Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
CHAPTER
FIVE
ECONOMIC
IMPACT
ANALYSIS
RESULTS
5.1
OVERVIEW
OF
ECONOMIC
IMPACT
ANALYSIS
METHODOLOGY
This
chapter
presents
the
projected
economic
impacts
of
the
regulatory
options
discussed
in
Chapter
Three
on
the
construction
and
development
(
C&
D)
industry.
In
this
chapter,
EPA
evaluates
the
impacts
of
these
costs
using
the
methodology,
models,
data,
and
approaches
described
in
Chapter
Four.

The
economic
impact
methodology
uses
several
methods
to
assess
economic
impacts
on
the
industry.
These
include
models
that
analyze
impacts
at
the
level
of
the
individual
construction
project,

individual
firm,
national
construction
market,
and
the
economy
as
a
whole.
The
analysis
considers
impacts
on
C&
D
firms
that
would
be
complying
with
the
regulations.
It
also
considers
the
impacts
on
those
who
purchase
the
output
of
the
C&
D
industry,
including
prospective
new
home
buyers;
owners
of
new
multifamily,
commercial,
and
industrial
properties;
and
public
entities
responsible
for
building
roads,
schools,
and
other
public
facilities.

The
chapter
is
organized
as
follows:

 
Section
5.2
presents
EPA
 
s
analysis
of
the
economic
impacts
of
the
proposed
rule
on
model
C&
D
projects.
These
results
are
based
on
the
financial
analyses
developed
for
representative
projects
in
Chapter
Four.

 
Section
5.3
presents
EPA
 
s
estimates
of
the
national
costs
of
the
proposed
rule.
EPA
determined
those
costs
by
multiplying
the
per­
acre
compliance
costs
by
estimates
of
the
number
of
acres
subject
to
the
proposed
effluent
guidelines
annually.

 
Section
5.4
presents
the
results
of
EPA
 
s
analysis
of
the
impacts
of
the
proposed
rule
on
model
C&
D
establishments.
This
section
examines
the
impact
of
the
incremental
compliance
requirements
on
the
financial
condition
of
representative
establishments,
using
data
on
their
present
financial
condition
as
a
starting
point.

 
Section
5.5
presents
EPA
 
s
analysis
of
closures
and
employment
losses.
These
impacts
are
based
on
the
model
establishment
described
in
Section
5.4.

5­
1
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
 
Section
5.6
presents
EPA
 
s
analysis
of
the
proposed
rule
 
s
impacts
on
barriers
to
entry
 
that
is,
how
the
incremental
costs
of
the
proposed
rule
could
affect
the
ability
of
new
businesses
to
enter
the
market.

 
Section
5.7
presents
EPA
 
s
market
model
analysis.
This
section
considers
the
impact
of
the
incremental
compliance
requirements
on
national
construction
markets
and
the
economy
as
a
whole.

 
Section
5.8
presents
EPA
 
s
analysis
of
potential
impacts
on
government
units.
This
section
considers
the
various
costs
to
government
associated
with
the
proposed
rule.

 
Section
5.9
presents
EPA
 
s
analysis
of
additional
impacts
of
the
proposed
rule.
This
section
discusses
regional
impacts,
social
costs,
and
unfunded
mandates.

5.
2
ANALYSIS
OF
IMPACTS
ON
MODEL
PROJECTS
Chapter
Four
defines
a
series
of
model
projects.
In
this
section,
EPA
uses
those
models
to
analyze
the
impact
of
the
proposed
rule
on
two
alternative
targets:
the
developer­
builder
(
assuming
that
they
absorb
the
incremental
costs)
and
the
consumer
(
assuming
that
the
same
costs
are
passed
on
to
the
buyer)
.
EPA
has
developed
model
projects
for
each
of
the
following:

 
A
residential
development
of
single­
family
homes
 
A
residential
development
of
multifamily
housing
units
 
A
commercial
development
(
enclosed
shopping
center)

 
An
industrial
development
(
industrial
park)

For
each
type
of
model
project,
EPA
has
analyzed
costs
and
impacts
for
a
range
of
project
sizes:

1,
3,
7.5,
25,
70,
and
200
acres.
The
model
projects
incorporate
all
of
the
baseline
costs
associated
with
developing
a
site
and
completing
construction
of
all
housing
units
or
buildings
on
the
site.
Accordingly,
it
is
assumed
that
the
baseline
costs
include
the
costs
of
complying
with
existing
Phase
I
and
Phase
II
NPDES
storm
water
regulations
as
they
would
apply
to
the
site.
The
model
then
allows
EPA
to
assess
the
incremental
impact
of
additional
requirements
imposed
under
the
proposed
rule.
Chapter
Four
5­
2
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
provides
a
detailed
description
of
the
model
project
characteristics,
assumptions,
and
data
sources,

including
an
itemized
listing
of
project
cost
elements.

5.2.1
Cost
Pass
Through
Considerations
The
model
projects
are
calibrated
to
allow
analysis
under
varying
assumptions
about
the
degree
of
cost
pass
through
(
CPT)
from
the
builder­
developer
to
the
buyer.
1
Costs
for
the
models
have
been
estimated
under
two
extreme
assumptions,
100
percent
CPT
and
zero
CPT.
Under
100
percent
CPT,
all
incremental
regulatory
costs
resulting
from
the
proposed
rule
are
passed
through
to
end
consumers.

Under
this
approach,
the
costs
are
also
assumed
to
be
marked
up
to
the
same
degree
as
any
other
project
costs.
2
Consumers
feel
the
impact
of
the
regulations
in
the
form
of
a
higher
price
for
each
new
building
or
housing
unit.
With
zero
CPT,
the
incremental
regulatory
costs
are
assumed
to
accrue
entirely
to
the
builder­
developer,
and
appear
as
a
reduction
in
profits.
EPA
determines
this
reduction
by
fixing
the
final
sales
price
of
the
housing
units
and
calculating
the
builder
 
s
profit
once
the
regulatory
costs
are
absorbed.

Existing
literature
and
industry
information
suggests
that,
in
the
important
single­
family
home
market,
at
least,
pass
through
of
regulatory
costs
in
the
new
housing
market
is
close
to
100
percent
(
e.
g.
,

Luger
and
Temkin,
2000)
,
but
the
actual
incidence
of
regulatory
costs
would
depend
closely
on
local
market
conditions.
To
illustrate
the
range
of
possible
impacts,
EPA
has
calculated
its
models
under
the
extreme
conditions
of
100
percent
and
zero
percent
CPT.
Accordingly,
for
each
sector
modeled
there
are
two
sets
of
results
reported
below.

5.2.2
Model
Project
Baseline
Performance
Under
the
baseline
assumptions
and
conditions,
the
sales
price
for
each
housing
unit
(
or
model
commercial
or
industrial
building)
is
calculated,
and
the
baseline
builder­
developer
profit
level
is
1
Cost
pass­
back
to
the
landowner
is
possible,
but
it
occurs
infrequently.
See
Section
4.1.2.
Since
EPA
lacks
data
on
the
actual
incidence
and
extent
of
cost
pass­
back,
it
is
not
analyzed
in
detail.

2
The
cost
markup
assumptions
are
built
into
the
model
and
are
explained
in
Chapter
Four.

5­
3
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
determined
based
on
the
sales
price.
Builder­
developer
pre­
tax
profit
is
assumed
to
be
approximately
10
percent
of
the
building
sales
price.
Table
5­
1
shows
the
baseline
sales
price
and
profit
for
each
model
project
type
and
each
project
size.
Data
and
assumptions
underlying
these
estimates
are
derived
in
Chapter
Four.
The
model
results
presented
later
in
this
section
show
changes
from
these
baseline
values
under
each
regulatory
option.

Table
5­
1.
Baseline
Sales
Price
and
Profit
Conditions
for
the
Model
Projects
Project
Type
and
Size
(
acres)
Calculated
Building
Sales
Price
Builder­
Developer
Pre­
tax
Profit
Single­
Family
Residential
1
acre
$
279,903
$
27,990
3
acres
$
283,093
$
24,251
7.5
acres
$
283,093
$
28,309
25
acres
$
282,951
$
28,295
70
acres
$
283,042
$
28,304
200
acres
$
283,058
$
28,306
Multifamily
Residential
1
acre
$
1,375,074
$
137,507
3
acres
$
4,125,374
$
412,537
7.5
acres
$
10,313,438
$
1,031,344
25
acres
$
34,378,235
$
3,437,823
70
acres
$
96,259,030
$
9,625,903
200
acres
$
275,025,887
$
27,502,589
Commercial
1
acre
$
1,498,800
$
149,880
3
acres
$
4,496,399
$
449,640
7.5
acres
$
11,240,999
$
1,124,100
25
acres
$
37,469,920
$
3,746,992
70
acres
$
104,915,760
$
10,491,576
200
acres
$
299,759,358
$
29,975,936
Industrial
1
acre
$
950,949
$
95,095
3
acres
$
2,852,899
$
285,290
7.5
acres
$
7,132,197
$
713,220
25
acres
$
23,773,989
$
2,377,399
70
acres
$
66,567,119
$
6,656,712
200
acres
$
190,191,761
$
19,019,176
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5­
4
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
5.2.3
Results
of
Model
Project
Analyses
Table
5­
2a
contains
the
results
under
the
100
percent
CPT
assumption,
while
Table
5­
2b
contains
identical
results
under
the
assumption
of
zero
CPT.
In
Table
5­
2a
(
100
percent
CPT)
,
the
impacts
of
the
regulatory
options
are
shown
as
the
percentage
increase
in
the
sales
price
of
each
model
project
unit.
In
Table
5­
2b
(
zero
CPT)
,
the
impacts
of
the
regulatory
options
are
shown
as
the
percentage
decrease
in
builder
profits.

100
Percent
Cost
Pass­
Through
Under
the
100
percent
CPT
assumption,
the
impacts
range
from
a
minimum
of
0.00
percent
(
i.
e.
,

there
is
no
incremental
impact
on
sales
price)
for
all
project
types
to
a
range
of
maximum
impact
values
(
where
the
percent
listed
indicates
an
increase
in
sales
price
of
that
amount)
:
0.09
percent
for
single­
family
residential,
0.05
percent
for
multifamily
residential,
0.05
percent
for
commercial,
and
0.07
percent
for
industrial.
All
of
the
maximum
impacts
occur
under
Option
2.

