LBCS Function Dimension

Introduction

Function is one of five dimensions in land-based classifications. Each dimension characterizes a land-use attribute and, when classifying, the land-use takes the appropriate four-digit code for that attribute. Only by using all five dimensions can one fully represent all land uses and describe their characteristics.

We define function as the economic purpose of a land use. The function dimension is a set of categories for characterizing a land-use's function.

The Supply-Based Framework of the Function Dimension

Historically, categories for economic purpose took two forms derived from the theory of aggregation: one based on supply, the other on demand.

• Supply-based categories differentiate the economic purposes based on what people do; they group similar production and service processes (inputs).
• Demand-based categories differentiate the economic purposes based on what people offer; they group similar products and services (outputs).

Supply and demand-based categories are often alike, because providers of similar products and services often use similar techniques. The Standard Industrial Classifications (SIC) employed mixed supply-based and demand-based categories. However, in the SIC, many distinctions were inconsistent across industry sectors. It has become clear that, for the sake of consistency, any classification system must follow either a supply-based framework, or a demand-based framework.

To better understand the need for distinction between supply-based and demand-based categories, take the example of a tire company with a manufacturing plant and a separate corporate headquarters. Demand-based categories would apply to the final output (tires), but supply-based categories would apply to all the inputs (office work and factory work). With demand-based categorization, both land-uses fall under tire manufacturing; while with supply-based categorization, the plant portion falls under tire manufacturing and the office portion falls under administrative services. Clearly, any set of categories must adhere to only one of these frameworks to be consistent.

As we move into a more specialized service and technology-based economy, there a number of advantages to supply-based categories. More and more people are employed in management and service-type jobs, which often do not necessarily reflect the final product of their companies or enterprises. For example, any typical office building involves certain economic activities, independent of whether it serves manufacturing or retailing. At the same time, the number of economic activities employed for the production of any product or service covers a wide range of economic purposes that would be ignored in a demand-based framework. Hence, supply-based categories are well-suited not only for economists, but for planners and others as well. The recent adoption of the North American Industrial Classification System (NAICS) also provides a tactical reason for using supply-based categories. NAICS replaces the old SIC and follows a less ambiguous supply-based framework. It has been adopted for tracking trade between U.S., Canada, and Mexico, and is used for most national economic statistics. The LBCS function dimension closely mirrors NAICS categories.

Most planning categories are traditionally supply-based: terms such as 'commercial', 'industrial', etc., apply to the type of production or service process, not to the final good that is produced. This traditional characteristic is made explicit in the function dimension.

What Is Meant by the Economic Unit

Since the function dimension follows a supply based framework, its categories apply to inputs (i.e. office work verses factory work in the example). But at what point do planners isolate inputs? One could divide inputs until every employee is classified! Obviously, there has to be a certain amount of work sufficient for being its own input. Planners have always assumed this amount to be whatever takes place on a parcel (the parcel being each area of land they classify). However, using parcels to divide economic inputs creates a number of difficulties for mixed land-uses. Furthermore, the parcel is more of a geographical division than a division of economic inputs. This is especially true in an information economy, as it is becoming increasingly difficult to link economic activities to geographical boundaries. Moreover, parcel boundaries themselves change even as the economic purposes do not.

If parcels are not appropriate for dividing inputs, then the question is one of determining some unit of economic activity which allows the identification of supply-based characteristics. Companies and enterprises are themselves economic units. However, it is obvious that these are not suited, since companies and enterprises often make use of many production or service processes which should be counted as different inputs. Therefore, a more precise unit is needed for the function dimension.

Definition of an Establishment

The function categories use the establishment as the economic unit, mirroring its use by NAICS. NAICS defines an establishment as "the smallest operating entity for which records provide information on the cost of resources - materials, labor, capital - employed to produce units of output." Most establishments are easily identified as stores, factories, farms, offices, etc. Every establishment is a place where paid employees produce goods or perform services. Each undertakes a fundamental service or production process, which is its major function. Establishments are not necessarily identical with companies or enterprises, which may consist of one establishment or more.

If multiple functions occur at a single location under single ownership (i.e. ownership of the business activities, not of the land), then you should group them as one establishment according to the major function. However, if neither function is supplementary and each has its own employment AND if no category exists for the combination, then designate separate establishments. Also designate separate establishments if the business activities are separately owned.

