THE DOE YUCCA MOUNTAIN PROJECT Contributions to the Nye County and Nevada Economies Alternative Patterns of Workforce Assignment and Residency

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1 THE DOE YUCCA MOUNTAIN PROJECT Contributions to the Nye County and Nevada Economies Alternative Patterns of Workforce Assignment and Residency Yucca Mountain: The South Portal Area Nye County Economic-Demographic Reports: #2 Nye County Nuclear Waste Repository Project Office 1210 E. Basin Road #6, Pahrump, NV 89048, (775) , FAX, Prepared by James M. Williams, (303) , with Lloyd Levy March, 2000

2 THE DOE YUCCA MOUNTAIN PROJECT Contributions to the Nye County and Nevada Economies Alternative Patterns of Workforce Assignment and Residency The Nye County Nuclear Waste Repository Project Office (NWRPO) conducts studies in order to better understand the potential impacts of the Yucca Mountain Project. Such studies include assessments of current and projected economic and demographic conditions in the site county and its communities, and analyses of the current or projected impacts of specific economic activities, such as the Yucca Mountain Project itself or other activities that may affect the community context which conditions Yucca Mountain Project effects. This report, on the effects of the Yucca Mountain Project if configured more like DOE flagship sites, documents one such assessment. Subsequent assessments may address related topics. INTRODUCTION The U.S. Department of Energy Office of Civilian Radioactive Waste Management (DOE/OCRWM) is responsible for management of the nation s highly radioactive wastes. Since 1987, when amendments to the 1982 Nuclear Waste Policy Act designated Yucca Mountain in Nye County as the single site to be characterized for use as a geologic repository, Nevada has become the main focus of the DOE/OCRWM program. In recent years (federal fiscal years 1996 through 1999), the program has spent about $347 annually (fiscal year 1999) of which about $250 million has flowed through DOE s Yucca Mountain Site Characterization Office in Las Vegas. In 1999, the Yucca Mountain Project (YMP) created 1,364 jobs in Nevada, of which 214 (15.7%) were located at worksites in Nye County at Yucca Mountain itself or the Field Operations Office at Area 25 of the Nevada Test Site. The total gross pay disbursed to this workforce (excluding benefits) was $83,327,000, of which $13,593,000 (16.3%) was wage and salary disbursements associated with the onsite jobs located in Nye County. The management of the YMP reflects a choice by the U.S. Department of Energy (DOE) to pursue a model closely resembling the management of the Nevada Test Site. The management model discourages investment in Nye County infrastructure, residential, and economic development by concentrating YMP administrative functions at offsite locations (Clark County). It also encourages the onsite (Nye County) work force to reside predominantly in Clark County by providing subsidized daily transportation. Other management models are possible and could have been pursued by DOE. This study, prepared by the NWRPO Economic Assessment Program, asks a specific question: What might be the contribution of the YMP if DOE had managed the project more like flagship DOE sites, where historical DOE

3 policies involve community and economic development in the site county? In other words, what shifts would occur in the regional economy in terms of output, Gross Regional Product, jobs, population, and income if alternative patterns of workforce assignment, residency, and procurement were to be implemented by DOE? In examining this question, the report makes no representations whether an alternative configuration would be desirable for DOE, the site county, or for other affected parties. 1 To examine this question, we modified available information describing YMP employment, residency, labor status, and workforce compensation to construct an alternative view of the YMP. We then conducted the analysis by entering the alternative project description into REMI, a widely accepted economic and demographic impact assessment model. 2 The REMI model used for this assessment was specifically calibrated to represent the interrelated economies of Nye County, Clark County, and the rest of Nevada. Prior to running the impact assessments, the model also was adjusted to reflect recent employment trends, updated Las Vegas hotel development prospects, and recent Nye County economic and retirement migration trends implied by current population estimates. The results of the impact analysis are expressed in terms of the model s estimates of how key economic values would be affected were the project to be removed from the region, as compared to estimates of the same values under baseline conditions with the project operating as it currently does. The key values used to characterize the economic impacts of the YMP are regional output, Gross Regional Product, total and secondary employment, resident employment, total personal income, and resident population. (A glossary defining these and other economic concepts used here is included as an appendix to this report.) THE CONFIGURATION OF YMP UNDER ALTERNATIVE MANAGEMENT POLICIES The alternative management patterns assessment is intended to depict the YMP in 1999 had DOE made a decision, beginning several years previous, to substantially reconfigure its activity in Nevada, so that it might conform more closely to that of flagship DOE sites. The alternative does not change total employment associated with the YMP; or the mix of union, exempt, and other 1 Note: This study does not assess the economic effects of DOE s payments-equal-totaxes (PETT). In 1999, Nye County received $5 million in PETT, and all Nevada entities received $5.7 million. 2 REMI Policy Insight Version 1.1, Regional Economic Models, Inc., 306 Lincoln Avenue, Amherst, Massachusetts. 2