Zero
Cost
Pass­
Through
Under
the
zero
CPT
assumption,
the
impacts
range
from
a
minimum
of
0.00
percent
for
all
project
types
under
various
option
combinations
(
indicating
no
impact
to
builder
profit)
to
a
range
of
maximum
impact
values,
all
under
one
percent.
Maximum
impacts
all
occur
with
Option
2
as
shown
below:

 
Single­
family
residential:
­
0.80
percent
 
Multifamily
residential:
­
0.45
percent
 
Commercial:
­
0.41
percent
 
Industrial:
­
0.64
percent
5­
5
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
2a.
Impact
of
Regulatory
Options
on
Model
Project
Financials
 
100
Percent
Cost
Pass
Through,
All
Project
Sizes
Option
Percent
Change
in
Project
Price
to
Buyer
Single­
Family
Multifamily
Commercial
Industrial
Min
Max
Min
Max
Min
Max
Min
Max
1
0.00%
0.04%
0.00%
0.02%
0.00%
0.02%
0.00%
0.03%

2
0.00%
0.09%
0.00%
0.05%
0.00%
0.05%
0.00%
0.07%

3
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

Table
5­
2b.
Impact
of
Regulatory
Options
on
Model
Project
Financials
 
Zero
Percent
Cost
Pass
Through,
All
Project
Sizes
Option
Percent
Change
in
Builder­
Developer
Profit
Single­
Family
Multifamily
Commercial
Industrial
Min
Max
Min
Max
Min
Max
Min
Max
1
0.00%
­
0.37%
0.00%
­
0.19%
0.00%
­
0.17%
0.00%
­
0.27%

2
0.00%
­
0.80%
0.00%
­
0.45%
0.00%
­
0.41%
0.00%
­
0.64%

3
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5.2.4
Nonbuilding
Project
Analysis
Results
This
section
presents
the
results
of
the
model
nonbuilding
project
analysis
described
in
Section
4.2.7.
As
indicated
in
that
section,
EPA
has
not
developed
actual
engineering
costs
for
projects
such
as
roads
and
highways.
As
a
result,
EPA
has
simulated
the
impact
of
the
proposed
rule
on
such
projects
using
worst­
case
(
i.
e.
,
highest)
estimates
of
the
per­
acre
engineering
costs
estimated
for
building
projects.

Due
to
the
lack
of
engineering
costs
for
this
project
type,
EPA
used
a
 
worst­
case
 
assumption
of
$
378
per
acre
in
compliance
costs.
This
figure
is
based
on
the
highest
per­
acre
compliance
cost
5­
6
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
estimated
for
a
7.5­
acre
building
project.
EPA
elected
to
use
the
compliance
costs
for
a
7.5­
acre
project
because
the
model
one­
mile
new
highway
construction
project
encompasses
10.67
acres.
EPA
estimates
that
the
baseline
costs
of
construction
for
one
mile
of
typical
road
or
highway
is
$
5.4
million
(
see
Section
4.2.7)
.
Using
$
378
per
acre,
the
worst­
case
estimate
of
compliance
costs
associated
with
one
mile
of
new
road
or
highway
construction
(
10.67
acres)
is
$
4,033.
This
equates
to
less
than
0.1
percent
of
baseline
costs,
indicating
even
under
worst­
case
assumptions
regarding
compliance
costs,
the
proposed
rule
is
unlikely
to
have
a
significant
impact
on
representative
nonbuilding
construction
projects.

5.3
ANALYSIS
OF
NATIONAL
COMPLIANCE
COSTS
EPA
has
calculated
the
national
compliance
costs
associated
with
the
proposed
rule
by
multiplying
the
compliance
costs
per
acre
(
by
project
type
and
size)
by
estimates
of
the
number
of
acres
developed
per
year.
EPA
used
data
from
the
USDA
National
Resources
Inventory
(
NRI)
to
estimate
the
number
of
acres
developed
per
year.
According
to
this
source,
approximately
2.2
million
acres
of
undeveloped
land
are
converted
to
a
developed
state
every
year.
EPA
has
adjusted
this
total
to
account
for
waivers
and
differences
in
regulatory
coverage
between
Option
1
and
Option
2.
3
As
described
in
Chapter
Four,
both
the
14­
Community
Study
(
conducted
in
support
of
the
Phase
II
NPDES
storm
water
rule
development)
and
building
permits
data
from
Census
were
used
to
allocate
the
developed
acreage
by
project
type
and
size.

Table
5­
3
contains
EPA
 
s
estimates
of
the
national
costs
of
the
regulatory
options.
The
national
costs
of
the
proposed
rule
range
from
$
0.00
for
each
project
type
(
Option
3)
to
a
maximum
of
$
121.5
million
for
single­
family
residential
construction,
$
59.4
million
for
multifamily
residential
construction,

$
277.3
million
for
commercial
construction,
and
$
11.0
million
for
industrial
construction
(
all
Option
2)
.

The
combined
national
compliance
costs
across
all
sectors
are
shown
in
the
final
rows
of
Table
5­
3a.
The
national
compliance
costs
under
Option
1
are
$
118.1
million
while
the
national
compliance
costs
under
Option
2
are
$
469.2
million.

3
Option
1
applies
to
sites
of
one
acre
or
more
in
size
while
Option
2
applies
to
sites
of
five
acres
or
more
in
size.

5­
7
­
­

­
­

­
­
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
3a.
Estimated
National
Cost
of
Storm
Water
Control
Options
(
All
Dollar
Amounts
in
Constant,
Pre­
tax,
1997
Dollars)

Option
Compliance
Costs
per
Acre(
$
)
Estimated
National
Costs
(
$
Millions)

Single­
Family
Residential
Option
1
$
57.0
$
24.1
Option
2
$
305.0
$
121.5
Option
3
$
0.0
$
0.0
Multifamily
Residential
Option
1
$
59.0
$
11.9
Option
2
$
319.0
$
59.4
Option
3
$
0.0
$
0.0
Commercial
Option
1
$
74.0
$
78.4
Option
2
$
312.0
$
277.3
Option
3
$
0.0
$
0.0
Industrial
Option
1
$
81.0
$
3.7
Option
2
$
303.0
$
11.0
Option
3
$
0.0
$
0.0
Total
Option
1
$
118.1
Option
2
$
469.2
Option
3
$
0.0
NOTE:
Compliance
costs
per
acre
are
weighted
national
averages
for
each
option
over
all
site
size
classes.
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5­
8
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
3b.
Calculation
of
Total
Cost
per
Unit
(
All
Dollar
Amounts
Are
in
Constant,
Pre­
tax,
1997
Dollars)

Single
Multi­
Family
Commercial
Industrial
Total
Option
1
Total
Costs
$
24,099,340
$
11,892,936
$
78,415,033
$
3,733,824
$
118,141,133
Total
Acres
533,878
252,182
1,332,476
57,523
2,176,058
Cost
per
Acre
$
45.14
$
47.16
$
58.85
$
64.91
Units
per
Acre
2.67
13,591
8,320
8,555
Cost
per
Unit
$
16.91/
house
$
0.003/
sq
ft
$
0.007/
sq
ft
$
0.008/
sq
ft
Option
2
Total
Costs
$
121,470,785
$
59,391,699
$
277,280,636
$
11,016,368
$
469,159,488
Total
Acres
501,100
229,958
1,061,108
42,733
1,834,898
Cost
per
Acre
$
242.41
$
258.27
$
261.31
$
257.80
Units
per
Acre
2.67
13,591
8,320
8,555
Cost
per
Unit
$
90.79/
house
$
0.019/
sq
ft
$
0.031/
sq
ft
$
0.030/
sq
ft
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

Table
5­
3b
shows
the
calculation
of
cost
per
unit
for
Options
1
and
2.
Units
are
 
dollars
per
house
 
for
single­
­
family
residential
construction
and
 
dollars
per
square
foot
 
for
all
other
categories.
.

Total
costs
are
the
estimated
national
costs
as
shown
in
Table
5­
3a.
Option
2
applies
only
to
sites
disturbing
5
acres
or
more,
so
this
option
encompasses
less
acreage
than
Option
1.
In
addition,
several
states
have
enacted
regulations
equivalent
to
the
proposed
standards
and
so
would
not
incur
incremental
costs
from
the
proposed
rule.
These
equivalent
states
are
included
in
the
storm
water
control
costs
per
acre
in
Table
5­
3a
but
removed
in
the
estimated
national
costs
in
the
same
table.
Table
5­
3b
recalculates
the
cost
per
acre
with
the
costs
attributable
to
states
with
equivalent
programs
removed.
With
this
adjustment,
the
cost
per
unit
is
calculated
by
dividing
by
the
number
of
houses
per
acre,
or
number
of
rentable
square
feet
per
acre,
which
is
derived
from
Census
and
R.
S.
Means
data.

The
cost
to
build
a
new
single­
family
home
increases
by
$
17
under
Option
1
and
$
91
under
Option
2.
Costs
per
square
foot
increase
by
less
than
1
cent
for
Option
1
and
2
to
3
cents
for
Option
2.

The
impacts
of
these
cost
increases
on
the
markets
for
new
construction
are
explored
in
Section
5.7.

5­
9
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
5.4
ANALYSIS
OF
IMPACTS
ON
MODEL
ESTABLISHMENTS
As
described
in
Chapter
Four,
EPA
developed
a
set
of
representative
model
projects
as
one
basis
for
analyzing
the
impacts
of
the
proposed
rule
on
the
construction
industry.
EPA
has
examined
the
impacts
of
the
compliance
costs
associated
with
these
model
projects
on
a
series
of
model
establishments
that
characterize
the
financial
conditions
of
 
typical
 
businesses
in
each
of
the
four
major
industry
sectors
(
single­
family
residential,
multifamily
residential,
commercial,
and
industrial;
see
Section
4.3)
.

The
model
firm
analysis
simulates
the
impact
of
the
incremental
compliance
costs
on
the
balance
sheet
and
cash
flow
of
the
model
establishments,
and
expresses
the
impacts
in
terms
of
changes
in
meaningful
business
financial
ratios.
The
ratios
used
in
the
analysis
include:

 
Gross
profit
ratio
 
Return
on
net
worth
 
Current
ratio
 
Debt
to
equity
ratio
These
ratios
are
reviewed
in
Chapter
Four,
which
also
presents
a
discussion
of
their
significance
as
indicators
of
financial
performance.

