I

DEVELOPMENT
PA C T
Robert W. Burchell
David Listokin
William R. Dolphin
Lawrence Q. Newton
Susan J. Foxiey
with
Robert M. Rodgers
Jeffrey L. Greene
Larry W. Canter
David J. Minno
WonsikShim
Wansoolm
About ULI-:
the Urban Land Institute
ULI-the Urban Land Institute is a nonprofit educa­
tion and research institute that is supported and di­
rected by its members. Its mission is to provide
responsible leadership in the use of land in order to
enhance the total environment.
ULI sponsors educational programs and forums to
encourage an open international exchange of ideas
and sharing of experience; initiates research that an­
ticipates emerging land use trends and issues and pro­
poses creative solutions based on this research;
provides advisory services; and publishes a wide vari­
ety of materials to disseminate information on land
use and development.
Established in 1936, the Institute today has some
13,000 members and associates from 46 countries rep­
resenting the entire spectrum of the land use and de­
velopment disciplines. They include developers,
builders, property owners, investors, architects, pub­
lic officials, planners, real estate brokers, appraisers,
attorneys, engineers, financiers, academics, students,
and librarians. ULI members contribute to higher
standards of land use by sharing their knowledge and
experience. The Institute has long been recognized as
one of America's most respected and widely quoted
sources of objective information on urban planning,
growth, and development.
Richard M. Rosan
Executive Vice President
Project Staff
Senior Vice President, Research, Education, alld Publieations
Rachelle L. Levitt
Vice President/Publisher
Frank H. Spink, Jr.
Managing Editor
Nancy H. Stewart
Manuscript Editor
Carol E. Soble
Electronic Publishing Solutions of Annapolis, Maryland
Book Design;Layout: David M. Williams
Cover Design: Melinda S. Appel
Production Manager
Diann Stanley-Austin
Word Processing
Joanne Nanez
About the Center for Urban Policy
Research, Rutgers University
The Center for Urban Policy Research at Rutgers
University is among the nation's oldest and most ac­
tive research organizations dedicated to the study of
urban policy. CUPR has specialized in studies of hous­
ing, development impact, economic development, ur­
ban and suburban land use, transportation, and the
environment. Founded in 1969, the center brings to­
gether a highly experienced full-time faculty of plan­
ners, economists, geographers, and computer and
systems experts. The center also supports an in-house
publications department.
The center has carried out more than $4 million in
research grants, published more than 100 books, and
organized many national conferences. CUPR has con­
ducted research for federal, state, and local agencies,
foundations, and private sector clients. Recent studies
conducted by the center include the economic assess­
ment of the New Jersey State Development and Rede­
velopment Plan; analysis of national housing mobility
strategies; preparation of an urban transportation
masterplan; development of a model subdivision and
site plan ordinance; housing needs assessments for
New Jersey and Westchester County, New York; and
a multiyear investigation of community involvement
in the siting of hazardous waste facilities.
Recommended bibliographic listing:
Burchell, Robert W_/ David Listokin, et al. Development
Impact Assessment Handbook. Washington, D.C.: ULI-the
Urban Land Institute, 1994.
ULI Catalog Number: D86
International Standard Book Number: 0-87420-743-6
Library 01 Congress Catalog Card Number: 93-61040
Copyright © 1994 by ULI-the Urban Land Institute
625 Indiana Avenue, N.W.
Washington, D.C. 20004-2930
0 - ' ~ i o d ~ 0000
Printed in the United States of America. All rights reserved.
No part of this book may be reproduced in any form or by
any means, electronic or mechanical, including photocopy­
ing, recording, or by any information storage and retrieval
system, without written permission of the publisher.
ii
Chapter 8
..
Introduction
Fiscal impact analysis compares the public costs
and public revenues associated with residential
and!or nonresidential growth (Burchell, Listokin, and
Dolphin, 1991). If costs exceed revenues, a deficit is in­
curred; if revenues exceed expenditures, a surplus is
generated. Fiscal impacts are projected for the public
jurisdiction(s) where growth is taking place---the mu­
nicipality, township, county, school district, and any
special districts (Marcou and Tischler, 1978).
Fiscal impact analysis-or, as it has sometimes
been called, cost-revenue analysis- has been part of
the planning profession for over half a century. It
started with a narrow application and over time has
broadened to encompass a wide range of uses. The
growing breadth of cost-revenue assessment is evi­
dent from the following historical synopsis.
Planners first employed fiscal impact analysis in
the 1930s to examine the effects of the nascent public
housing program. Expenditures for the program were
justified on the basis that public housing projects
yielded a net local fiscal surplus compared to the
slums they replaced. In the early 1940s, fiscal impact
analysis was similarly used in the context of urban re­
newal programs to demonstrate the local fiscal advan­
tages of the new land uses that would replace the old.
Over time, the locus and context of fiscal impact
analysis broadened (Levin, 1975). During the massive
suburbanization movement of the 1950s, cost-revenue
studies were effected to gauge the impact of new sin­
gle-family detached homes and apartments on local
school districts and municipal service providers. In
the 1960s, supported by U.s. Department of Housing
and Urban Development 701 planning assistance
FISCAL IMPACT ANALYSIS
funding, fiscal impact analysis was used to evaluate
the economic effect of master plans. During this same
period, cost-revenue projection was also applied to
weigh the costs versus revenues of annexation tu both
the annexing and annexed jurisdictions.
In the 19705, the techniquc emerged as an almost
universal large-scale development accompaniment­
either undertaken voluntarily by the deVeloper or re­
quired by the municipality (Levin, 1975; Cuthbertson,
1976). Public jurisdictions such as the Association of
Bay Area Governments began to incorporate cost­
revenue assessment into their planning and other ac­
tivities (Lewis and Hoffman, 1977). The 1970s also
saw the rise of fiscal impact models. The Urban Insti­
tute was a pioneer in this regard (Muller, 1975); its
work eventually led to computerized cost-revenue ap­
proaches such as the Municipal Impact Evaluation
System (MUNlES) developed by Tischler and Associ­
ates, Inc.
The 1970s also marked the publication of The Fiscal
Impact Handbook by Rutgers University (Burchell and
Listokin, 1978). Building on earlier work conducted at
Rutgers in a publication entitled Housing Development
and Municipal Costs (Sternlieb et aI., 1972), the Hand­
book was developed as a baseline document for wide
application by planners, developers, and others. The
Handbook brought greater methodological consistency
to a field that was characterized by divergent and
often questionable approaches. Publication and dis­
semination of the Handbook led to Widespread use and
acceptance of fiscal impact analysis.
By the 198Os, cost-revenue assessment had become
a common, albeit not universal, element of develop­
ment impact and planning assessment (Montasser
and Tischler, 1980). A cost-revenue projection was
125
typically included in the socioeconomic section of en­
vironmental impact statements (see chapter 5); such a
projection was required with respect to larger or in
other ways atypical projects such as developments of
regional impact (ORIs) in Florida. Annexation was
often reviewed on its fiscal merits; rapidly growing
communities ranging from Germantown, Tennessee,
to Naperville, Illinois, routinely prepared technical
guides to evaluate the fiscal effects of annexation on
their borders (Tischler and Associates, 1988;
Naperville, 1981). Planners considering changes to a
community's master plan also factored in the various
f i ~ c a l consequences of land use altematives, along
with other social and environmental effects. For in­
stance, Newark, Delaware, developed a cost-revenue
handbook to assess rezoning and other land use
changes. Fiscal impact analysis was also increasingly
used in a policy context ranging from decisions on the
expenditure of economic development funds (i.e.,
whether the public subsidy would be recouped from
the project-induced fiscal surplus) to the location of
military facilities.
In the 1990s, fiscal impact analysis is finding appli­
cation in still-emerging planning contexts. Emphasis
on growth management has intensified interest in
comparing the fiscal effects of development under a
planned or managed land use system to the impacts
of growth under sprawl or trendline conditions
(American Farmland Trust, 1986). In Maryland, for in­
stance, both Montgomery and Howard Counties have
considered the fiscal as well as the traffic, environ­
mental, and other effects of alternative future land
use patterns (Montgomery County, 1989; Tischler and
Associates, 1989). The state of New Jersey commis­
sioned a study by Rutgers University to analyze the
revenue implications of a state plan that will modify
existing development patterns (Burchell, 1992). Com­
munities are also recognizing that fiscal impact conse­
quences should be factored into the determination of
impact fees; growth resulting in a revenue surplus
should receive a credit in the calibration of the impact
charge. This fiscal impact-impact fee linkage has been
incorporated into the formulation of impact fees for
NaperVille, Illinois, and into the development of prof­
fer charges in Virginia Beach, Virginia (Listokin, 1988;
Burchell and Listokin, 1990).
