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1.0 INTRODUCTION 1.4. Categories of Regional Economic Benefits Considered in the Study The proposed project will generate the following types of economic benefits in the City and regional economy: Direct Benefits — Direct benefits relate to: a) short-term business activity of general contractors and associated business (architecture services, engineering services, etc.) involved in the project construction and b) the ongoing local spending by new residents and expenditures to managing the apartment complex. Indirect Benefits— Indirect benefits will result when local firms directly impacted by the project in turn purchase materials, supplies or services from other firms. Examples would include increased sales of building materials as a result of construction activity, along with purchases of local goods and services associated with managing and operating the apartment complex. Induced Benefits— Induced benefits relate to the consumption spending of employees of firms that are directly or indirectly affected by the project. These would include all of the goods and services normally associated with household consumption (e.g., housing, retail purchases, local services, etc.). Based on construction cost data provided by the applicant, all construction -phase direct benefits are tied to construction -related expenditures within the City and the County; impacts from construction - related expenditures made outside of the County (e.g., loan fees, interest, marketing, etc.) are not evaluated in this analysis. The analysis quantifies the above benefits in terms of the following measures: • Total industry output—The increase in gross industry receipts, representing the total economic activity generated by the construction phase and from local spending by new residents. For local retailers, output equals gross margin and not gross sales. • Value added —The portion of total output that most accurately reflects local economic activity (i.e., local payrolls, profits, taxes, as distinct from gross output which includes the value of intermediate goods [construction raw materials] purchased outside the region) • Jobs — expressed in this analysis in terms of full-time and part-time employees lasting one year • Employee Compensation —associated with the created jobs As discussed further below, these are the categories of benefits evaluated by the economic modelling software used for this analysis. Appendix C (glossary) provides additional technical definitions of these economic benefit categories. Employee compensation includes total payroll cost of the employee paid by the employer. This includes wage and salary, all benefits (e.g., health, retirement) and payroll taxes (both sides of social security, unemployment taxes, etc.) THE NATELSON DALE GROUP, INC. DRAFT Economic Impact Analysis The Madison (Santa Ana, CA) 75A-100 Page 3