5.
4
.
1
Building
Construction
This
section
presents
the
results
of
simulations
of
firm
performance
under
the
regulatory
options
being
considered
by
EPA.
As
indicated
in
Chapter
Four,
the
simulations
have
been
run
under
two
CPT
scenarios:
(
1)
zero
CPT
from
the
developer­
builder
to
the
consumer
and
(
2)
an
estimated
actual
CPT,

where
a
 
realistic
 
share
of
the
compliance
costs
are
passed
though
to
consumers
in
the
form
of
higher
prices.
EPA
has
estimated
a
separate
CPT
factor
for
each
market
sector
individually.
The
zero
CPT
results
presented
in
this
section
represents
the
 
worst
case
 
scenario;
;
impacts
under
the
more
realistic
CPT
assumption
are
much
smaller
than
those
shown
below.

5­
10
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
4
shows
sample
results
for
a
firm
in
the
single­
family
residential
construction
industry
(
SIC
1531)
completing
between
10
and
24
housing
starts
per
year,
based
on
costs
for
7.5­
acre
projects.

Impacts
are
most
severe
on
the
return
on
net
worth
ratio,
a
recurring
outcome
throughout
EPA
 
s
model
firm
analysis.
Return
on
net
worth
is
the
most
sensitive
ratio
because
it
is
based
on
net
profit
after
taxes,

which
makes
up
1.2
percent
of
revenues
for
the
 
typical
 
establishment
in
SIC
1531
according
to
D&
&
B
data.
Impacts
are
much
less
severe
under
the
other
financial
ratio
measures.

Table
5­
5a
provides
a
summary
of
the
results
for
each
sector
by
regulatory
option,
over
all
project
sizes
and
under
the
zero
CPT
scenario.
The
results
are
broadly
similar
to
the
detailed
example
presented
in
Table
5­
4
for
the
single­
family
residential
sector.
Table
5­
5b
provides
the
same
summary
of
financial
ratios
under
the
estimated
actual
cost
pass
through
scenario.
In
both
scenarios
the
most
severe
impacts
are
observed
when
measured
by
impact
on
return
on
net
worth,
followed
by
the
gross
profit,
debt
to
equity,
and
current
ratios.
The
largest
impact
over
both
scenarios
is
a
5.85
percent
decline
in
the
return
on
net
worth
ratio
for
the
single­
family
residential
sector
under
Option
2
with
zero
CPT.
With
the
exception
of
return
on
net
worth,
the
remainder
of
the
results
under
zero
CPT
are
at
or
below
1.0
percent
for
all
project
types.
The
results
under
the
estimated
actual
CPT
scenario
indicate
impacts
of
less
than
1.0
percent
for
all
financial
ratios
and
all
four
project
types,
with
most
of
the
impacts
being
less
than
0.10
percent
(
with
the
exception
of
return
on
net
worth)
.

5­
11
­
­

­
­

­
­

­
­
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
4
Impact
of
Regulatory
Options
on
Financial
Performance
for
Model
Firm
Single­
family
Residential
Construction,
10­
24
Housing
Units
Starts
Class
Impact
Regulatory
Option
Option
1
Option
2
Option
3
Cost
Impact
Incremental
Costs
per
Acre
Per
Year
$
64
$
371
$
0
Incremental
Costs
per
Establishment
Per
Year
$
354
$
2,034
$
0
Impact
on
Financial
Performance
Gross
Profit
Ratio
Percent
change
from
baseline
0.2278%

­
0.0780%
0.2270%

­
0.4490%
0.2280%

Return
on
Net
Worth
Percent
change
from
baseline
0.0502%

­
0.8810%
0.0481%

­
5.0680%
0.0506%

Current
Ratio
Percent
change
from
baseline
1.3935%

­
0.0070%
1.3930%

­
0.0400%
1.3936%

Debt
to
Equity
Ratio
Percent
change
from
baseline
1.9161%

0.0310%
1.9189%

0.1800%
1.9155%

Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5­
12
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
5a.
Impact
of
Regulatory
Options
on
Model
Firm
Financial
Performance
Zero
Cost
Pass
Through
Construction
Industry
and
Regulatory
Option
Percent
Change
in
Financial
Ratios,
From
Baseline
a
Gross
Profit
Return
on
Net
Worth
Current
Ratio
Debt
to
Equity
Min.
Max.
Min.
Max.
Min.
Max.
Min.
Max.

Single­
family
residential
Option
1
0.000%
­
0.230%
0.000%
­
2.540%
0.000%
­
0.020%
0.000%
0.900%

Option
2
0.000%
­
0.520%
0.000%
­
5.850%
0.000%
­
0.050%
0.000%
0.210%

Option
3
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%

Multifamily
residential
Option
1
0.000%
­
0.310%
0.000%
­
0.990%
0.000%
­
0.050%
0.000%
0.200%

Option
2
0.000%
­
0.950%
0.000%
­
3.070%
0.000%
­
0.160%
0.000%
0.640%

Option
3
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%

Commercial
Option
1
0.000%
­
0.170%
0.000%
­
0.530%
0.000%
­
0.020%
0.000%
0.130%

Option
2
0.000%
­
0.400%
0.000%
­
1.250%
0.000%
­
0.050%
0.000%
0.310%

Option
3
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%

Industrial
Option
1
0.000%
­
0.140%
0.000%
­
0.430%
0.000%
­
0.020%
0.000%
0.120%

Option
2
0.000%
­
0.320%
0.000%
­
1.020%
0.000%
­
0.050%
0.000%
0.280%

Option
3
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%

a
Ranges
(
minimum
and
maximum)
reflect
results
across
model
firms
of
varying
sizes.
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5­
13
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
5b.
Impact
of
Regulatory
Options
on
Model
Firm
Financial
Performance
Estimated
Actual
Cost
Pass
Through
Construction
Industry
and
Regulatory
Option
Percent
Change
in
Financial
Ratios,
From
Baseline
a
Gross
Profit
Return
on
Net
Worth
Current
Ratio
Debt
to
Equity
Min.
Max.
Min.
Max.
Min.
Max.
Min.
Max.

Single­
family
residential
Option
1
0.000%
­
0.034%
0.000%
­
0.379%
0.000%
­
0.003%
0.000%
0.013%

Option
2
0.000%
­
0.077%
0.000%
­
0.872%
0.000%
­
0.007%
0.000%
0.031%

Option
3
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%

Multifamily
residential
Option
1
0.000%
­
0.026%
0.000%
­
0.083%
0.000%
­
0.004%
0.000%
0.017%

Option
2
0.000%
­
0.080%
0.000%
­
0.259%
0.000%
­
0.014%
0.000%
0.054%

Option
3
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%

Commercial
Option
1
0.000%
­
0.017%
0.000%
­
0.054%
0.000%
­
0.002%
0.000%
0.013%

Option
2
0.000%
­
0.040%
0.000%
­
0.126%
0.000%
­
0.006%
0.000%
0.031%

Option
3
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%

Industrial
Option
1
0.000%
­
0.021%
0.000%
­
0.066%
0.000%
­
0.003%
0.000%
0.018%

Option
2
0.000%
­
0.048%
0.000%
­
0.155%
0.000%
­
0.008%
0.000%
0.042%

Option
3
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%

a
EPA
applied
the
following
estimated
cost
pass
through
factors:
Single­
family
residential,
85.10%
;
Multifamily
residential,
91.55%
;
Commercial,
89.87%
;
Industrial,
84.75%
.
b
Ranges
(
minimum
and
maximum)
reflect
results
across
model
firms
of
varying
sizes.
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5.4.2
Nonbuilding
Construction
EPA
has
analyzed
the
potential
impacts
of
the
proposed
rule
on
nonbuilding
construction
establishments
based
on
Census
data
and
the
cost
data
presented
in
Section
5.2.4.
As
previously
discussed,
this
analysis
focuses
on
highway
and
street
construction
contractors
(
NAICS
23411)
due
to
the
lack
of
financial
data
for
other
segments
of
the
heavy
construction
industry
group
(
NAICS
234)
.

5­
14
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
The
model
establishment
analysis
for
heavy
construction,
although
somewhat
simplified,
follows
the
basic
methodology
outlined
in
Section
4.3
for
establishments
in
the
commercial
and
industrial
construction
industries.
EPA
has
determined
that
the
median
highway
construction
establishment
(
NAICS
23411)
,
based
on
revenues,
is
in
the
50
to
99
employee
size
classification
category
as
defined
by
Census
(
U.
S.
Census
2000)
.
Within
this
employment
size
class,
EPA
calculated
average
establishment
revenues,
employment,
and
costs
as
discussed
in
Section
4.3.1.2.

For
the
model
establishment,
EPA
examined
the
economic
impacts
of
the
worst­
case
compliance
cost
impacts
on
the
same
four
financial
ratios
analyzed
above
for
the
residential,
commercial,
and
industrial
construction
industries.
Due
to
the
lack
of
actual
engineering
cost
estimates
for
highway
construction,
the
compliance
costs
used
in
this
analysis
do
not
correspond
to
a
particular
regulatory
option
or
combination
of
options.
Compliance
costs
for
7.5­
acre
projects
were
chosen
for
this
analysis
because
they
are
closest
in
size
to
the
model
highway
construction
project
assumed
to
be
undertaken
by
the
model
establishment,
which
encompasses
10.67
acres.

Table
5­
6
shows
the
results
of
this
analysis
for
the
model
highway
construction
firm
(
50­
99
employment
size
class)
.
Overall,
the
impacts
are
not
large,
with
only
one
estimate
above
one­
quarter
of
one
percent.
As
with
the
model
establishments
in
the
building
construction
industries,
the
impacts
are
largest
for
the
return
on
net
worth
ratio.