4 employees; or the gross pay of those employees; or the number of union employees working onsite. The following summary describes the changes we made in order to simulate reasonable alternative management policies: a) the percentage of offsite employees working out-of-state is half that estimated for 1998 and 1999, b) the percentage of exempt (generally professional and managerial) employees working onsite is half that of union employees, and other support employees working onsite is increased in response to the increase in exempt employees, c) the portion of onsite employees living in Clark County is reduced by 50%; the residency of offsite employees is not changed. FINDINGS AND CONCLUSIONS The alternative view of the YMP in which traditional DOE management patterns in Nevada are modified to shift more of project activity to the site county enhances the economic development effects of the project many times within Nye County, while imposing a fractional penalty on Clark County. This evaluation is best expressed in terms of how shares of the project effects shift among areas of the state and in terms of the project s changed contribution to current levels of Gross Regional Product. Economic and Demographic Impacts Output. Under the alternative patterns hypothesized for this analysis, the YMP workforce would have had a total impact of $210,288,000 on output (or gross sales) within Nevada in 1999, of which $70,124,000 (33.3%) would have occurred in Nye County. The remainder of the project s impact on output would have occurred in Clark County ($132,244,000, or 62.9%) and in the rest of Nevada (3.8%). Compared to current patterns, alternative management would increase site county output by $56,142,000, or 402%, and decreased Clark County output by $33,394,000, or 20%. Gross Regional Product. Under alternative patterns, the YMP s total impact on gross regional product (GRP) within Nevada in 1999 would have been $126,481,000, of which $41,198,000 (32.6%) would have occurred in Nye County. The remainder of the project s impact on GRP would have occurred in Clark County ($80,464,000, or 63.6%) and in the rest of Nevada (3.8%). Compared to current patterns, alternative management would increase site county GRP by $33,046,000, or 405%, and decrease Clark County GRP by $20,282,000, or 20%. Secondary Employment. Under alternative patterns, the YMP workforce would have generated 1,401 secondary jobs within Nevada in This is about 0.75 additional secondary jobs for every direct job. Of these, an estimated 182 (13%) would have been in Nye County versus 1,136 (81%) in Clark County and 83 (6%) in the rest of Nevada. Compared to current 3

