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FORECAST METHODOLOGY Forecasting makes statements about what could happen. Prediction makes statements about what will happen. Forecasting implies that we have some ability to influence the course of events in the future. Council regional forecasts attempt to provide an understanding of the forces at work and, given a continuation of forces, a likely range'of possibilities. The forecasts provide a basis for monitoring growth. This is crucial for developing and applying procedures which have enough flexibility to respond to the trend shifts that are likely to occur in the future. However, it is important to recognize future uncertainty and the associated risks or costs of an incorrect forecast. The risks will vary with the service or facility being planned for. Roads, transit, sewer lines, waste treatment facilities, landfills, schools, social programs, etc., each differ in how much flexibility can be provided to deal with future uncertainty and at what cost. Despite the uncertainty, decisions have to be made that result in things being built or organized that will have to be lived with for some time. In planning, these decisions will often be made, in part, based on the best available expectations of the future. We need to strike a balance between flexibility and associated costs. REGIONAL POPULATION (AND HOUSEHOLD) FORECASTS Basic assumptions underlying the forecasts of population and households: • No wars or disasters. Although these events have profoundly influenced the demographics in the past--the post-war baby-boom being a particularly profound recent example--these events are not predictable. • No major human behavioral changes in: 1. Family size 2. Marriage and divorce rates 3. Housing preference 4. Labor force participation and agge� at retirement Although these demographic and social behaviors have been continuously changing, they've demonstrated a certain amount of trend stability. Many appear to be leveling off after decades of change. • No radical changes in the structure (functioning) of the U. S. economy. A step-down method is used to forecast population and households for the Twin Cities Metro Area as a whole. A generally accepted forecasting principle is that the larger the geographic area, the more accurately it can be forecasted. This is because smaller areas tend to be influenced by more factors outside their control (many of which are internal to the larger area). In addition, it allows use of sophisticated forecasts that.are available at the national level.