5­
15
­
­
­
­
­
­
­
­

­
­
­
­
­
­
­
­
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
6.
Impact
of
Proposed
Rule
on
Model
Firm
Financials
­
Highway
Construction
Cost
Pass
Through
Assumption
Gross
Profit
Return
on
Net
Worth
Current
Debt
to
Equity
Ratio
Percent
Change
from
Baseline
Ratio
Percent
Change
from
Baseline
Ratio
Percent
Change
from
Baseline
Ratio
Percent
Change
from
Baseline
Zero
Cost
Pass
Through
Baseline
0.223000
0.198344
1.629629
1.061856
Worst­
Case
0.222256
­
0.33%
0.196307
­
1.03%
1.628681
­
0.06%
1.064601
0.26%

90
Percent
Cost
Pass
Through
Baseline
0.223000
0.198344
1.629629
1.061856
Worst­
Case
0.222926
­
0.03%
0.198141
­
0.10%
1.629534
­
0.01%
1.062131
0.03%

Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

Under
a
zero
cost
pass
through
(
CPT)
assumption,
the
largest
impact
is
on
return
on
net
worth,

which
declines
by
just
over
1.0
percent.
Impacts
under
an
estimated
CPT
value
of
90
percent
are
all
at
or
below
0.10
percent.

5.5
ANALYSIS
OF
IMPACTS
ON
CLOSURES
AND
EMPLOYMENT
LOSSES
As
discussed
in
Chapter
Four,
EPA
used
two
approaches
to
estimate
potential
facility
closures
and
employment
losses
resulting
from
the
proposed
rule.
The
primary
approach
was
to
analyze
changes
in
key
financial
ratios
that
occur
as
firms
 
costs
increase
in
response
to
the
proposed
rule.
.
To
estimate
closures,
EPA
examined
a
weighted
average
of
changes
in
the
current
ratio,
debt
to
equity
ratio,
and
return
on
net
worth
ratios.
EPA
then
constructed
a
cumulative
distribution
function
for
each
ratio
to
estimate
the
percent
of
establishments
that
would
likely
fall
below
 
critical
 
values
after
incurring
compliance
costs.
That
percent
falling
below
this
critical
value,
multiplied
by
the
number
of
facilities
represented
by
the
model
under
evaluation,
resulted
in
a
projected
number
of
closures.
Employment
losses
were
calculated
by
multiplying
the
number
of
establishments
projected
to
close
by
employment
estimates
for
the
model
facility
representing
those
closures.

5­
16
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
EPA
 
s
alternative
approach,
which
analyzed
estimated
model
facility
cash
flow,
was
used
as
a
check
on
the
financial
ratio
analysis
described
above.
Results
from
this
analysis
are
contained
in
Appendix
5­
A.

5.5.1
Facility
Closures
Table
5­
7a
shows
closure
analysis
results
using
the
financial
ratio
method
under
a
zero
CPT
assumption
 
the
worst
case
scenario.
.
Results
under
a
calculated
CPT
assumption
are
presented
in
Table
5­
7b.
The
largest
number
of
establishment
closures
is
projected
to
occur
in
the
commercial
sector
(
43
projected
closures)
,
followed
by
the
single­
family
residential
sector
(
13
closures)
.
Facility
closures
as
a
percent
of
total
facilities
are
less
than
one
percent
under
all
proposed
options
and
for
all
industry
sectors.
As
seen
in
Table
5­
7b,
closure
impacts
are
even
smaller
when
CPT
is
accounted
for.

Table
5­
7a.
Estimated
Facility
Closures
Zero
Cost
Pass
Through
Option
Single­
Family
Multifamily
Commercial
Number
Pct.
of
Total
Number
Pct.
of
Total
Number
Pct.
of
Total
1
4
0.005%
1
0.022%
11
0.028%

2
13
0.015%
3
0.065%
43
0.108%

3
0
0.000%
0
0.000%
0
0.000%

Option
Industrial
Heavy
TOTAL
Number
Pct.
of
Total
Number
Pct.
of
Total
Number
Pct.
of
Total
1
2
0.026%
0
0.000%
18
0.012%

2
7
0.090%
26
0.230%
92
0.063%

3
0
0.000%
0
0.000%
0
0.000%

Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5­
17
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
7b.
Estimated
Facility
Closures
Estimated
Cost
Pass
Through
Option
Single­
Family
Multifamily
Commercial
Number
Pct.
of
Total
Number
Pct.
of
Total
Number
Pct.
of
Total
1
1
0.001%
0
0.000%
1
0.003%

2
2
0.002%
0
0.000%
4
0.010%

3
0
0.000%
0
0.000%
0
0.000%

Option
Industrial
Heavy
TOTAL
Number
Pct.
of
Total
Number
Pct.
of
Total
Number
Pct.
of
Total
1
0
0.000%
0
0.000%
2
0.001%

2
1
0.013%
3
0.027%
10
0.007%

3
0
0.000%
0
0.000%
0
0.000%

Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5.5.2
Employment
Losses
Table
5­
8a
presents
employment
loss
analysis
results
for
the
financial
ratio
method
under
a
zero
CPT
assumption
to
show
the
worst
case
scenario.
Results
under
a
calculated
CPT
assumption
are
presented
in
Table
5­
8b.

Employment
impacts
as
a
percent
of
each
sector
 
s
total
employment
are
roughly
the
same
as
closure
impacts.
This
is
to
be
expected,
because
EPA
estimated
employment
impacts
by
multiplying
projected
closures
by
the
number
of
employees
per
establishment.
Note
that
in
the
multifamily
sector,

the
percentage
of
employment
losses
is
slightly
larger
than
the
percentage
of
closures.
This
is
because
the
model
establishments
most
affected
by
the
proposed
rule
account
for
a
disproportionately
high
percentage
of
sector
employment.

5­
18
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
8a.
Estimated
Employment
Losses
Zero
Cost
Pass
Through
Option
Single­
Family
Multifamily
Commercial
Number
Pct.
of
Total
Number
Pct.
of
Total
Number
Pct.
of
Total
1
34
0.016%
12
0.034%
162
0.029%

2
145
0.067%
61
0.173%
603
0.110%

3
0
0.000%
0
0.000%
0
0.000%

Option
Industrial
Heavy
TOTAL
Number
Pct.
of
Total
Number
Pct.
of
Total
Number
Pct.
of
Total
1
43
0.029%
0
0.000%
251
0.021%

2
133
0.089%
647
0.233%
1,589
0.130%

3
0
0.000%
0
0.000%
0
0.000%

Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

Table
5­
8b.
Estimated
Employment
Losses
Estimated
Cost
Pass
Through
Option
Single­
Family
Multifamily
Commercial
Number
Pct.
of
Total
Number
Pct.
of
Total
Number
Pct.
of
Total
1
5
0.001%
1
0.003%
16
0.003%

2
22
0.006%
5
0.014%
61
0.011%

3
0
0.000%
0
0.000%
0
0.000%

Option
Industrial
Heavy
TOTAL
Number
Pct.
of
Total
Number
Pct.
of
Total
Number
Pct.
of
Total
1
7
0.005%
0
0.000%
29
2
20
0.013%
65
0.023%
173
3
0
0.000%
0
0.000%
0
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5­
19
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
5.6
ANALYSIS
OF
BARRIER
TO
ENTRY
This
section
presents
the
results
of
EPA
 
s
barrier
to
entry
analysis.
As
discussed
in
Section
4.3.3,
EPA
examined
the
ratio
of
compliance
costs
to
current
and
total
assets
to
determine
if
new
market
entrants
would
find
it
more
difficult
to
obtain
construction
loans
to
start
a
project
than
would
existing
firms.
As
discussed
in
more
detail
in
that
section,
this
methodology
is
conservative
by
design
because
it
does
not
account
for
the
fact
that
a
firm
would
typically
be
expected
to
finance
20
percent
of
the
incremental
compliance
costs
to
obtain
the
loan
 
not
the
full
amount
as
assumed
here.
.

5.6.1
Building
Construction
As
shown
in
Table
5­
9a,
compliance
costs
represent
a
maximum
of
0.82
percent
of
a
model
establishment
 
s
current
assets
(
0.60
percent
of
total
assets)
across
all
options
and
project
types.
These
maximum
projected
impacts
occur
in
the
multifamily
sector.
For
the
industrial
and
commercial
sectors,

compliance
costs
are
less
than
0.30
percent
of
current
assets,
while
in
the
single­
family
sector,
costs
are
less
than
0.25
percent
of
current
assets.
Table
5­
9b
shows
the
barrier
to
entry
analysis
results
under
an
estimated
CPT
scenario.
As
shown,
the
impacts
are
smaller
than
under
the
zero
CPT
scenario,
with
the
maximum
impact
on
both
current
assets
and
total
assets
at
less
than
0.10
percent.

5­
20
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
9a.
Barrier
to
Entry
Analysis
 
Zero
Cost
Pass
Through
Option
Compliance
Costs
Divided
by:

Current
Assets
Total
Assets
Min
Max
Min
Max
Single­
Family
Residential
1
0.000%
0.100%
0.000%
0.070%

2
0.000%
0.230%
0.000%
0.170%

3
0.000%
0.000%
0.000%
0.000%

Multifamily
Residential
1
0.000%
0.260%
0.000%
0.190%

2
0.000%
0.820%
0.000%
0.600%

3
0.000%
0.000%
0.000%
0.000%

Commercial
1
0.000%
0.120%
0.000%
0.090%

2
0.000%
0.270%
0.000%
0.220%

3
0.000%
0.000%
0.000%
0.000%

Industrial
1
0.000%
0.110%
0.000%
0.080%

2
0.000%
0.250%
0.000%
0.190%

3
0.000%
0.000%
0.000%
0.000%

Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5­
21
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
9b.
Barrier
to
Entry
Analysis
 
Cost
Pass
Through
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.
Option
Compliance
Costs
Divided
by:

Current
Assets
Total
Assets
Min
Max
Min
Max
Single­
Family
Residential
1
0.000%
0.015%
0.000%
0.011%

2
0.000%
0.034%
0.000%
0.025%

3
0.000%
0.000%
0.000%
0.000%

Multifamily
Residential
1
0.000%
0.022%
0.000%
0.016%

2
0.000%
0.069%
0.000%
0.050%

3
0.000%
0.000%
0.000%
0.000%

Commercial
1
0.000%
0.012%
0.000%
0.009%

2
0.000%
0.028%
0.000%
0.022%

3
0.000%
0.000%
0.000%
0.000%

Industrial
1
0.000%
0.016%
0.000%
0.013%

2
0.000%
0.038%
0.000%
0.029%

3
0.000%
0.000%
0.000%
0.000%

5.6.2
Nonbuilding
Construction
The
barrier
to
entry
analysis
also
produced
results
in
line
with
the
results
previously
reported
for
the
other
four
industries.
Table
5­
10
shows
the
results
of
this
analysis.
Under
a
zero
CPT
assumption,

compliance
costs
are
less
than
one
percent
of
both
current
and
total
assets
using
the
best
estimate
compliance
cost.
Using
the
worst­
case
estimate,
compliance
costs
are
slightly
above
2.5
percent
of
current
assets
and
nearly
1.5
percent
of
total
assets.
With
cost
pass
through,
these
impacts
are
significantly
lower.

