The Economic Impact of the Omega at North Port EB-5 ...members.ozemail.com.au/~prestigefc/Documents for...Fort Lauderdale-Pompano Beach Metro Area, Tampa-St. Petersburg-Clearwater

The Economic Impact of the Omega at North Port EB-5 Project in the Prospective Omega

Florida Regional Center

December 21, 2012 [Updated]

Prepared by:

400 Cornerstone Drive, Suite 310 Williston, VT 05495 800-765-1377 www.epreconomics.com

Letter of Transmittal December 21, 2012 Mr. James Taylor c/o Omega Capital, LLC 2 Metroplex Drive Birmingham, AL 35209 Dear Mr. Taylor: Attached with this letter is the economic impact analysis of the potential Omega at North Port EB−5 project to be developed in North Port, Florida, which our firm prepared at your request. The report update is intended to accompany a regional center designation using a “Hypothetical” or “Actual” EB-5 project that has been filed with the U.S. Citizenship and Immigration Service’s under the EB−5 Immigrant Investor Program. In the report you will find an explanation of the findings and the methods used to estimate the project’s prospective economic impacts. We have prepared our analysis using assumptions and estimates developed from third party data sources, information you have provided, and research and knowledge of the industry and region from our many years of applied economic practice. Where we have used third party data and project information from you and your team, we have assumed that information to be correct. In completing our analysis, we have performed a number of tests and cross checks to verify the internal consistency of the results and find those results to be reasonable. However, changing events and circumstances may cause actual results in any one given year, and for the impacts in total, to be materially different than those reported here. Thank you; we appreciated the opportunity to work with you and your professional team on this project. Sincerely, Jeffrey B. Carr President and Economist Economic & Policy Resources, Inc.

Table of Contents Highlights and Frequently Asked Questions .................................................... 1

General .............................................................................................................. 1 Regional Center ................................................................................................. 1 Omega at North Port EB-5 Project..................................................................... 3

2.0 Introduction ................................................................................................... 7 2.1 Purpose of the Study ................................................................................... 7

3.0 Economic Impact Analysis ......................................................................... 24 3.1 Methods of Analysis ................................................................................... 24 3.2 Data Sources ............................................................................................. 24 3.3 The Regional Dynamics Economic Analysis Model (REDYN) ................... 24 3.4 Model Specifications .................................................................................. 28

4.0 Model Output and Results .......................................................................... 38 5.0 Conclusions ................................................................................................. 45 Appendix 1: ........................................................................................................ 48 Appendix 2: ........................................................................................................ 49 Appendix 3: ........................................................................................................ 51

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Highlights and Frequently Asked Questions The purpose of this section is to provide a summary and to answer frequently asked questions (FAQ’s) regarding economic and job impact studies prepared in support of EB-5 project and/or regional center applications to the United States Citizenship and Immigration Service (USCIS) through the EB-5 Immigrant Investor Program. This section references information in the report where more detail related to the topic of the question may be found. The FAQ’s are broken into sections by general questions, questions about the regional center, and questions about the proposed EB-5 project. The format is for the bullet point to be the question and for the sub-bullet point to be the answer to that question.

General What is the purpose of this study?

o This study has been prepared for submission as part of an application by the prospective Omega Florida Regional Center (OFRC) for regional center designation under the USCIS EB-5 Immigrant Investor VISA Program. The prospective regional center is comprised of 19 counties located in south and south-west Florida. The OFRC is providing an impact assessment study for an actual assisted living facility project known as the “Omega at North Port EB-5 Project” as support for its regional center designation application. The NAICS sectors associated with the development, construction and operation of assisted living facilities (or community care facilities for the elderly) represent the project development activity which the OFRC is also seeking approval. As a “hypothetical project” or “actual project,” it is understood that the proposed EB-5 project is not Matter of Ho complaint and is not yet finalized enough to meet “exemplar” approval standards. While it is understood the I-924 may be approved, the project will not be mentioned by name in the I-924 approval letter and thus will not be considered pre-approved as “exemplar.”

What data sources were used in the preparation of this study?

o This economic and job creation impact study was prepared using assumptions and data from third party sources, information from the project developers and the regional center, and research and knowledge of the sector and region from the team of analysts’ more than 50 years of collective experience in applied economics. A bibliography of several key literature resources pertaining to regional economics is included with this report in Appendix 4.

Regional Center

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What are the geographic boundaries of the proposed Omega Florida Regional Center (OFRC)?

o The OFRC is composed of 19 mostly urbanized counties in a contiguous region of south and south-west Florida. The OFRC is comprised of 25,286 square miles, which is about 40 percent of State of Florida. This geographic area contains seven metropolitan statistical areas (MSAs) including Miami-Fort Lauderdale-Pompano Beach Metro Area, Tampa-St. Petersburg-Clearwater Metro Area, Naples-Marco Island Metro Area, Lakeland-Winter Haven Metro Area, Cape Coral-Fort Myers Metro Area, Punta Gorda Metro Area, and North Port-Brandenton-Sarasota Metro Area—the site of Omega at North Port EB-5 Project.

For which NAICS activities is the OFRC seeking approval?

o The OFRC is seeking approval for the following NAICS activities: Commercial and Institutional Building Construction (NAICS 23622); Site Preparation Contractors (NAICS 238910), and Community Care Facilities for the Elderly (NAICS 62331).

o Commercial and Institutional Building Construction consists of establishments primarily engaged in construction (including new work, additions, alterations, maintenance and repairs) of nonresidential, commercial and industrial, buildings. Commercial and Institutional buildings include manufacturing plants and factories, commercial buildings, religious buildings, hospitals and nursing care facilities, hotels and office buildings, warehouses, and school buildings.

o Site Preparation Contractors consists of establishments primarily engaged in site preparation activities, such as excavating and grading, demolition of buildings and other structures, and septic system installation. Earth moving and land clearing for all types of sites (e.g., building, non-building, mining) is included in this industry.

o The Community Care Facilities for the Elderly industry comprises

establishments primarily engaged in providing residential and personal care services for (1) the elderly and other persons who are unable to fully care for themselves and/or (2) the elderly and other persons who do not desire to live independently. The care typically includes room, board, supervision and assistance in daily living, such as housekeeping services. In some instances, as in Omega at North Port, skilled nursing care (e.g., memory care) is provided for residents in separate on-site facilities.

What methodology is the OFRC seeking approval for from USCIS as an indirect job

estimating methodology?

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o USCIS regulations allow applicants to submit an economic analysis of a proposed EB-5 project to demonstrate how a regional center designation will promote economic growth (e.g. through improved productivity, job creation and increased capital investment) within a region under 8 CFR 204.6(m)(3)(i).

o The OFRC is seeking approval for use of the REDYN dynamic input-output model as an indirect job estimating methodology for this and future OFRC projects. This analysis uses the REDYN Model to estimate the economic and employment effects associated with the Omega at North Port EB-5 Project. See Appendix III for more detail on the REDYN Model.

What evidence is presented to support the request for approval of the OFRC as a

regional center under the USCIS through the EB-5 Immigrant Investor VISA Program?

o This prospective OFRC is unique within the United States for its demography.

As of the 2010 Census, the proposed regional center had a resident population of which 18.3% was aged 65 years or older, compared to the national average of 13.0%. All of the nineteen counties in the regional center had a higher percentage of persons over the age of 65 years than the national average, with some counties having significantly higher concentrations. The population of Sarasota County, the location of the proposed project, had a concentration of over 31% of persons over the age of 65 years.

o A market study of the assisted living facility industry in south and south-west Florida was conducted by Cushman & Wakefield Regional, Inc.—a nationally known firm that conducts such studies for clients throughout the United States. Demand for assisted living facilities, such as those created by the Omega at North Port EB-5 Project, is expected to increase substantially in coming years. This is due to an ongoing increase in the number of elderly people of financial means requiring assistance with daily tasks and on what the study found in recent years to be a largely unchanged capacity in the region for health and assisted living care.

Omega at North Port EB-5 Project

What is the Omega at North Port EB-5 Project?

o The proposed Omega at North Port EB-5 project consists of the development, construction, and on-going operations of an assisted living facility. The Omega at North Port EB-5 Project includes a total of $13.75 million in development expenditures over a 12-month construction period. This figure includes only “hard” construction costs, and specifically excludes all “soft

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costs;” hence, all such soft costs and “furniture, furnishings, and equipment” are not included in impact Year 1.

o The EB-5 project consists of a 134 unit assisted living facility, including 32 Memory Care units for patients with degenerating mental capability (e.g. Alzheimer’s Disease). The project includes various amenities consistent with the highest standards demanded of senior living. See Section 3.2 of the project business plan for more detail.

Where is the project located?

o The Omega at North Port EB-5 Project is located on the campus of South Biscayne Church in the City of North Port, Sarasota County, Florida.

Does the project location qualify as a targeted employment area (TEA) under the

EB-5 Program?

o Yes, Omega at North Port EB-5 project location is within a high unemployment Targeted Employment Areas (TEA) as preliminarily approved by the State of Florida’s Department of Economic Opportunity on January 23, 2012. Updates to this designation will be pursued as needed. Therefore, it is expected that investors in the proposed EB-5 project will qualify for the $500,000 EB-5 program investor minimum.1

How many new jobs are expected to be created as a result of the development, construction, and on-going operations of the Omega at North Port EB-5 Project within the OFRC, outside the OFRC, and in the U.S. as a whole?

o Following successful development and operation, the Omega at North Port EB-5 Project is expected to create the following new jobs in impact Year-3:2

369 net new direct and indirect jobs within the geographic boundaries of the OFRC.

Outside the geographic boundaries of the OFRC, the project is expected to create 172 net new jobs.

A total impact of 541 net new jobs in the U.S. as a whole. See pages 39-46 for more detail.

What effect will the Omega at North Port EB-5 Project have on output, disposable

income, and household earnings within the OFRC, outside the OFRC, and in the U.S. as a whole?

1 The high unemployment rate TEA certification will need to be updated after the State of Florida makes its transition to calendar year 2011 employment and unemployment data. 2 Which is intended to mirror the so-called two and one-half year job creation timeline—absent any prospective consular retrogression under the EB-5 program later this federal fiscal year.

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o Following successful development and operation, the Omega at North Port

EB-5 Project is expected to have the following four-year cumulative impacts (in $2013): Increased economic output valued at $119.9 million within the OFRC,

$141.4 million outside the OFRC, and $261.3 million in the U.S. as a whole.

Increased disposable income of $88.7 million in the OFRC, $48.2 million outside the OFRC, and $136.9 in the U.S. as a whole.

Increased household earnings of $60.1 million in the OFRC, $42.8 million outside the OFRC, and $102.9 in the U.S. as a whole.

See pages 39-46 for more detail.

What effect will the Omega at North Port EB-5 Project have on the key sectors/subsectors of Utilities (NAICS 221), Construction (NAICS 23), Professional, Scientific, and Technical (Business) Services (NAICS 541), and Maintenance and Repair (NAICS 811), as requested by USCIS guidance documents?

o Following successful development and operation, the Omega at North Port EB-5 Project is expected to increase demand in key sectors/subsectors within the Omega Florida Regional Center by four-year cumulative totals ($2013) of:

$1.1 million for the Utilities (NAICS 221) subsector. $13.4 million for the Construction (NAICS 23) sector. $4.3 million for the Professional, Scientific, and Technical (Business)

Services (NAICS 541) subsector. $0.9 million for the Maintenance and Repair (NAICS 811) subsector.

o Outside the regional center, key sector/subsector demand is expected to

increase by six-year cumulative totals ($2013) as follows: $1.5 million for the Utilities (NAICS 221) subsector. $2.6 million for the Construction (NAICS 23) sector. $6.0 million for the Professional, Scientific, and Technical (Business)


o In the U.S. as a whole, key sector/subsector demand is expected to increase

by four-year cumulative totals ($2013) as follows: $2.6 million for the Utilities (NAICS 221) subsector (difference due to

rounding). $16.0 million for the Construction (NAICS 23) sector (difference due to

rounding). $10.2 million for the Professional, Scientific, and Technical (Business)


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o Key sector/subsector job gains in the regional center in impact Year-3 range from a low of one net new job in the Utilities (NAICS 221) subsector to a high of 10 net new jobs in the Professional, Scientific and Technical (Business) Services (NAICS 541) sector.

o Outside the regional center key sector/subsector job gains in impact Year-3

range from a low of one net new job in the Utilities (NAICS 221) subsector to a high of 12 net new jobs in the Professional, Scientific, and Technical (Business) Services (NAICS 541) subsector.

o For the U.S. in total, key sector/subsector job gains in impact Year-3 range

from a low of one net new job in the Utilities (NAICS 221) subsector to a high of 23 net new jobs in the Professional, Scientific, and Technical (Business) Services (NAICS 541) subsector.

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2.0 Introduction

2.1 Purpose of the Study This analysis is intended to assist the USCIS in their evaluation of the Omega at North Port EB-5 Immigrant Investor project pre-approval application. In compliance with USCIS guidance, this study sets forth the likely net economic and job creation impacts associated with the proposed EB-5 project in North Port in Sarasota County Florida. Changes in number of jobs, economic output, personal income, and household earnings that the EB-5 project is expected to generate are described for 3 geographies: inside the regional center, outside the regional center, and for the U.S. as a whole. The pending regional center is described in detail with emphasis on regional transportation networks and the economic climate. Thus, the project’s economic benefits are demonstrated both regionally and nationally. The Omega at North Port EB-5 project entails initial development, including construction of an assisted living facility including several memory care units, fit up and inventory of medical supplies and equipment, and finally staffing the facility with specialized personnel. Additional and continuing economic activity will be generated from the operations of the facility—which are expected to begin in Year 2 of the project timeline. This economic development is contingent upon up to $7.5 million in EB-5 project funding, which is to be combined with $25.2 million in other capital.3 These investment dollars total to an overall project capital stack of $32.7 million at completion. Of this total, the economic and job impact assessment study includes only $13.8 million in hard construction costs in the impact modeling to be conservative. This expansion of the regional base of invested capital, the creation of new jobs and associated economic growth4 effects cannot be realized without the EB-5 investor capital, which is required to fund the project. In this way, the economic growth impacts reported in this analysis are dependent upon USCIS approval of the proposed project. This impact assessment analysis shows that the proposed EB-5 project, if constructed and operated as planned, would result in significant positive economic impacts for the regional economy of the prospective regional center and the U.S. economy overall. Most importantly from an EB-5 program context, these benefits would include a significant number of new EB-5 eligible jobs within the regional center. The proposed Omega at North Port EB-5 project, if approved, would also increase labor demand, output, personal income, and household earnings within a number of key subsectors inside and outside the regional center’s economy, contributing to the local economy and the U.S. economy as a whole. These impacts were estimated using the REDYN

3 This other capital may include other senior debt and bond proceeds. 4 This economic and job impact assessment study, taken together with the project business plan, presents the specific details of how the Omega of North Port project will result in new economic growth within the prospective regional center and the U.S. overall.