Example of an Establishment

Consider these two land-uses: first, an office building serving a nearby factory (we could call it a branch office); second, a management headquarters office for a similar type of enterprise. The branch office belongs to the factory establishment, while the management headquarters is a separate establishment. What distinguishes the two? The factors are subtle, yet significant. Use the following guidelines to differentiate:

1. An establishment provides a distinct production process or service. The branch office directly serves the production process of the factory; it might manage equipment purchasing, take phone calls for factory workers, etc. This branch office does NOT provide its own unique process. The company headquarters, however, provides its own production process, that of managing the company.
2. An establishment provides employment within its own industry classification. Employees of the branch office are said to work for the manufacturing industry. They deal with factory procedures, factory paperwork, or factory workers. On the other hand, employees of the company headquarters are said to work for the management industry. They are responsible for management duties that might apply equally to a manufacturing company, an advertising agency, or a restaurant chain.
3. Most establishments are physically concentrated. The branch office serves the factory because of its proximity. The work of the company headquarters, however, is independent of its location. Some establishments (such as communications transportation establishments) do not adhere to his guideline.

Category-Specific Establishments

Residential: Each establishment has at least one resident or employee in residence during any part of the year. Generally, separate ownership designates separate establishments. However, the boundaries between separate establishments are often insignificant in this category, since a condominium, for example, is classified under "private households" regardless of whether it is one establishment, or many. Establishments that are inactive or idle, (i.e. no residential activity within the course of a year), but not abandoned, are classified as "unclassifiable." Abandoned establishments are classified in "not applicable to this dimension." Leased departments, such as food stores in apartment buildings, are considered separate establishments and are classified in their respective categories provided they are employers with at least $1,000 in payroll distinct from that of the residential establishment.

General sales or services; Arts, Entertainment, and Recreation: Each establishment is an employer with at least $1,000 in payroll, and is in operation at any time during the year. Leased departments (e.g., a separately owned shoeshine parlor in a barbershop, a beauty shop in a department store) are treated as separate establishments. Within "real estate, and rental and leasing", establishments are the permanent offices from which properties are leased or managed, not the individual properties that are leased or managed.

Manufacturing: Establishments include all manufacturing plants with one employee or more in operation at any time during the year.

Transportation, communication, information, and utilities: The establishments in this category present unique problems. They do not adhere to the "single physical location" rule. Furthermore, nearly all developed land serves these establishments in some sense. You must make the decision as to what uses to categorize here.

Education, public admin., health care, etc.: Each establishment is an employer with at least $1,000 in payroll, and is in operation at any time during the year. Although most of these establishments are publicly owned, this should not be thought of as the defining characteristic for this category. Establishment types are independent of ownership constraints unless specified otherwise.

Construction: An establishment is defined as the place where business activities related to construction are conducted during any part of the year. Construction establishments that are inactive or idle for an entire year are classified under "unclassifiable"; abandoned establishments are classified under "not applicable to this dimension". Establishments do not represent each project or construction site. Construction sites are classified under "unclassifiable", and the activity dimension designates the construction activity.

Mining: Establishments include all mineral extraction and support sites that have at least one employee and are in operation at any time during the year. Establishments in the oil and natural gas category represent statewide operations rather than those of a single extraction site.

Agriculture, forestry, fishing and hunting: Establishments are farms, or, are employers that provide crop or animal production, collection (as in hunting, forestry etc.), or support services. A farm, as an establishment, is one or more tracts of land, which may be owned, leased, or rented by a farm operator at any time during the year.

Applying Function Codes

All economically purposeful land serves at least one establishment. The descriptions for LBCS function categories follow establishment types. To classify the function of land, use the LBCS Function code for the type of establishment(s) the land serves.

An establishment is served by the land it uses for production, employment, facilities, etc. This land is typically within a concentrated area but may comprise multiple land units or parcels. For example, a sporting arena establishment might be served by the arena itself, its parking lots, and its entrance. Each of these is classified using the same function code, even if they are separate land units. When one land unit serves an array of establishments, such as a commercial development may house a number of retail and professional service establishments, then this single land unit is assigned multiple LBCS Function codes.

In an ideal land-use survey, one would obtain sufficient details for each establishment to categorize it accurately. This, however, may not be realistic given problems of accuracy, data maintenance, and the normal turnover of business products or services. Identifying the business operation (i.e. company, enterprise, etc.) on a given parcel is something easily obtainable. But identifying every establishment within that operation may be overly onerous for land use purposes. In this case we recommend dividing the operation into establishments according to each disjoint location; then, classify each establishment according to the economic function at each location (i.e. according to the production and service activities of the location). For example, if the enterprise is a car manufacturer with two locations, one is a computer data center and the other is a employee benefits office, then each gets a separate LBCS Function code. But if both these functions were in one parcel, meaning only general information about a land-use is available, but not information about each establishment, then assign a LBCS Function category broad enough to account for all the establishments.

Multiple function codes should be reserved for land that serves multiple establishments. Multiple codes should not be applied to describe the function of a single establishment. If more than one category is applicable for a single establishment, then use the best match. The reason for this is to avoid unnecessary ambiguity. Most establishments do not fall cleanly into any given category - supplementary functions exist (a furniture store also sells some hardware, a restaurant has a pool table, a factory has an office space in the front, etc.) It would not only be tedious to code all of the supplementary functions, it would also be a distortion of the main economic function of the establishments.