5­
22
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
10.
Barrier
to
Entry
Analysis
­
Highway
Construction
Compliance
Cost
Assumption
Compliance
Costs
Divided
By:

Current
Assets
Total
Assets
Zero
Cost
Pass
Through
Baseline
0.00%
0.00%

Worst­
Case
0.29%
0.17%

With
90
Percent
Cost
Pass
Through
Baseline
0.00%
0.00%

Worst­
Case
0.03%
0.02%

Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5.7
ANALYSIS
OF
IMPACTS
ON
NATIONAL
CONSTRUCTION
MARKETS
EPA
used
three
approaches
to
estimate
the
potential
impacts
of
the
regulatory
options
on
the
national
single­
family
housing
construction
market.
This
section
presents
the
results
of
these
analyses.

In
the
first
approach,
EPA
analyzed
the
impacts
of
the
proposed
rule
on
consumers
under
the
assumption
that
developers
and
builders
pass
on
100
percent
of
the
costs
to
the
new
single­
family
home
buyer.
To
assess
these
impacts,
EPA
developed
a
model
that
estimates
the
change
in
income
needed
to
qualify
for
financing
to
purchase
the
(
higher
priced)
housing
unit,
and
then
estimates
the
change
in
the
number
of
households
that
would
meet
the
higher
income
criteria.
In
theory,
this
provides
an
estimate
of
the
change
in
new
housing
demand
that
could
arise
as
a
result
of
the
proposed
regulations.

EPA
 
s
second
approach
applies
a
partial
equilibrium
model
to
220
metropolitan
housing
markets
to
estimate
how
compliance
costs
change
the
proportion
of
homes
in
the
market
that
the
median
income
household
can
afford,
termed
the
Housing
Opportunity
Index
(
HOI)
.
HOI
is
published
quarterly
by
the
NAHB.
This
index
offers
a
similar
estimate
of
the
change
in
housing
demand
that
may
arise
from
the
effluent
guideline
in
terms
of
a
familiar,
widely
publicized,
indicator.

5­
23
­
­
­
­
­
­
­
­
­
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
The
third
approach
is
a
single
national
partial
equilibrium
model.
Changes
in
prices
and
quantities
from
this
model
are
used
to
derive
the
impacts
on
employment
and
social
welfare.

EPA
 
s
methodology
for
these
models
is
discussed
more
fully
in
Section
4.5.

5.7.1
Residential
Construction
Markets
5.7.1.1
Housing
Affordability
Table
5­
11
shows
that
the
incremental
costs
of
the
proposed
rule
add
a
maximum
of
$
58
to
the
$
82,472
in
income
that
is
required
to
purchase
the
baseline
model
home.
After
this
income
change,

between
5,200
and
29,000
households
(
0.03
percent
to
0.15
percent
of
total
qualifying
households)

would
fail
to
qualify
for
a
mortgage.

Table
5­
11.
Impact
of
Erosion
and
Sediment
Control
Costs
on
Housing
Affordability
(
All
Dollar
Amounts
are
in
Constant,
Pre­
tax,
1997
Dollars)

Option
ESC
Costs
(
$
/
Unit)
Total
Change
in
Costs
(
$
/
Unit)
Income
Needed
To
Qualify
(
$
)
Change
in
Income
Needed
(
$
)
Number
of
Households
Shifted
(
Thousands)
Percent
of
Households
Shifted
That
Could
Afford
Baseline
(
Percent)

1
$
20
$
36
$
82,482
$
10
­
5.2
­
0.03%

2
$
111
$
201
$
82,529
$
58
­
29.1
­
0.15%

3
$
0
$
0
$
82,472
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5.7.1.2
Housing
Opportunity
Index
The
HOI
is
an
alternative
measure
of
housing
affordability.
EPA
estimated
the
change
in
HOI
from
its
baseline
value
for
220
regional
housing
markets.
Table
5­
12
summarizes
these
results
in
terms
5­
24
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
of
the
average
change
calculated
across
each
Census
Bureau
division.
Since
the
HOI
encompasses
both
existing
and
new
housing,
the
results
show
the
net
effect
for
the
entire
housing
market.
The
value
of
the
HOI
varies
considerably
by
region.
In
the
Pacific
region,
high
real
estate
prices
result
in
only
one
third
of
households
having
sufficient
income
to
purchase
the
median­
priced
home.
In
the
central
regions,

however,
three­
quarters
of
households
can
afford
the
median­
priced
home.

The
proposed
regulation
has
little
effect
on
regional
HOI.
Table
5­
13
shows
the
percentage
change
in
HOI
by
Census
division.
Option
1
changes
HOI
by
less
than
two­
hundredths
of
one
percent
in
all
regions.
Option
2
changes
HOI
by
less
than
0.2
percent.
The
largest
changes
occur
in
the
South
Atlantic
region.
These
changes
are
much
smaller
in
scale
than
annual
changes
that
result
from
normal
shifts
in
real
estate
market
conditions
and
demography
of
the
market
areas.

Table
5­
12.
Single­
Family
Residential
Average
HOI
by
Census
Division
Option
Census
Division
1
New
England
2
Middle
Atlantic
3
East
North
Central
4
West
North
Central
5
South
Atlantic
6
East
South
Central
7
West
South
Central
8
Mountain
9
Pacific
1
54.24
62.36
72.66
78.81
70.30
69.69
64.73
44.57
32.62
2
54.23
62.31
72.59
78.74
70.24
69.65
64.69
44.55
32.61
3
54.24
62.37
72.67
78.82
70.31
69.70
64.73
44.58
32.63
HOI
indicates
the
percent
of
households
in
each
region
that
can
afford
the
median­
priced
house.
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

Table
5­
13.
Single­
Family
Residential
Percentage
Change
in
HOI
by
Census
Division
Option
Census
Division
1
New
England
2
Middle
Atlantic
3
East
North
Central
4
West
North
Central
5
South
Atlantic
6
East
South
Central
7
West
South
Central
8
Mountain
9
Pacific
1
0.00%
­
0.02%
­
0.02%
­
0.02%
­
0.02%
­
0.01%
­
0.01%
­
0.01%
­
0.01%

2
­
0.02%
­
0.10%
­
0.10%
­
0.10%
­
0.11%
­
0.08%
­
0.07%
­
0.07%
­
0.04%

3
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

HOI
indicates
the
percent
of
households
in
each
region
that
can
afford
the
median­
priced
house.
Source
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5­
25
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
5.7.1.3
Single­
Family
Housing
Prices
and
Quantities
Table
5­
14
shows
the
results
of
EPA
 
s
analysis
using
the
market
model
approach.
The
table
shows
the
estimated
changes
in
median
single­
family
home
prices
from
all
combinations
of
the
proposed
options.
The
changes
in
costs
range
from
$
0
to
$
111.
The
market
model
recognizes
that
market
conditions
control
how
much
of
these
costs
can
be
passed
through
to
consumers.
Thus,
the
price
increase
is
somewhat
smaller
than
the
related
cost
increase,
reflecting
the
fact
some
costs
would
be
borne
by
the
builder­
developer.
The
largest
increase
in
price
reduces
the
quantity
that
can
be
sold
by
about
two­
hundredths
of
one
percent.
The
total
loss
in
output
to
the
construction
industry
ranges
from
$
0
to
$
72
million.

Table
5­
14.
Single­
Family
Residential
 
Changes
in
Price
and
Quantity
From
the
Baseline
(
All
Dollar
Values
Are
in
Constant,
Pre­
tax,
1997
Dollars)

Option
Change
in
Cost
(
$
/
Unit)
New
Price
(
$
/
Unit)
Price
Change
(
$
/
Unit)
Quantity
Change
(
Units)
Quantity
Change
(
Percent)
Loss
of
Output
(
$
Million)

1
$
20
$
288,414
$
17
(
44)
­
0.00%
­
$
12.8
2
$
111
$
288,492
$
95
(
248)
­
0.02%
­
$
71.6
3
$
0
$
288,397
$
0
0
­
0.00%
0
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5.7.1.4
Multifamily
Housing
Prices
and
Quantities
Table
5­
15
shows
the
estimated
changes
in
median
price
of
a
unit
in
a
multifamily
building
from
the
proposed
options.
The
changes
in
costs
range
from
$
0
to
$
40
per
unit.
Multifamily
housing
disturbs
a
smaller
area
per
unit,
so
any
ESC­
related
costs
are
spread
over
more
units.
The
market
model
suggests
a
higher
share
of
compliance
costs
in
multifamily
housing
would
be
passed
through
to
consumers,

compared
to
single­
family
homes,
so
price
changes
are
closer
to
the
actual
change
in
builder
costs.
The
price
changes
passed
through
to
consumers
range
from
$
0
to
$
40
per
unit.

5­
26
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
15.
Multifamily
Residential
 
Changes
in
Price
and
Quantity
From
the
Baseline
(
All
Dollar
Values
Are
in
Constant,
Pre­
tax,
1997
Dollars)

Option
Change
in
Cost
(
$
/
Unit)
New
Price
(
$
1,000/
Unit)
Price
Change
(
$
/
Unit)
Quantity
Change
(
Units)
Quantity
Change
(
Percent)
Loss
of
Output
(
$
Million)

1
$
7
$
132.53
$
7
­
7
0.00%
­
$
0.9
2
$
40
$
132.57
$
40
­
41
0.01%
­
$
5.2
3
$
0
$
132.53
$
0
0
0.00%
­
$
0.0
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5.7.2
Non­
Residential
Construction
Markets
5.7.2.1
Commercial
Space
Rental
prices
for
commercial
space
are
typically
quoted
in
dollars
per
square
foot
per
year.
Table
5­
16
shows
the
estimated
changes
in
median
rental
rate
of
a
square
foot
of
commercial
space
from
the
proposed
options.
The
changes
in
costs
range
from
$
0
to
$
0.02
per
square
foot.
Tenants
of
commercial
space
are
considerably
more
price
sensitive
than
residential
buyers,
so
less
of
the
change
in
costs
can
be
passed
through
to
tenants.
The
change
in
average
price
per
square
foot
reflects
this
absorption
of
compliance
costs
by
builders
and
building
owners.