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dynamic input/output model, which has been approved by the USCIS for completion of EB-5 economic impact analyses.5 Dynamic input-output models like REDYN simulate the economic relationships between sectors of an economy on several levels of geographic detail. These models allow analysts to see how changes in individual or multiple sectors in a state or regional economy ripple throughout the broader system. Incremental demand created by investment expenditures in one sector of a regional economy increases employment not only in that sector, but also in other related sectors and geographic regions. Linkages exist with other sectors and regions which provide commodities or other inputs to a project; consequently, impacts of the original investment are felt in these other sectors and regions through increased output, employment, and income. The REDYN economic model employed for the economic and job creation impact study estimates the impact a specific investment will generate throughout a determined area—in this case the prospective OFRC economy. The input/output model uses a dynamic (or a longitudinal) approach that models not only the relationship between sectors in an economy (e.g. for a county or state), but also the interconnectivity of regional economies. The dynamic element of the model has a well-developed impedance database that is able to account for temporal effects due to competitive differences between either geographic regions and/or different sectors of the economy. Over time, these competitive pressures emerge and then tend to bring the regional economy back to equilibrium. The process, in that way, depicts the so called “ripple effect” impact of economic changes on a region. In this impact assessment study, the initial economic stimulus (in this case the construction and operation of the Omega at North Port assisted living facility) reverberates through the regional economy and progressively spreads outward from the facility, the basis of the new business activity. Eventually the new waves of economic activity are absorbed into the larger economy creating a new level of economic equilibrium. In the long run, the project, if developed as proposed, is expected to materially alter the regional economy through a significant amount of new investment and related business development activities. Therefore, it is expected that the regional economy of the prospective OFRC will have a correspondingly higher level of output, investment, employment, and income than would otherwise be the case in the absence of the proposed Omega at North Port EB-5 project, which seeks project pre-approval and regional center designation for the proposed geography detailed in the following section.

5 See Section 3.3. The Regional Dynamics Economic Analysis Model (REDYN) and Appendix III for a thorough description of the REDYN model.

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Overview of the Regional Economy: Omega Florida Regional Center The proposed Omega Florida Regional Center (OFRC) is composed of 19 counties in southern Florida containing the areas commonly known as South and South West Florida. The U.S. Office of Management and Budget has designated 7 Metropolitan Statistical Areas (MSAs) within the regional center geography. MSA areas are used by the U.S. Census Bureau and other agencies to calculate statistics in a consistent way and are characterized by the presence of a population center (or multiple related population centers) within a county or group of counties with a distinct economic coherence and social identity. The regional center contains the two largest metropolitan areas within Florida, the Miami-Fort Lauderdale-Pompano Beach and Tampa-St. Petersburg-Clearwater metro areas. These MSAs contribute substantially to the regional center population, which in total accounts for 58.7% of Floridians. Geographically, the regional center encompasses a total land area of about 25,300 square miles or roughly 40% of Florida.

Figure 1

Northport‐Brandenton‐

Sarasota Metro Area Punta Gorda Metro Area

Cape Coral‐Ft Myers

Metro Area

Manatee Charlotte Lee

Sarasota

Tampa‐St Petersburg‐

Clearwater Metro Area

Miami‐Ft Lauderdale‐

Pompano Beach Metro Area

Lakeland‐Winter

Haven Metro Area

Hernando Broward Polk

Hillsborough Miami‐Dade

Pasco Palm Beach

Pinellas

Naples‐Marco Island

Metro Area Other Counties

Collier DeSoto

Glades

Hardee

Hendry

Highlands

Monroe

Omega Florida Regional Center Counties by Metropolitan Area

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Figure 2: Map of the Proposed Omega Florida Regional Center

Located on the Atlantic Coast of the Omega Florida Regional Center, The Miami-Fort Lauderdale-Pompano Beach Metro area is the largest metro area in the southern United States with a population of 5.6 million in 2010. The metro area is known as an important center of finance, education and culture, in addition to being home to many corporate headquarters. With its location on the tip of the Florida peninsula, Miami is an important international city, as a central economic hub for much of the Caribbean. On the western side of the Florida peninsula, facing the Gulf of Mexico, the population is clustered around Tampa Bay, the largest natural bay in Florida. Tampa Bay is surrounded by 3 cities of more than 100,000 people: Tampa, St Petersburg, and Clearwater. The population of the Tampa-St. Petersburg-Clearwater MSA anchored by these cities was 2.8 million according to the 2010 census, making this MSA the second

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largest metro area in Florida. The adjacent North Point-Sarasota-Bradenton, Punta Gorda, and Cape Coral-Ft. Myers MSAs run in a line along the Gulf Coast and are renowned as popular destinations for those resettling in Florida. The regional center is unique within the United States for its demography. According to the U.S. Census Bureau as of 2010, the proposed regional center had a resident population of which 18.3% was aged 65 years or older, compared to a national average of 13.0%. All counties within the region had a higher percentage of persons over the age of 65 in 2010 than the national average, with some counties having significantly higher concentrations. The population of Sarasota County, the location of the proposed project had a concentration of 31.2% senior citizens. Another notable demographic feature of the region is that 29.3% of the regional center’s population identified as Hispanic, which is nearly twice the national average. Additionally, 24.8% of the regional center’s residents were born outside the United States, again twice the national average.6 South Florida’s year-round warmth and sunshine make the state a popular vacation, second home, and retirement destination. The state of Florida attracted over 82 million business and leisure travelers in 2010.7 “Snowbirds” or people who reside in a northern state in the summer and warmer southern states in the winter are also important to the proposed Omega Florida Regional Center. A 2004 study conducted by the University of Florida found that Florida hosts about 1.1 million temporary residents, the majority of which live in South Florida and stay an average of 5 months. Nearly two-thirds of these people are over 55 years old, and most of them travel from New York, Michigan, Ohio, Pennsylvania and Canada. Tourists and residents alike can enjoy the benefits of conserved natural areas in and around the proposed Omega Florida Regional Center. The most famous of these is Everglades National Park, which sets a biologically diverse and unique ecosystem aside for conservation as well as enjoyment of visitors. As a home to alligators, manatees, wading birds, and river otters the park is a popular destination for wildlife viewing. Biscayne National Park contains Biscayne Bay on the coast of Miami-Dade County and is popular for scuba diving, fishing, kayaking and sailing. Coral reefs in the Atlantic, Big Cypress Natural Preserve to the west and Loxahatchee National Wildlife Refuge are also big outdoor attractions within the regional center. The Tampa Bay Estuary is another important wildlife habitat, with several wildlife refuges located within the bay. All add to the natural environment within the proposed regional center and provide a contrast to the heavily populated coastal cities. The transportation network in the proposed regional center links the cities within the region to each other as well as linking the region to areas outside. Notably, with many coastal cities and ports, the regional center has a physical structure that allows specialization in overseas transportation – of both cargo and travelers. With a location

6 Calculated using 2010 census data. 7 Source: Florida http://media.visitflorida.org/research.php

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close to the Panama Canal, southern Florida’s ports truly allow access to the entire world. Additionally, within the regional center there are many interstate roadways, airports, and railroads that connect the region internally and to the United States as a whole. The Omega Florida Regional Center is served by 5 interstate highways, which provide efficient overland access throughout the regional center and beyond for both passenger travelers and freight shipments. Two major U.S. transportation arteries, Interstate 75 and Interstate 95, originate in the OFRC. I-95 travels up the Atlantic Coast leaving north from Miami and passing through Jacksonville in northern Florida. It continues connecting major population centers all along the eastern seaboard of the of United States, including: Savannah, GA; Richmond, VA; Baltimore, MD; Philadelphia, PA; Metro New York City; and Boston, MA. It ends at Maine’s eastern border with Canada. I-75 begins in Miami as well, and connects the Gulf Coast of the peninsula, through Port Charlotte, Bradenton, and Tampa, FL. The Interstate 275 connects the large St Petersburg peninsula with I-75, crossing the mouth of Tampa Bay across the iconic 4 mile long Sunshine Skyway Bridge. I-75 then leaves the state and continues north through Atlanta, GA; Chattanooga, TN; Cincinnati, OH; Detroit, MI; and ends at Michigan’s northern border with Canada. Interstate 4 runs from Tampa across the state to the major tourism destination of Orlando. Additionally the Ronald Reagan Turnpike, a state toll road, connects Miami to Orlando before connecting with I-75. Passenger rail travel for southern Florida is provided by Amtrak. The Silver Service/Palmetto line connects Miami to New York City via Orlando, FL; Savannah, GA; Charleston, SC; and Washington, DC. An additional line connects to Tampa. Within the Miami Metro Area, there are two commuter rail systems, the Metrorail and Tri-Rail. The heavy rail Tri-Rail system follows a south-north route from West Palm Beach through Boca Raton, Fort Lauderdale, Hollywood, and Miami to the Miami International Airport in Hialeah. The elevated rapid transit system known as Metrorail serves Miami’s urban core and connects it to suburbs Hialeah, Medley, Coconut Grove Coral Gables, South Miami and Dadeland. Additionally within the Miami Metro area, each county runs an interconnected network of bus lines. On the Gulf Coast, the Hillsborough Area Regional Transit Authority (HART) and the Pinellas Sun Coast Transit Authority provide bus and some light rail service to the cities of St. Petersburg, Tampa, and the surrounding areas. Additionally a majority of the other urban counties within the regional center run their own bus transportation systems.8 The proposed Omega Florida Regional Center is home to many vital ports that play a large role in the regional center’s economy. Of these the largest is Tampa Bay. The port of Tampa Bay is the largest port in both the state of Florida and the regional center. The port’s infrastructure and large natural harbor make Tampa an important transportation gateway. In fiscal year 2011, the Port of Tampa processed 37.2 million tons of cargo, and played host to 807,000 cruise passengers. Port Manatee, also within

8 Links to all Florida Transit organizations available from Florida Public Transit Association (FPTA) http://www.floridatransit.org/index.html

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Tampa Bay brought in 8.0 million tons of cargo. The Port of Miami, with its international business and tourism economies is also an important port. Serving the state’s largest city, the port of Miami moved 7.3 million tons of cargo in 2011. As the largest cruise ship port in the world, 4.15 million cruise passengers traveled through the port in 2010. The port links Miami and the proposed regional center to 250 ports in over 100 countries. Port Everglades, in nearby Broward County is a crucial hub of both tourism and industry as well, and saw 3.7 million cruise passengers and 5.2 million tons of cargo in 2010.9 These ports, in addition to being connected to the rest of the country by the interstate highway system are connected by freight rail as well, with CSX being the major carrier with service in the area. The regional center also contains several airports providing commercial service. Miami International Airport is the largest and is important to Miami’s ranking as a world city. It is the U.S.’s largest gateway to Latin America and the Caribbean – an important component of its status as a leading international airport globally. Of U.S. airports, Miami International transported the most international cargo, 2nd largest number of international passengers and was 3rd overall in total freight (domestic + international).10 In 2010, 35.7 million passengers and 2 million tons of freight passed through Miami International Airport. In Tampa, the Tampa International Airport is the largest on the western side of the peninsula. Tampa International transported 16.7 million passengers in 2011, and transported 180 million tons of cargo.11 In Broward County, the Fort Lauderdale-Hollywood International Airport served 21.9 million passengers. The prospective Omega Florida Regional Center is regarded globally as a diverse area of significant international importance. Its character as a cultural melting pot is reflected in the language, food, music, and business worlds. With major cities anchoring the population centers and a surrounding natural landscape of beaches, ocean and everglades the area is attractive to tourists and snowbirds seeking a warm weather destination. Travel to and from the proposed Omega Florida Regional Center is facilitated through a network of interstate highways, a number of international airports and its world-leading collection of cruise ship ports. This cultural, geographical and transportation system cohesiveness is the foundation upon which this application for the Omega Florida Regional Center builds. An analysis of the regional economy follows and demonstrates the economic character of the region. For this analysis, peer regions were chosen to draw comparisons between areas. Peer regions included are: Sarasota County, where the projects are located; the proposed Omega Florida Regional Center; the State of Florida; and the U.S. as a whole, which provides baseline data.

9 Port statistics from the Florida Ports Council http://www.flaports.org/ 10 http://www.miami-airport.com/pdfdoc/facts_at_a_glance.pdf 11 Tampa Airport Administration http://www.tampaairport.com/about/facts/index.asp

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Chart 1: Population Growth Trends, July 2000 – July 2010

Chart 1 shows that the population growth in Florida and the regional center outpaced that of the U.S. for the July 1, 2000 through July 1, 2010 period. The population of the proposed OFRC grew at an average annual rate of 1.4% for sample period total of 15.0%. This was greater than the U.S. annual average rate of 0.9% growth (totaling 9.5% growth for the period). The State of Florida led the peer regions in population gain with an annual average growth rate of 1.6%, for total growth of 17.4% for the period. The population of Sarasota County’s growth was comparable to that of the regional center as a whole with a 16.1% increase for the 2000-2010 period. Chart 2: Unemployment Rates Trends, Calendar Years 2001-2010

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Change in Population(Indexed to July 1, 2000=100)

United States Florida OFRC Sarasota County

Source: Census Bureau Prepared by Economic & Policy Resources, Inc.

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2%

4%

6%

8%

10%

12%

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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

12-Month Average Unemployment Rates(Jan-Dec)

United States Florida OFRC Sarasota county

Source: Bureau of Labor Statistics Prepared by Economic & Policy Resources, Inc.

