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The
New Practitioner's Guide to
Fiscal Impact Analysis
Preface
The
New Practitioner's Guide to
Fiscal Impact Analysis is the
third in a series of studies
conducted by the Rutgers University
Center for Urban Policy Research
over the past decade. The first,
The Fiscal Impact Handbook,
presented detailed impact projec-tion
procedures and also provided
the then most-current household
size and school-age children
data by type/size of housing
unit-that available from the
1970 Census of Population and
Housing-Public Use Sample. The
second study, the Practitioner's
Guide to Fiscal Impact Analysis,
summarized the fiscal impact
techniques in an instructional
format. It also updated the
household and school-age children
profiles by analyzing the most
appropriate intercensal data
base-the American (Annual) Housing
Survey.
Both
The Fiscal Impact Handbook and
the Practitioner's Guide to
Fiscal Impact Analysis have
been adopted by planning bodies,
planning professionals, demographers,
students and others as a basic
reference. They are applied
in many contexts including comparing
the costs and revenues of a
proposed new development, analyzing
the com-munity-wide fiscal consequences
of municipal land use policies,
and conducting school enrollment
projections.
The
Practitioner's Guide to Fiscal
Impact Analysis draws its sustenance
and strength from The Fiscal
Impact Handbook. The Handbook
is also in its fourth printing
and will undergo complete revision
in 1986. Subsequent to the revision
of the Handbook there will be
a completely new edition of
the Practitioner's Guide.
Pending
a new edition of the Practitioner's
Guide, it is imperative that
the basic reference be kept
as current as possible. This
is especially critical with
respect to the household and
school-age children counts as
these have changed with the
changing demographic profile
and housing consumption of the
American family.
The
New Practitioner's Guide to
Fiscal Impact Analysis provides
household size and school children
multipliers from the most current
and comprehensive available
data source-the 1980 Census
of Population and Housing-Public
Use Sample. In response to the
broadened application of The
Fiscal Impact Handbook and Practitioner's
Guide series, it presents an
expanded range of demographic
information. In addition to
school-age multipliers, the
current study indicates the
share of the school-age population
which attends the public schools
(public school children multipliers)
as well as the count of the
pre-school-age population. The
former is instructive for defining
the public sector educa-tional
responsibility and financial
obligation; the latter is important
for determining future school
load, whether in public or non-public
schools.
In
sum, The New Practitioner's
Guide to Fiscal Impact Analysis
makes available current demographic
data and presents it in a format
conducive to application in
a wide variety of impact projections.
I. INTRODUCTION AND DEFINITIONS
INTRODUCTION TO THE PRACTITIONER'S
GUIDE AND TO FISCAL IMPACT ANALYSIS
Introduction
to the Practitioner's Guide
The
purpose of the Practitioner's
Guide is to present a summary
of fiscal impact anal-ysis for
instructional purposes.' It
is designed to be used by experienced
planners for the familiarization
of entry level planners and
lay public officials or planning
board members with techniques
and procedures to evaluate the
public costs and revenues associated
with development. The Practitioner's
Guide is an administrator's
tool for the teaching of fis-cal
impact analysis. Its contents
have been carefully selected
and arranged to provide only
information essential for the
successful completion of fiscal
impact instruction.
The
Practitioner's Guide is divided
into six sections:
I.
Introduction and Definitions
II. Fiscal Impact Cost Projection
Methods
III. Fiscal Impact Revenue Projection
Techniques
IV. Related Information to Fiscal
Impact Analysis:Legal, Models,
Multipliers
V. Hypothetical Fiscal Impact
Problems and Solutions
VI. Updated Demographic Multipliers
The
Introduction and Definitions
section discusses the organization
of the Guide and carefully defines
fiscal impact analysis.
Section
II contains detailed Cost Projection
Methods. For each method information
is presented on: assumptions,
advantages/disadvantages, and
data requirements. This sec-tion
also includes information on
method applicability, i.e.,
which of the various meth-ods
should be employed given certain
fiscal and problematical conditions
at the site of the analysis.