Price
changes
range
from
$
0
to
$
0.02
per
square
foot.
Quantity
reductions
are
estimated
to
reach
seven­
hundredths
of
one
percent
for
the
most
costly
option.
The
total
loss
in
output
to
the
construction
industry
ranges
from
$
0
to
$
67.1
million.

5­
27
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
16.
Commercial
 
Changes
in
Price
and
Quantity
From
the
Baseline
(
All
Dollar
Values
Are
in
Constant,
Pre­
tax,
1997
Dollars)

Option
Change
in
Cost
(
$
/
Sq.
Ft.
)
New
Price
(
$
/
Sq.
Ft.
)
Price
Change
(
$
/
Sq.
Ft.
)
Quantity
Change
(
Units)
Quantity
Change
(
Percent)
Loss
of
Output
(
$
Million)

1
$
0.01
$
14.67
$
0.00
­
36
­
0.01%
­
$
14.7
2
$
0.02
$
14.69
$
0.02
­
163
­
0.07%
­
$
67.1
3
$
0.00
$
14.66
$
0.00
0
­
0.00%
$
0.0
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5.7.2.2
Industrial
Space
Only
12,100
industrial
projects
are
estimated
to
start
in
the
base
year.
Rental
prices
for
industrial
space
are
typically
quoted
in
dollars
per
square
foot
per
year.
Table
5­
17
shows
the
estimated
changes
in
median
rental
rate
of
a
square
foot
of
industrial/
warehouse
space
from
the
proposed
options.
The
changes
in
costs
range
from
$
0
to
$
0.02
per
square
foot.
Buyers
of
industrial
space
are
considerably
more
price
sensitive
than
homeowners,
so
less
of
the
change
in
costs
can
be
passed
through
to
the
end­

users.
The
change
in
average
price
per
square
foot
reflects
this
absorption
of
compliance
costs
by
builders
and
developers.

Price
changes
range
from
$
0
to
$
0.02
per
square
foot.
Quantity
reductions
are
estimated
to
reach
0.3
percent
for
the
most
costly
option,
albeit
on
a
small
number
of
projects
in
the
baseline.
The
total
loss
in
output
to
the
construction
industry
ranges
from
$
0
to
$
17.8
million.

Table
5­
17.
Industrial
 
Changes
in
Price
and
Quantity
From
the
Baseline
(
All
Dollar
Values
Are
in
Constant,
Pre­
tax,
1997
Dollars)

Option
Change
in
Cost
(
$
/
Sq.
Ft.
)
New
Price
(
$
/
Sq.
Ft.
)
Price
Change
(
$
/
Sq.
Ft.
)
Quantity
Change
(
Units)
Quantity
Change
(
Percent)
Loss
of
Output
(
$
Million)

1
$
0.01
$
5.17
$
0.00
­
11
­
0.08%
­
$
4.4
2
$
0.02
$
5.18
$
0.02
­
46
­
0.32%
­
$
17.8
3
$
0.00
$
5.16
$
0.00
0
0.00%
$
0.0
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5­
28
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
5.7.3
Output
and
Employment
As
discussed
in
Section
4.5,
additional
compliance
costs
reduce
the
output
of
the
construction
industry
as
the
increased
price
reduces
sales.
The
estimate
of
this
effect
is
shown
in
the
 
Loss
of
Output
 
column
of
Table
5­
18.
Most
of
the
losses
are
in
the
large
single­
family
residential
and
catch­
all
commercial
construction
sectors.
These
losses
are
offset,
however,
by
increases
in
output
and
employment
in
those
industries
associated
with
compliance,
i.
e.
,
design,
installation,
and
inspection
of
ESCs.
The
estimate
of
the
amount
of
new
work
generated
in
these
activities
is
shown
in
the
 
Stimulus
from
Added
Work
 
column.
.
The
next
two
columns
show
the
changes
in
jobs
related
to
the
loss
in
construction
spending
and
(
offsetting)
increase
in
regulatory
compliance
spending.
Under
both
options,

the
stimulus
adds
more
jobs
than
the
loss
of
output
takes
away,
with
the
result
that
net
employment
change
from
construction
impacts
is
a
positive
number.
In
the
single­
family
sector,
for
example,
under
Option
1
there
is
a
loss
$
12.8
million
of
output
but
an
offsetting
stimulus
of
$
21.5
million.
The
loss
represents
475
jobs,
but
the
stimulus
generates
797
jobs;
the
net
result
is
that
322
more
jobs
are
generated.
Note
that
these
job
estimates
apply
to
the
entire
economy,
not
just
the
construction
sectors.

They
represent
all
of
the
impacts
that
result
as
changes
in
the
construction
industry
ripple
through
other
sectors.

The
stimulus
to
the
construction
industry
comes
at
the
expense
of
consumer
spending,
as
home
buyers
and
other
consumers
devote
more
of
their
income
to
housing.
EPA
assumes
that
this
loss
of
consumer
surplus
takes
the
form
of
reduced
spending
for
other
products,
though
it
might
also
take
the
form
of
reduced
amenities
in
housing
construction.
Removing
this
spending
from
the
national
economy
reduces
the
employment
that
arises
in
response
to
consumer
spending.
The
 
Change
in
Employment
From
Consumer
Spending
 
column
shows
this
reduction
in
jobs,
,
which
offsets
the
stimulus
to
construction.
When
this
effect
is
factored
in,
the
net
change
in
total
employment
is
negative.

Total
employment
losses
range
from
0
to
1,400
jobs.
These
estimates
do
not
consider
how
long
individuals
may
be
out
of
work,
nor
do
they
consider
individuals
 
alternative
opportunities.
.
Because
of
this,
such
input­
output
analysis
results
are
usually
considered
an
over­
estimate
of
the
hardship
initiated
by
the
change
to
the
economy.

5­
29
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
18.
Changes
in
Output
and
Total
Employment
From
the
Baseline
(
All
dollar
Values
Are
in
Constant,
Pre­
tax,
1997
Dollars)

Option
Loss
of
Output
(
$
Million)
Stimulus
From
Added
Work
(
$
Million)
Change
in
Employment
From
Lost
Output
(
Jobs)
Change
in
Employment
From
Stimulus
(
Jobs)
Net
Change
in
Employment
From
Construction
Impacts
(
Jobs)
Change
in
Employment
From
Consumer
Spending
(
Jobs)
Net
Change
in
Total
Employment
(
Jobs)

Single­
Family
Residential
1
(
$
12.8)
$
21.5
(
475)
797
322
(
498)
(
176)

2
(
$
71.6)
$
120.2
(
2,662)
4,467
1,805
(
2,792)
(
986)

3
$
0.0
$
0.0
0
0
0
0
0
Multifamily
Residential
1
(
$
0.9)
$
2.5
(
34)
91
57
(
67)
(
10)

2
(
$
5.2)
$
13.7
(
192)
509
317
(
374)
(
56)

3
$
0.0
$
0.0
0
0
0
0
Commercial
1
(
$
14.7)
$
42.6
(
546)
1,583
1,037
(
1,062)
(
25)

2
(
$
67.1)
$
194.7
(
2,494)
7,234
4,740
(
4,857)
(
116)

3
$
0.0
$
0.0
0
0
0
0
0
Industrial
1
(
$
4.4)
$
6.7
(
164)
248
84
(
152)
(
68)

2
(
$
17.8)
$
26.9
(
662)
1,001
338
(
616)
(
277)

3
$
0.0
$
0.0
0
0
0
0
0
Total
1
(
$
32.8)
$
73.2
(
1,219)
2,719
1,501
(
1,780)
(
279)

2
(
$
161.7)
$
355.5
(
6,010)
13,212
7,201
(
8,638)
(
1,436)

3
$
0.0
$
0.0
0
0
0
0
0
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5.7.4
Changes
in
Welfare
Measures
As
discussed
in
Section
4.6,
the
proposed
regulation
shifts
the
supply
curves
for
new
construction
in
each
sector.
This
shift
alters
the
balance
between
consumers
and
producers.
Each
group
contributes
to
the
costs
of
complying
with
the
regulation.
As
Table
5­
19
indicates,
consumers
may
lose
5­
30
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
from
$
0
to
$
316.6
million,
depending
on
the
option
selected.
Producers
lose
from
$
0
to
$
40.4
million.

Almost
all
of
this
loss
is
shifted
from
consumers
and
construction
firm
owners
to
construction
firms
to
pay
the
costs
of
complying
with
the
regulation.
As
shown
in
the
last
section,
the
net
effect
on
construction
may
be
a
stimulus.
However,
a
small
portion
is
utterly
lost
to
society.
This
portion,
termed
the
 
deadweight
loss,
 
ranges
from
$
$
0
to
$
200,000.

Table
5­
19.
Changes
in
Social
Welfare
Measures
 
All
Sectors
Combined
(
All
Dollar
Values
Are
in
Constant,
Pre­
tax,
1997
Dollars)

Option
Total
Deadweight
Loss
(
$
Million)
Total
Consumer
Surplus
Loss
(
$
Million)
Total
Producer
Surplus
Loss
(
$
Million)

1
$
0.0
$
65.2
$
8.2
2
$
0.2
$
316.6
$
40.4
3
$
0.0
$
0.0
$
0.0
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5.7.5
Regional
Effects
The
multifamily
housing
and
non­
residential
market
models
estimate
impacts
at
the
state
level
based
on
information
about
local
real
estate
markets.
The
single­
family
housing
market
model
estimates
market
effects
at
the
MSA
level,
which
can
then
be
aggregated
to
the
state
level.
Table
5­
20
shows
the
loss
in
output
to
the
construction
industry,
by
state,
from
compliance
with
the
more
expensive
Option
2.