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Unemployment rate trends for the calendar year 2000-2010 period are compared in Chart 2, above. The upturn in unemployment rates starting in 2008 is a symptom of the “Great Recession,” which followed the collapse of the financial and housing markets that same year. Because Florida and the prospective regional center economies were heavily invested in the construction and real estate market growth leading up to the recession, the economic effects of the downturn have been have been particularly severe within these geographies. Though Florida, the proposed regional center and Sarasota County showed lower rates of unemployment through 2003-2007, rate increase relative to the U.S. were rapid during the recessionary period. In calendar year 2010, the most recent annual data available, these 3 peer regions all showed higher unemployment than the national average of 9.6%. Sarasota County’s unemployment rate of 12.2% that year is the highest of the peer regions, followed by the State of Florida and the proposed Omega Regional Center with rates of 11.5% and 11.8% respectively. Chart 3: Change in Total Private Employment, Calendar Years 2001-2010

Filling out the picture on employment trends among the peer regions, changes in the total private sector employment numbers for calendar years 2001-2010 are shown in Chart 3. These trends reflect the same recessionary forces that the unemployment numbers do, showing a consistent effect of the economic downturn on jobs in the peer regions. Florida and the OFRC saw employment peak in 2006, preceding declines of 12.2% and 12.3% respectively. These declines eroded early growth in jobs, and the state’s employment numbers contracted 1.8% for the period while the regional center shrank 4.5%. Sarasota County reported the largest overall declines of any peer region, losing 12.5% of total private sector employment. The U.S. reported smaller

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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Change in Total Private Sector Employment(Indexed to 2001=100)


Source: Bureau of Labor Statistics Prepared by Economic & Policy Resources, Inc.Source: Bureau of Labor Statistics Prepared by Economic & Policy Resources,

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employment increases over the first half of the decade, but experienced a less severe contraction as will, resulting in a 2.8% decline over the ten year period. Chart 4: Trends in Construction of Buildings (NAICS 236) Sector Employment, Calendar Years 2001-2010

The Construction of Buildings sector (NAICS 236) employment trends for calendar years 2001-2010 are shown in Chart 5. The Floridian peer regions show expansion in sector employment between 2003 and 2006 at rates much above those of the U.S. baseline, suggesting that the region made significant investment in the “housing bubble” during this period. Across all peer regions, the contraction in sector jobs corresponding to the Great Recession offset early period growth; regions with the largest growth also suffered the largest contractions in employment. The result across all peer regions was an overall negative change in employment levels. The U.S. experienced the least volatility in sector employment and reported a 2.7% average annual decrease which totals to 21.7% for the ten year period. The State of Florida suffered sector job decreases of 23.1% for the period. The proposed Omega Regional Center and Sarasota County saw similar decreases of 28.8% and 13.0% respectively.

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Change in Construction of Buildings Sector Employment(Indexed to 2001=100)



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Chart 5: Trends in Nursing and Residential Care Facilities (NAICS 623) Sector Employment, Calendar Years 2001-2010

Chart 6 presents the calendar year 2001-2010 employment trends for Nursing and Residential Care Facilities sector (NAICS 623) employment, which is the industry subsector that encompasses assisted living facility related economic activities. All peer regions reported sector employment growth, with the Floridian regions outpacing national averages. This reflects both the regional concentration of seniors and the aging population nationwide. The United States reported the least growth, with the sector expanding at an annual average of 1.8%, for a total of 17.4% between 2001 and 2010. Sarasota County saw the largest increase of any peer region, reporting average annual growth of 3.9% or a total of 41.4%. The OFRC and the State of Florida grew at similar rates, with sector employment growing 28.6% and 28.5% respectively. Chart 6: Trends in Real GDP, Calendar Years 2001-2010

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Change in Nursing and Residential Care Facilities Employment(Indexed to 2001=100)



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Real GDP: Total, Private Industries(Indexed to 2000=100)

United States Florida OFRC Proxy North Point MSA

Source: Bureau of Economic Analysis Prepared by Economic & Policy Resources, Inc.

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Turning from employment trends to economic output, the inflation-adjusted gross domestic product (GDP) trends are shown in Chart 7, above. Due to data availability, the regional center excludes the 5 counties that are not included in an MSA (this proxy region includes 97% of the regional center’s population). The North Point-Bradenton-Sarasota MSA is included instead of Sarasota County. In these data, the “Great Recession” period is seen in the national GDP decline between calendar years 2007 and 2009. The official end of the recessionary period is marked here by the economic growth shown between 2009 and 2010. Overall for the period, GDP growth did not vary widely between peer regions. The United States and the North Point MSA respectively reported nearly identical growth of 13.0% and 13.4% over the sample period. Florida as a whole and the OFRC proxy respectively reported growth of 19.1% and 15.7%. Chart 7: Trends in Construction Sector (NAICS 23) Real GDP, Calendar Year 2001-2010

A comparison of the real GDP trends within the Construction sector (NAICS 23), shows the regional center proxy and other Floridian peer regions as distinct from the national trends. While nationally the Construction sector reported declines throughout the sample period, the Florida regions experienced significant early-period gains in real sector output. These gains were followed by an extended sharp contraction, the severity of which makes the national contraction appear small by comparison. The United States reported an average annual decline of 4.3%, for a total decline of 32.7% over the sample period. Trends in the other peer regions moved together, and GDP within the Florida Construction industry, for example, increased more than 20% between 2001 and 2005 and declined more than 40% between 2006 and 2010. Florida reported an overall decline for the ten year period of 30.6%. The OFRC proxy and the North Point MSA declined 32.4% and 32.9% respectively, over the same period.

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Real GDP: NAICS 23 Construction Industries(Indexed to 2000=100)



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Chart 8 Trends in Hospital and Nursing and Residential Care Facilities (NAICS 623) Real GDP, Calendar Year 2001-2010

Through calendar years 2001-2010, growth of real GDP in the Hospitals, Nursing and Residential Care Facilities subsector grew as one would expect given the shifting demographics of the United States. Growth in the U.S. was 2.3% annually, consistently slightly higher than in Florida or the regional center proxy, and it compounded for a total output increase of 20.2%. Florida and the OFRC proxy reported average annual growth over the sample period of 2.1% and 2.0% respectively. These totaled to increases of 17.8%, and 17.1% respectively for the period. The North Point MSA followed a unique path among the peer regions, declining early and recovering late in the period to report an increase of 2.0% between 2001 and 2010. Looking at the comparative economic structures of the areas under analysis, Table 1 (below) shows jobs by major industry in the proposed Omega Florida Regional Center12 economy and the State of Florida, both in terms of levels and as a share of total private sector jobs in calendar year 2010 (calendar year 2010 being the latest year for which complete data are available). The right column in Table 4 is the location quotient statistic. A location quotient is the ratio of an industry employment share in a given geography to the same share in another. This allows relative employment concentrations (that is, one geography relative to another) to be more easily compared. The location quotients were calculated for each industry as follows:

12 For the location quotient analysis a proxy region capturing 95% of the regional center population is used, due to data availability.

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(Indexed to 2000=100)



ntni

ci

/EE

/EELQ

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Where: E

i = Employment in the region’s industry

Ec = Total employment in the region

Eni

= National employment in the industry

Ent

= Total national employment

Location quotient analysis provides measures of economic specialization and is used to identify those industries that have a comparatively larger or smaller concentration or presence in the economic base of the regional center’s economy. A location quotient that is equal to 1.0 means that the share of employment in the regional industry is exactly the same as the percentage employment in its counterpart national industry. If the location quotient is greater than 1.0, the share of employment in the regional economy exceeds the national share of employment in that counterpart industry. Conversely, if the location quotient is less than 1.0, that means the region’s share of employment in the industry is less than that of its national counterpart. Location quotients over 1.0 mean that an industry is a relatively more significant employer in the region, with a location quotient of 1.2 or greater indicating a possible export or traded goods-services industry. Location quotients below 1.0 indicate the employer is under-represented relative to the reference region, and a location quotient of less than 0.80 indicates the possibility for import substitution in the subject geography (assuming near average productivity). The location quotients found in Table 4 (below) show the ratio of the State of Florida and the regional center job concentration, respectively, to the national level job concentration by sector. In other words, how the structure of regional center economy compares to that of the U.S. as indicated by job concentration in each sector. As an example, the first available location quotient is Agriculture, Forestry, Fishing and Hunting in the OFRC is 1.25, demonstrating a significantly higher than average share of its private workforce employed in that industry sector relative to the U.S. economy’s average job concentration. The analysis of these location quotients suggests that within the OFRC, the Agriculture, Forestry, Fishing and Hunting (with a Location Quotient of 1.25); Transportation and Warehousing (1.98); Finance and Insurance (1.59); Real Estate and Rental and Leasing (1.27); Professional and Technical Services (2.22); Management of Companies and Enterprises (1.97); Educational Services (2.47); and Arts, Entertainment and Recreation (1.34) industries have higher employment concentrations within the regional center relative to the corresponding national concentrations. This could mean that Finance and Insurance, for example, is an export industry or regional area of expertise for the regional center economy. There are also industry sectors in the regional center with below national average employment concentrations. The OFRC had relatively less employment in the Mining, Quarrying and Oil and Gas Extraction (with a location quotient of 0.10); Utilities (0.65); Manufacturing (0.44); Information (0.58); Administrative and Waste Services (0.34); and Health Care and Social Assistance (0.17) industry sectors. This may suggest lower

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overall productivity levels in the regional and local economies in these industry sectors or opportunities for import substitution (i.e. Local and regional growth opportunities) from and economic development perspective.

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Table 1: State and Regional Location Quotients, Calendar Year 2010

United States OFRC* Florida United States OFRC* Florida OFRC* FloridaNAICS 11 Agriculture, forestry, fishing and hunting 1,142,192 44,430 82,121 1.1% 1.3% 1.4% 1.25 1.27

NAICS 21 Mining, quarrying, and oil and gas extraction 641,366 1,987 3,632 0.6% 0.1% 0.1% 0.10 0.10

NAICS 22 Utilities 560,713 11,403 22,540 0.5% 0.3% 0.4% 0.65 0.71

NAICS 23 Construction 5,948,837 183,353 347,106 5.6% 5.5% 5.7% 0.99 1.03

NAICS 31-33 Manufacturing 11,810,371 163,230 307,499 11.0% 4.9% 5.1% 0.44 0.46

NAICS 42 Wholesale trade 5,561,787 181,596 308,484 5.2% 5.5% 5.1% 1.05 0.98

NAICS 44-45 Retail trade 14,544,111 517,667 928,370 13.6% 15.5% 15.4% 1.14 1.13

NAICS 48-49 Transportation and warehousing 3,985,037 245,488 433,660 3.7% 7.4% 7.2% 1.98 1.93

NAICS 51 Information 2,807,721 50,977 78,140 2.6% 1.5% 1.3% 0.58 0.49

NAICS 52 Finance and insurance 5,618,477 278,381 533,024 5.3% 8.4% 8.8% 1.59 1.68

NAICS 53 Real estate and rental and leasing 1,971,344 77,735 123,658 1.8% 2.3% 2.0% 1.27 1.11

NAICS 54 Professional and technical services 7,479,760 518,340 925,436 7.0% 15.6% 15.3% 2.22 2.19

NAICS 55 Management of companies and enterprises 1,855,139 113,582 197,085 1.7% 3.4% 3.3% 1.97 1.88

NAICS 56 Administrative and waste services 7,153,937 76,308 135,668 6.7% 2.3% 2.2% 0.34 0.34

NAICS 61 Educational services 2,419,382 186,426 317,248 2.3% 5.6% 5.2% 2.47 2.32

NAICS 62 Health care and social assistance 15,902,253 85,114 150,550 14.9% 2.6% 2.5% 0.17 0.17

NAICS 71 Arts, entertainment, and recreation 1,921,653 80,514 182,898 1.8% 2.4% 3.0% 1.34 1.68

NAICS 72 Accommodation and food services 11,079,375 380,094 736,503 10.4% 11.4% 12.2% 1.10 1.18

NAICS 81 Other services, except public administration 4,369,780 135,219 230,749 4.1% 4.1% 3.8% 0.99 0.93

NAICS 99 Unclassified 173,872 168 435 0.2% 0.0% 0.0% 0.03 0.04

Base Industry: Total, all industries 106,947,104 3,331,998 6,044,806 100.0% 100.0% 100.0% 1.00 1.00

Source: Bureau of Labor Statistics

Location Quotient

*Due to lack of data due to Federal non-disclosure rules the following counties are excluded from this analysis: Desoto, Glades, Hardee, Hendry, Highlands, Monroe and Hernando counties. The proxy region, excluding these counties accounts for 94% of the regional center population

Prepared by Economic & Policy Resources, Inc.

Industry

Employment Composition of Total Private

23Po lic y Re s o u rc e s , In c .EPR Ec o n o m ic &

The above information has been provided as evidence of the economic, social, environmental, geographic, and cultural ties between the 19 counties that comprise the proposed Omega Florida Regional Center. The temperate climate attracts tourists and temporary residents as well as shaping the regional environment.13 Economically, employment and GDP trends demonstrate that the regional economy operates as a region—that in many respects is distinct from the national economy. These ties, together with a robust transportation network serving both passenger travel and freight shipping, show that the proposed Omega Florida Regional Center functions as an integrated economic region, which should enable the U.S. Citizenship and Immigration Service to approve the geography as an official regional center. From the economic, cultural and infrastructure evidence presented above, it appears there is a sound foundation of regional integration and continuity upon which the Omega Florida Regional Center rests. Considered together with the reach and activities associated with the Omega at North Port EB-5 Project, USCIS designation as a regional center for industry sectors NAICS 2362 (Nonresidential Building Construction), NAICS 238910 (Site Preparation Contractors), and NAICS 6233 (Community Care Facilities for the Elderly) appears defensible and justified.

13 Notably the climate supports “The Everglades”, the large area of swamp in the center of the peninsula.


3.0 Economic Impact Analysis

3.1 Methods of Analysis

Economic and job creation impact modeling was performed using the Regional Dynamics Economic Analysis Model (hereafter “REDYN”) to determine the economic and employment impacts associated with the proposed construction of the Omega at North Port EB-5 Project—which is an assisted living facility. REDYN is the newest and most sophisticated of the advanced input/output models available today. The REDYN Model has been used to assess the net job and other economic benefits associated with economic development projects, new businesses, certain types of policy changes and utility power projects in various states. A detailed description of the REDYN model is found in the appendices at the end of this impact study report.

3.2 Data Sources

The economic and job creation impact assessment analysis included and relied on significant information and data that was supplied by representatives of the OFRC staff and consultants. The data included a construction timeline and other expected project development costs. The EB-5 project management also provided extensive and detailed information on pre-operations and operations through the third year of full operations that represented the period until which the operations of the facility were stabilized. Additional research and analysis were also completed by EPR to crosscheck and corroborate client provided data for reasonableness—including the review of a third party market study which clearly indicated the need for the beds to be provided by the proposed EB-5 project. Industry and EB-5 project related metrics such as output and employment were compared to statewide and regional data sources. Appropriate quality control checks, including the triangulation of data sources with other sources of third party information, and activity estimates proved the data to be reasonable for the purposes of this economic and job creation impact analysis of the proposed EB-5 project within the proposed geography of the Omega Florida Regional Center. Based on these data, inputs were created for use in the REDYN input-output tool to model the economic impact of the construction and operation of the project.