In
Section III, Revenue Projection
Techniques, are found summaries
of the revenues which are affected
by growth as well as procedures
for the calculation of potential
revenue impacts. This is true
for local revenues, i.e., taxes
and charges, as well as for
intergovernmental transfers
from both the state and federal
governments.
Section
IV presents Related Information
to fiscal impact analysis-how
the procedure is used in ongoing
planning, its legal standing,
and the models and multipliers
which may be used for its effectuation.
Section
V contains Hypothetical Problems
and Solutions which may be administered
by the practitioners as working
examples of each method.
Section VI presents Updated
Demographic Multipliers, those
derived for standard housing
types using the 1980 U.S. Census
of Population and Housing.
Introduction to Fiscal Impact
Analysis
The
purpose of this Guide is to
describe and demonstrate applications
for the various techniques which
have emerged to gauge the public
costs of land development. These
techniques are grouped under
a common procedural description-fisca/
impact analysis. All seek to
predict both the municipal and
educational servicing costs
which accrue due to the public
service demands of various forms
of residential and nonresidential
growth.
The
technique, fiscal impact analysis,
is not new-it is now close to
fifty years old. Planners first
employed this type of evaluation
in the early public housing
effort of the 1930's to justify
the replacement of deteriorated
structures due to their negative
local fiscal effects. In the
late 1940's it was used in the
urban renewal movement to demon-strate
the revenue generating superiority
of the new land use that would
replace the old. Since that
time there has been steady growth
in its employment through the
1950's, 1960's, into the 1970's.
Fiscal impact analyses are now
used to project the economic
impact of alternative development
proposals, major zoning or subdivision
review plans, for boundary changes,
municipal annexations, large
scale, mixed-use developments
or new communities, and as an
integral part of the filing
procedure for an environmental
impact statement.
Today,
there is a growing awareness
that if it is possible to estimate
the costs associated with growth,
it may further be possible to
dampen the short run service
discontinuities usually associated
with this growth and to allow
the many public services which
support development to be in-place
and available when they are
needed. There is, as a result,
a growing demand for straightforward,
standardized methods to estimate
the local public costs and revenues
associated with land development.
Yet
what is the current state of
the art? In an analysis of 140
cost-revenue studies obtained
from around the country, it
was clear that in the majority
of cases their quality was poor.
Twenty percent of the studies
were either incomplete, could
not be followed, or were conceptually
or technically wrong. In over
half the locations where the
study was undertaken, the presiding
local official could not gauge
the study's accuracy. In 60
percent of the cases there was
no way for technicians to use
an existing fiscal impact analysis
without the specific local consultants
or staff planners who prepared
the original report. This view
of field practice indicated
a pressing need for standardized
methods, with explicit assumptions
. . . and careful definitions
as to the costs and revenues
which were or were not being
considered. Further, it was
clear that there was now more
than one fiscal impact method
and sensitivity had to be paid
to an appropriate pairing of
method with task. This Guide
is an attempt to answer these
obvious field needs.
DEFINITION
OF FISCAL IMPACT ANALYSIS
Fiscal
impact analysis, as used here,
is:
A
projection of the direct, current,
public costs and revenues associated
with residen-tial or nonresidential
growth to the local jurisdiction(s)
in which this growth is taking
place.
Certain
terms in this definition must
be clearly understood. The following
paragraphs discuss them in detail.
Fiscal
impact analysis, as explained
in this Guide, considers direct
impact. It projects only the
primary costs that will be incurred
and the immediate revenues that
will be generated. Direct or
primary costs include, for example,
salaries for instructors to
teach new students generated
by a large subdivision, or for
policemen to control traffic
at a new shopping center. Direct
or primary revenues include
property and sales taxes and
intergovernmental monies generated
as a consequence of the specific
growth increment. Indirect impacts
are not treated due to: (1)
the near impossibility of predicting
accurately the secondary consequences
of growth; and (2) the recurring
potential for double count-ing
when primary and secondary impacts
are viewed simultaneously. In
the first case, will a shopping
center increase real property
values of adjacent parcels or
does the presence of an immediate
market enhance the value of
the shopping center? In the
second, should property tax
revenues from an off-site nonresidential
development, which in part is
supported by a residential development,
be considered the primary impact
of the nonresidential development
or the secondary impact of the
residential development? This
Guide considers no differential
property value loss or gain
relative to proximate development
due to property or sales tax
increases of a nonresidential
facility benefitting from the
nearby population. In the first
case, it is assumed that the
"contagion effects"
of land uses in the long run
will net to zero. In the second,
the revenue contributions of
any land use are considered
only when that land use's primary
fiscal impact is under scrutiny.
