oki fiam in apa 10 22 09

Using Fiscal Impact Analysis to Build Sustainable LocalGovernments

Della Rucker, AICP, CeCD

Larisa Sims, AICP

Indiana APA State ConferenceOctober 22, 2009

Today’s agenda What is Fiscal Impact

Analysis?

Why do it?Why don’t people do it? How does it work?

Sneak Peek: The OKI Fiscal Impact Model

What is fiscal impact?

How many times have you heard this:

Question:“Is growth good or bad for the

property tax base in my community?”

Answer:“Um… yes.”

Huh?

What does a fiscal impact analysis do?

Measures cash flow to and from the public sector

Compares alternativedevelopment scenarios

Analyzes ramifications ofdevelopment proposals

Asks: Are the revenues generated by new growth enough to cover the service and facility demands it will create?

Why Bother?

If we can quantify the impact that land use and development decisions will have on their community’s financial health – if we can provide facts, not assumptions – our communities will be more likely to make land use decisions that build long-term fiscal health.

What Does Fiscal Impact Analysis not do?

Does not directly calculate economic impacts (job creation, multiplier effects, etc.)

Does not calculate economic impacts resulting from multiplier effects.

Does not account for non-fiscal impacts of development.

Fiscal impacts are only one of many factors that may provide a reason for land use change:

Keep in mind…

So how do we figure out the fiscal impact of a plan alternative or a development proposal?

Revenues Actual Unrealized

CostsPublic Private (surrounding property owners)

Two methods: Average costing or per capita multiplier method

Marginal costing method

== XX$$

$$$$

$$AVGAVG NewNew = FI= FI

How do you do this?

LAND USE

DEPENDENT VARIABLES

Budgets Revenues and Expenditures

INDEPENDENT VARIABLES

PopulationTraffic volumesEmployment…etc.

LU

LUREVENUE and EXPENDITURE

$/Unit

$/Unit

The easy part first: estimating property taxes The parts:

Assessed value (link) Property tax rate (millage) Adjustments, deductions, rollback,

caps, etc

The formula: Assessed Value X Millage –

Adjustments = Property tax obligation

Estimating income/earnings tax The parts:

Estimated number of employees Actual (might be low) or Potential based on national/regional

average per square feet Income/earnings tax rate

Estimated percent of employees paying income taxes to locality (may be receiving reciprocity or abatement)

The formula: (Employees X income tax rate) = income

tax obligation

Sales tax The parts:

Estimated sales Actual (might be low) or Based on typical local experience, or based on national/regional average per square feet

Sales Tax rate May differ from one county or city to next May have different parts (part to state, part to county)

The formula: Estimated sales X sales tax rate = sales tax obligation

Other types of taxes:

Business Establishment-type taxes Tax on profits Tax on personal property or inventory Tax on holdings Capital gains Etc., etc., etc…..

Estimating Costs (externalities):

Not so easy…Highly variable across local

governments.Depends on how you count. They probably don’t know themselves.

Typical types of costs:

Public Safety Health and Welfare Public Service (Streets, water, sewer, etc.) Courts and Incarceration General Administration Building and Development

Ways to estimate costs: Per unit costs based on what local

government can tell you (eg: road maintenance per square mile, course load per social worker)

Per unit costs from comparable communities (census of governments)

Proportional allocation of local budget.

Potential types of costs: Police/fire runs Traffic congestion/management Sewer/water/road infrastructure

(note: this is often paid by the developer).

Stormwater runoff Students in schools.

Potential costs General formula: average unit cost

(per student, per lane mile of roadway, per fire run) X number of units added as a result of proposed activity =estimated public cost

This “public cost” may not include any improvements that the local government is paying for directly. This “public cost” measures the impact on existing services, and may indicate whether or not existing services can fill the need, or if the development will necessitate adding service capacity in the future.

What’s the difference between a fiscal impact analysis and a fiscal impact analysis

model?

Model Challenges1. Interfacing between different

data sets: Land use Assessment Factors that influence fiscal

impacts

Different purposes Different sorting criteria Different levels of detail

Model Challenges

2. Differences in governmental structure Cities, Counties,

Townships States

Model Challenges3. Do the numbers we need exist?

Local data (budgets, assessments) Regional/national sources

Population census Census of governments

Data discrepancies Data suppression

Other Model ChallengesNet impacts (difference

between existing impacts and proposed)

Default values and overrides

Administrative functionality

Issues and Challenges

The best model in the world will be useless unless it is easy and straightforward for the average professional planner/administrator to use

And now: the OKI Fiscal Impact Model:

Thank you!

Della Rucker, AICP, CEcDNational Lead for Economic Development

Della.Rucker@Jacobs.com

Jacobs1880 Waycross Rd.

Cincinnati, OH 45240513-288-6613

www.jacobs.com/jacobsworld

LinkedIn: Della RuckerPlaxo: Della Rucker

Facebook: Della Rucker Aicp CecdTwitter: dgottrucker

Blog: dellarucker@wordpress.com

Larisa Sims, AICPRegional Planning Manager

Lsims@oki.org

720 East Pete Rose Way, Suite 420Cincinnati, Ohio 45202

www.oki.org