Fiscal Impact Analysis

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Fiscal Impact Analysis
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Good References

• Robert Burchell and David Listokin, The Fiscal
  Impact Handbook Estimating Local Costs and
  Revenues of Land Development, Center for Urban
  Policy Research, 1978.
• Robert Burchell and David Listokin, The New
  Practitioners Guide to Fiscal Impact Analysis,
  Center for Urban Policy Research, 1985.
• Edwards, Mary (n.d.) Community Guide to
  Development Impact Analysis or specifically to
  her piece on fiscal impact analysis
  http//www.lic.wisc.edu/shapingdane/facilitation/a
  ll_resources/impacts/analysis_fiscal.htm

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Local Fiscal Impact Analysis

• Typically, used by planners to assess the impact
  of development projects on the local governments
  budget.
• May be required by land-use plan development,
  rezoning requests, annexations, or greenfield
  development projects.
• Economic developers use it to shape incentive
  packages.

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Points to Consider1

• Development results in increased demand for
  services.
• Fiscal Impacts vary with the type of the
  development, the location of development,
  community services, existing service capacity and
  local policy.
• The fiscal impact method used to make estimates
  matters to the final results.
• Impacts are cumulative.
• Development affects different groups in different
  ways.

1 Edwards, Mary, Community Guide to Development
Impact
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Elements of Fiscal Impact Analysis

• Narrowly-focused analysis
• Public only private costs and revenues are not
  included.
• Usually relates to a single political
  jurisdiction.
• Generally does not include externalities or
  intangible impacts (environmental, congestion
  impacts).
• Provides an estimate of how the governments
  budget will be affected by the new development.

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General Local Fiscal Impact Methods

• Average Cost Approaches
• Per-capita Multiplier most versatile, based on
  average costs per person, average school costs
  per pupil.
• Service Standard more detailed than the
  per-capita method, based on averages of manpower
  per 1,000 population, used infrequently
• Proportional Valuation allocates costs based on
  proportional property value of a non-residential
  facility.

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General Local Fiscal Impact Methods

• Marginal Cost Approaches
• Case Study used in situations where either
  large excess or deficient capacity exists and
  average costs arent appropriate, based on
  interviewing department heads for specifics on
  over/under capacity.
• Comparable City best for long term projections
  and large scale projects which significantly
  change population size or grow rate.
• Employment Anticipation used to determine
  municipal service costs for nonresidential
  facilities which have significantly more or fewer
  employees per square foot than average.

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Average and Marginal Cost

• Average cost
• Costs assigned to new development are based on
  the average cost of providing the service per
  service unit (household, student, employee, etc.)
  times the number of new service units.
• Average cost is most often used because
• it is easy to apply to projects
• appears more equitable to public officials and
  citizens
• It works best when the project would represent an
  incremental additional demand for services within
  the current capacity of local infrastructure.

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Average and Marginal Cost

• Average cost problems include
• Lack of sensitivity to local capacity issues.
• Difficult to apply with the effects from
  non-residential development.

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Average and Marginal Cost

• Marginal cost
• Costs assigned to new development are based on
  the additional cost of providing the service
• This works best when the effects of the project
  are out of scale with recent experience or
• The community has had either exponential growth
  or decline and there is a significant oversupply
  or under-supply of local capacity.

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Average vs. Marginal Cost
A
15,000
A
A
10,000
Cost of Service Per User
5,000
B
B
0
Demand for Services/Number of Users
A
New facility built / facility at minimum
capacity
B
Facility at maximum capacity
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Fiscal Impacts Revenue Categories
Property- values based.

• Property Taxes
• Sales Taxes
• Excise and Special Use Tax
• Licenses And Permits Revenues
• Service Charges
• Fines
• Other Revenues

Gravity, pull-factor models.
Per-capita approach is used most often.
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Fiscal Impacts Expenditure Categories
Per-pupil approach can be used.

• Education
• General Government
• Public Works
• Court System
• Public Safety
• Health Services
• Public Assistance
• Recreation and Library
• Other Expenditures
• Debt Service

Per-capita or per-household approach can be used.
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The LOCI Approach

• Created in 1995 to help local governments
  estimate the impact of new or expanding
  businesses.
• Helps them negotiate with prospects over
  incentives.
• Uses a per-household approach to most revenue and
  expenditure forecasting.

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The LOCI Approach

• Property taxes calculated directly from the
  projects investments, tax digest, and local tax
  rates.
• Sales taxes calculated from local tax rates and a
  simple pull-factor retail model.
• All other revenue sources use the per-household
  approach.

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The LOCI Approach

• Good for single-firm analysis, i.e., a single
  manufacturer, distribution center, export-based
  retail, office headquarters.
• Not good for land use analysis, i.e., residential
  projects, mixed-use projects.
• Can incorporate phased projects.

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The LOCI Approach

• Incentive impacts assessed as up-front
  expenditures/investments, or over time such as a
  tax abatement program.
• Can be used for hypothetical analysis of proposed
  industrial park (tri-county study in Northeast
  Georgia).

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The WebFIT Approach

• Web-based software tool for fiscal impact of a
  land use plans, redevelopment project, other
  near-term land use projects.
• Uses parcel-level tax digest for analysis of
  current land use characteristics.
• Uses regression equations for forecasting
  revenues and expenditures.

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Current to Future Land Use
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WebFIT Demo

• www.edi.gatech.edu/fit
• Login as
• Username guest
• Password demo