Fiscal
impact analysis examines current
costs and revenues. It tallies
the financial effects of a planned
unit development, urban renewal
complex, new town, shopping
center, etc. by considering
the costs and revenues such
facilities would generate if
they were completed and operating
today. This approach recognizes
that development or redevelopment
often requires several years
and that inflation will increase
costs and revenues over time.
It also assumes, however, that
the rising costs of providing
public services will be matched
by an essentially comparable
increase in revenues-that the
relative relationship of costs
and revenues will change little
over time.
Fiscal impact analysis is concerned
with public (governmental) costs
and revenues. It does not consider
private costs of public actions,
i.e., the costs passed on to
developers or consumers through
local land use regulations or
building, health, and fire codes.
Thus, special assessments on
real property or the value of
land dedications required of
devel-opers are considered private
revenues. Private services provided
by home associations and community
trusts are also considered private
expenditures.
Tallying
and comparing costs and revenues
are significant parts of fiscal
impact analysis. Costs include
operating expenditures (salaries,
statutory and material costs)
and capital outlays, either
directly incurred by a public
jurisdiction or paid to others
as a result of a specific development.
Revenues comprise all monies
a government receives from external
sources as a result of the development
or redevelopment. Revenues counted
in a fiscal impact analysis
include municipal and school
district own source (local)
contributions (taxes, charges,
and miscellaneous revenue) and
state and Federal intergovernmental
transfers.
Fiscal
impact analysis is further concerned
with the cost and revenue implications
derived from population and/or
employment change. These changes
are broadly defined as residential
and/or nonresidential entrance
into or departure from a community.
The fiscal impact analysis may
be a prediction or a post hoc
evaluation and may evaluate
population and/or employment
change in either the private
or public sectors (i.e., a builder
attempting to develop a mixed
use planned unit development
or a local authority seeking
municipal approval for a public
housing project or a civic center).
Finally,
costs are projected to only
the local jurisdictions in which
the population or employment
change is taking place. In most
instances, the local jurisdiction
is the town, township, borough,
or parish for municipal costs
and the school district(s) for
primary and secondary school
district expenditures. Fiscal
impact analysis, as defined
here, does not consider services
administered by and revenues
flowing to utilities, special
districts, county governments,
regional authorities, and states.
Emphasizing
projections of exclusively local
costs reflects user demand.
Local govern-ments-either municipal
or school district-provide most
services to residential and
non-residential properties.
Police and fire protection,
road maintenance and repair,
educa-tion, etc., represent
types of local government services.
Local property owners must often
share the cost of these services.
Impacts on the cost are of vital
interest to the local population;
fiscal impact analyses volunteered
by developers or required by
local ordi-nances are the result.
Services provided by special
districts are usually paid for
with user charges. They typically
do not affect the local population
directly. County government
services in areas where local
governments also provide services
to property frequently involve
major road construction or repair
and institution or agency maintenance.
The effect of change in their
expenditures (related to a particular
growth increment) on local residents
is usually relatively small
and not of vital concern.
Practitioner's
Notes
(1)
Emphasize the underlined portion
of the definition.
(2) Point out interchangeability
of fiscal impact analysis and
cost-revenue analysis yet differences
between fiscal impact analysis
and cost effective or cost benefit
analysis.
(3) Make clear that a development's
secondary impacts are not ignored.
Rather they are analyzed when
they appear as their own primary
impacts.
(4) Underscore analysts' concern
with publicly funded activities
and publicly raised revenues.
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