Fiscal impact analysiS is also becoming an element
in many community planning processes that tradition­
ally have never incorporated cost-revenue considera­
tions. An example is a capital facilities needs
assessment. In Florida, for instance, state law man­
dates communities to prepare a capital improvement
clement (CIE) that must include a projection of both
future infrastructure needs and the revenues required
to finance the identified capital improvements. Flor­
ida communities such as Venice have conducted fiscal
impact studies of future growth to help satisfy their
CIE planning requirement. Fiscal impact analysis is
also being used in the context of personnel planning.
For instance, Plymouth, Minnesota, applied a commu­
nitywide cost-revenue assesslnent to determine, among
other things, the level of staffing various city depart­
ments would need to accommodate expected growth.
In short, fiscal impact analysis has evolved from a
technique narrowly applied to justify public housing
and urban renewal spending to a tool that today is
broadly used in a wide variety of planning contexts.
Similarly, the fiscal impact assessment's analytic state
of the art has evolved over the past half-century as
noted in the discussion below.
Evolving State of the Art
Over time, fiscal impact analysis has changed from
an ad hoc and overly simplistic projection that em­
ployed the same methodology in all cases to a more
standardized and comprehensive assessment that en­
compasses different approaches suitable to varying
applications. These changes make for a much more ac­
curate analysis today than in years past.
In the mid-1970s, the authors considered the national
state of the art of fiscal impact assessment (Burchell
and Listokin, 1978). At that point, fiscal impact analy­
sis favored direct, average-costing procedures that
typically employed the per capita multiplier technique.
Under this technique, service costs per unit of popula­
tion (persons, pupils, and employees) would be de­
rived and then applied to the devetopment-generated
population (persons/pupils/ employees). These costs
were then matched against growth-induced revenues
to yield the net fiscal impact.
In assessing the state of the art as of the mid-1970s,
the authors observed several characteristics. In most
instances, the cost-revenue analysis was performed in
a singular case-by-case fashion, and the per capita ap­
proach was applied arbitrarily. In addition to the ab­
sence of standardization, fiscal impact analysis
typically focused on the end-state and was overly sim­
plistic. It usually did not consider the effects of devel­
opment over time as opposed to merely at final
buildout. Neither did it factor in interactive effects
such as the impact of local ratable additions on inter­
governmental assistance.
While many of these methodolol;ical weaknesses con­
tinue today, noticeable improvements have emerged. In
the movement to more standardized approaches, the
per capita method-still the most common technique-­
is applied much more unifonnly. Other refinements are
obvious as well. Even though average costing is still the
most common application, it is tempered with an en­
hanced sensitivity to marginal impacts. Such impacts
are often determined from case study interviews of local
public officials knowledgeable of service needs and ca­
pacities. Another change is that the time frame of the
analysis has shifted from exclusively end-state to peri­
odic. As important as it is to define a development's
fiscal consequences at buildout, it is likewise in­
126
I
r
sightful to trace its year-by-year effects on the way to
completion--often through the econometric modeling
application of cost-revenue analysis.
Finally, the base data employed in fiscal impact
cost projections have been refined. Ongoing efforts at­
tempt to derive accurate demographic multipliers­
the average number of people and school children
associated with different type and size configurations
of housing units. Demographic multipliers-a key in­
put in the estimation of public service costs-have
been updated periodically by the authors in The Practi­
tioner's Guide to Fiscal Impact Analysis series (Burchell
and Listokin, 1980; Burchell, Listokin, and Dolphin,
1985) and by other sources such as the Illinois School
Consulting Service.
The revenue side of the fiscal impact equation has
also been marked by improved accuracy. Not only is the
property tax more precisely estimated by considering ac­
tuallocal assessment practices, but the analysis gives
greater consideration to nonproperty tax revenues such
as local fees and charges and intergovernmental aid
(Stein, 1976). These nonproperty tax revenues are impor­
tant sources of income and may be enhanced and, at
times, even reduced by proposed development. For in­
stance, the introduction of a significant nonresidential
ratable or certain types of residential development (such
as an age-restricted housing complex) may, by increas­
ing the local property valuation per pupil, reduce the
state school aid received by a locality. Current applica­
tion of fiscal impact analysis incorporates such changes
into revenue flows.
Improvement is also evident in the analysis of non­
residential facilities. In addition to developing a better
sense of how such development influences public
revenues and affects local nonproperty and property
tax collections and intergovernmental aid, researchers
are continually searching for an improved definition
of the public service cost consequences of nonresiden­
tialland uses. To date, refined applications of both the
per capita approach and intensive case study analysiS
hold the greatest promise of enhancing the analysis of
the fiscal effects associated with the development of
nonresidential facilities.
In sum, fiscal impact analysiS has evolved from an
ad hoc assessment to a more standardized and accu­
rate discipline. In addition, the number of techniques
available to the analyst has expanded. In years past,
only one method was available for application-a sim­
ple version of the per capita multiplier approach. To­
day, the per capita method has been refined and
supplemented by additional methodologies, indud­
lng the case study and econometric approaches.
Fiscal Impact Analysis: Methodology
Fiscal impact analysis is a studied, technical under­
taking. Step-by-step procedures to carry out the per
capita, case study, and other methodologies are detailed
in a number of procedural guides. The most compre­
hensive guide is the Rutgers University publication
entitled TIre Fiscal Impact Halldbook (Burchell and Lis­
tokin, 1978). The Halldbook has been synthesized and
updated in a periodic series called The Practitioner's
Guide to Fiscal Impact Analysis (Burchell and Listokin,
1980; Burchdl, Listokin, and Dolphin, 1985). In addition,
a useful overview of the different techniques is pro­
vided in a 1988 report published by the International
City Management Association and entitled"AnalYZing
the Fiscal Impact of Development" (Tischler, 1988).
While it is not appropriate to duplicate the detail of
the several procedural gUides, it is instructive to sum­
marize the substantive content of cost-revenue assess­
ment. Four basic procedures guide all fiscal impact
methods as follows:
• determine the population generated by growth­
people, school-age children, and employees;
• translate this population into consequent public
service costs;
• project the revenues induced by growth; and
• compare development-induced costs to revenues:
if costs exceed revenues, a deficit is incurred; if
revenues exceed expenditures, a surplUS is realized.
The three fiscal impact metllods-per capita, case
study, and econometric--<liffer mainly in the "transla­
tion" of population into public selvices and costs and, to
a lesser extent, in terms of their revenue projections and
comparison of costs to revenues. The differences will be­
come evident from the following discussion of the proce­
dures and methods of cost-revenue assessment.
Projecting Population
It is important to identify the aspects of growth
that affect public service provision. For residential
development, the population and pupil generation
associated with different housing configurations is a
major influence on municipal and school district oper­
ating and capital obligations. The housing types that
arc most population-intensive place the greatest cost
burden on the public sector in terms of accommodat­
ing growth.
The fiscal impact analyst uses demographiC multi­
pliers to predict the poputalions that will result from
new housing development. As discussed in chapter 6,
multipliers calculate the number of the two principal
users of local services: people, for municipal services;
and school-age children, for school services. The mul­
tipliers for household size represent the average num­
ber of persons living in a housing unit and vary
according to the type and size of housing units. Hous­
ing type refers to single-family (detached) homes,
townhouses, garden apartments, high-rise units, etc.;
size is expressed by number of rooms or bedrooms.
As might be expected, detached single-family units
a r e ~ on average, associated with larger household
sizes than are attached multifamily units while larger
units house more household members. The sources
127
for demographic multipliers are detailed in Appendix
II of this handbook and are summarized shortly.
The multipliers for school-age children represent
the average number of children of school-attending
age and are generally specified according to grade
category (i.e., K-<i, 7--<l, 9-12). In conducting a fiscal
impact study that considers effects on public services,
the analyst typically focuses on public school-age chil­
dren or the share of school-age pupils attending pub­
lic schools.
The discussion thus far has focused on the attribute
of residential growth-population (residents and pub­
lic school-age children)-that prompts a public serv­
ice response. While agreement is Widespread that
demographics are the appropriate "unit" to be consid­
ered with respect to residential development, the de­
bate over the corresponding nonresidential "unit"
continues. Several studies, however, have concluded
that it is the employment intensity of nonresidential
development that prompts public service costs (Bea­
ton, 1983). In other words, all things being equal, a
nonresidential facility that introduces more jobs into a
community will generate a more significant and
costly public service response for both operating and
infrastructure development outlays than a sister non­
residential project that is less labor-intensive.
Employment intensity is typically expressed in
terms of the number of employees per 1,000 square
feet of nonresidential space. It is higher for certain
categories of use such as office development than for
warehousing, for example. Data sources for the num­
ber of employees per 1,000 square feet are discussed
shortly.
