Any potential EB-5 investors that reviewed a project’s Economic Analysis report has likely come across the name “RIMS II”. What exactly is RIMS II? What is it used for? Why is its role in EB-5?
RIMS II, which stands for Regional Input-Output Modeling System, is an economic model developed by the U.S. Bureau of Economic Analysis (BEA). It is used to estimate the economic impact of changes in a region’s economy, such as new investments, policy changes, or external economic shocks. RIMS II allows analysts and policymakers to understand how changes in one part of the economy can ripple through and affect other sectors, helping to measure the regional economic effects of various projects or events.
What is RIMS II used for?
RIMS II is commonly used for:
- Economic Impact Analysis: To assess how a new project, such as an EB-5 hotel project, will affect regional income, employment, and output.
- Evaluating Infrastructure and Public Investment: Estimating the impacts of public investments in infrastructure, transportation, and other government projects on regional economies.
- Policy Analysis: Helping governments analyze the potential effects of new policies on local economies, such as tax changes, subsidies, or regulations.
- Business and Market Analysis: For businesses or consultants to assess how a specific business activity or investment would affect the economy of a region.
How does RIMS II work?
RIMS II operates based on input-output analysis, a method that traces the flow of goods and services between sectors in an economy. Here is how it works:
- Input-Output Tables: RIMS II uses regional input-output tables, which represent the transactions between industries in a given region. These tables show how the output of one industry serves as input for others. For example, the demand for steel in the automobile manufacturing industry could be traced to its impact on other sectors like mining or transportation.
- Direct, Indirect, and Induced Effects:
- Direct Effects: The immediate impact of a new project or economic activity. For instance, if a new hotel is built, the direct effects are the jobs created within the hotel itself, and the wages paid.
- Indirect Effects: These are the secondary effects resulting from increased demand for goods and services from local suppliers. For example, the hotel’s demand for cleaning supplies will stimulate activity in other industries, such as transportation and packaging of those supplies needed by the hotel.
- Induced Effects: These effects arise from the increased income of workers and businesses, which boosts demand for local goods and services, creating additional economic activity and jobs in the region.
- Multipliers: RIMS II calculates multipliers, which are used to estimate the total economic impact. The multiplier effect measures how much total economic output increases for every dollar of new spending or investment in a region. For example, an investment of $1 million might lead to a total regional economic impact of $2 million, with $1 million being the direct impact and the remaining $1 million from indirect and induced effects.
- Regional Customization: RIMS II allows for customization based on specific regions. The input-output tables used are tailored for different geographic areas, so they can provide estimates for cities, counties, states, or even larger regions. By adjusting the model for specific local characteristics, it offers more accurate insights into how changes in a particular economy will unfold.
How is RIMS II used for EB-5?
From an EB-5 standpoint, RIMS II is used to demonstrate how many jobs will be created as a result of the EB-5 project. It does so by taking the construction spend and projected operating revenue and running through its input-output and regional modeling to calculate the total number of jobs that an EB-5 project will create. RIMS II is recognized for its accuracy and credibility, and is frequently relied upon by regional centers and investors for proving job creation numbers to USCIS.