3.3 The Regional Dynamics Economic Analysis Model (REDYN) The internet based REDYN Model was developed by Regional Dynamics, Inc. currently of Scottsdale, AZ, through its principal creator, the late Thomas Tanner, Ph.D., a former model manager at Regional Economic Models Inc. (known as REMI) of Amherst, Massachusetts. Dr. Tanner was a former member of the faculty at University of Georgia, and was most recently employed at the Strom Thurmond Institute of Government and Public Affairs at Clemson University at the time of his death in May of 2009. Dr. Tanner’s work experience at REMI gave him the expertise to create an alternative to the REMI model. The result is


an integrated input/output model of the counties and cities of the U.S. which has significant advantages over the existing menu of retail input/output models: REMI (which is prohibitively expensive) , IMPLAN (as maintained by the Minnesota IMPLAN Group, Inc. which was originally developed for the U.S. Forest Service which is a static input-output tool), and RIMS II final demand and/or employment multiplier tables (which is maintained by the U.S. Department of Commerce which is also a static tool). The REDYN Model employs a concept known as New Economic Geography,14 a theory first developed by Nobel Laureate Paul Krugman while he was at the Massachusetts Institute of Technology. This approach employs “fully general equilibrium” models that “derive aggregate behavior from individual maximization.” This competitive framework is translated into a model that makes the assumption that “commodities produced by an industry are truly joint in the production process, as prescribed by a uniform production function for all firms in each industry based on competitive pressures to diffuse advantages quickly across all firms in an industry.” New Economic Geography also focuses on agglomeration economies and the relationships between them in different levels of geographic space.15 To illustrate this, consider a tight group of commercial establishments configured as a mall. This is the smallest level of an agglomeration economy. It is related to the regional commercial market which is part of the national market and the world market. It is the linkages between these levels of economic agglomeration that New Economic Geography seeks to explain and illustrate.

REDYN Data Sources As is the case with other input-output tools, the REDYN Model uses a variety of data provided by U.S. Government entities. The basis for the model is the North American Industry Classification System (NAICS) to the five digit level. This allows the model to provide detail for 703 industries and over 180 commodities for the geographic region specified in the model.16 This classification system and level of detail makes REDYN’s output compatible for comparison to government reported statistics as this is the system used for publishing economic data by the U.S. Department of Labor’s Bureau of Labor Statistics (BLS), the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) and the U.S. Census Bureau. These government bureaus provide the original data that is accumulated and transformed into the REDYN Model’s input/output (e.g. multipliers) and other specified relationships.

14 See Exhibit 1. 15 Agglomeration economies refer to circumstances where economic units, although competing, find it mutually advantageous to co-locate or to locate sufficiently close enough to share production resources and/or customers. 16 See Exhibit 2.


In addition, the REDYN model also employs data from the U.S. Census Bureau’s County Business Patterns. County Business Patterns data is the source for wage bill payroll data and employment data used in the model. The model’s developers preferred this approach since it is an annual series that is more complete in its coverage of the workforce than the Quarterly Census of Employment and Wages (hereafter “QCEW”) series, as it includes self-employed persons, employees of private households, agricultural production workers, and railroad workers. These workers are not “covered” by most state unemployment insurance systems and are therefore not reported in the QCEW series. The County Business Patterns data set also is preferred because it provides detail about employment and wages down to the zip code level where concentration of industry is high enough to provide reportable data. The suppression of data due to confidentiality issues is a common problem of all types of wage and employment data used in specifying input/output models. REYDN has developed a way to fill in the blanks called the row and column sum (RAS) method. After performing the RAS analytics on the County Business Patterns data it is reconciled with Regional Economic Information System (REIS) data from the Bureau of Economic Analysis of the U.S. Department of Commerce to confirm consistency. The REIS data is especially helpful for providing data in the agriculture and governmental sectors. The REIS data is also used to allocate national consumption to the roughly 3,100 counties in the United States that are provided on the aggregate level by the National Income and Product Accounts (NIPA). The levels of consumption of industries and households are a key building block in the creation of input/output models.17 The input-output tables themselves are created using BEA Input/Output (IO) make and use tables. The data in these tables are augmented by the biennial ten-year IO forecast tables from the Bureau of Labor Statistics. A major difference between the REDYN model and other input/output models is its use of a new distance impedance database supplied by the Oak Ridge National Laboratory.18 This allows the REDYN Model to add elements of trade flow and gravity theory based on distance impedance specific to road, rail, water, air and proxy transport. The combination of these data sources gives the REDYN model the power to predict with greater accuracy than ever before the economic impacts of a wide range of economic changes. Summary of the Methodology for Calculating Indirect Jobs: In contrast to proving the direct job count of an EB-5 project through the provision of payroll records to a USCIS reviewer, the calculation of indirect jobs cannot be measured and verified directly through records. Instead, indirect jobs under the EB-5

17 See Exhibit 3. 18 See Exhibit 4.


program must be verified through the use of estimating methodologies that are deemed to be “reasonable” under the requirements of the EB-5 program. The EB-5 applicant has some latitude under the “reasonable methodologies” requirement. The most common estimation techniques involve the utilization of input-output tools that involve a range from simple mathematical calculations on a spreadsheet (e.g. under RIMS II) to integrated EB-5 project simulations using sophisticated input-output models. Even though these approaches vary in sophistication and structure, the general approach to this estimating process is essentially the same for all of the USCIS-approved input-output tools in that they all use calculated coefficients based on detailed federal data. Compilation of these data, which are updated each year to varying degrees, involves assembling and updating data regarding how much input is used for producing a given amount of output. In its simplest form, the estimation process is comprised of two fundamental steps: (1) calculations to determine what are commonly referred to as national coefficients which are based on production functions,19 and (2) determinations as to what proportion of those goods and services are purchased within the region. The first calculations estimate how much input is used in any given year to produce a given amount of output in any given year. The second group of calculations referred to above involves calculations of what are referred to as regional purchase coefficients (RPCs). These regional purchase coefficients essentially estimate what proportion of those goods and services are purchased within the region under analysis. The REDYN model, like other input-output models such as IMPLAN and REMI, handles all those calculations within the model software based on the geography and type of stimulus specified by the analyst. The REDYN model is geographically specified so that regional purchase coefficients are calculated for all involved sectors based on purchases of goods and services from “within the region” firms. The matrix can be, and usually is, large and complex. RPCs tend to be higher for service providing industry categories and lower for goods producing industry categories. In either case, indirect jobs under the REDYN input-output model are calculated through the input-output simulation process based on these quantified national relationships and regional purchase coefficients as calculated within the software algorithms embedded in the REDYN model.

19 Again, to reiterate, this is a process where the amount of input (and the corresponding number of jobs and corresponding amount of income) required to produce an amount of output of a final product or service is estimated.


3.4 Model Specifications

Discussion of Input-Output Model Inputs For any EB-5 project, the modeling of potential project economic and job creation impacts can be conducted from the supply side or the demand side of the economic equation. When modeling the economic impacts associated with the supply, an analyst captures the increase in direct employment and wages, and looks to determine the economic linkages of the project via an input-output model. A demand-side approach would capture the additional spending (often specified as a change “final demand”) in the regional economy as a result of the development and operation of a new project. The relevant information and data used to develop the specific input-output model inputs for this impact assessment analysis of the Omega at North Port EB-5 project included: (1) the amount and timing of the EB-5 project’s development expenditures (which were obtained from project management through representatives of the OFRC—but excluded all “soft” construction costs), and (2) a detailed pro-forma of pre-operations and operations ramp-up and expected change in output associated with those activities.20 The data included the components and dollar amounts of the “hard” development expenditures on an annual timeline, and a comprehensive set of financial pro formas—including expected revenues for facility operations. The data from the project developers were laid out in a comprehensive and a detailed business plan that will be filed along with the other application materials. These data were then employed to develop the specific inputs that were employed in the REDYN input-output model—as supplemented by additional research to properly quantify and then specify each input for use in the input-output model. The principal analytical task at this point in the impact assessment analysis is to properly quantify the new business activity increment attributable to the proposed EB-5 project to be used in the input-output model. For this analysis, impact modeling was completed from a demand-side perspective, capturing the effects of additional final demand in the regional economy of the OFRC associated with the revenues of the Omega at North Port EB-5 project. Additional increases in personal and household incomes in the regional economy are expected to result (through “ripple effects”) in the creation of new business activity and additional jobs (including jobs elsewhere in the regional economy and the economy in the balance of the United States—or outside of the economy of the proposed OFRC). Beyond the discussion above, key input-output modeling details and assumptions for the Omega at North Port EB-5 project are described below:

20 It should be noted that pre-operations activity that are expected to occur the second half of year 1 of the development timeline.


1. The first step in this impact assessment analysis was to create a model

reflecting the geographic requirements for the input-output model framework based on the EB-5 project’s location. For this analysis, an input-output model was constructed that included both specific areas within the regional center and an additional area comprised of the rest of the United States outside the regional center. The first area was important in order to make sure the input-output model had the greatest degree of accuracy since regional economic structure can differ as industry linkages vary significantly across different regions throughout the United States—just as RIMS II and IMPLAN multipliers vary by region to region.21 The second area was constructed in order to allow the impact study to calculate total U.S. economic and job creation impacts as prescribed in the EB-5 program regulations. In the case of this impact assessment analysis, the input-output model constructed was comprised of the following geographic areas: (1) Sarasota County, Florida, (2) the other regional center 18 counties (in south and south-west Florida), (3) the balance of Florida, and (4) the balance of the U.S.22 The impact in the regional center plus that in the balance of the U.S. sum to the total U.S. impact—which assists in deriving the data required under the EB-5 reporting protocols.

In other words, the sum of the impact in regions 1 and 2 represents the economic and job creation impact within in the proposed regional center. The impact in the regional center geography plus the impact in the balance of Florida (region 3 above), and the rest of the U.S. (region 4 above) sums to the total expected U.S. economic and job creation impact. The use of the REDYN model allows for flexibility in assessing modeling results down to the county level, for the state as a whole and for the U.S. economy overall. This model structure, when employed with the assumptions listed below and using the specific data inputs as specified in Table 2 (below) enable an analyst to replicate the input-output simulation employed in this analysis.

2. Once the input-output model was constructed, the next step was to develop

estimates of the change in final demand for the construction activity. Building construction costs for the proposed North Port assisted living facility total $12.43 million dispersed over a 12 month period as detailed in Table 2, below. The input-output assessment analysis utilized NAICS 23622—Commercial & Industrial Building Construction—which is the 2012 NAICS category for above amount of construction input, into the REDYN model. The inputs also included $1.32 million in site development costs that

21 See Blair, Peter and Miller, Ronald. Input-Output Analysis, 1985; and Hoover, Edgar M. An Introduction to Regional Economics, 1971. 22 This means the entire U.S. excluding Florida.


were inputted into the input-output model as final demand expenditures under NAICS 238910—Site Preparation Contractors. This category includes items such as dirt moving for construction, grading construction sites, and similar necessary activity. The overall construction budget (including site development) is supported by detailed third party construction cost estimates which were obtained through a competitive bidding process which was awarded to Gilbane Building Company—one of the nation’s most experienced building companies. Gilbane has been operating in the Florida market since 1972, and includes the successful completion of roughly 30 senior housing projects within the state. Even though there are in all likelihood EB-5 program eligible, “soft costs” expenditures associated with this project, the economic and job impact assessment analysis does not include any soft costs in the impact assessment analysis’ job counts. The above referenced sourcing materials are included elsewhere in the filing materials.

3. Estimates of the change in final demand were then developed for the

operations phase of the Omega at North Port EB-5 Project using project management’s estimates of annual operating revenues. These estimates of operating revenues were then adjusted for projected inflation23 and inputted into the input-output tool under NAICS 62331—Community Care Facilities for the Elderly. The operations budget is supported by a comprehensive and detailed market study, and reflects numerous years of collective operating experience of the project management team. The market study and profiles-experience of the project management team are also included elsewhere in this filing.

4. The REDYN model was then run with those inputs, and this run put the

model inputs through the multiplier matrices embedded in the REDYN software. The computer algorithm included coefficients in the input/output model that determine the amount of inputs per unit of output in each industry category where the new business purchases goods and services produced or sold regionally (locally). The software algorithm also contained coefficients in the input/output model that determine the number of new inputs for each unit of output in each industry category for goods and services produced or sold regionally (locally). The simulation was then solved within the input-output model to estimate the indirect (or secondary and tertiary) links that create the job, output, income, and other economic impacts throughout the regional economy. With REDYN, the input-output run also applied additional advanced procedures though the software algorithm, including impedance-based commodity trade flows, and detailed national input-output use tables to estimate a complete U.S. multi-regional supply response to indirect and induced demand, and to the exogenous final demand change. For construction activity impacts, only indirect jobs

23 Inflation (CPI-US) was projected using forecasts from IHS Global Insight, December 2012.

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associated with construction activity were enumerated for EB-5 program purposes. Direct construction jobs were subtracted from the total job impact from construction activity to derive the reported indirect job results.

5. The multi-region results (including employment counts, additional

disposable income, household earnings, and output) were then compiled from reported outputs from the REDYN model for the scenario modeled. These results were then grouped geographically into results for the regional center, outside the regional center, and the U.S. economy as a whole summations as prescribed in the accepted standards and procedures under 8 C.F.R. Section 204.6(m)(3)(iv). Under this regulation, outputs for increased household earnings, greater demand for business services, utilities, maintenance and repair, and construction were calculated from the REDYN model inputs and reported in the relevant tables in the impact assessment report.

Table 1 Inputs – Omega at North Port EB-5 Assisted Living Project

Discussion of Increased Final Demand Discussion of the Construction Budget: The project development (for pre-construction and soft costs) and hard construction budget was developed cooperatively by Gilbane Building Company and the proposed EB-5 project’s management team. Gilbane Building Company was selected as the construction manager for the proposed EB-5 project through a competitive “Request for Qualifications” process for the proposed Omega at North Port EB-5 Project. Gilbane Building Company has been in business since 1873 and has operated in the state of Florida since 1972, where it has completed not less than 30 senior living facilities projects (including 23 assisted living facilities projects). Gilbane’s core competency is in managing complex construction activities. The company has a proven track record of completing successful development and construction of projects similar to that proposed by the EB-5 project developers in this application. This company history strongly supports an expectation that this project will be constructed and opened as planned within the forecast budget and timeline.

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An initial construction cost budget was developed by EB-5 project management, drawing upon their own development expertise that includes numerous projects of this type throughout the United States. The initial construction development and hard cost budget was then reviewed by Gilbane utilizing its expertise and its extensive budgeting tool box, including its “CostAdvisor” tool. Gilbane’s CostAdvisor is an interactive initial cost estimating program that is ideal for conceptual cost modeling of proposed projects of this type.24 The tool is calibrated with the company’s extensive historical cost data together with local market input producing what Gilbane refers to as a “confident early budget.” Gilbane’s approach is to forecast construction costs for an initial conceptual construction budget based on real project information—including gross square footage, building footprint, number of stories, location, and initial plans of design for the building’s “basis of design” for its interior and exterior. This tool and its capabilities bolster Gilbane’s extensive experience in pre-construction, comprehensive construction services (e.g. hard construction expenditures oversight), and post-construction advocacy for their clients, through which they guide projects all the way from project planning and pre-construction activities through to hard construction and all close-out activities. The applicant believes that the preceding should help to fully source and fully explain all data and calculations used in the analysis of the budget assumptions and cost estimates of construction—which has become a requirement for EB-5 projects. Also to this end, Table 5 in Section 3.4 of the EB-5 project business plan contains a detailed itemization of all hard costs and soft costs in the construction budget. That cost breakdown shows all costs, including costs that were not used in the economic modeling, such as land acquisition, project management fees, and contingency costs. Only the costs itemized above were included in the input-output impact modeling. Discussion of Operations: For operations, the role of assisted living facilities serving the elderly is to provide those who have difficulty independently managing daily activities the help they need in their day-to-day lives. Activities may include housework, laundry, meal preparation, memory care, and medication management. Research shows that as a person ages, the likelihood that he will need assistance with one or more “activities of daily living” increases. On top of these daily needs, as a population ages its healthcare needs expand significantly, making medical care for the elderly a primary concern. Assisted living facility staffing reflects the need for both medical and daily assistance needs particular to their elderly residents.