The demographic multipliers for different type and
size housing units and the employment-intensity lev­
els for the different nonresidential land uses are ap­
plied against the matrix of the project pro forma to
yield the anticipated project-induced population­
people, pupils, and employees. An illustrative exam­
ple is shown in Exhibit 8.1. The hypothetical
mixed-use development encompasses 300 residential
units and 150,000 square feet of nonresidential space.
The residential component includes 200 three- and
four-bedroom single-family detached homes and 100
two-bedroom townhouses; the nonresidential sector,
100,000 square feet of office space and 50,000 square
feet of retail space. Applying household size and
school-age children multipliers for the different type
and size housing units planned for the project yields a
development-induced population estimate of 891 peo­
ple and 192 pupilS. (For the illustrative example, the
school-age children projection of 192 students is not
reduced to a public school-age pupil increment. In a
comprehensive study, this last step would be in­
cluded.) Applying a ratio of 3.0 employees per 1,000
square feet of office space and 2.5 employees per
1,000 square feet of retail space yields a projection of
425 employees from the nonresidential component of
the mixed-use development. As in the social impact
assessment, these population projections serve as the
starting point for the identification of attendant ef­
fects.
Exhibit 8,1: EXAMPLE OF A PER CAPITA FISCAL IMPACT METHOD:
Number of
Development Units (in
Composition square feet}
Residential
Single-Family DC'tached
lhree-Bedroom 100
Four-Bedroom 100
Townhouse
Two-Bedroom 100
Nonresidential
Office 100,000
Retail 50,DOD
Total
NUMERIC EXAMPLE
Popul<ltion (per unit or Project-Generated
1,000 square feel) Population2 Cost per Unit
3
Project-Generated Cost
People
1
Pupils! Employees People Pupils Employees reople Pupils Employees People Pupils Employees Total
3,09 0.67 NA
3.77 1.14 NA
2.05 !J.l1 NA
NA NA 3.0
NA NA 2.5
I
309 67 NA $581 $6,571 NA $179,529 $ 4 ~ 0 , 2 5 7 NA
377 114 NA $581 $6,571 NA $219,037 $749,094 NA
205 11 NA $581 $6,571 NA $119,105 $72,281 NA
NA NA 300 NA NA $247 NA NA $74,100
NA NA 125 NA NA $247 NA NA $30,875
891 192 425 $581 $6,571 $247 $517,671 $1,261,632 $104,975 $1,884,278
Noles
In this example, public school-age children are assumed for illustrative purposes to equal the school-age children count. In reality, the former will typically be
80 percent to 90 percenl of the latter. In a full, formal fiscal impact analysis, the public school-age children figure would be the basis for calculating public
education costs.
NA = Not applicable
I Derived from the demographic multipliers obtained from the American Housing Survt'lJ (see Appendix II).
2 Equals number of units/square feet multiplied by the respective population/employee profiles.
3Cakulated as shown in Exhibit 8.2
..
128
Projecting Costs
Once the population introduced by growth is deter­
mined, the next step is to translate the increment of
people, students, and workers into added public serv­
ices and costs. The Fiscal Impact Handbook, The Practitio­
ner's Guide series, and the other reference volumes
cited earlier all detaU several techniques for deriving
the associated services and expenditures while the ma­
jor methods are summarized below.
Per Capita Method
The per capita method first determines current
public service costs on a per unit basis-per pupil
for the school district and per capita and per em­
ployee for the municipality, township, village,
county, and any special districts (i.e., fire, park,
community college). The per student outlay is read­
ily determined. Total school costs or the total school
property tax levy is divided by the total pupil en­
rollment to yield the total cost or property tax ex­
pense, respectively, per student.
With noneducational services, however, it is incor­
rect simply to divide incurred outlays by the local
population because such services benefit both residen­
tial and nonresidential land uses. Service costs must
therefore be apportioned between these two types of
development. The residential share of all residential
and nonresidential service costs is estimated by divid­
ing the residential property value and number of par­
cels by the residential and nonresidential property
values and the number of parcels, respectively. The
calculation produces the residential percent of the resi­
dential/ nonresidential parcels and the residential per­
cent of the residential/nonresidential property value.
The two results are averaged, and the combined value
is then applied to the total local mWlicipal costs to de­
rive the estimated residential-associated share.
ThlS analysis can be illustrated by referring to the
example presented in Exhibits 8.1 and 8.2. In the hypo­
thetical community of 25,000 residents and 10,000 em­
ployees, municipal outlays totaled S17 million. The
local tax base, comprising 10,000 parcels, amounted to
$800 million. Of this total, 9,600 residential parcels
were valued at $600 million, and 400 nonresidential
parcels were valued at $200 million. The residential
share of total valuation and total parcels was there­
fore 75 percent and 96 percent, respectively, for a com­
bined average of 85.5 percent. The 85.5 percent figure
is applied to the total municipal outlay of $17 million
to yield estimated residential-associated expenditures
of $14.535 million; the remaining $2.465 Il\illion is as­
signed to services associated with nonrestOentialland
uses. With a local population of 25,000 and workforce
of 10,000 employees, the municipal costs per capita to­
tal $581 ($14,515,000/25,000); the service outlay per
worker amounts to $247 ($2,465,000/10,000).
Per pupil costs in the community are
calculated much more Simply. The local school dis­
trict incurred outlays of $23 million to educate a stu­
dent population of 3,500. The per student expense is
therefore $6,571.
Exhibit 8.2: DETERMINATION OF FISCAL IMPACT COST PARAMETERS FOR THE
PER CAPITA METHOD APPLICATION
1. Expenditures
Total Municipal Expenditures
2. Parcels
Total Parcels
Residential Parcels
Residential Parcel Percentage
3. Assessed Value
Total Assessed Value
Residential Parcel Assessed Value
Residential Value Percentage
<1. Expenditure Parameters
Estimated Share of Residential-Associated Expenditures
Municipal Residential-Associated Expenditures (lx4)
Total Local Population
Municipal Expenditure per Capita
Total School Expenditures
Total School Population
School Cost per Pupil
Total Nonresidential-Associated Expenditures
Total Local Employees
Municipal Cost per Employee
$17,Goo,000
1O,0GO
9,600
96%
$80G,000,000
$600,000,000
75%
85.5%
(96% + 75%)
$14,535,000
25,000
$581 ($14.535 million + 25,000)
$23 million
3,500
$6,571
$2.465 million ($17 million - $14.535 million)
10,000
$247 ($2.465 million + 10,000)
Source: Municipal and school district budgets.
129
Growth-induced public service costs are then fac­
tored by multiplying the per capita cost by the total
number of people, employees, and pupils introduced
by development. As described earlier, the illustrative
mixed-use development was projected to add 891 peo­
ple, 425 workers, and 192 students. At a per unit cost
of $581 per capita, $247 per employee, and $6,571 per
pupil, the per capita method would project costs of
about $0.6 million to serve the new residents and
added workforce and about $1.3 million to provide
public education.
Service costs can also be expressed on a per unit ba­
sis. For instance, in the illustrative example, the single­
family detached unit contains an average of about
3.43 people and 0.91 school-age children. (This discus­
sion aggregates the three- and four-bedroom single­
family detached units; a slightly different result is
obtained when each type of single-family home is con­
sidered individually.) At a per capita and per pupil
cost of $581 and $6,571, respectively, the single-family
detached home generates $7,973 (3.43 x $581 + 0.91 x
$6,571) in public service outlays. For the townhouse
unit, which has a lower household size and school­
age children yield (2.05 and 0.11, respectively), public
service costs amount to $1,191 (2.05 x $581) for mu­
nicipal services and $723 (0.11 x $6,571) for schools for
a total outlay of $1,914---less than one-quarter of the
expenditure for the single-family detached home.
The per capita method is the classic average-cost­
ing approach. Service costs are projected at the aver­
age per unit outlay per capita, pupil, and employee.
'The technique is straightforward, relatively easily ef­
fected, and, in most cases, yields a quick handhold on
the impacts of development. For these and other rea­
sons, it is the most common technique employed in
the field. As such, step-by-step procedures for imple­
menting the per capita method are incorporated into
the preview model.
Case Study Method
The case study approach relies on intensive site-spe­
cific interviews of public officials knowledgeable of lo­
cal service conditions and capacities as the primary
means of determining the effects of population growth
on public services and costs. The interviews identify the
anticipated marginal costs of growth given conditions
of excess or deficient service capacity. In the case of ex­
cess capacity (capacity beyond that needed to accommo­
date the existing population at current service levels),
growth will add to costs atlower-than-average per cap­
ita/ student/employee levels. In the case of deficient ca­
pacity (capacitY below that needed to accommodate the
existing population at current service levels), growth
will add to costs at higher-than-average per capita/stu­
dent/employee levels.