Loss
of
output
largely
follows
the
expected
pattern
of
population
and
growth.
Several
states
show
zero
loss
for
some
categories
because
there
is
so
little
activity
in
that
state
that
the
effect
could
not
be
measured.
For
example,
multifamily
housing
in
Vermont.
California,
Pennsylvania,
and
several
other
states
(
indicated
with
an
e)
show
no
effect
as
current
State
regulations
were
deemed
equivalent
to
the
proposed
regulations
and
so
there
was
no
incremental
impact
on
firms
operating
in
those
states.

Although
the
totals
would
be
lower
for
Option
1,
the
pattern
of
losses
would
be
similar.

Table
5­
21
provides
a
similar
state­
by­
state
breakdown
of
the
net
change
in
employment
as
a
result
of
compliance
with
the
proposed
regulation.
In
several
states,
multifamily
housing,
commercial,

5­
31
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
and
industrial
stimulus
effects
are
greater
than
the
losses,
and
the
regulation
causes
a
small
net
positive
change
in
employment
within
those
categories.

Table
5­
20.
Loss
of
Output
to
the
Construction
Industry
by
State
and
Use
Category
(
$
Millions)
(
All
Dollar
Values
Are
in
Constant,
Pre­
tax,
1997
Dollars)
,
Option
2
State
Single­
Family
Multifamily
Commercial
Industrial
Total
Alabama
(
1.2)
0.0
(
0.9)
(
0.4)
(
2.5)

Alaska
(
0.2)
0.0
0.0
0.0
(
0.2)

Arizona
e
e
e
e
e
Arkansas
(
0.4)
0.0
(
0.7)
(
0.2)
(
1.3)

California
e
e
e
e
e
Colorado
(
3.6)
(
0.3)
(
1.2)
(
0.5)
(
5.6)

Connecticut
e
e
e
e
e
Delaware
(
0.3)
0.0
(
0.5)
0.0
(
0.8)

District
of
Columbia
(
4.8)
(
0.2)
0.0
0.0
(
5.1)

Florida
(
7.4)
(
1.0)
(
15.3)
(
0.9)
(
24.6)

Georgia
(
0.9)
(
0.5)
(
4.1)
(
1.6)
(
7.1)

Hawaii
(
0.4)
0.0
0.0
0.0
(
0.4)

Idaho
e
e
e
e
e
Illinois
e
e
e
e
e
Indiana
(
3.6)
(
0.1)
(
1.6)
(
1.5)
(
6.9)

Iowa
(
0.7)
0.0
(
0.7)
(
1.0)
(
2.5)

Kansas
(
0.5)
0.0
(
0.9)
(
0.5)
(
1.8)

Kentucky
(
1.1)
0.0
(
1.3)
(
0.8)
(
3.3)

Louisiana
(
1.8)
0.0
(
1.8)
(
0.2)
(
3.8)

Maine
0.0
0.0
(
2.4)
(
0.1)
(
2.5)

Maryland
(
2.1)
0.0
(
2.1)
(
0.3)
(
4.4)

Massachusetts
e
e
e
e
e
Michigan
(
5.9)
(
0.1)
(
2.9)
(
1.1)
(
10.0)

Minnesota
(
3.5)
(
0.1)
(
2.4)
(
1.0)
(
7.0)

Mississippi
(
0.7)
0.0
(
0.7)
(
0.2)
(
1.7)

Missouri
(
3.1)
(
0.1)
(
2.0)
(
0.6)
(
5.9)

Montana
0.0
0.0
(
0.3)
(
0.1)
(
0.3)

Nebraska
(
0.6)
(
0.1)
(
0.8)
(
0.2)
(
1.7)

Nevada
4.0
(
0.3)
(
2.8)
(
0.3)
0.7
New
Hampshire
e
e
e
e
e
New
Jersey
(
3.9)
(
0.1)
0.0
(
0.1)
(
4.1)

New
Mexico
e
e
e
e
e
New
York
(
13.4)
(
0.7)
(
6.9)
(
0.6)
(
21.5)

North
Carolina
(
3.2)
(
0.4)
(
3.3)
(
1.5)
(
8.4)

5­
32
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
20.
Loss
of
Output
to
the
Construction
Industry
by
State
and
Use
Category
(
$
Millions)
(
All
Dollar
Values
Are
in
Constant,
Pre­
tax,
1997
Dollars)
,
Option
2
State
Single­
Family
Multifamily
Commercial
Industrial
Total
North
Dakota
(
0.1)
0.0
(
0.3)
(
0.3)
(
0.6)

Ohio
(
6.8)
(
0.2)
(
1.1)
(
1.2)
(
9.3)

Oklahoma
e
e
e
e
e
Oregon
(
1.0)
(
0.1)
(
2.2)
(
0.8)
(
4.1)

Pennsylvania
e
e
e
e
e
Rhode
Island
(
0.7)
0.0
(
1.2)
0.0
(
1.9)

South
Carolina
e
e
e
e
e
South
Dakota
e
e
e
e
e
Tennessee
e
e
e
e
e
Texas
e
e
e
e
e
Utah
e
e
e
e
e
Vermont
(
0.1)
0.0
(
1.2)
(
0.1)
(
1.4)

Virginia
e
e
e
e
e
Washington
(
1.9)
(
0.3)
(
4.1)
(
0.5)
(
6.8)

West
Virginia
e
e
e
e
e
Wisconsin
(
1.8)
(
0.2)
(
1.2)
(
1.3)
(
4.4)

Wyoming
0.0
0.0
(
0.2)
0.0
(
0.3)

United
States
Total
(
71.6)
(
5.2)
(
67.1)
(
17.8)
(
161.7)

Note:
e
indicates
state
has
regulations
equivalent
to
the
proposed
options.
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.

5­
33
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
21.
Net
Change
in
Total
Employment
by
State
and
Use
Category
(
Jobs)
Under
Proposed
Rule
Option
2
State
Single­
Family
Multifamily
Commercial
Industrial
Total
Alabama
(
17)
0
(
3)
(
5)
(
26)

Alaska
(
3)
0
0
0
(
3)

Arizona
e
e
e
e
e
Arkansas
(
5)
0
(
8)
(
3)
(
17)

California
e
e
e
e
e
Colorado
(
50)
(
3)
(
4)
(
4)
(
62)

Connecticut
e
e
e
e
e
Delaware
(
4)
0
(
2)
0
(
7)

District
of
Columbia
(
66)
(
3)
0
0
(
69)

Florida
(
102)
(
16)
(
15)
(
15)
(
187)

Georgia
(
12)
(
9)
(
28)
(
28)
(
64)

Hawaii
(
5)
0
0
0
(
5)

Idaho
e
e
e
e
e
Illinois
e
e
e
e
e
Indiana
(
50)
(
1)
49
(
30)
(
32)

Iowa
(
10)
0
(
­
3)
(
23)
(
35)

Kansas
(
7)
0
(
3)
(
8)
(
18)

Kentucky
(
16)
(
1)
(
5)
(
13)
(
34)

Louisiana
(
24)
0
(
21)
(
3)
(
48)

Maine
0
0
(
37)
0
(
37)

Maryland
(
28)
0
(
7)
(
4)
(
41)

Massachusetts
e
e
e
e
e
Michigan
(
81)
0
57
(
9)
(
33)

Minnesota
(
49)
(
1)
(
8)
(
17)
(
74)

Mississippi
(
10)
0
(
3)
(
3)
(
16)

Missouri
(
43)
(
1)
(
7)
(
9)
(
61)

Montana
0
0
(
3)
(
1)
(
3)

Nebraska
(
8)
(
1)
(
3)
(
3)
(
15)

Nevada
55
(
7)
(
44)
(
4)
0
New
Hampshire
e
e
e
e
e
New
Jersey
(
54)
0
24
1
(
29)

New
Mexico
e
e
e
e
e
New
York
(
184)
5
56
(
2)
(
125)

North
Carolina
(
44)
(
7)
(
12)
(
29)
(
92)

North
Dakota
(
1)
0
(
1)
(
5)
(
7)

Ohio
(
93)
(
1)
34
(
21)
(
81)

Oklahoma
e
e
e
e
e
Oregon
(
14)
(
2)
(
28)
(
11)
(
55)

5­
34
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Table
5­
21.
Net
Change
in
Total
Employment
by
State
and
Use
Category
(
Jobs)
Under
Proposed
Rule
Option
2
Source:
EPA
estimates
based
on
the
methodologies
presented
in
Chapter
Four.
State
Single­
Family
Multifamily
Commercial
Industrial
Total
Pennsylvania
e
e
e
e
e
Rhode
Island
(
9)
0
(
19)
0
(
28)

South
Carolina
e
e
e
e
e
South
Dakota
e
e
e
e
e
Tennessee
e
e
e
e
e
Texas
e
e
e
e
e
Utah
e
e
e
e
e
Vermont
(
2)
0
(
18)
0
(
21)

Virginia
e
e
e
e
e
Washington
(
26)
(
4)
(
64)
(
5)
(
99)

West
Virginia
e
e
e
e
e
Wisconsin
(
25)
(
3)
37
(
20)
(
10)

Wyoming
0
0
(
3)
(
1)
(
3)

United
States
Total
(
986)
(
56)
(
116)
(
277)
(
1,436)

5.8
IMPACTS
ON
GOVERNMENTAL
UNITS
As
Section
4.8
discusses,
EPA
estimates
that
the
proposed
rule
would
impose
some
costs
on
governmental
units
involved
in
 
codifying
 
the
construction
general
permit.
.
This
section
examines
the
costs
imposed
on
governmental
units
associated
with
the
proposed
Option
2.

5.8.1
Construction
Program
Administration
EPA
has
analyzed
the
costs
to
governments
under
the
assumption
that
the
majority
of
construction­
related
regulatory
costs
would
be
associated
with
processing
general
permits.
As
noted
previously,
EPA
assumes
that
the
majority
of
NPDES
Phase
I
and
Phase
II
NPDES
storm
water
permit
programs
are
fully
implemented,
and
that
any
new
regulatory
requirements
would
be
superimposed
upon
these
programs.