24 It should again be noted that this project is an “Actual” project that is not providing an “exemplar I-526 petition” for review. As an “Actual” project, planning is not complete enough to meet “exemplar” standards and “exemplar review” under Matter of Ho standards is not requested.


Projected economic and population growth suggest a surge in demand for assisted living facility services is underway. Most people requiring the type of care provided by an assisted living facility such as Omega at North Port begin their residency at such a facility at ages between late-70s and mid-80s. The onset of Alzheimer’s disease is of particular concern for this age group, affecting 1 of 8 people aged 65 and older. The disease has a devastating effect on an individual’s ability to live independently. The planned Omega at North Port facility will include 32 memory care units that will be specifically designed to meet the needs of Alzheimer’s patients. By 2030, all “baby boomers” will have reached age 65 and will number roughly 72.1 million, or 19% of the total US population. Of this group, 7.7 million will suffer from Alzheimer’s disease. Specifically in Florida, the number of people age 65 and older is expected to grow 77% by 2030. Chart 9: Population Growth for the State of Florida

The estimate of the change in final demand for the operations phase of the proposed EB-5 project arises from an independent market assessment study that was commissioned by project management to thoroughly evaluate the market into which the Omega at North Port EB-5 project will be entering—assuming the EB-5 project application is approved by the USCIS. The October 2011 study25 was conducted by Cushman & Wakefield Regional, Inc., an independent, third party company located in Tampa, Florida, which has considerable experience in this type of market analysis in the assisted living facility sector. The study included analysis of regional demographics and income, amenities of the region,

25 Market Study: A Proposed Assisted Living Residence at South Biscayne Church in North Port Florida; Cushman & Wakefield Regional, Inc.; October 20, 2011.

0

1

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3

4

5

6

7

2010 2015 2020 2025 2030

Millions

Year

Growth of Florida population 65+Projected from 2010 US Census

Sources: US Census Bureau; University of Florida, Bureau of Business & Economic Research, Population Studies Prepared by Economic & Policy Resources, Inc.


the North Port, Florida community, interviews with stakeholders, and a comprehensive survey of regional competitors (including both existing providers and those potential providers that had planned facilities that could be developed over a time frame that could have an effect in or on the marketplace and within a relevant period of time that corresponded to the expected development of the proposed EB-5 project.

The analysis found that the existing assisted living facilities in the North Port area are performing at a level above average for the industry overall, with an average occupancy rate of 90% or above. The present-day market is especially healthy for new facilities with relatively numerous amenities, including those that are comparable to the proposed EB-5 project. However, the future of the market is of particular relevance to the prospective EB-5 project. For this reason, the marketing study analyzed the anticipated assisted living supply and demand levels with projections through 2015. Demand was calculated using demographic projections, National Center for Health Statistics estimates projecting need for assistance with “activities of daily living,” and with income sufficient for residency. This market analysis found that there increasing levels of unmet demand, increasing steadily from 598 units in 2012 to 723 units in 2015—without the proposed EB-5 project.26 Even assuming the development of the Omega at North Port EB-5 project, the level of unmet demand in the regional marketplace would still be at the level of nearly 600 units and would be only marginally below the level of unmet need that existed in 2012 before the proposed EB-5 project was developed (see Table 3 below). Table 3: Supply and Demand Projections in the North Port, FL Assisted Living Facility Market

Note. Table adapted from the Cushman and Wakefield market study. As a result, given the greater than 585 unit level of unmet need in the marketplace, it is the conclusion of this analysis that the proposed EB-5 project will likely meet “unmet unit need” for assisted living facilities in the regional economy. It is positioned to not complete with existing assisted living facilities, and will therefore not result in the displacement of existing supply or the

26 In fact, at 134 units, the North Port facility would fill less than 1/4 of the existing unmet need indicated by the market study.

Year 2010 2011 2012 2013 2014 2015

# of Qualified individuals in PMA 817 859 901 942 984 1026

# of Units (including proposed 303 303 303 437 437 437Omega project after 2013)

Unmet Demand 514 556 598 505 547 589


displacement of existing jobs within the regional market. Instead the development and operation of the proposed Omega at North Port EB-5 project’s economic and job activity additions will likely result in increased final demand. These data and information indicated that it was reasonable to conclude that no adjustment for final demand or job displacement in this impact assessment analysis was required. The budgeted pro forma was developed by the EB-5 project management team based on their experience and as informed by the aforementioned market study. The Omega at North Port EB-5 Project team consists of a well-rounded group of businesspeople with expertise in senior living facilities as well as other complex industries including investment and top-tier talent management: notably, Earl Wade, who is a Director of Omega Communities, LLC. As a Director, he is compensated for providing his expertise as a consultant which mirrors the duties and responsibilities of a Chief Operating Officer. Mr. Wade founded Co-operative Retirement Systems of America (“CRSA”) in 1989. CRSA provides professional management, development, marketing and financial advisory services to senior living communities across America and internationally. In 2010, CRSA was acquired by Life Care Services (“LCS”), and Mr. Wade currently serves as Chief Operating Officer of CRSA/LCS Management, LLC and CRSA/ LCS Development LLC (collectively “CRSA”). CRSA is now a wholly owned subsidiary of LCS, a family of companies that provides high-quality lifestyle products and services to seniors. Combined, CRSA and its sister company Life Care Services are the fifth largest manager of senior housing in America, with over 90 senior living communities and over 30,000 units under management. Mr. Wade recently led CRSA’s expansion efforts internationally including projects in China and Costa Rica. Also supporting the project, though the development of the financial projections, is Donald Selheimer, Finance Manager for CRSA/LCS Management. In this role, Mr. Selheimer is responsible for evaluating the financial feasibility, and overseeing the financing of, development phase projects. He previously served as Senior Vice President of Finance and Accounting Services for CRSA Management, LLC, the predecessor company to CRSA/LCS. Mr. Selheimer has more than 25 years of retirement living and senior housing experience. Prior to joining CRSA in 1994, Mr. Selheimer served as Chief Financial Officer for Peninsula United Methodist Homes, Inc. (PUMH). PUMH is a Wilmington, Delaware, based multi-facility owner operator and manager of life care, nursing and home health care entities. In his capacity as Chief Financial Officer for PUMH, Mr. Selheimer was responsible for all financial reporting, accounting issues and compliance as well as filing of all required IRS documents. Mr. Selheimer served as a Senior Manager for KPMG Peat Marwick’s National Long Term Care Consulting Practice, located in Chicago, Illinois. Additionally, Mr. Selheimer served as a member of Ernst & Young’s National Retirement Center Consulting Group.


The Omega at North Port EB-5 Project pro-forma benefits from this extensive industry-specific background and the resources that accompany this experience. As seasoned professionals in the industry, the team recognized from the project’s outset that a pro-forma’s reliability is highly dependent on the localized market conditions into which a prospective assisted living development will enter. In order to address this concern, Cushman & Wakefield Regional Inc. was commissioned to complete a comprehensive market analysis for the Omega at North Port EB-5 Project. This study was completed in October of 2011—which was roughly six months prior to this application’s original filing date. This study analyzes the market conditions for a proposed 134-unit assisted living/memory care residence, including a 102-unit assisted living/ 32-unit memory care residence. The study identified the primary market drivers of the proposed project’s primary market area which included nine zip codes within a larger secondary market area, a seven-mile radius around the proposed location of the facility, and comprehensively analyzed the amount of and characteristics of the supply and demand within the primary market area. The study conducted a detailed study of potentially competing facilities-projects in the market area, and analyzed the senior demographics in the market area. The study also made a determination of market support for the proposed assisted living/memory care project through this demographic analysis and the market conditions found in the area. While the market study broadly concluded that the proposed project “will be supported,” by high occupancies and unmet demand in the primary market area, the study also tested details of the proposed project’s expected pricing and other aspects of EB-5 project’s financial projections. Through this analysis, Cushman and Wakefield produced specific estimates of average gross income per unit for each operations year encompassed in the EB-5 project timeline. The CRSA financial projections for North Port SLC, LLC estimate annual revenues based on projected occupancy of the assisted living and memory care units, monthly fees charged for assisted living and memory care, anticipated level of care charges and other ancillary revenues. The financial projections assume an average gross income per unit (AGIPU) of $61,202 during the initial year of occupancy, and increasing to $63,032 by the third year of operations.

The market study prepared by Cushman & Wakefield provides and AGIPU of $56,260.27 The market study was prepared in October 2011 and estimated market rents for a community to open in approximately one year. Because the project will open approximately 18 months later than anticipated in the market study, the AGIPU has been adjusted for inflation at a rate 3.5% for 1.5 years. The inflation adjusted Cushman & Wakefield estimated AGIPU at opening of the community is projected to be $59,239, and increase to $63,459 by the third year of operations.

27 See the Stabilized Operating Income table on Page 46 of the Cushman & Wakefield report.

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The table below compares the AGIPU from the market study prepared by Cushman & Wakefield to the AGIPU utilized in the financial projections. Please note that the years specified are years of operations, not accounting for the one year construction period associated with the full scope of the Omega at North Port EB-5 Project. Thus, Year 1 in the table below conforms to impact Year 2, and so on, as reported in the economic and job impact study. The table below compares the AGIPU from the market study prepared by Cushman & Wakefield to the AGIPU utilized in the financial projections. Please note that the years specified are years of operations, not accounting for the one year construction period associated with the full scope of the Omega at North Port EB-5 Project. Specifically, Year 1 in the table below conforms to impact Year 2, and so on, in the economic and job impact study.

Table 4: Comparison of Financial Projections to the Market Study—Omega at North Port EB-5 Project

Market Study Year 1 Year 2 Year 3

Average Gross Income per Unit (Page 46) $56,260

Inflation for Adjusted Opening Date 1.5 Years @ 3.5% 1.0530

Average Gross Income per Unit $59,239 $59,239 $61,313

Annual Inflation 1.0000 1.0350 1.0350


Projections Year 1 Year 2 Year 3

Average Occupancy 48 110 129


Financial Projections - Annual Revenues $2,937,689 $6,819,013 $8,131,094

Comparison of Market Study to Projections Year 1 Year 2 Year 3

Average Gross Income per Unit - Market Study $59,239 $61,313 $63,459

Average Gross Income per Unit - Projections $61,202 $61,991 $63,032

% Difference 3.31% 1.11% -0.67%

North Port SLC, LLC

Financial Projection Revenue Estimates Compared to Market Study

Looking at the table, the difference in the AGIPU during the first 2 years is due to the projected number of residents entering the project under assisted living versus memory care. The difference in Year 3, the first year of stabilized

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occupancy, shows an immaterial difference in the Cushman & Wakefield and CRSA projected AGIPU of less than ¾ of 1% (.75%). The difference between the revenue projections included here and those presented in the project business plan pro-forma and used in the economic modeling are due to rounding differences. The modeled numbers are more conservative than these rounded figures (e.g. Operations Year 2 with revenues of $6.82 million shown here corresponds to modeling impact Year 3 with revenues of $6.70 million), thus resulting in a conservative estimate of economic and job impacts arising from the Omega at North Port EB-5 Project.

4.0 Model Output and Results The REDYN model estimates all measurable linkages associated with the incremental economic activity in NAICS 23622 Commercial and Institutional Building Construction, NAICS 238910—Site Preparation Contractors, and NAICS 62331 Continuing Care Retirement Communities and Assisted Living Facilities for the Elderly related to the proposed Omega at North Port EB-5 project. This incremental activity associated with the development project will create and sustain employment. This impact assessment finds that the project would have positive and significant economic and job creation impacts in the prospective regional center. By Year 3, the proposed EB-5 project will add a total of 541 net new jobs and a total of 646 net new jobs in year 428 due to the expanded business activity related to the proposed project as it ripples throughout the regional and U.S. economy. These impacts were calculated using the REDYN dynamic input-output model.29 As a result, this economic and job impact assessment study finds the development and operations of the proposed EB-5 project as planned would generate significant and positive economic benefits for the U.S. economy as a whole (see Table 5 below). More specifically and assuming the development and successful operation of the Omega at North Port facility with EB-5 funding support, the proposed project would likely result in: (1) a net increase of 541net new jobs to be created by Year 3 of the proposed project timeline and a total of 646 net new jobs by Year 4, (2) a four-year cumulative total of $261.3 million in increased output, (3) a cumulative four year total of $136.9 million in increased disposable income over the first four years of the project (in 2013 dollars), and (4) a cumulative total of $102.9 million in increased household earnings over the first four years of the project (in 2013 dollars).

28 Year 4 is expected to be the year where operations of the assisted living facility project stabilize. 29 For a full description of the REDYN input-output model see Appendix III of this report.


Table 5 Summary Results–Omega at North Port EB-5 Project30

This impact assessment also finds that the proposed project would have a positive impact on the regional economy within the Omega Florida Regional Center.31 These benefits include: (1) the creation of a total of 369 net new jobs by Year 3 and 440 net new jobs in Year 4—when the project’s operations are stabilized—within the geographical area of the prospective regional center, (2) a four-year cumulative total of $119.9 million in increased output, and (3) a cumulative total of $102.9 million in increased disposable income over the first four years of the project (in 2013 dollars), and (4) a cumulative total of $60.1 million in increased household earnings over the first four years of the project (in

30 It should be noted that these impacts from the economic and job impact assessment study correspond to impacts during Years 1 through 4 of the project timeline. Since the proposed regional center hopes to gain USCIS approval and begin marketing in calendar year 2013, development year 1 corresponds to calendar year 2013. The reader should note that the business plan starts with Year 0—which corresponds to calendar year 2012. 31 All results assume the approval of the regional center associated with this application. These potential regional center impacts serve as evidence of the regional center’s potential to improve the economy within the regional geography.