5 patterns, alternative management would increase site county secondary employment by 146, or 406%, and decrease Clark County secondary employment by 138 or 11%. Resident Employment. Under alternative patterns, the YMP would have generated resident employment of 3,500 in 1999 in Nevada, of whom 652 (18.6%) would have resided in Nye County, 2,680 (76.6%) in Clark County and 168 (4.8%) in the rest of Nevada. Compared to current patterns, alternative management would increase site county resident employment by 584, or 859%, and decrease Clark County resident employment by 710 or 21%. Personal Income. Under alternative patterns, total personal income of Nevadans attributable to the project would have been $187,156,000 in 1999, of which $47,360,000 (25.3%) would have accrued to Nye County residents, $133,000,000 (71.1%) to Clark County residents, and $6,796,000 (3.6%) to other Nevada residents. Compared to current patterns, alternative management would increase site county personal income by $40,494,000, or 590%, and decrease Clark County personal income by $38,500,000 or 22%. Population. Under alternative patterns, the YMP would have generated a total resident population of 3,359 persons statewide in 1999, of whom 1,114 (33.2%) would have been in Nye County, 2,138 (63.6%) in Clark County and 107 (3.2%) in the rest of Nevada. Compared to current patterns, alternative management would increase site county resident population by 958, or 614%, and decrease Clark County resident population by 562 or 21%. Contribution to the Region s Economies Under alternative management policies, the YMP would have created $41,198,000 in GRP in Nye County, or 5.1% of estimated total GRP in In comparison, current management created $8,152,000 in GRP in the site county, or 1.0% of total GRP in The YMP would have been 23 times more important to the economy of the site county than to the economies of Clark county or the state. Observations The reconfiguration examined in this assessment would have involved substantial change for all parties (DOE/OCRWM, Nye County, Clark County and the State of Nevada). None of the parties have seriously considered the change, or concluded that it is (or would have been) desirable, in principle or in practice. Some would question why make such changes when the YMP itself is uncertain. Others would argue that it is difficult or impossible to make a DOE flagship site of one that has not developed as such from the outset. Still others question whether current management practices provide a basis for the site county to accept the additional risk, while others might question why DOE does not locate its own 4

6 employees and contractors in the site county if its project is as safe as DOE maintains. Here are some of the implications of a change in YMP management policies to make them more consistent with those at flagship DOE sites: The reconfiguration would have had substantial impacts on YMP employees and their families. About 550 fewer YMP employees would live out of state. About 350 fewer employees would live in Clark County. About 100 more employees would live in Nye County. DOE would have had to assist employees in their relocations and would have to assist the site county provide a residential and service community in which they would willingly live. DOE would also have to persuade the families of its own workforce that it is safe to live near the site where the nation s highly radioactive waste could be stored. DOE would have had to change many of its traditional management policies in Nevada e.g. large-scale subsidized busing from Las Vegas and shortterm assignments for professional employees at onsite work locations. DOE would have had to provide efficient workspace for about 1,000 additional employees in the site county. Even with the substantial change, only one-third of the economic effects of the YMP would occur in the site county. Two-thirds would occur elsewhere in Nevada, mainly in Clark County. Over time, however, if the YMP continues and as Nye County continues to grow and change, the site county s share of the economic impact of the YMP would more closely approximate its share of direct employment (60%). BASELINE ECONOMIC DEVELOPMENT TRENDS As noted above, the REMI economic impact assessment model used here was ordered and calibrated specifically for this type of analysis. The Nye County REMI model represents the economy in terms of 14 broad industry sectors. On a geographical level, the model separates the state of Nevada into three distinct economic regions: Nye County, Clark County and the balance of the state. The economic values and relationships in the model are estimated largely on the basis of actual economic data available through 1995 from the U.S. Bureau of Economic Analysis and other public sources. 5

7 Because the model s last year of history is 1995, 3 the Nye County economic assessment program has made several adjustments to the out-of-the-box REMI model, comparable to those made by other REMI users in Nevada. These include an adjustment for general economic trends since 1995 and an adjustment for Clark County casino-hotel development that is forecasted by industry observers to occur between 1996 and 2005 but that was not sufficiently accounted for in REMI s standard forecast for the Clark County model region. Besides these adjustments, the Nye County assessment program adjusted the model to simulate the shutdown of the Barrick-Bullfrog Mine and Mill in Beatty, a process begun after the model s last year of history. The Nye County assessment program also adjusted economic and retiree migration flows until the REMI standard forecast better approximated the recent, known trends in estimated Nye County population. The adjusted REMI model projects Nye County population at 53,896 by 2010, up from 33,628 in It is important to note that this baseline projection reflects underlying economic trends in Nye County, other Nevada counties and the nation, as evidenced in data available through Except as noted above, the baseline does not reflect other economic events. 4 INFORMATION SOURCES FOR IMPACT ASSESSMENT In this analysis, the Nye County Assessment Program has attempted to describe the YMP configured as it might have been had DOE managed the project as it manages other flagship DOE sites. The assumptions used to modify the current patterns were described above. The description of current management patterns themselves that is, how the project has actually occurred from 1996 through 1999 is based on several separate information sources, all produced by DOE s Yucca Mountain Site Characterization Office (DOE/YMSCO) or Nevada Operations Office (DOE/NV). 5 3 Because the Nye County REMI model s last year of history is 1995, values produced by the model for the years 1996 through 1999 and which are used in this analysis are not actual values but rather are forecasts even though actual values have occurred and may already have been measured or estimated from contemporaneous data by economic analysts. 4 The January 1998 report, 1998 Baseline Economic/Demographic Projections For : Nye County and Nye County Communities describes in greater detail the REMI model, the adjustments for forecasting baseline trends, and the economic and demographic forecast results for communities and for Nye County as a whole. 5 The January 1996 report Monitoring the DOE/OCRWM Program, the Yucca Mountain Project, and Related DOE Activities in Nevada describes the following sources of information and the Nye County monitoring program assessment procedures in greater detail. 6