5­
35
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
Based
on
the
assumption
that
all
states
would
change
their
storm
water
programs
to
include
certification
of
sedimentation
basins
and
other
aspects
of
the
proposed
rule,
EPA
estimated
the
annual
costs
of
establishing
such
a
program.
These
costs
are
presented
in
Table
5­
22.
EPA
estimates
that
states
would
experience
$
0.26
million
in
costs
staying
current
with
federal
guidance,
state
guidance,
and
evolving
industry
practice
(
U.
S.
EPA
2002)
.

Table
5­
22.
Costs
To
Establish
Construction
Programs
(
$
1997)

Element
Value
Units
Labor
hours
to
review
EPA
regulation
and
modify
state
practices
200
Hours/
Year
Labor
cost
$
26.02
$
/
Hour/
State
State
Cost
per
year
$
5,203
$
/
Year/
State
Number
of
States
50
States
Totals
$
260,150
$
/
Year
Source:
U.
S.
EPA.
2002.

In
evaluating
the
annual
costs,
EPA
assumed
that
the
current
trend
 
states
taking
the
lead
in
implementing
the
regulation
of
construction
activities
 
will
continue
in
the
future.
EPA
elected
not
to
evaluate
how
to
distribute
its
total
estimated
implementation
cost
between
state
and
municipal
agencies,

and
instead
has
attributed
all
costs
to
states.

5.8.2
Government
Construction
Costs
Government
entities
commission
nearly
a
quarter
of
the
value
of
construction
put
in
place
(
Census,
2000)
.
Government
projects
would
need
to
comply
with
the
proposed
regulation
so
their
costs
would
increase,
just
as
private
projects
 
would.
.
Roughly
one­
half
of
government
projects
are
maintenance
or
reconstruction
of
existing
structures
which
does
not
entail
new
ground
disturbance.
EPA
estimates
that
approximately
25
percent
of
total
impacts
would
fall
on
government
projects
resulting
in
a
$
29.2
million
additional
cost
to
government
entities
under
proposed
Option
1
or
a
$
115.9
million
5­
36
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
additional
cost
under
proposed
Option
2.
4
This
effect
is
discussed
in
detail
in
the
Unfunded
Mandates
Reform
Act
(
UMRA)
analysis
in
Chapter
Ten.

5.9
OTHER
IMPACTS
This
section
addresses
Executive
Order
(
EO)
12866,
which
directs
federal
agencies
to
assess
the
costs
and
benefits
of
each
significant
rule
they
propose
or
promulgate,
as
well
as
issues
of
environmental
justice
and
children
 
s
health.
Chapter
Ten
addresses
the
Unfunded
Mandates
Reform
Act
(
UMRA)
.

Section
5.9.1
describes
the
administrative
requirements
of
EO
12866.
Sections
5.9.2
and
5.9.3
describe
EPA
 
s
analysis
of
environmental
justice
and
children
 
s
health
issues
for
the
proposed
rule.
Another
piece
of
legislation
 
the
Unfunded
Mandates
Reform
Act,
or
UMRA
 
also
has
requirements
relevant
to
EPA
 
s
plans.
Chapter
Ten
addresses
UMRA.

Much
of
the
information
provided
in
this
section
is
summarized
from
other
documents
that
support
this
proposed
rulemaking,
as
well
as
other
sections
of
this
report.

5.9.1
Requirements
of
Executive
Order
12866
Under
EO
12866
(
58
FR
51735,
October
4,
1993)
,
the
Agency
is
to
determine
whether
a
regulatory
action
is
 
significant
 
and
therefore
subject
to
OMB
review
and
the
directives
of
the
EO.
.
The
Order
defines
a
 
significant
regulatory
action
 
as
one
that
is
likely
to
result
in
a
rule
that
may:
:

(
1)
Have
an
annual
effect
on
the
economy
of
$
100
million
or
more
or
adversely
affect
in
a
material
way
the
economy,
a
sector
of
the
economy,
productivity,
competition,
jobs,
the
environment,
public
health
or
safety,
or
state,
local,
or
tribal
governments
or
communities;

(
2)
Create
a
serious
inconsistency
or
otherwise
interfere
with
an
action
taken
or
planned
by
another
agency;

4
Additional
cost
to
government
entities
under
the
proposed
ESC
options
includes
costs
potentially
incurred
by
Federal,
State,
and
local
government
entities.

5­
37
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
(
3)
Materially
alter
the
budgetary
impact
of
entitlements,
grants,
user
fees,
or
loan
programs
or
the
rights
and
obligations
of
recipients
thereof;
or
(
4)
Raise
novel
legal
or
policy
issues
arising
out
of
legal
mandates,
the
President
 
s
priorities,
or
the
principles
set
forth
in
the
Executive
Order.

EPA
has
determined
that
the
proposed
C&
D
rulemaking
is
a
 
significant
regulatory
action
 
under
the
terms
of
EO
12866,
because
the
total
costs
of
the
proposed
rule
are
estimated
to
exceed
$
100
million
annually.
As
such,
this
action
was
submitted
to
OMB
for
review.
Changes
made
in
response
to
OMB
suggestions
or
recommendations
will
be
documented
in
the
public
record.

In
addition
to
submission
of
the
action
to
OMB,
the
principal
directives
of
the
EO
are
that
the
Agency
perform
an
analysis
comparing
the
benefits
of
the
regulation
to
the
costs
that
the
regulation
imposes,
that
the
Agency
analyze
alternative
approaches
to
the
proposed
rule,
and
that
the
reason
for
the
proposed
rule
be
identified.
Wherever
possible,
the
costs
and
benefits
of
the
proposed
rule
are
to
be
expressed
in
monetary
terms.
To
address
these
directives,
the
following
section
describes
the
reasons
why
EPA
is
revising
the
existing
regulations,
and
Chapters
Eight
and
Nine
present
the
estimated
social
costs,

pollutant
reductions,
and
monetary
benefits
of
the
proposed
C&
D
regulations.
Section
5.8
addresses
the
impacts
of
the
proposed
regulations
on
governmental
units.
An
in­
depth
profile
of
the
potentially
affected
industry
sectors
is
presented
in
Chapter
Two
of
this
report.

Reason
for
the
Regulation
Executive
Order
12866
directs
the
Agency
to
identify
the
reason
for
the
regulations
being
proposed.
The
reasons
for
proposing
the
C&
D
regulations
are
stated
throughout
this
report
(
Chapters
One
and
Six)
and
are
presented
in
the
preamble
of
the
proposed
rulemaking.
These
reasons
are
summarized
briefly
below:

 
In
spite
of
existing
regulatory
controls,
there
is
continued
runoff
of
sediment
from
construction
sites
and
newly
developed
areas.
Sediment
entering
public
waterways
imposes
costs
on
water
users
in
the
form
of
additional
demand
for
pre­
treatment
of
water
withdrawn
and
diminished
value
for
in­
stream
uses.
Users
cannot
identify
and
seek
compensation
from
the
construction
sites
causing
the
problem.
So
there
is
a
market
failure
in
terms
of
the
environmental
externality
of
sediment
emissions.
The
proposed
5­
38
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
regulations
are
expected
to
address
the
impairment
of
many
U.
S.
waterways
and
the
associated
human
health
and
ecological
risks.

 
The
existing
regulation
appears
to
be
insufficient
to
protect
or
restore
water
quality.
There
exists
an
information
asymmetry
between
builders
and
enforcement
officials
in
which
builders
know
their
level
of
care
with
regard
to
erosion
and
sediment
controls
while
officials
may
or
may
not
know.
The
certification
and
inspection
provisions
of
the
proposed
rule
increase
the
level
of
information
available
to
officials.
The
revisions
would
make
the
regulations
apply
more
uniformly
throughout
the
country
and
 
raise
the
bar
 
for
storm
water
control,
in
general.

Both
UMRA
and
EO
12866
require
the
statutory
authority
for
the
rule
to
be
cited.
A
detailed
discussion
of
the
objectives
and
legal
basis
for
the
proposed
C&
D
regulations
is
presented
in
the
preamble.

A
discussion
of
the
UMRA
is
presented
in
Chapter
Ten
of
this
report.

5.9.2
Environmental
Justice
According
to
EO
12898,
Federal
Actions
To
Address
Environmental
Justice
in
Minority
Populations
and
Low­
Income
Populations
,
federal
agencies
are
to
address
potential
environmental
justice
issues
that
may
be
triggered
by
proposed
actions.
Based
on
guidance
in
EPA
 
s
Guidelines
for
Preparing
Economic
Analyses
,
the
potential
effects
of
the
proposed
regulation
on
minority
and
low­
income
populations
have
been
considered
(
U.
S.
EPA
2000)
.
EPA
has
determined
that
the
proposed
rule
would
not
have
a
disproportionately
large
effect
on
minority
or
low­
income
populations,
nor
would
it
have
disproportionately
high
human
health
or
environmental
effects.
Thus
no
further
analysis
on
environmental
justice
issues
has
been
conducted
for
this
proposal.

5.9.3
Children
 
s
Health
Pursuant
to
EO
13045,
Protection
of
Children
From
Environmental
Health
Risks
and
Safety
Risks
,
EPA
has
considered
whether
this
proposed
rule
would
have
any
significant
effects
on
children
 
s
health
or
safety
(
U.
S.
EPA
2000)
.
EPA
has
determined,
based
on
the
information
provided
throughout
5­
39
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
this
report,
that
the
proposed
rule
would
not
have
any
significant
effects
on
children
 
s
health
or
safety,

and
no
further
analysis
has
been
conducted
for
this
proposal.

5­
40
Economic
Analysis
of
Construction
and
Development
Proposed
Effluent
Guidelines
May
2002
5.10
REFERENCES
Tetra
Tech.
2002.
Personal
Communication
from
J.
Swanson,
Tetra
Tech,
Inc.
,
to
J.
Cantin,
ERG,
Inc.
January
29.

U.
S.
Census
Bureau
2000.1997
Economic
Census:
Construction:
Subject
Series.
January.

U.
S.
EPA
2002.
 
Development
Document
for
the
Effluent
Guidelines
for
the
Construction
and
Development
Point
Source
Category.
 
Washington,
D.
C.
:
U.
S.
Environmental
Protection
Agency.

U.
S.
EPA
2000.
 
Guidelines
for
Preparing
Economic
Analyses.
 
Washington,
D.
C.
:
U.
S.
Environmental
Protection
Agency,
Report
EPA
240­
R­
00­
003,
September.

5­
41