Development Year Year 1 Year 2 Year 3 Year 4Timeline Construction

2012

Model Inputs NAICS

Construction

Commercial & Institutional Building Construction 23622 $12,430.8

Site Development Costs 23891 $1,320.0

Operations 62331 $2,985.2 $6,705.8 $8,088.2

Model Output [1] [2]Total U.S. Economy

Output ($2012, 000s) $101,934 $26,619 $60,083 $72,702Disposable Income ($2012, 000s) $48,969 $14,630 $33,102 $40,170Household Earnings ($2012, 000s) $37,267 $10,923 $24,715 $29,983Jobs 556 243 541 646

Regional Center EconomyOutput ($2012, 000s) $47,211 $12,217 $27,419 $33,072Disposable Income ($2012, 000s) $30,319 $9,717 $21,965 $26,671Household Earnings ($2012, 000s) $20,694 $6,558 $14,820 $17,989Jobs 262 166 369 440

Jobs per Increment of Development Expenditure Total Jobs created per $1.0 million of development spending Development in the Regional Center Geography, Year 3 Expenditures Year 3 Jobs per

($ nominal, 000s) Jobs $1.0 million13,751 369 26.8

Jobs created per $1.0 million of development spending Development in the U.S. Economy, Year 3 Expenditures Year 3 Jobs per

($ nominal, 000s) Jobs $1.0 million13,751 541 39.4

Notes:[1] Economic activity was modeled at the county level.[2] Modeling assumed no displacement based on a third party market study by Cushman & Wakefield Regional, Inc.

Prepared by: Economic & Policy Resources, Inc.

On-Going Operations


2013 dollars). The proposed project’s Year 1 job count includes only indirect jobs associated with construction activity because the length of the construction period is shorter than 24 months. The jobs per $1.0 million in hard construction cost investment therefore include only operating jobs from Year 3. The job impacts from construction are included here because EB-5 investment dollars are expected to be used in the construction of the proposed facility. In addition, because the project is utilizing a lending approach to the EB-5 capital investment, all of the jobs that are attributable to the Omega at North Port project are indirect for EB-5 program purposes. This level of job creation in the geography of the proposed regional center corresponds to an EB-5 program eligible job impact of 26.8 net new jobs per $1.0 million of hard construction cost expenditures. At the level of the national economy, results indicate there will be 39.4 net new jobs within the U.S. economy by Year 3 for each $1.0 million in hard construction cost expenditures. For the rest of the U.S. economy outside of the proposed Omega Florida Regional Center, this economic and job impact assessment study for the Omega Florida Regional Center project estimates impacts to include a four year cumulative total of (1) $141.4 million (in constant 2013 dollars) in increased output, (2) a cumulative total of $48.2 million in increased disposable personal income (in constant 2013 dollars), and (3) a four year cumulative total of $42.8 million in increased household earnings for the U.S. economy outside of the regional center.32 The Year 3 net new job increase outside the regional center is expected to be 172 jobs, corresponding to total U.S. job impact of 541 jobs in impact Year 3 less total job impacts of 369 (Calculated as follows: 541 minus 369 equals 172) within the Omega Florida Regional Center. Detail by Activity on the Within Regional Center Impacts: This updated economic report contains additional detail regarding the economic and job impacts by NACIS sector category. As discussed above, all of the requested NAICS are consistent with 2012 NAICS categories. The following two tables below also include a separate construction activity and operations results for full transparency and to aid in the study’s review. This updated impact assessment analysis was also completed using the latest project construction budget (as of December 2012) and operating pro forma. In addition, the study presents implied multipliers for each impact year, results which are summarized in Table 3 below. It should be noted that implied multipliers for Year 1 relate to construction, which takes place at that time, and multiplier for Year 3 corresponds to operations.

32 These outside the regional center impacts are calculated as the difference between the cumulative U.S. totals for each variable less the estimated impacts within the proposed Omega Florida Regional Center.


The inputs derived from the latest construction budget for the proposed Omega at North Port EB-5 project were presented above. Relative to the original March 2012 construction budget, the construction budget has been reduced by $0.546 million. Operations revenues are unchanged from the March 2012 analysis. The revised construction budget includes: site development costs (modeled under NAICS 2389133) of $1.32 million and commercial and institutional building construction (modeled under NAICS 2362234) of $12.43 million. These are disaggregated in the revised impact assessment analysis whereas in the previous impact study these expenditures were combined under Commercial & Institutional Building Construction. The updated economic and job impact analysis of the proposed Omega at North Port EB-5 project includes an assessment of the initial construction activity, and an assessment of annual operations—which commences once development is completed (Table 3). In this updated impact assessment analysis, the impact assessment study’s results associated with the initial $13.75 million capital investment include the following: an increase total output by $47.2 million (= $13.75 million direct + $33.46 million indirect) and add 412 total jobs (=150 direct + 262 indirect35). For operations, Impact Year 3 total revenues of $6.71 million supports 201 direct workers of Omega at North Port. Total output for Impact Year 3 is estimated at $27.42 million (=$6.71 million direct + $20.71 million indirect) with total employment at 369 workers (= 201 direct + 168 indirect). For EB-5 program purposes, only indirect jobs associated with the Year 1 construction activity could be used in the “10 jobs per EB-5 investor” math.

33 NAICS 23891 corresponds to the Site Preparation Contractors sector. 34 NAICS 23622 corresponds to the Commercial and Institutional Building Construction sector. 35 If this application were seeking approval for Construction job benefits, only the indirect job effects associated with construction activity would be counted.


Table 6: Direct and Total Impacts with Implied Multipliers for the Omega at North Port EB-5 Project

The above results provide the following updated multiplier calculations by activity: Table 7: Updated Multiplier Table

Year 1 Year 2 Year 3 Year 4Construction

Construction:

Direct effectsOutput ($2013, 000s) $13,750.8 $0.0 $0.0 $0.0Jobs 150 - - -

Indirect effectsOutput ($2013, 000s) $33,460.2 $0.0 $0.0 $0.0Jobs 262 - - -

Total effectsOutput ($2013, 000s) $47,210.9 $0.0 $0.0 $0.0Jobs 412 - - -

Operations:

Direct effectsOutput ($2013, 000s) $0.0 $2,985.2 $6,705.8 $8,088.2Jobs - 91 201 239

Indirect effectsOutput ($2013, 000s) $0.0 $9,231.8 $20,713.0 $24,983.4Jobs - 76 168 201

Total effectsOutput ($2013, 000s) $0.0 $12,217.0 $27,418.8 $33,071.6Jobs - 166 369 440

Implied multiplier

Jobs per $1 million in Construction 29.9Jobs per $1 million in Operating Revenues 55.0

Prepared by: Economic & Policy Resources, Inc.

On-Going Operations

NAICS Input Implied Total Jobs

Activity Code ($ Millions) Multiplier Created

Construction [1] 23622/238910 13.75 19.1 262

Operations 62331 6.71 55.0 369

Hard Construction Costs EB‐5 Jobs Per $1.0 Million

EB‐5 Indirect Jobs [2] ($ Millions) (Implied Multiplier)

369 13.75 26.8

Notes:

[1] Indirect jobs from construction activity only.

[2] All jobs are indirect for EB‐5 program purposes by definition due to the lending approach deal structure.


Review of USCIS Required NAICS Sector Impacts: The above described job and output impact totals are comprised in part from impacts in key subsectors. These include: NAICS 541 Business Services (Professional, Scientific and Technical Services), NAICS 221 Utilities, NAICS 811 Maintenance and Repair, and NAICS 23 Construction. To be in compliance with USCIS guidance documents regarding economic and job impact reporting for EB-5 projects, detailed predictions of impacts associated with the Omega at North Port EB-5 project are reported for both inside and outside the pending regional center and for the U.S. economy in total. Table 8: Subsector Employment and Output Impacts within the Regional Center—OFRC's Omega at North Port EB-5 Project

Table 8 (above) describes employment and output impacts by USCIS-requested subsector within the pending Omega Florida Regional Center. These include increased demand for: (1) Professional, Scientific, and Technical (Business) Services at $0.9 million in Year 3 (with a four-year cumulative total of $4.3 million), (2) Utilities at $0.3 million in Year 3 (with a four-year cumulative total of $1.1 million), (3) Repair and Maintenance Services at $0.2 million in Year 3 (with a four-year cumulative total of $0.9 million), and (4) Construction at $0.7 million (with a four-year cumulative total of $13.4 million).36 These output increases correspond to job increases within the subsectors. Among gaining subsectors, new job totals range from a low of 1 net new job in impact Year 3 in the Utilities subsector to a high of 10 net new jobs in the Professional, Scientific & Technical Services subsector.

36 All values are reported in constant 2013 dollars.


Omega at North Port EB-5 project, if developed and operated as planned, would also have subsector output and employment impacts outside the regional center (see Table 9 below). These include: (1) an increase of $1.3 million in the Professional, Scientific, and Technical (Business) Services subsector in Year 3 (with a four-year cumulative total of $6.0 million), (2) a $0.4 million increase for the Utilities subsector in Year 3 (contributing to a four-year cumulative impact of $1.5 million), (3) an increase of $0.2 million in Repair and Maintenance in Year 3 (with a four-year cumulative total of $0.9 million), and (4) a $0.6 million increase in the Construction subsector (with a four-year cumulative total of $2.6 million).37 The associated subsector job impacts range from a low of 1 net new job in impact Year 3 in the Utilities subsector to a high of 12 in the Professional, Scientific, and Technical (Business) Services—also in impact Year 3. Table 9: Subsector Employment and Output Impacts outside the Regional Center--Omega at North Port EB-5 Project

For the USCIS-requested subsectors, Table 10 (below) presents detailed estimates of impact for both output and jobs for the U.S. economy as a whole. From the table, total U.S. output growth impacts by subsector include: (1) an increase of $2.2 million in the Professional, Scientific, and Technical (Business) Services subsector in Year 3 (with a four-year cumulative total of $10.2 million in constant 2013 dollars), (2) a $0.6 million increase for the Utilities subsector in Year 3 (contributing to a four-year cumulative impact of $2.6 million in 2013 constant dollars), (3) an increase of $0.4 million in Repair and Maintenance in Year 3 (with a four-year cumulative total of $1.7 million in constant 2013 dollars), and (4) a $1.3 million increase in the Construction subsector (with a four-year cumulative total of $16.0 million in constant 2013 dollars). For jobs in the U.S. economy as a whole, this impact assessment study estimates that Year 3 job

37 All values are reported in constant 2013 dollars.


gains will range from a low of 1 in the Utility subsector to a high of 23 in the Professional, Scientific, and Technical (Business) Services sub-category.

Table 10: Total U.S. Subsector Employment and Output Impacts—Omega at North Port EB-5 Project

Note: Totals may not add due to rounding. Lastly, the economic and job impact estimates presented above in this economic and job impact assessment study demonstrate specifically how the approval of the Omega Florida Regional Center Omega North Port EB-5 project will promote economic growth within the regional center geography. USCIS project approval will therefore result in significant and positive economic and job impacts for both the regional economy of the OFRC, the State of Florida, and the economy of the U.S. as a whole—consistent with the requirements under 8 CFR 204.6(m)(3)(i).

5.0 Conclusions The results of this economic and job impact assessment study show how approval of the proposed Omega at North Port EB-5 project to be located in Sarasota County, Florida is expected to have significant and positive impacts on the regional economy of the Omega Florida Regional Center and on the economy of the U.S. as a whole. These impacts include a total of 369 net new jobs created in Year 3 and 440 net new jobs in Year 438 of the prospective OFRC regional economy. Additional impacts within the regional center include a four year cumulative total of $119.9 million in increased output, and a four year cumulative total of $88.7 million in increased disposable income, and a total of

38 Year 4 is the year of the operations timeline where it is expected that the assisted living facility’s operations will stabilize.


$60.1 million in increased household earnings over the first four years of the project (in 2013 dollars). Because the project is utilizing a lending approach to the EB-5 capital investment, all of the jobs that are attributable to the Omega at North Port EB-5 project are indirect for EB-5 program purposes. Overall, the proposed EB-5 project is expected to produce an increase of approximately 541 net new jobs in year 3 and 646 net new jobs in year 4 in the U.S. economy. Additional and positive economic impacts include: (1) a total of $261.3 million (in 2013 dollars) in additional output over the first four years of the project (including a cumulative total of $119.9 million inside and $141.4 million in output outside of the boundaries of the OFRC), (2) a cumulative total of $136.9 million (in 2013 dollars) in additional disposable income over the first four years of the project (comprised of a four year cumulative total of $88.7 million inside and a cumulative total of $48.2 million in disposable personal income outside of the boundaries of the OFRC), and (3) a cumulative total of $102.9 million (in 2013 dollars) in additional household earnings (including a total of $60.1 million in household earnings inside and a four year cumulative total of $42.8 million in household earnings outside the bounds of the proposed regional center). The study also reports impacts by activity area. In this updated impact assessment analysis, the impact assessment study’s results associated with the initial $13.75 million capital investment include the following: an increase total output by $47.2 million (= $13.75 million direct + $33.46 million indirect) and add 412 total jobs (=150 direct + 262 indirect39). For operations, Impact Year 3 total revenues of $6.71 million supports 201 direct workers of Omega at North Port. Total output for Impact Year 3 is estimated at $27.42 million (=$6.71 million direct + $20.71 million indirect) with total employment at 369 workers (= 201 direct + 168 indirect). For EB-5 program purposes, only indirect jobs associated with the Year 1 construction activity could be used in the “10 jobs per EB-5 investor” math. These impacts on output arise from increases in demand within a collection of related subsectors as required by the USCIS in EB-5 impact assessment studies. These include Professional (or business) Services (with a four-year cumulative total of $4.3 million within the proposed regional center), Utilities (with a four-year cumulative total of $1.1 million within the proposed regional center), Repair and Maintenance services (with a four-year cumulative total of $0.9 million within the proposed regional center) and Construction (with a four-year cumulative total of $13.4 million within the proposed regional center). Job impacts within the regional center by subsector range from a low of 1 net new job in impact Year 3 in the Utilities subcategory to a high of 10 net new jobs in the Professional, Scientific, and Technical (Business) Services subsector in impact Year 3.

39 If this application were seeking approval for Construction job benefits, only the indirect job effects associated with construction activity would be counted.