8 YMP employment is estimated on a monthly basis by DOE/YMSCO. The estimates identify onsite employment (at Yucca Mountain or the Field Operations Center) and offsite employment, but they do not identify the location of offsite employees. For this assessment we averaged monthly employment (on and offsite, total workforce, and full-time equivalent) for the calendar years 1996 through DOE/NV estimates Yucca Mountain and defense-related employment, and identifies offsite employment in Las Vegas, elsewhere in Nevada, and out of state. For this assessment, we used the distribution of offsite employees in July of 1998 and YMP employment residency was estimated in employee surveys conducted by DOE/YMSCO in 1994 and Such surveys have not been conducted again since The surveys identified the residency (by ZIP code) of employees by worksite (on and offsite) and labor status (union, exempt, nonunion/non-exempt) employees. Union workers are generally crafts workers and equipment operators; exempt workers generally have managerial or professional positions; non-union/non-exempt workers generally have technical or clerical positions. For this assessment we summed ZIP code survey results by county and averaged the percentage distributions for 1994 and DOE/NV provides employee compensation reports for its major contractors in Nevada. Similar reports are developed for major contractors at other DOE sites and for the entire DOE complex. These reports identify total labor costs, gross pay and benefits for union, exempt, and non-union/non-exempt employees. The Nye County monitoring program assessed these reports for several years in the late 1980s and early 1990s. For this assessment we used the assessment findings for the last year the assessment was conducted (1994), summed for the four major DOE/NV contractors. APPLYING REMI TO ASSESS THE YUCCA MOUNTAIN PROJECT Assessing the YMP required two rounds of REMI runs to generate a more accurate portrayal of the distribution of the effects of the YMP in Nevada. This is possible because residency information available for the YMP allows evaluation and adjustment of the first round REMI assessment to more accurately portray the distribution of YMP impacts among the three regions depicted in our REMI model. 7

9 In the first round, YMP employment by worksite (Nye, Clark, and the rest of Nevada) was subtracted from the economy s services sector. 6 This approach, called a counter-factual scenario, estimates the contribution of an economic activity by simulating its closure and removal from the economy. This round of the assessment also required the subtraction of an additional amount of total wage and salary income. This was to more consistently simulate the impact of losing YMP jobs that are known to pay higher than average wages and salaries relative to the average level contained in the services sector of the Nye County REMI model. Using these inputs, the first round REMI run estimated secondary employment, total employment by place of residence and resident population and income. However, an examination of first round results suggested that the model s default distribution of impacts among the model regions was inconsistent with survey data available from DOE monitoring that characterizes the residency distribution of YMP employees. These specially gathered data, otherwise not available to the REMI model, were compared to the results of the first round REMI run. Based on that comparison, a residence adjustment was made to better reflect the known, direct portion of resident employment in each county. The residence adjustment was made in the second round REMI run by shifting personal income from one model region to another in amounts consistent with the known residency and gross pay of the project s direct employees, as reflected in the DOE monitoring data. The impacts presented and discussed above are derived from the outputs of the second round REMI run. The specific economic model inputs used to simulate the YMP as it might be reconfigured are presented in Table 2. Contributors: Jim Williams, formerly president of Planning Information Corp., has been responsible for numerous economic and demographic analyses, including many in Nye County and the State of Nevada. For over a decade, he has consulted with Nye County on the socioeconomic, financial, and transportation aspects of the DOE high-level nuclear waste program. Lloyd Levy, formerly senior research associate at Planning Information Corp., has conducted numerous economic and demographic analyses, including the Nye County population monitoring program, baseline forecasts for Nye County and the State of Nevada, and an assessment of the effects of electric utility restructuring in the State of Wyoming. The cover photo was kindly provided by the USDOE Yucca Mountain Site Characterization Office. 6 The REMI model used by the Nye County Assessment program portrays the regional economy in terms of 14 highly aggregated industries. A large proportion of the jobs on the Yucca Mountain Project are jobs at business service firms contracted to DOE. Business services jobs are reflected in the broad services industry of Nye County s REMI model. 8