The case study method thus departs from the per cap­
ita approach in both its assumption and approach. The
per capita technique projects population-induced costs
at the average per unit outlay, which is detennined ar­
ithmetically by dividing local service costs by the cur­
rent service population. By contrast, the case study ap­
proach focuses on defining the marginal response to
growth through intensive field-level investigation.
These differences are illustrated by the application
of the case study approach to the hypothetical mixed­
use development. According to the per capita ap­
proach, the proposed development would require
municipal outlays of about $0.6 million to serve new
residents and employees and school outlays of about
$1.3 million to accommodate new pupilS. These fig­
ures were based on the existing local costs per capita,
employee, and pupil. According to the case study ap­
proach, expenditures would be ascertained from inter­
views that would detail the specific personnel and
capital equipment necessary to accommodate the pro­
posed growth. For the illustrative project, the case
study approach estimates school costs at about $1.1
million-$0.2 million less than the per capita ap­
proach because of the system's excess capacity. The
case study, however, reveals a higher municipal serv­
ice outlay than that indicated by the per capita ap­
proach-$0.7 million compared to $0.6 million. The
added cost reflects deficient municipal service capac­
ity, especially with respect to the volunteer squads,
which will require municipal outlays for capital
equipment. The level of detail of anticipated effects is
revealed only by application of the case study method.
Econometric Method
Both the per capita and case study approaches
translate population into service costs in terms of a
given set of service conditions and cost parameters de­
termined either arithmetically or through site study,
respectively. The econometric approach goes beyond
the "one-snapshot-in-time" analysis to a "moving pic­
ture" of the community and its development profiles
and tKe profiles' changing effects and interactions
over'time. It employs a basic equation that relates a ju­
risdiction's public service expenditures to its revenue
parameters-tax base, tax rate, etc. The cost and reve­
nue parameters embodied in the equation typically
start at the existing average levels----€.g., average costs
per capita, average assessed value per unit, etc. To
this equation are introduced historical and current
data matrices that allow past steady-state and current
development conditions (both the target development
under study and other simultaneous development) to
affect future projections. Data matrices may include
local expenditure and revenue levels per capita; the
development's pro forma schedules, including build­
out by type of land use; value by category of land use;
estimates of annual expenditure, revenue, and real
property valuation change under steady-state condi­
tions; and estimates of annual expenditure, revenue,
and real property valuation change under target and
other development conditions.
The econometric approach yields a picture of devel­
opment impact at the end of the development period as
130
well as at multiple interim stages. nus technique also
compares steady-state and other-than-target develop­
ment conditions to those of the development under
examination. In contrast to the typically fixed view af­
forded by the per capita and case srudy approaches,
the econometric approach allows fiscal comparisons
of growth with and without the target development
and thus presents an unfolding and often-changing
perspective on the fiscal consequences of growth.
The hypothetical example is useful in illustrating
the differences among the three fiscal impact tech­
niques. Given that the scltool district spent $23 mil­
lion to educate 3,500 pupils, the per capita approach
used a $6,571 average per pupil cost parameter to pro­
ject growth-induced school outlays for the end-state
of development. Thus, if the hypothetical project
added 38 pupils a year over a five-year buildout, the
development would at completion introduce 192 stu­
dents and incur projected growth-induced school
costs of $1.3 million (192 x $6,571). For its part, the
case study identified some slack school capacity and,
as such, projected total school outlays of$1.1 million
at the deVelopment's completion or a $5,700 per pupil
cost to educate the 192 project-induced students.
By contrast, the econometric approach starts with the
eXisting average $6,571 per srudent cost factor but modi­
fies the cost over time as the target development, other
development, and steady-state conditions interact into
the furure. By introducing a more efficient service popu­
lation, the population "flows" that result from the incre­
mental addition of new households might yield a $6,500
per srudent factor in the first year of the projection, a
$6,400 per pupil outlay in the second year, and so on.
The econometric approach, unlike the per capita and
case srudy applications, would incorporate the year-by­
year differences into its annual forecasts. Thus, first-year
schaul expendirures would total $247,000 (38 x $6,500);
second-year expendirures, $486,400 (76 x $6,400); and so
on to the development's end-state. Similarly, the
econometric approach would apply a year-by-year cost
analysis to municipal outlays, in each case factoring
how the target development affects local expendirures
over and above steady-state trends and other develop­
ment impacts.
Whatever tedmiquc is applied-per capita, case
study, or econometric-the translation of population
growth into public service costs yields one side of the
fiscal impact calculation. These costs must then be
matched against development-induced revenues.
Projecting Revenues
Public service jurisdictions rely on revenues that in­
clude both local and extralocal sources. Local sources
comprise a variety of levies, while extralocal sources
pertain to intergovemmental transfers from the state
and federal governments.
The local levies are usually the more significant
sources of income and encompass taxes and charges
and miscellaneous revenues. The most significant tax
is commonly the levy on property. Other taxes in­
clude levies on personal property, utility use, con­
sumer sales, and income. In addition to taxes,
government jurisdictions receive income from fees
and assorted revenues from interest earnings, per­
mits, charges for services, fines and penalties, etc.
In considering growth-induced revenues, the full ma­
trix of public revenues should be examined as follows:
I Own-Source Revenues
A. Taxes
1. Real property
2. Personal property
3. Utitity
4. Income
5. Other
B. Charges and Miscellaneous Revenues
1. Interest, rents, royalties
2. Licenses and permits
3. Charges for services
4. Fines
5. Sales of fixed assets
6. Other
II Intergovernmental Revenues
A. Slate Aid
B. Federal Aid
In projecting specifically how growth affects both
local and extralocal revenues, the fiscal impact analyst
first considers the basis for each revenue source and
then examines how development will affect each
source. To illustrate, the property tax is a percentage
levy on the value of land and improvements (real
property). In some jurisdictions, a property tax is also
imposed on personal property as well as on the value
of automobiles. To project the property tax revenues
from growth, the analyst first determines the assessed
value of the development in terms of its property tax
constituent components-real, personal, and automo­
biles. The assessed valuation is then multiplied by the
prevailing property tax rate.
Similar step-by-step calculations shown in Exhibit
8.3 project revenue collections associated with the
other revenue sources. To illustrate, many govern­
ments receive income from the sales tax. To calculate
growth effects, the analyst estimates how develop­
ment will add to local sales and then projects the con­
comitant gain in sales tax revenues based on the
applicable sales tax rate. Another source of local in­
come is interest earnings typically derived from in­
vesting major revenues before they are disbursed to
pay for local expenses. The local interest earnings
from growth can be determined by calculating how
development adds proportionately to local revenue re­
sources (i.e., property tax base) that can be invested.
In certain instances, revenue collections are related. to
population size. For example, many local governments
raise funds from fines/lioenses and pennits. As growth
adds to the populationbase, the community will levy
more traffic violations and overdue library charges, collect
131
Exhibit 8.3: FISCAL IMPACT ANALYSIS:
MUNICIPAL REVENUE CALCULATION EXAMPLES
REVENUE SOURCE REVENUE FORMULA
I Own-Source Revenues
I.A. Taxes
I.A.I. Property Tax
Market value x Assessment factor Assessed val ue
Assessed value x Property tax rate Property tax revenue
I.A.2. Utility Tax
Utility consumption Utility tax rate
X Utility tax revenue
(Le., kWh consumption) (i.e., per kWh)
I.A.3. Sales Tax
Added local sales x Sales tax rate Sales tax revenue
I.A.4. Other Local Taxes
I.A.4. a. Real Estate Transfer
Market value Transfer Annual turnover Real estate transfer
of property
x
tax rate
x
percent sales tax revenue
I.A.4.b. Motor Vehicle Sticker
Vehicle ownership by Vehicle sticker fee Motor vehicle sticker
type / size of housing unit
x
per automobile tax revenue
I.A.4.c. Transient Occupancy Tax
Daily Daily Nwnber Transient Transient
Number of
x occupancy x rate per x of rooms x occupancy occupancy
motel rooms
rate room rented daily lax tax revenue
LB. Charges and Miscellaneous Revenue
Assessed value of growth
+ x Existing interest income Interest revenue
Existing community tax base
Population by type /size of x Per capita license License and
housing unit and permit income permit revenue
I.B.I.