This impact assessment study also finds that impacts outside of the prospective OFRC contribute to the project’s expected economic contributions to the U.S. economy. These include: Professional (or Business) Services subsector with a four-year cumulative total of $6.0 million in constant 2013 dollars, Utilities subsector with a four-year cumulative impact of $1.5 million in 2013 constant dollars, Repair and Maintenance with a four-year cumulative total of $0.9 million in constant 2013 dollars, and the Construction subsector with a four-year cumulative total of $2.6 million in constant 2013 dollars. Job impacts outside of the regional center range from a low of 1 net new job in impact Year 3 in the Utilities subsector to a high of 12 in the Professional, Scientific, and Technical (Business) Services—also in impact Year 3. When totaled (and it should be noted that the totals sometimes do not add due to rounding), output growth impacts inside and outside the proposed OFRC give impacts for the entire U.S. economy by subsector as follows: (1) the Professional, Scientific, and Technical (Business) Services subsector four-year cumulative total of $10.2 million in constant 2013 dollars, (2) the Utilities subsector with a four-year cumulative impact of $2.6 million in 2013 constant dollars, (3) the Repair and Maintenance subsector with a four-year cumulative total of $1.7 million in constant 2013 dollars, and (4) a cumulative $16.0 million increase in the Construction subsector in constant 2013 dollars. For jobs in the U.S. economy as a whole, this impact assessment study estimates that Year 3 job gains will range from a low of 1 net new job in the Utility subsector to a high of 23 in the Professional, Scientific, and Technical (Business) Services sub-category (see Table 10 above). High Unemployment Rate Targeted Employment Rate Designation: It should be noted that Omega at North Port EB-5 Project’s location is within a high unemployment Targeted Employment Area (TEA) as determined by the location is within a high unemployment Targeted Employment Areas (TEA) as preliminarily approved by the State of Florida’s Department of Economic Opportunity on January 23, 2012. Updates to this designation will be pursued as needed. Therefore, it is expected that investors in the proposed EB-5 project will qualify for the $500,000. REDYN Input-Output Model: The REDYN Model developed and maintained by Regional Dynamics, Inc. was used to provide a reasonable estimate of the economic and job creation impacts attributable to the development and operations of the Omega at North Port EB-5 project. A combination of data supplied by the project developers, public and proprietary data on the industry, region and individual component markets, data from the United States Census Bureau, the Bureau of Labor Statistics, and the Bureau of Economic Analysis were used in this analysis.

HW

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Appendix 1: About Economic & Policy Resources, Inc. Proposed Omega North Port EB-5 Project in the Prospective Omega Florida Regional Center Economic & Policy Resources (EPR): EPR began providing consulting services to public and private clients in 1983. Our staff is comprised of 9 full-time and 2 part-time employees. We deliver economic, financial, planning and public policy services to support our clients’ critical decision making processes. Our staff of economists, planners and financial analysts uses state-of-the-art analytical tools and methods to inform and address client issues. EPR has developed and has access to extensive data (including proprietary data) and analytical tools to provide credible, fully-considered analyses-results. We have a proven record of accomplishment on a wide-range of studies involving economic, socioeconomic, community and economic development, and public policy topics. Our completed projects list includes over 75 EB−5 economic impact assessment assignments over the past seven years.


Appendix 2: Limitation and Contingent Conditions Proposed Omega of North Port EB-5 Project in the Prospective Omega Florida Regional Center The results of this impact study should be viewed with certain limitations. This analysis is intended to assist the U.S. Citizenship and Immigration Service and interested parties in estimating the economic and job creation impacts associated with a potential EB-5 project within the geography of the prospective Omega Florida Regional Center.

In undertaking this assignment, we employed accepted practices and assumptions designed to produce results that are conservative estimates for purposes of understanding the impacts of the proposed project. Actual results could differ.

It should also be noted that specific estimates of year to year impacts are difficult to make with a high degree of accuracy. The potential project’s impact in any one year could deviate from those presented in this report due to factors–such as interest rates and business cycles–that are beyond the scope of this analysis.

The authors believe the study is a reasonable and conservative estimate of the likely economic and job creation impacts of this development activity under the assumptions employed in this study as of the date of this report.

Data utilized in the analysis was obtained from the developers of the assisted living community facility. We also employed data and information from various industry sources (e.g. selected trade associations) and other third party publications (e.g. from authoritative federal government departments and agencies), which are typically used by and commonly relied upon by economic analysts. Information supplied by the developers has been accepted as correct without further verification (although we conducted routine quality control checks for reasonableness), and we express no opinion on the accuracy of that information. The report reflects facts and conditions existing and known as of the date of the report. Subsequent events and additional information may require a review and alteration of the opinions and conclusions presented here. Possession of this report, or a copy thereof, does not carry with it the right of publication of all or part of it, nor may it be used for any purpose by anyone but the client without the prior written consent of the client or of Economic & Policy Resources, Inc. and, in any event, not without proper attribution. The opinion expressed herein is valid only for the purposes described herein.


The undersigned has no present or prospective interest in the property that is the subject of this report and has no personal interest or bias with respect to the parties involved. Economic & Policy Resources, Inc. is paid an hourly rate for time spent in analyzing and preparing its conclusions and opinions. Economic & Policy Resources, Inc.’s fees are not contingent upon the outcome of any event for which this report may be used.


Appendix 3: Schedule of Exhibits Proposed Omega of North Port EB-5 Project in the Prospective Omega Florida Regional Center Exhibit 1: The Business of Regional Dynamics, Inc.: Economic Modeling Redefined – Source: Regional Dynamics, Inc. Exhibit 2: How the Regional Dynamics Economic Model Works: The REDYN Model in a Nutshell – Source: Regional Dynamics, Inc. Exhibit 3: REDYN Model Data Sources and Baseline Estimation Process: Where the REDYN Model Gets Data – Source: Regional Dynamics, Inc. Exhibit 4: The Regional Dynamics Economic Analysis Model: What the REDYN Model Does – Source: Regional Dynamics, Inc. Exhibit 5: Feature Comparison – Major Commercial Economic Models – Source: Regional Dynamics, Inc.

Exhibit 1: The Business of Regional Dynamics, Inc.:

Economic Modeling Redefined – Source: Regional Dynamics, Inc.

©2005 www.RegionalDynamics.com Rev: 10/21/2005 Page 1 of 1

The Business of Regional Dynamics, Inc.Economic Modeling Redefined

Regional Dynamics is an economic modeling company. We offer the REDYN advanced economic model by web subscription or batch services to consultants, agencies, firms, planners, and analysts (users). REDYN runs on the Internet. Subscriptions include advice to apply and interpret the model. Our model estimates the multi-regional impacts and year-by-year (dynamic) nonlinear effects on industries, consumers, and governments from changes in company sales, jobs, wages, or investments; changes in taxes or personal or government spending; or public policy changes such as energy, environment, school, health, or security measures. The results are called simulation forecasts, or simulations.

Our model is a fundamental re-envisioning of economic theory applied to estimating multi-regional, dynamic effects. It reflects advances in New Economic Geography, especially gravity theory (regional attraction) and trade flow (regional imports/exports), based on a new distance impedance database from Oak Ridge National Laboratories that enables calculating trade flow by commodity by road, rail, water, air, and proxy transport.The breakthrough in design is the commodity production linkage between the trade flow process and an entity-based data structure for the economy. Entities include industries, workers, governments, investors, etc., and commodities are the goods they use and make.

The upshot—users can build and run multiple online custom models on the fly for solid project analysis. These features make REDYN more flexible, complete, and accessible than any other modeling process—in a nutshell: No sticker shock; better solutions.

Because our model runs on the Internet for all 3,100+ US counties, it meets the need for multi-regional tools usable by state, regional, Federal, and consulting organizations who share policy or forecasting interests or economic impact interests in the same geographic areas. The model’s fresh, efficient design and its Internet accessibility make it ideal for supporting long-term collaborative efforts as well as for doing individual studies.

The model also is ideal for studying effects of sequential regional inputs, or generating a schedule of responses from a large set of alternative inputs, across a very large number of counties. Repetitive changes across many regions may be better handled as an offline batch job following an analytic script rather than as an Internet project. However, the batch approach has an engagement element as follows: After a user calls us, we accept and review the user’s study information, set up and run the script, then produce and deliver agreed brief script reports in hard copy or electronic format from the simulation results. Alternatively, users can subscribe online to their simulation results so they can create their own simulation-based script reports at will for open-ended multiple studies.

We offer model subscriptions to consultants, but we’re not in the consulting business.We’re happy to initiate or partner with consultants if an agency, company, or other group issues a request for proposals (RFP) to do a study involving economic modeling and consulting. However, we’d prefer that the consultants do the modeling and produce the study defined in the RFP, and mention our name and modeling process in the study.

Exhibit 2: How the Regional Dynamics Economic Model Works:

The REDYN Model in a Nutshell – Source: Regional Dynamics, Inc.

©2005-2006 www.RegionalDynamics.com Rev: 01/21/2006 Page 1 of 7

How the Regional Dynamics Economic Model WorksThe REDYN Model in a Nutshell

REDYN is a dynamic, nonlinear, endogenous, Input-Output (I-O), computable general equilibrium (CGE) economic and demographic forecasting and analysis engine based on the North American Industrial Classification System (NAICS). REDYN’s online model-building edge excels at providing a uniquely complete and consistent Internet tool to configure and access plans, policies, events, and risks fully and very rapidly.

The REDYN model reflects advances in New Economic Geography (NEG) for gravity theory and trade flow to estimate all local and multi-regional trade flow effects by commodity by distance by transport mode by direction in response to any output or demand changes. It does not lock each industry into a straight-line industry transport cost within one implied universal transport distance, mode, and direction between county pairs. In addition, its multi-regional scope always includes the whole regionalized US economy in every forecast and simulation.

REDYN’s breakthrough design links three elements into one core activity: its continuous make-and-use commodity transformation production function, its NEG trade flows, and its entity-based data structure for the economy (social accounting matrix). All industries and entities including labor both use and make one or more commodities (goods and services). All commodities use appropriate transport modes, or communications mode if non-material.

The REDYN model moves all commodities including labor both within counties and between all county pairs and the automatic rest-of-US area by five transport modes (road, rail, water, air, and estimated). It uses I-O transport demand and Cobb-Douglas step-wise adjustments (equal proportion changes, i.e., constant elasticity of substitution) to assign commodities to modes, and a detailed Oak Ridge National Laboratory impedance database to account for accessibility (impedance) by mode, distance, and travel direction by commodity (accounting for net elevation difference effects) between all origin-destination pairs.

Users can control access (impedance) either at a mode level, or at a commodity-by-mode level. The Cobb-Douglas shift of commodities toward transport mode(s) with increased accessibility (reduced impedance values) induces changes in delivered prices for all affected commodities including labor. The industries or entities producing or using the affected commodities then adjust their output and thus their need for inputs.

The price-driven output and input adjustment process also applies if a user models a non-transport change or policy, such as an impact, demand, cost, tax, or price scenario. These changes affect local and remote supply and demand for one or more commodities, and thus their delivered prices after they pass through the transportation system. To varying degrees, the process then affects delivered prices, outputs, and inputs for all commodities through the continuous commodity transformation production function applied by every industry and entity wherever located. Expressed over time and distance, this ongoing cycle is the essence of modern CGE-NEG modeling and forecasting defined by REDYN.


Operationally, REDYN's multi-processor Internet server carries active regions for over 3,100 counties, 700 industries, 820 occupations, hundreds of commodities, and a 50-year forecast in a 2-terabyte database. It offers much more power, flexibility, and multi-user access, including consultant and institutional collaboration, than desktop systems offer.

The REDYN model framework takes the traditional economic concept of the circular flow diagram absolutely seriously, and discards the artificial primacy given to the idea of factor inputs to production. The framework views the economy as a comprehensive, continuous process in which industries and entities convert input commodities into output commodities. For example, producers or industries clearly do this, as is seen in the classic I-O table structure based on real-world business behavior.

Labor too can be viewed as an “industry” or entity. It converts consumer goods and services into a wage bill, which is a market commodity behaviorally identical to any other. Similarly, remittance cohorts, defined as the unemployed as well as all individuals such as retired persons and others who receive government payments through transfers, can be seen as entities that convert consumer goods and services into transfer payments.

Likewise, governments convert purchases of commodities including industry goods and services and labor’s wage bill into government goods and services that are “purchased” primarily through tax revenue. Finally, the model includes “investors” to produce financial capital, “speculators” to produce physical capital, and “land” to anchor each regional economy with its particular attributes so that the regions do not collapse together as would occur if all regions had the same basic labor, farm, water, mineral, and infrastructure resources when multiregional transport costs are considered.

The REDYN model can be visualized as regional entities using, making, and moving commodities in an organized circular process that captures supply (making goods and services), demand (using goods and services), and delivered price (costs for making and moving goods and services) to clear the supply and demand for all commodities in and across all regions.

The charts on the next five pages summarize the model’s operation as follows…

� Circular Flow Economic Entity Process � Commodity Make Table by Entity � Commodity Use Table by Entity � Entity Production Function Form by Region � Demographics and Migration � Economic Model Schematic Summary � Economic Model Production Function and Commodities by Entity � Economic Model Prices and Trade Flow


CIRCULAR FLOW ECONOMIC ENTITY PROCESS In & Between All Regions

ENTITIES Producer Wage Transfr Govt Fincl Cap Phys Cap MAKE: Goods Bills Pmts Goods (Div-Int-Rent) (Resid, P&E) Land

Producers x Labor x Remittance Cohorts x Governments xFinancial Capital Providers (Investors) xPhysical Capital Makers (Speculators) xLand x

MAKE Commodities:Supply(ExWorks Price, i.e., price at source of good or service)

MOVE Commodities:Trade Flow(Transport Cost by Commodity, Distance, Mode, and Direction for all Regional Pairs) 5 Modes: Road, Rail, Water, Air, Other

USE Commodities:Demand(Delivered Price = ExWorks Price + Transport Cost)


ENTITIES Producers Labor Remits Govts Investors Spec LandUSE—Producer Goods&Svcs x x x x x x Labor (Wage Bill) x x x Transfr Pmts/Taxes xGovt Goods&Svcs x x x x x x Fincl Cap (Div-Int-Rent) x x Phys Cap (Resid, P&E) P&E Res Res P&E Res Land x x x x x x

Entity PRODUCTION FUNCTION FORM by Region

Input Demanded Output (Sales) Supplied Dlvrd ExWorks Intl Commodity Qty RPC Price Jobs Commodity Qty Price PctLand x 1.0 x Primary x x x Residential x x x 2nd x x x Financial x x x 3rd x x x Plant&Equip x x x 4th x x x Wage Bill x x x x Others/Misc x x x Goods&Svcs x x x Scrap x x x

DEMOGRAPHICS: Cohort-survival estimation� White, non-Hispanic � Black, non-Hispanic � Other, non-Hispanic � Hispanic� Male or Female � Ages 0-1, 2-99 by year, 100+ years

MIGRATION: Induced by economic activity� Intrinsic behavior of economic labor’s wage bill commodity (historical relationships by

region across wage bill, output, jobs, and people) � Estimate wage bill and output changes, then scale to jobs and people (rational

expectations notion) � Subject to regional constants by cohort (controls for demographic composition)


REDYN Economic Model Schematic-SUMMARY

Use Make(Input) Standard entity production function… (Output)