10 TABLE 1. ECONOMIC IMPACT ANALYSIS RESULTS Yucca Mountain Project: Alternative Patterns, 1999 Impacts Nye Clark Rest of NV All NV Direct Employment (jobs) 1, ,830 Secondary Employment (jobs) 182 1, ,401 Total Employment (jobs) 1,277 1, ,231 Resident Employment (persons) 652 2, ,500 Resident Population (persons) 1,114 2, ,359 Personal Income (in 000's of current $) 47, ,000 6, ,156 Output (in 000's of current $) 70, ,224 7, ,288 Gross Regional Product (in 000's of current $) 41,198 80,464 4, ,481 Baseline Nye Clark Rest of NV All NV Direct Employment (jobs) NA NA NA NA Total Employment (jobs) 11, , ,631 1,141,079 Resident Employment (persons) 10, , ,494 1,107,771 Resident Population (persons) 36,032 1,257, ,293 1,845,283 Personal Income (in 000's of current $) 622,000 36,268,000 16,534,000 53,424,000 Output (in 000's of current $) 1,094,626 58,729,945 28,841,099 88,665,670 Gross Regional Product (in 000's of current $) 806,004 37,738,566 19,727,536 58,272,106 Regional Impact as Percent of All Nevada Nye Clark Rest of NV All NV Direct Employment 59.8% 40.0% 0.2% 100.0% Secondary Employment 13.0% 81.1% 5.9% 100.0% Total Employment 39.5% 57.8% 2.7% 100.0% Resident Employment 18.6% 76.6% 4.8% 100.0% Resident Population 33.2% 63.6% 3.2% 100.0% Personal Income 25.3% 71.1% 3.6% 100.0% Output 33.3% 62.9% 3.8% 100.0% Gross Regional Product 32.6% 63.6% 3.8% 100.0% Regional Impact as Percent of Baseline Nye Clark Rest of NV All NV Direct Employment NA NA NA NA Total Employment 10.67% 0.24% 0.02% 0.28% Resident Employment 6.12% 0.36% 0.05% 0.32% Resident Population 3.09% 0.17% 0.02% 0.18% Personal Income 7.61% 0.37% 0.04% 0.35% Output 6.41% 0.23% 0.03% 0.24% Gross Regional Product 5.11% 0.21% 0.02% 0.22% Indexes Nye Clark Rest of NV All NV Secondary / Direct Employment NA 0.77 Resident / Workplace Employment Population / Resident Employee Personal Income/Resident $42,513 $62,208 $63,514 $55,718 Source: REMI Policy Insight Version 1.1 (Regional Economic Models, Inc., 306 Lincoln Avenue, Amherst, Massachusetts). Inputs prepared by NWRPO Economic Assessment Program,

11 TABLE 2. ECONOMIC IMPACT MODEL INPUTS DOE Yucca Mountain Project: Alternative Patterns Nye County REMI Policy Variable Sector Denomination Employment (number) Services Thousands Wage Bill (amount) Services Nominal $ (000's) Residence Adjustment (amount) Commuters Nominal $ (000's) Clark County REMI Policy Variable Sector Denomination Employment (number) Services Thousands Wage Bill (amount) Services Nominal $ (000's) Residence Adjustment (amount) Commuters Nominal $ (000's) Rest of NV REMI Policy Variable Sector Denomination Employment (number) Services Thousands Wage Bill (amount) Services Nominal $ (000's) Residence Adjustment (amount) Commuters Nominal $ (000's) Source: Inputs prepared by Nye County Nuclear Waste Repository Project Office (NWRPO) for REMI Policy Insight Version 1.1 (Regional Economic Models Inc., 306 Lincoln Avenue, Amherst, Massachusetts). 10