Interest Earnings
I.B.2. Licenses and Pennits
I.B.3. Charges for Services
1.8.4. Fines and Forfeits (Examples)
II Intergovernmental Revenues
State Assistance
II.A. Income Tax Redistribution
II.B. Motor Fuels Redistribution
II.c. Other State Aid
Population by type/size of x
housing unit
Vehicle ownership
by type /si.ze of
housing unit
Population
by type / size of
housing unit
Population
by type / size of
housing unit
Population
by type / size of
housing unil
Population
by type / size of
housing unit
Per capita service
charge income
x
Per capita
automotive
fine revenue
x
Per capita
library fine
x
x
income
Per capita
income tax
redistribution
Per capita
motor fuels
redistribution
Per capita
Service charge
revenue
Automotive
fine
revenue
library
fine
revenue
Income
lax
revenue
Motor
fuels
revenue
Other
x "other" state aid
state aid revenue
more bicycle registration fees, etc. Therefore, local in­
come from fines and licenses can be expected to in­
crease as a proportionate share of population
Intergovernmental income is projected similarly.
Thus, if a state granted $100 per pupil for textbooks, the
development-associated income for such aid would be
equal to the number of new students multiplied by
$100. Where school aid fonnulas are more complex and,
for example, incorporate ratios between the local versus
state average equalized valuation per student, the ana­
lyst would then ascertain how these relationships would
change with the onset of development and thus how
state support fonnulas would be altered.
By applying the formulas depicted in Exhibit 8.3,
the hypothetical example generates a total $2.2 mil­
lion in revenues. Of this amount, the largest share,
$1.4 million or about two-thirds, is attributable to the
property tax; the remaining $0.8 million reflects the ar­
ray of local nonproperty and intergovernmental aid
sources described above. These figures would typi­
cally be disaggregated to the unit level. In the hypo­
thetical example, the single-family detached homes
(combining the three- and four-bedroom units) gener­
ate about $7,200 in total annual revenues; the lower­
priced townhouses yield $3,800 in total annual
revenues.
In projecting growth-induced costs, fundamental
differences may be observed among the per capita,
case study, and econometric approaches. In determin­
ing revenues, the differences are more a matter of nu­
ance. To illustrate, in the case study approach, the
analyst typically spends the most time interviewing
public officials responsible for revenue-municipal
and school business administrators, the tax assessor,
tax collector, etc. Further, in both the per capita and
case study approaches, established tax parameters
(i.e., a $2.00 property tax rate) are applied to forecast
the growth-induced revenues at the end-state of devel­
opment. By contrast, the analyst applying the
econometric approach starts with a tax value such as
the property tax rate but would modify the rate annu­
ally into the forecasting period as the target develop­
ment, other development, and steady-state conditions
affect the jurisdiction's fiscal posture and annual prop­
erty tax levy. Thus, the first-year tax rate could be
$2.00 but could decline to $1.90 in the second year, to
$1.85 in the third year, and 50 on as ensuing develop­
ment results in a fiscal surplus. This interactive rela­
tionship over time between development and the tax
rate differentiates the econometric approach from the
per capita and case study methods.
Comparing Costs to Revenues
Once the growth-induced population is projected,
the next step is to determine the basic values for a fis­
cal impact assessment by translating the forecasted
population into costs and estimating the development­
generated revenues. Costs are matched against reve­
nues; if they exceed revenues, a deficit i ~ incurred; if
they fall short of revenues, a surplus is realized. When
the per capita and case study approaches are applied,
the cost-revenue comparison is typically expressed as
an end-state value at development buildout; when the
econometric technique is used, the cost-revenue com­
parison is usually presented as a series of annual net
results. The results are typically expressed for both
the overall project and the individual development
categories.
In the illustrative example, application of the per
capita approach yielded total annual service costs ap­
proaching $1.9 million versus annual revenues of
about $2.2 million. The result is a net fiscal surplus of
approximately $0.3 million. The result is a composite
of the different fiscal impacts of the respective project
components. Thus, as shown below, the single-family
SUMMARY OF THE FISCAL IMPACTS OF THE ILLUSTRATIVE EXAMPLE
Fiscal Impact per Unit (per residential unit!
per 1,000 square feet)
Number Units/ Total Project Net
Project Component 1,000 Square Feet Costs Revenues Net Impact Fiscal Impact
Residential
Single-Family Detached
1
200 $7,973 $7,190 ($783) ($156,600)
Townhouses 100 $1,914 $3,804 $1,890 $189,000
Nonresidential
Office 100 $740 $2,993 $2,253 $225,300
Retail 50 $616 $2,394 $1,778 $88900
$346,600
Rounded to $347,000
Note
1 Averages the results of three- and four-bedroom units, i.e., uses a 3.5 household size and 1.0 school-age child multiplier for
"blended" 3.5 bedroom single-family detached units.
133
detached homes with high household and school-age
children profiles produce a fiscal deficit, but the loss
is more than offset by the surplus associated with the
attached townhouse units and the project's office and
retail uses.
The above discussion shows the fiscal impact re­
sult derived from the per capita method. With other
methods, the finding would be somewhat different.
For instance, wherever the per capita approach esti­
mated annual service costs at about $1.9 million, the
case study estimated a lower service outlay of $1.8
million-Dr $0.1 million less-due to the method's
consideration of considerable excess school capacity.
The net fiscal surplus would therefore be $0.1 million
more by applying the case study method or a total of
$0.4 million.
Selecting an Appropriate Fiscal Impact
Method
Thus far, the three fiscal impact methods have
been described in terms of their application. But it is
important to consider the basis for their selection. Un­
der what conditions would the analyst use the per
capita, case study, Or econometric technique?
One consideration relates to the appropriateness of
average costing. When the service system capacity
bears a close relationship to service demand and the
average cost of providing services to current users is a
reasonable approximation of the cost to provide serv­
ices to future users, the average-cost approach is most
appropriate and dictates use of the per capita ap­
proach, which stresses average per unit service com­
mitments. By contrast in jurisdictions with
considerable slack or deficient service capacity, aver­
age per unit service costs would misstate the true ef­
fects of growth. The average would overestimate the
needed service commitment in instances of slack ca­
pacity and would understate the expensive service re­
sponse necessary under conditions of deficient
capacity. Accordingly, the case study, which is most
sensitive to local conditions and anticipated effects,
would be appropriate.
The case study is also the best method for deter­
mining the impact of specialized nonresidential facili­
ties, including military bases, energy plants, regional
shopping centers, and other nonresidential develop­
ment that does not lend itself to Simple average per
unit cost projections. For similar reasons} the case
study is suited to assessing the fiscal impacts of atypi­
cal residential development such as group homes or
other facilities for special needs populations.
When is the econometric method applied? As an
average-costing approach, the econometric method
should not be used in situations where considerable
slack or deficient capacity has been identified. Simi­
larly, it is not appropriate for the specialized condi­
tions best handled by the case study. The econometric
method is instead used in "standard" development
cases where average per unit costing reflects public
service realities. In other words, the same general con­
ditions that dictate the selection of the per capita
method apply as weB to the econometric method. The
analyst, however, applies the econometric approach
as opposed to the per capita technique to the analyses
of unusually large developments with commen­
surately long build-out periods (e.g., a planned unit
development comprising thousands of units that will
enter the market over a decade). The very size of the
developments might alter some of the basic condi­
tions affecting a community's cost and revenue pa­
rameters (e.g., the local school-age population and
reliance on local versus intergovernmental revenue).
In addition, large-scale projects often produce differ­
ent impacts over the course of their buildout. Because
the econometric technique's equation incorporates a
jurisdiction'S interactive and evolving cost-revenue ef­
fects over time, it is most suitable for ascertaining the
impacts of large, multiyear projects.
A price, however, is attached to the use of the
econometric method. The technique requires consider­
able setup time for the basic modeling and is there­
fore much more expensive than the other techniques
discussed, especially the per capita method. Another
consideration is that the advent of desktop computers
permits the increasingly sophisticated application of
the per capita method. As a result, that method can
now incorporate some of the features that were once
unique to the econometric technique. For instance, a
per capita approach, once typically limited to show­
ing only end-point results, may now incorporate inter­
mediate fiscal outcomes as well.
In the field, the per capita method is by far the
most commonly applied of all fiscal impact tech­
niques. It therefore serves as the basis for the preview
model. First, however, the discussion turns to requisi­
te data sources for conducting a fiscal impact study.
Data Sources
Whichever method is selected, several data ele­
ments must be collected. The most critical informa­
tion sources are discussed below.
Demographic Multipliers
Demographic multipliers indicate the average num­
ber of people and school-age children residing in differ­
ent type and size housing units. They are available from
national data sources and local surveys. The former in­
clude the Public Use Microdata Sample (PUMS) of the
decennial census and the American Housing Survey
(AHS). Local data are available from the municipality,
schools, developers, and other sources.
134
Appendix II of this handbook contains the most
current demographic information available from such
macrolevel sources as the rUMS and AHS. It presents
the average household size and average number of
school-age children, the latter differentiated by grade
level. The information is organized around the most
common housing types and sizes (as expressed by
number of bedrooms).