Delivered See DETAILED PRODUCTION FUNCTION ExWorksPrice Price

ExWorks & Delivered Prices…See DETAILED PRICES & TRADE FLOW

Commodity CommodityDemand Supply

1/21/2006

4 Household Types

4 Government Types

ENTITIES

2 Speculator TypesAll NAICS Industries &

Move (Trade Flow)NAICS Commodities by

5 Transport Modes

Other/Estimated

Road

Rail

Water

Air


REDYN Economic Model Schematic-DETAILED ENTITY PRODUCTION FUNCTION

Standard Make & Use Production Function for All EntitiesEntities … Producers, Labor, Remittance Cohorts, Govts, Investors, SpeculatorsStandard Make & Use Production Function by Entity Group …

Industries (By NAICS Code); Speculators (Capital Goods Makers: Residential, and Nonres Plant & Equip)Use Commodites: Land, P&E (Indus only), Financial (Spec only), Labor, Goods&Svcs [Dlvrd Prices]

Make Commodities: Producer Indus (Primary, Others, Misc, Scrap); Spec (Res, P&E) [ExWorks Prices]

Households (Workers; Unemployed & Retired; and Savers)Use Commodites: Land, Res, Goods&Svcs [Dlvrd Prices]

Make Commodities: Wage Bill, Proprietors Income, Transf Pmts, Div-Int-Rent [ExWorks Prices]

Govts (Fed Mil & Nonmil, and State & Local Educ & Noneduc)Use Commodites: Land, Transf Pmts/Fees&Taxes, P&E, Labor, Goods&Svcs [Dlvrd Prices]

Make Commodities: Primary, Others, Misc, Scrap [ExWorks Prices]

CommoditesAll NAICS Commodities ... Supplied & Demanded …Aggregated by Detailed NAICS Commodity Across All Entities by Region …

Supplied Categories (Make By) Demanded Categories (Use By)Land (Fixed by Region) Land (HH, Govts, Indus, Spec)Residential (Speculators) Residential Capital (HH)Div-Int-Rent (Households) Financial/D-I-R Capital (Spec)Plant & Equip (Speculators) Plant & Equip Capital (Govts, Indus)Wage Bill & Prop Income (HH) Labor (Govts, Indus, Spec)Transf Pmt/Fee/Tax (HH/Indus/Spec) Transf Pmts/Fees&Taxes (Govts)Primary/Others/Misc/Scrap (Producers & Govts) Goods&Svcs (HH, Govts, Indus, Spec)

1/21/2006


REDYN Economic Model Schematic-DETAILED PRICES & TRADE FLOW

Prices & Trade Flow …

ExWorks Transport DeliveredPrice by + Cost by = Price byCommodity Commodity by Commodityby Source Mode, by Distance, by Using(Supplying & by Direction (Demanding)or Output) Within & Between RegionRegion All Regions

Details on Prices & Flows …

Supplied Transport Demandedat ExWorks each commodity at DeliveredPrice within & between Price from anspecific in all regions A, B, C, … output regioneach output by demanded mode to eachregion based at a cost for mode, specificon delivered distance, & direction demandingprices for the (elevation cost effect) region (Note )commods toeach entity's Note on Delivered Priceproduction In any demanding region, the delivered price by commodity is the blend acrossfunction in the supplying output regions ranked by lowest delivered price to the demandingthe region region until the total quantity demanded has been met for the demanding region.

1/21/2006

Exhibit 3: REDYN Model Data Sources and Baseline Estimation Process:

Where the REDYN Model Gets Data – Source: Regional Dynamics, Inc.


REDYN Model Data Sources and Baseline Estimation ProcessWhere the REDYN Model Gets Data

Regional Dynamics uses several sources to estimate county-level employment and output for its baseline database. The REDYN model applies the North American Industrial Classification System (NAICS) at the five-digit detail level (703 industries), and also uses NAICS to identify all the goods and services (over 180 commodities) consumed and produced by the detailed industries. NAICS is used by the US Government to classify and organize information about all the various industries making up the US economy, such as retail stores, automobile manufacturing, insurance firms, and so forth. NAICS reports five levels of detail. The two-digit level aggregates all activity into 24 broad economic industries, and the five-digit level identifies activity across 703 specific industries.

The primary data sources are the County Business Patterns (CBP) from the Bureau of the Census, and the Regional Economic Information System (REIS) from the Bureau of Economic Analysis (BEA). Wage Bill (payroll) data are derived from the same sources and with the same techniques as the employment data. The CBP reports the total annual payroll for each NAICS code up to the five-digit level of detail for the US as a whole and for every region, state, and county. However, total employment data and total payroll data are subject to data suppressions for privacy. Regional Dynamics developed a sophisticated row-and-column sum (RAS) analytic system to fill all data suppressions by using all information available in the CBP series and guaranteeing internal consistency with unsuppressed wage and employment data. All the furnished and estimated CBP wage bill and employment data are then totaled and scaled to match the wage bill and employment data reported in the BEA’s REIS, which includes all county and state wage bill data at three-digit NAICS detail and employment data at two-digit NAICS detail.

The REIS directly provides wage bill and employment data for the government and agriculture sectors, and also disposable personal income data by county. The REIS county income data are used to allocate national consumption to counties from the BEA’s National Income and Product Accounts (NIPA).

Annual Input-Output (IO) tables are constructed using BEA IO make-and-use tables, as well as biennial 10-year IO forecast tables from the Bureau of Labor Statistics (BLS). Make tables describe all the commodities made by each economic entity, and use tables describe all the commodities used by each economic entity. The very detailed BEA IO make-and-use tables are extended year-by-year to match the annual changes in make-and-use composition implied by the current 10-year BLS IO tables. This generates a detailed annual forecast series of national IO make-and-use tables.

Each county’s wage bill by industry is used to allocate each industry’s national output to counties from the NIPA, and then the regional output by industry is allocated to commodities based on the national IO make table proportions. This assumes that the commodities produced by an industry are truly joint in the production process, as dictated by a uniform production function for all firms in each industry based on competitive pressures to diffuse advantages quickly across all firms in an industry.

Exhibit 4: The Regional Dynamics Economic Analysis Model:

What the REDYN Model Does – Source: Regional Dynamics, Inc.


The Regional Dynamics Economic Analysis ModelWhat the REDYN Model Does

Regional Dynamics offers REDYN, a fundamentally new, web-based, massively multi-regional, dynamic, nonlinear New Economic Geography analysis engine with a complete economic database and baseline forecast. After subscribing to the system, users input online changes by region and year: e.g., jobs, wages, output, income, intermediate demand, and final consumption, investment, and government demand. REDYN then estimates detailed, annual, gravity-based trade flows and impacts in all US counties and industries.The model is a live, online Internet service. It’s also available to run batch mode jobs to process massively multi-regional tasks (3,100+ regions) for automated or scripted work.

The REDYN model applies a fresh I-O methodology based on very detailed make-and-use tables with social accounting matrix features for all entities, a comprehensive commodity production transformation function, and impedance-based commodity trade flows by five transport modes. Oak Ridge National Laboratories developed the impedance measures.

The model automatically includes an explicit extra region for all US counties outside any given simulation to identify the full US output and trade flow response. The model also automatically seeks the suppliers of suppliers to find the complete US supply chain response by region and industry in any simulation.

REDYN excels at offering a uniquely complete and consistent model-building edge that no other modeling process can replicate for configuring and assessing plans, events, and risks fully and rapidly across regions and years.

Here’s how it works. At run time, users apply their subscribed resources as an online tool kit to build and run custom models at will. This design flexibility lets users quickly build models scaled correctly for any studies, event analysis, overlapping or alternative analytic perspectives, or backcast analysis.

The REDYN model estimates employment, output, wages, occupations, income, gross product, demand, self-supply, trade flow, etc. Within a user’s subscription, the model generates year-by-year reports by county and year, for all subscribed counties, or for any aggregation into user-defined areas for each study. For easy regional comparison at no extra cost, each report focuses on one concept (jobs, output, wages, and so forth) arranged by region by year on a sheet in a spreadsheet book. Users then can apply full spreadsheet tools for sorting and charting. Online and phone support are included.

The model is available to all users across agency levels. Clients can offer access to other users through user-group web pages with discounts or rebates based on the size of the client’s subscription. Clients subscribe to a regional area (one or more counties, states, or groups); to 703 industries (North American Industrial Classification System); and to an analytic type (I-O only, or equilibrium and I-O). The client sets the number and identity of its subscribing users; one user is free. Subsequently added users including consultants or staff can be managed by one or more additional users on an incremental fee basis.

Exhibit 5: Feature Comparison – Major Commercial Economic Models

Source: Regional Dynamics, Inc.


Feature Comparison – Major Commercial Economic Models Feature REDYN REMI IMPLAN RIMS Notes

Access/Subscription Internet/Yes Desktop CD/No Desktop CD/No Desktop CD/No 1* Process to Deliver Custom Study Models

Immediate at user run time, any time

Queue, batch, + mail or overnight

Batch + mail or overnight

Batch + mail or overnight

2*

# of Custom Area Study Models per User

Build any custom models as needed

One (1) model per client

Alternative single regions only

Alternative single regions only

3*

Fee for User-defined Custom Study Models

None within subscription

Non-trivial fees for more models

None, but 1 region only

None, but 1 region only

4*

Dynamic Forecast Yes (50 years) Yes (to 2050) No No 5 Nonlinear Forecast Yes Minimal n/a n/a 6 Active Multi-regions 3,100+ 80+ maximum None None 7 Automatic MRUS Yes No n/a n/a 8* Impedance Database Yes No No No 9* # of Transportation Modes (Trade Flow)

5 (road/rail/air/ water/special)

None None None 10*

Last History Year Lag Soon: 6-7 months 2+ years 2 years 90-180 days 11* Industry Detail NAICS 5 (703) REMI 3 (169) NAICS 2-5 (509) NAICS (473) 12 Commodity Detail and Classification Type

NAICS /180+non-agr commods

None SIC /528 commods incl agr

None 13*

Std Occup Code Detail 820+ /SOC 6-digit 90+ /std; 820+ /fee None None 14 IO Tables Make & Use Industry only Make & Use Industry only 15 Integrated IO-SAM Yes No Partial No 16* Wage Bill & Empl CBP & REIS CBP & REIS CBP & REIS REIS only 17 Suppression Fill for Wage Bill & Empl

NAICS 5-digit RAS process

NAICS 4-digit statistical process

Yes, but not exhaustive

n/a 18

Disposable Income incl Commuters

REIS direct & Res Adj/JTW/gravity

REIS directly & Res Adj/JTW

REIS directly & Res Adj/JTW

No data access 19*

County Consumption REIS & NIPA REIS & NIPA REIS & NIPA No data access 20* County Output Wages & NIPA Wages & NIPA Wages & NIPA No data access 21* County Output by Commodity

Output & detailed IO Make Table

None Output & IO Make Table

None 22

Demographics/Migr Yes/rational migr Yes/adaptive migr No No 23* Business Cycle Yale—Fair-Parke U. Mich.—RSQE n/a n/a 24 BEA IO Forecast Yes No No No 25* Multi-regional Search for All Suppliers

Search process by region for full US

Search step only for client’s regions

Search step only for one region

n/a 26*

Analytics CGE and IO CGE and IO IO only Multipliers only 27 Jobs+Wages+Output Blended handling Double count input Double counts Double counts 28 Backcasting Plan 1998 in 2006 No No n/a 29* Subcounty Regions Plan for 2006 Yes (manual) By ZIP Code No 30 Production Function Includes All Supply, Demand, Trade Flow

Inclusive function for IO and CGE processing

Non-inclusive function needs post process equations

No endogenous gravity-based trade flow

n/a 31*

Displacement Effect Allocated or Prop Allocated only No No 32* Induced Investment Yes Yes No n/a 33 Fiscal Effects Yes (standalone) Yes (integrated) No No 34 Display Data Results Multi-regional Region by region One region One region 35* Consultant/Other User Incremental fee Non-trivial fees Full price fee No added fee 36*


*/ Line Notes for Features:

1-4: REDYN subscribers subscribe to a pool of regions from which to build custom run time models at will.

8: The REDYN model automatically creates and reports on an active extra region for the rest-of-US outside the region(s) being modeled. This allows results for the selected region(s) to reflect endogenous trade flow, supply chain, and other demand effects stemming from the whole multi-region US (MRUS) model.

9, 10, 13: REDYN’s New Economic Geography (NEG) engine applies a complete database of impedance measures by transport mode developed by Oak Ridge National Laboratories. Unlike straight-line measures, impedance can differ between regions with the mode and with the direction of travel, and trade flows can be estimated by commodity by mode. ORNL’s database also enables REDYN’s equilibrium model to estimate economic effects from transportation network models, and to estimate freight system effects on the economy due to commodity volume changes or transport mode capacity changes in county transportation networks.

11: The REDYN model uses available CBP and REIS county values to allocate current US wage bill and employment data to populate counties with apportioned detail numbers. Initial data from 2001; soon 2005.

16: The REDYN commodity make-and-use Input-Output tables use a Social Accounting Matrix to capture every economic entity type. Entities include producers (industries), employed labor (occupations), remittance cohorts (unemployed labor, retirees), governments, investors, and speculators. Commodities include producer commodities, labor occupations, transfer payments, government goods, financial capital, and physical capital.

19-21: The impedance database (note 9 above) enables REDYN to separate the process for populating the database from processes for estimating a gravity model’s effective distance parameters. REDYN can use gravity analysis on commuter Journey-to-Work to estimate occupations and income levels by residence.

23: Intrinsic rational expectations induce migration from economic activity subject to cohort regional constants.

25: The REDYN model extends the very detailed BEA IO make-and-use tables year-by-year to match the annual changes in make-and-use composition implied by the 10-year BLS IO tables. This generates a detailed annual forecast series of national IO make-and-use tables.

26: The REDYN model applies the detailed national IO use tables to estimate a complete US multi-regional supply response to indirect and induced demand, and to exogenous final demand, in a search cycle which looks for the suppliers of suppliers across all US industries by every US region until the process cuts off.

29: The REDYN model will use 2001-2002 county values to allocate 1998-2000 US NAICS data to counties.

31: The inclusive REDYN commodity transformation production function captures all production and NEG gravity relationships – there is no need for post-process adjustment equations. Detailed industries and other entities by region by year transform input commodities into output commodities using a robust, nonlinear, dynamic, parameterized, endogenous, iterative production function in a continuous process that fully includes intermediate and factor inputs, final demand, jobs and output, and endogenous gravity trade flows.

32: Displacement is sales crowding out; REDYN allows supply-source allocation or equal proportion crowding.

35: The REDYN report suite automatically includes a comparative regional display format as an embedded feature at no extra cost. Results are generated as sheets in a spreadsheet book with full sorting, charting, scaling, and pivot capabilities.

36: Subscribers can offer access to other users (e.g., mixed state/local agencies, partners, clients, etc.) through user-group web pages with discounts or rebates up to 50% based on the size of the master subscription—and subscribers and other users can add staff or consultants by one or more new users on an incremental fee basis.