Example B: Porter's Wage Index - Computation Methods 1 and 2

When you use the Porter's Wage Index and formula to calculate the escalation amount, the system uses the maximum, minimum, or lease factor percentages.

This table lists the fields and values for the setup information in the Escalation Indices program (P1550):

Field	Value
Escalation Index	PWNY
Calendar Year	2007
January Index	13.86
February Index	13.86
March Index	13.86
April Index	13.86
May Index	13.86
June Index	13.86
July Index	13.86
August Index	13.86
September Index	13.86
October Index	13.86
November Index	13.86
December Index	13.86

This table lists the fields and values for the setup information in the Escalation Information program (P15016) for Lease 101:

Field	Value
Index Code	CPI
Period Length	12
Next Month	01
Next Year	08
Maximum Amount	1,500.00
Base Index	13.75
Original Basis	60,000.00
Porter Wage Factor	1.75
Porter Wage Square Feet	5,000.00

This table lists the fields and values for the setup information in the Escalation Billing Generation program (R15150):

Field	Value
1. Escalation Generation Date	03/01/2008
1. Amount Used for Catch-Up Billings	1 (estimated billings less adjustments)
2. Process Catch-Up Billings	1

The system performs these steps to calculate the escalation amount using the Porter's Wage Index:

1. Because an override date was not entered in the processing options of the Escalation Billing Generation program (R15150), the system retrieves the current index value based on the computation method that is entered and the values in the Next Month (NPSM) and Next Year (NPSY) fields in the escalation information.

   The index is the same for each month, so the system uses 13.86 regardless of the calculation method.

2. Depending on the value in the Porter Wage Computation field (PWC), the system calculates either an amount change or percent change between the Porter Wage indices:

   • If the computation method is 1, the system uses the difference between the current and base index to determine the gross escalation amount.

     In this example, the gross escalation amount is 0.11 (13.86 − 13.75).

   • If the computation method is 2, the system uses the formula (current index − base index) ÷ base index) to calculate the gross escalation percent.

     In this example, the gross escalation rate is 0.008 [(13.86 − 13.75) ÷ 13.75].

3. Depending on the computation method, the system calculates the amount of escalation per square foot differently:

   • If the computation method is 1, the system multiplies the gross escalation amount by the value in the Porter Wage Factor field (PWF).

     In this example, the amount of escalation per square foot is 0.1925 (0.11 × 1.75).

   • If the computation method is 2, the system uses the formula (gross escalation percent × Porter Wage Factor) × 100 to calculate the amount of escalation per square foot.

     In this example, the amount of escalation per square foot is 1.4 [(.008 × 1.75) × 100].

4. Next, the system multiplies the amount of escalation per square foot by the value in the Porter Wage Square Feet field (PWSF).

   • If the computation method is 1, the system calculates the escalation amount as 962.50 (0.1925 × 5,000) per year.

   • If the computation method is 2, the system calculates the escalation amount as 7,000 (1.4 × 5,000) per year.

5. To determine the escalation amount per month (periodic adjustment amount), the system divides the escalation amount by 12.

   In this example, the periodic adjustment amount is 80.21 if the computation method is 1 and 583.33 if the computation method is 2.

   Note: The system derives a monthly escalation amount because the billing frequency in the escalation information is set up as monthly. If the billing frequency had been annual or yearly, the system would not have performed this step.

6. At this point, the system determines whether it needs to perform catch-up billings.

   To determine this, the system compares the value of the Escalation Generation Date processing option to the values in the Next Month and Next Year fields of the escalation information. If a gap exists between the two dates, then the system performs catch-up billings (unless the processing option is set to bypass generating catch-up billings).

   In this example, the Next Month and Next Year fields in the escalation information are set up for 01 and 08, respectively, and the escalation date entered is March 1, 2008. Because the system always uses the month following the date entered in the processing option to start generating the escalation, it begins to calculate the escalation as of April 1, 2008. Therefore, it would generate a billing record in the Lease Billings Master table (F1511B) for three months of catch-up billings.

   Note: The system does not write the recurring billing record for the escalation amount until you run the Escalation Update Without Post program (R15152).