Another source of multipliers, typically of the
school-age children profile, is local surveys usually
conducted by or in cooperation with the school board
or school superintendent and based on busing or at­
tendance records. In fact, the fiscal impact analyst
should usc a local survey to validate the multipliers
obtained from the rUMS or AI-lS, particularly when a
fiscal impact assessment is applied to specialized
housing types. For instance, in projecting the number
of school-age children generated by a proposed town­
house development in a ski resort, the analyst should
consider the school yields of similar vacation-oriented
housing developments in the area, not the general
school-age children counts derived from the rUMS or
AHS.
A local survey is conducted as follows. First, a list
of housing developments similar to the project under
study is compiled (i.e., recently completed ski-area va­
cation homes) along with information on the number
of housing units and their bedroom distribution. Sec­
ond, the number of school-age children (K-12) for
each of the identified housing developments is ob­
tained. The pupil counts are available from busing, at­
tendance, and other records maintained by the local
schools The third and final step is to divide the total
number of school-age children by the total number of
units to derive the average number of school-age chil­
dren per unit for the project under examination (i.e.,
ski-area vacation homes containing two and three bed­
rooms).
The discussion thus far has focused on local pupil
counts. [t is much more difficult to determine local
household size. In some instances, demographic infor­
mation on household size is locally available from
renter and housing purchaser applications as well as
from other marketing information maintained by de­
velopers. These sources can be used as a rough gauge
to determine the average household yield per unit.
The use of locally derived demographic multipliers
offers several advantages. First, with respect to fiscal im­
pact assessment, demographic multipliers-used to de­
termine the number of people, particularly school-age
children, generated by growth-are often the single
greatest source of controversy and thereby frequently
call into question the credibility of the results of a fiscal
impact assessment. Locally derived multipliers, how­
ever, can disarm much of the controversy. Second, local
surveys typically provide the most current information
and the most jurisdiction-specific data (e.g., for the same
school district under study). By contrast, demographic
multipliers from the PUMS or AHS may be dated by a
few years and/or may be available only on a larger
geographic scale (e.g., a county, Metropolitan Statisti­
cal Area, or census region as opposed to a local com­
mtmity or school district).
In practice, obtaining local demographic data is often
problematic. Inlormation on the number of school-age
children generated by specific types of development
may not be recorded or may be held confidential and
kept from the analyst. Even if school yields from com­
pleted projects can be obtained, the nwnber of units and
bedroom distribution of the development in question­
especially the latter--are frequently difficult to ascer­
tain. These hurdles are compounded with respect to the
overall project-generated population because no coun­
terpart to a school district keeps records on the number
of people in different types of housing. Finally, a com­
mon problem with available sources of local informa­
tion is insufficient sample size Of, worse, reliance on a
biased sample.
In summary, despite the several advantages associ­
ated with locally derived demographics, the analyst
usually has to rely on national sources-the rUMS or
AHS. Whenever possible, however, the analyst
should seek out local information. A local survey
adds to the fiscal impact assessment's credibility and
is especially compelling when considering atypical
housing types such as vacation homes, units clustered
around a spedal use (i.e., marina or golf course), and
high- and low-end developments (i.e., estate homes
and very low-income housing).
Nonresidential Multipliers
Nonresidential multipliers indicate the number of
employees associated with different types of nonresiden­
tialland uses such as office, retail, and industrial devel­
opment. The multipliers are typically expressed as the
worker count per l,OOO-square-foot module and are de­
rived from the sources noted in conjunction with the cal­
culation of the operation-phase direct employment
impacts in the economic impact analysis (chapter 7). For
instance, information on the number of retail employees
per 1,OOo-square-foot module can be derived from the
data contained in the Census of Retail Trade. Office em­
ployment intensity is indicated in Trip Generation pub­
lished by the Institute of Transportation Engineers. In
addition to these published materials, the analyst may
wish to contact trade and research organizations such as
the Urban Land Institute and the International Council
of Shopping Centers and local planning, economic de­
velopment, and tax offices (e.g., certain jurisdictions im­
pose a "head tax" per employee and thus keep records
on employment intensity).
Population
An accurate count of the public jurisdiction's cur­
rent population is necessary for determining accurate
135
per capita/per pupil costs that then become the basis
for the per capita and econometric methods. Informa­
tion on population is available from the local plan­
ning department, the school district's vital statistics
office, and/ or from state, county, or regional plan­
ning agencies.
In using the population statistics, the analyst must
take advantage of the most current data. Typically,
school districts update their census of on-roll students
on a quarterly or even more frequent basis. By con­
trast, figures on the total population are often out­
dated, especially in intercensal periods.
It is incumbent upon the analyst to update all
population counts to the most current period by ex­
amining recent local housing production activity as in­
dicated by the number of certificates of occupancy
that have been issued and by pairing production with
the household sizes indicated by the demographic
multipliers (see AppendiX II). To illustrate, if a com­
munity reported an estimated 1990 population of
10,000 and added 100 units of single-family detached
homes over 1991 to 1992, each with an estimated
household size of 3.5, then the community's 1992
population would be estimated at 10,350. The current
(1992) population would then be properly paired
with current (1992) cost and revenue figures (e.g., to­
tal municipal expenditures and total nonproperty tax
income related to population) to derive valid fiscal im­
pact parameters (e.g., 1992 per capita municipal ex­
penditures and per capita nonproperty tax revenues).
Costs and Revenues
Cost information is obtained primarily from the
budgets of the municipality, school district, and other
public jurisdictions affected by growth. TIle analyst
must consider the full set of budgetary documents, in­
cluding a summary volume/section as well as de­
tailed backup materials on operating outlays (for
staffing and support expenditures), capital costs (for
major purchases), and debt service (for principal and
interest repayment on preViously incurred liabilities).
The analyst should also consult other documents that
reveal the jurisdiction's spending proclivities and
needs. Such documents range from the business ad­
ministrator's annual message that usually highlights
changes in the immediate past and upcoming fiscal
years to the jurisdiction's official capital facilities plan.
Revenue information is similarly available from the
municipal, school district, and county annual budgets
as well as from the other documents mentioned above.
It is important to go beyond merely identifying the ju­
risdiction's sources of income to understanding how
these monies are allocated. Thus, information on how
locally collected but state-distributed revenues (i.e.,
sales taxes) are transferred often must be obtained
from the state treasurer's office. Similarly, informa­
tion on the status, flow, and future distribution of
state and federal intergove=ental transfers, such as
aid to education, must come from the state treasurer's
office and/ or from federal program sources.
Property Tax Rate/Equalization Ratios
The analyst must obtain the property tax rates for
the relevant public jurisdictions and, equally as impor­
tant, the assessment-to-sales or equalization ratios.
These ratios are important for indicating the share of
true value at which a property is assessed; a ratio of
0.5 means that a property is assessed for tax purposes
at one-half its true value; a ratio of 0.25, at one-quar­
ter of real value; and so on. To project revenues from
the real property tax, the fiscal impact analyst multi­
plies the expected assessed value of the incoming de­
velopment (as determined by the assessment ratios)
by the property tax rate.
Information on the tax rate and equalization ratio
is available from the clerk, assessor, or business ad­
ministrator of the respective public jurisdictions af­
fected by the development. In considering anticipated
property tax income, the analyst must consider the ac­
tual practice of the tax assessor's office, which may
not always comport with the nominal official guide­
lines. For instance, toward the end of the tax year, a
"working" equalization ratio may differ from the pub­
lished figure due to changing values. This working ra­
tio must be incorporated into the fiscal impact
calculation.
Trends/Projections in Expenditures,
Revenues, and Populations
The econometric approach accounts for trends/pro­
jections in expenditures, revenues, and populations.
Information is available from many of the source
documents cited above as well as from interviews
with public officials. For instance, the school superin­
tendent should be queried with respect to anticipated
enrollment trends and the receipt of state aid.
Preview and Quickway Models of
Fiscal Impact Analysis
The preview model of fiscal impact analysis fol­
lows the per capita methodology-the most widely
applied fiscal impact technique-and encompasses
the basic steps of cost-revenue analysiS. First, the
model projects the number of people/pupils/employ­
ees generated by growth. Second, it translates the
population increment into attendant public service
costs by multiplying the development-generated
population by the per person/pupil/employee expen­
diture factors. Third, the preview model considers the
revenues added by growth and, finally, compares
costs to revenues to yield the net fiscal impact.
136
Quickway approaches the cost side of fiscal impact
analysis by using model factors for the development­
generated population and employment. Population
and employment arc converted to costs of
ment by applying other model factors for average
costs per capila, pupil, or employee. QUickway han­
dles development-generated revenues by applying av­
erage equalized tax rates to the development's market
value. Included. too, are average relationships be­
tween property taxes generated and other sources of
revenue.