12 GLOSSARY Demand. Demand is the amount of goods and services demanded, or consumed, by the local region. Some demand is satisfied locally, some by imports. Demand differs from output in that only the proportion of demand that is usually supplied locally is added to local output. Demand is apportioned to local production by using the regional purchase coefficient. Direct Employment. Direct employment means the jobs that are an integral part of a project or other economic activity that is being considered by an economic impact analysis. In the REMI model, changes to direct employment are caused by the policy variables that are entered when running a simulation. Direct changes are also called exogenous changes, meaning that the values are determined outside the economic impact model. Employment. Employment is a Bureau of Economic Analysis (BEA) concept that measures full-time and part-time jobs on a place-of-work basis, that is, in the economic region where the employer is located. Individuals may hold more than one job and, therefore, may be counted twice. Gross Regional Product. Gross Regional Product (GRP) is analogous to the national concept of Gross Domestic Product, or value-added. GRP equals the residual that is left over for compensation and profits after subtracting the value of all intermediate inputs from the gross sales value of an entities production, or output. Indirect Employment. Indirect employment means jobs that are created by the supply requirements and linkages of the project or other economic activity analyzed. Indirect employment is sometimes called intermediate employment. Induced Employment. Induced employment means jobs that are created by the re-spending of wages by employees of the project being analyzed and employees of any secondary economic activity simulated by the project. Investment Spending. Investment Spending converts a single amount into changes in demand by industry using a detailed table of supply linkages. Changes in demand by industry are then apportioned to local industry production, or output, using the regional purchase coefficient. Output. Output represents the amount of production in dollars recorded by economic entities within a region. Output includes purchases of intermediate goods, plus value-added, or compensation and profit. Output can also be thought of as gross sales. Personal Income. Personal income is a Bureau of Economic Analysis (BEA) concept that measures income on a place-of-residence basis, that is, in the 11

13 economic region where the recipient lives. The components of personal income are Labor and Proprietors Income, Personal Contributions to Social Insurance, the Net Residence Adjustment, Dividends, Interest and Rent, and Transfer Payments. In the REMI model, changes to any of the components of personal income will impact real disposable income and, as a result, the induced effects of personal consumption in the economy. Population. Mid-year estimates of population include survivors from the previous year, births, special populations (e.g., military personnel, college students and prisoners), and economic, international and retired migrants. Regional Purchase Coefficient. The Regional Purchase Coefficient is a measure of the percentage of local demand supplied from within the local region. It is the proportion of the regional demand for a good or service that is fulfilled by regional production as opposed to imports from other regions. Residence Adjustment. The Residence Adjustment policy variable changes the residence adjustment component of personal income in a region. It converts place-of-work income to a place-of-residence basis and is used to simulate workforce commuting patterns that differing from the historical patterns embedded in the REMI model. Resident Employment. Also called Residence-Adjusted Employment. The number of employed persons residing within a region, regardless of whether they work within the region or commute to work outside the region. Also known as employment by place of residence. Sales. Sales policy variables directly change the dollar level of production, or output, in a specified industry. Sales policy variables also assume that all of the sales are produced by industries located in the specified region, as well. Secondary Employment. Secondary employment means the jobs created in the economy other than the direct employment created by the project itself. Secondary employment equals the total employment estimated by the model, minus the direct employment integral to the project being analyzed. Secondary employment is composed of indirect employment (sometimes called intermediate employment) and induced employment. The effects that create secondary employment are also known as multiplier effects. Wage Bill. The Wage Bill is the total dollar amount of wage and salary disbursements by industries located within an economic region. Using the Wage Bill policy variable adjusts for employees of the project being simulated having a different wage rate than REMI s calculated industry average wage. 12