of goods and services Labor Income (000's) Output* (000’s) Labor Income (000's) “ “ Estimated economic impacts of the existing mill plus potential new mill operations to the Arizona economy over 10 years include 2,188 jobs, labor income of $1.4 billion, and $9.6 billion in economic output. Table 4 - Total Ongoing Economic Impacts of Existing and Potential New Mill Operations to the State of Arizona Over a 10 Year Period Existing Mill Operations Potential New Mill Operations Total Output $4,762,490,000 Total Jobs 1,237 Total Labor Income $795,278,000 $4,842,709,000 951 $611,246,000 $9,605,199,000 2,188 $1,406,524,000 Total Impact of Existing and Potential New Mill Operations When the impacts of the proposed new mill operations are added to the economic impacts of the existing Mesa mill operations, economic impacts are especially profound as shown in Table 4. The estimated economic impacts of the existing mill plus potential new mill operations to the Arizona economy over 10 years include 2,188 jobs, labor income of $1.4 billion, and $9.6 billion in economic output. Attachment A Definitions of Economic Impact Terms Used in this Analysis Direct effects are production changes associated with the immediate effects of a change in expenditures. For example, CMC’s new construction spending leads to an increase in wages, jobs, profits, taxes, etc. in the Mesa region and in the State of Arizona. These direct effects are the results of construction workers’ salary and their income flowing around the economy. CMC’s ongoing operations and wage payments to employees and suppli-ers also cause direct spending effects. Indirect effects are the secondary production changes resulting from the various rounds of re-spending by businesses, in backward-linked sectors, affected by CMC’s direct expenditures. Architects and brick suppliers, for example, receive orders from the construction companies responsible for the construction of the new building. The resulting income for those suppliers to the construction or operations process becomes more capital that flows around the local economy. Similarly, CMC’s ongoing operations generate re-spending by related businesses, resulting in increased economic impact. Induced effects are the effects resulting from the re-expenditures of households. Employees of companies earn wages that are spent on goods and services. For example, households purchase groceries, durable goods, and personal services in the local economy. This additional cash flow in the local economy results in creation of more ancillary jobs and additional consumers spending money in the local economy. In this analysis, Output represents the value of industry production, meaning the total value to the local econo-my of the new income flowing around the economy. Output represents all of the economic transactions that take place: the sale of the product, the purchase of the materials to make the product, the salary and benefits paid to the workers, and the spending that takes place because the workers were paid. General and Limiting Conditions Every reasonable effort has been made to ensure that the data contained in this report are accurate as of the date of this study; however, factors exist that are outside the control of SDG and that may affect the estimates and/or projections noted herein. This study is based on estimates and assumptions provided by Commercial Metals Company, and other information developed by SDG and its sub-consultant, Dr. Frank Hefner, from its independent research effort, general knowledge of the industry, and information provided by, and consultations with, the client and the client’s representatives.