Quickway's results include a comparison of costs
and revenues to the host municipality, school district,
and county as well as a statement on the magnitude
of the annual fiscal surplus or deficit: small,
ate, or large. The level of the annual surplus or deficit
is further presented as a share of total annual reve­
nues raised.
The analysis in the preview model is effected
through a series of inputs and outputs (see Exhibit
8.4). The inputs include base data either built into the
model (i.e., demographic multipliers) or added by the
user (i.e., the project pro forma and the local property
tax rate). The outputs include the interim and final cal­
culations of fiscal impact analysis such as the develop­
ment-induced population, service costs, revenues,
and the net fiscal effect.
The inputs and outputs of the preview model are
discussed in greater detail below. The 23 input factors
follow:
Population Faclors. To project the development-in­
duced population and workforce, the demographic
and nonresidential multipliers were already applied
to the project pro forma in the social impact compo­
nent of the model. The inputs therefore start with the
public service expenditure profile.
Cost Factors (Inputs 1-9}.lnputs 1 through 9 encom­
pass the public service costs for the different public ju­
risdictions affected by growth, including the
municipality, county, school district, etc. To apportion
municipal!county expenditures associated with resi­
dential and nonresidential uses, respectively, the ana­
lyst enters the valuation and number of parcels .
contributed by the two respective land use categories.
The data are readily available from the local business
administrator, treasurer, and assessor.
Revenue Factors (Inputs 10-23). Inputs 10 through 23
include parameters for calculating the development­
induced property tax, local nonproperty tax, and inter­
governmental revenues. As with local costs, these
factors are unique to each location; therefore, the spe­
cific local values must be entered into the model.
The values are readily available. For the property
tax, the analyst obtains the applicable assessment-to­
sales ratio and the property tax rates from the asses­
sor's office for entry into the model as inputs 10
through 15. For local nonproperty income and inter­
gov€'mmental sources, revenues are expressed on
either a per capita basis or a valuation-added basis
(i.e., per $1,000 of assessed value). Obtained from the
existing local budget, these values are entered as in­
puts 16 through 23.
The preview model contains 16 outputs that are re­
lated to the input fields as follows:
Population Generation (Olltputs 1-3). For the devel­
opment under exalnination, the model generates the
number of people (output 1) as well as the number of
children added, the latter differentiated by school
grade level (K--{j, 7-8, 9-12) (output 2). In parallel,
where nonresidential or mixed-use development is
considered, the model yields the number of employ­
ees (output 3).
Cost Generation (Outputs 4-7). The model multiplies
the project-induced population by the existing cost pa­
rameters contained in inputs 1 through 7 to generate
the project-induced outlays required of the municipal­
ity, school district, and other public jurisdictions.
Revenue Generation (Outputs 8-12). The property tax
determination involves two calculations. First, the as­
sessed valuation (output 8) is computed by applying
the assessment ratio to the market value of the project
(both previously entered as inputs 10 and 11). The
model then applies the property tax rate for the appli­
cable public jurisdictions (inputs 12 and 13) to the as­
sessed valuation to yield the development-induced
property tax revenue by jurisdiction (output 9).
The model projects local nonproperty tax income
(output 10) by multiplying the project-induced popu­
lation and valuation (outputs 1, 2, and 8) by the pre­
viously determined nonproperty tax revenue per
capita and per $1,000 valuation, respectively (inputs
16,17,20, and 21). The intergovernmental revenue
generated by growth (output 11) is calculated through
a similar procedure.
The sum of the development-induced property tax,
nonproperty tax, and federal and state aid (outputs 9
through 11) yields the total income generated by
growth (output 12).
Net Fiscal Impact/Effects (Outputs 13-16). The net fis­
cal impact is determined by comparing the develop­
ment-induced costs versus revenues. The resulting
surplus or deficit figures are indicated individually
for all the affected public service jurisdictions as well
as in aggregate (outputs 13 and 14). These cost-reve­
nue outcomes are then placed in perspective by relat­
ing the figures to total revenues as well as to the
property tax levy for each affected public jurisdiction
(outputs 15 and 16).
Advantages and Limitations of the
Preview Model
The fiscal impact preview model offers numerous
benefits. First, it is patterned after the per capita ap­
proach, which is the most applicable and widely used
cost-revenue method. Its data demands are not bur­
densome; the input factors are either built into the
137
Exhibit 8.4: PREVIEW AND QUICKWAY MODELS OF FISCAL IMPACT ANALYSIS
INPUT
DEVELOPMENT-INDUCED POPULATION
(PREVIEW MODEL)
1. Development-generated residents
2. Development-generated school·age children
3. Development-generated employees
PUBLIC SERVICE EXPENDITURES
(PREVIEW MODEL)
1. Total municipal expenditures
2. Total residential parcels
3. Total nonresidential parcels
4. Total valuation
5. Total nonresidential valuation
6. Total municipal population
7. Total nonresidential employment
8. Total education expenditures
9. Total school enrollment
PUBLIC SERVICE REVENUES
(PREVIEW MODEL)
10. Project value
11. Property·tax-assessment-to·sales rate
12. Municipal property tax levy (rate)
13. School property tax levy (rate)
14. Municipal property tax base
15. School property tax base
16. Municipal nonproperty taxes associated with
property value
17. Municipal nonproperty taxes associated with population
18. Municipal intergovernmental revenues associated
with property values
19. Municipal intergovernmental revenues associated
with population
20. School nonproperty taxes associated with value
21. School nonproperty taxes associated with population
22. School intergovernmental revenues associated with value
23. School intergovernmental revenues associated with
popUlation
OUTPUT
DEVELOPMENT-INDUCED POPULATION
(PREVIEW MODEL)
1. Development-generated residents
2. Development-generated school-age children
3. Development-generated employees
PUBLIC SERVICE EXPENDITURES
(PREVIEW MODEL)
4. Development-induced municipal expenditure
5. Development-induced municipal nonresidential
expendihlre
6. Development-induced school expenditure
7. Development-induced total expenditure
PUBLIC SERVICE REVENUES
(PREVIEW MODEL)
8. assessed valuation
9. Development-induced municipal property tax revenue
10. Development-induced municipal nonproperty taxes
11. Development-induced municipal intergovernmental
revenues
12. Total municipal development-induced public revenues
9. a. Development-induced school property tax revenues
10. a. Development-induced school nonproperty taxes
11. a. Development-induced school intergovernmental
revenues
12. a. Total school development-induced public revenues
DEVELOPMENT NET FISCAL IMPACT
(PREVIEW MODEL)
13. Development·mduced municipal net fiscal impact
13. a. Development-induced school net fiscal impact
14. total net fiscal impact
15. Municipal fiscal impact perspective (total revenues)
(Quickway)
15. a. School fiscal impact perspective (total revenues)
(Quickway)
16. I\.funicipal fiscal impact perspective (property taxes)
16. a. School fiscal impact perspective (property taxes)
138
model or otherwise readily obtainable. For instance,
the assessment-to-sales ratio and property tax rates
as well as the number and value of parcels by resi­
dential/nonresidential type are either posted in offi­
cial public documents such as the annual tax roll or
are available from a telephone call to or interview
with the tax assessor. Similarly, the other cost and
revenue parameters, including municipal and
school expenditures, are also readily collected from
published budgetary documents and/or from con­
tacting the local business administrator and school
superintendent.
Despite its modest input data demands, the model
produces a full array of cost-revenue outputs, includ­
ing a detailed breakout of the development-induced
population; costs by public service jurisdiction; costs
induced by the residential versus nonresidential com­
ponents of a project; revenues by jurisdiction; reve­
nues differentiated into property, other local source,
and intergovernrnental categories; and, finally, the net
fiscal effects by individual jurisdiction and the aggre­
gate public impact. Thus, the model does not give a
"black box" final result but arrays and shows all the
calculations and intermediate products that lead to
the calculation of the final fiscal impact.
Nonetheless, the model does have some shortcom­
ings. As a per capita methodology, the model is
widely applicable though not always best suited to all
situations. To illustrate, in cases of severe excess or
slack capacity, the case study approach provides a
more accurate picture of the impacts of growth. In ad­
dition, the case study method offers a level of descrip­
tive detail on local conditions and service responses
that goes far beyond the preview model's strictly nu­
meric outputs.
Another shortcoming concerns the manner in
which the model calculates revenues. Revenue inputs
are factored on a per capita or valuation-increment ba­
sis. While such an approach is generally acceptable, it
oversimplifies certain revenues--especially intergov­
ernmental transfers. Intergovernmental aid is often
distributed according to complicated formulas that re­
late local to state parameters (local valuation per pu­
pil compared to a state foundation level) whose
values themselves change annually. The preview
model is not structured to reflect such a high level of
specificity and, as such, yields an approximation
rather than the most accurate projection of develop­
ment-induced revenues.
This discussion points to the appropriate use of the
preview model. The model does not substitute for a
comprehensive, report-length fiscal impact study that
embodies case study detail, considers the nuances of
each revenue source, and so on. The preview model
does, however, provide a reasonably reliable depic­
tion of the order-of-magnitude fiscal impact of
growth. It is useful for quickly answering whether de­
velopment will approximately break even or likely
generate a large or small surplus or deficit.
Such order-of-magnitude information is useful in
several situations. When a project is first considered,
the developer often explores alternative development
possibilities in terms of type, scale, and location. A
quick preview analysis of the fiscal effects of the vari­
ous scenarios can help the developer select the most
promising options. The analysis would typically be
undertaken in conjunction with parallel studies of eco­
nomic feasibility and environmental and traffic im­
pacts. (These other exploratory studies could be
assisted through use of the preview model in the vari­
ous substantive areas.)
Once a developer decides on a development option
and applies to the appropriate public authorities for de­
velopment approval, the fiscal impact preview model
can proVide useful information. On a smaller project,
say a subdivision of 20 to 30 homes, a full fiscal impact
study may not be required or even appropriate. None­
theless, it is often instructive to present the findings of
the preview analysis-provided the limitations of the
model are made clear. Even when an independently
commissioned, standalone cost-revenue study is per­
fanned, a developer or consultant may wish to "run"
the model to get a quick, in-house sense of the final re­
sults. This preview is useful because the full study may
not be completed for many months.
Critiquing a Fiscal Impact Analysis
A fiscal impact study is reviewed by several indi­
viduals-the client paying for the report, plan­
ning/ zoning board members, the consultants retained
by these boards, and the public at large. The follow­
ing provides a checklist for such review:
General Considerations
Inadequate Documentation
The "numbers" in a fiscal impact report-the devel­
opment-induced residents and school-age children,
cost figures, the new increment of property taxes, and
so on-are often presented without sufficient back­
ground discussion and documentation. It is impera­
tive to detail the assumptions, databases, and
calculations that guided the analysis so that the study
can be understood, followed, and replicated.
Unbalanced Presentation
The cost-revenue equation must be appropriately
balanced across several dimensions. Most fundamen­
tally, both revenues and costs must be presented. In a
few lingering cases, an analyst presents only one side
of the equation, typically the revenue side, and indi­
cates that a "shopping center will generate $1 million
in property taxes upon buildout." The revenue fig­
ures signify nothing in the absence of corresponding
cost figures.
139
Even when both costs and revenues are indicated,
it is important to avoid further imbalances. For in­
stance, if the analysis considers only the costs sup­
ported by the property tax (i.e., the per capita expense
determined by dividing the property tax levy by the
local population), then it must focus exclusively on ad
valorem revenue collections. If other growth-induced
revenues (i.e., intergovernmental aid) are added, then
the analysis is unfairly tilted to show a benefit from
growth.
Large Order-of-Magnitude Impact
A fiscal impact report is suspect if it shows a result
that is extremely large in terms of its order-of-magni­
tude effect on the community-whether a significant
surplus Dr deficit with a marked effect on the local ju­
risdiction (e.g., either decreasing or increasing prop­
erty taxes by 40, 50, 60 percent or more). While it is
theoretically possible that a project can yield a signifi­
cant result, it is more likely that a fiscal impact study
is flawed by one of the above considerations (e.g.,
costs are not correctly paired with revenues) or by
one of the technical errors outlined below.
Technical Checklist
Demographic Multipliers
Are the multipliers current? Do they reflect the lat­
est available information such as that contained in Ap­
pendiX II? Are the multipliers correct? For instance, to
calculate a development's impact on the local school
district, the analyst should use the number of public
school-age children and not the more encompaSSing
school-age children figures; the latter includes stu­
dents attending nonpublic schools. Are the multipli­
ers appropriate? As discussed, general demographic
sources should not be used for specialized housing
types. Are the demographics locally sensitive? Has
every effort been made to obtain local information
and/ or feedback?
Projecting Costs
Is the appropriate method applied-per capita,
case study, or econometric? Are the cost factors cur­
rent? Do they reflect the latest budgets and popula­
tion estimates? Are costs properly stated? For
instance, public jurisdictions usually pay for infra­
structure over time; consequently, development-in­
duced capital costs should be shown on an amortized
rather than lump-sum basis.
Projecting Revenues
Are the appropriate revenues counted? As stated ear­
lier, costs and revenues must be properly paired in
terms of the property tax and nonproperty tax compo­
nents. Are the revenue factors clIrrent? Do they reflect
the latest assessed ratios, property tax rates, permit
and fee schedules, and intergovernmental allocation
formulas? Are the revenues locally sensilive? Do they
incorporate the field-level operating practices of the
assessor and other tax officials? Are the revenues
properly stated? For instance, certain revenues are
generated annually, but others accrue on a periodic
basis, Le., the time at which a property is sold and the
recording tax paid. This difference in timing should
be incorporated into the analysis. To illustrate, if prop­
erties tum over an average of once in five years and
the transfer tax on a sale is $2,000, then the expected
transfer tax income per year is $400. Applying the
$2,000 amount per unit annually would overcredit the
development-induced revenues.
The reviewer should also be sensitive to possible
mathematical errors in the calculation of both costs
and revenues. For example, a mismatch commonly oc­
curs in pairing the property assessment with the tax
rate. Applying an equalized tax rate to the assessed
tax base results in an undercount of income; con­
versely, multiplying the market value by the nominal
tax rate overcounts revenue. The correct procedure is
to use the same basis for both rate and assessment.
In short, a fiscal impact analysis is a technical un­
dertaking and, as such, many factors must be moni­
tored in revieWing such a study.
Presentation
The fiscal impact analysis report should contain
the following components:
A. Summary of Findings
Brief presentation on the number of people, school­
age children, total costs/revenues, fiscal surplus or
deficit, and impact on local taxes.
B. Overview of the Report
Outline of what was requested, what (if anything)
was added to the report, and-as important-what
was not covered in the analysis.
C. Methodology Employed
Basic technique employed-per capita, case study,
or econometric; what the procedure covers; the advan­
tages associated with the chosen method.
D. Data and Data Refinement
Information sources: published documents, com­
puter tapes, site visits/personal interviews, and/or
other local surveys.
E. Development Costs
What are they? What do they include (operating
and capital)? How severe a test of the development
are they? How do the estimated costs compare to the
results from other studies conducted in either the
same jurisdiction or elsewhere?
140
..
F. Development Revenues
What are they? What do they include (local/inter­
governmental transfers)? How conservative is the
analysis of revenues? How do the report's projections
compare to studies of development revenue flows
conducted in the same locale or elsewhere?
G. Net Fiscal Impact
Annual and! or cumulative annual difference be­
tween costs and revenues. To be conservative, if the
study demonstrates a significant positive revenue
flow, the analyst must understate the surplus by add­
ing a cushion for additional costs. If the study demon­
strates a small net impact relative to earlier
expenditures or the fiscal profile data, the analyst
should not specify a trivial surplus or deficit but in­
stead call the net impact a "break even."
H. Impact in Context
What is the impact of the development in the con­
text of total local expenditures or in the context of all
revenues raised through the property tax? What will
it mean to the tax rate? How does it compare to other
tax increases or decreases experienced historically?
I. Rigor of the Analysis
The analyst should emphasize the extreme care
taken to interpret the development and its impact and
discuss how reliance on the chosen method-per cap­
ita, case study, or econometric-produced the most
rigorous pOSSible analysis.
The public presentation of a cost-revenue report be­
fore a planning board, board of adjustment, and so on
combines the technical nature of the written report
with the art of oral communications. In general, the
public presentation follows the report format de­
scribed above. It should avoid jargon, obscure meth­
odological discussion, and unnecessary numeric
detail. The presentation should proceed as follows:
Introduction and Summary. Describe "fiscal im­
pact analysis" in simple terms and present the find­
ings for the case in question. Place the projected
cost-revenue result in proper perspective by stating
what it means to the local taxpayer.
Methodology. Outline the method used by relying
on a general illustratiye example. Explain why the
technique was chosen.
Projecting Population. Summarize the projected
number of people, pupilS, and workers generated by
growth. Given that projections often become a point
of contention, describe in some detail how the devel­
opment-induced population was determined. Indicate
that the numbers were reviewed with local officials
and in other ways checked against "real world" expe­
rience. Discuss the development-induced population
within the context of the eXisting local population
base.
Projecting Costs. Describe the cost projections in
simple terms and proVide an illustrative example of
the calculation. Describe briefly what the imputed
costs will pay for-added staffing, equipment,
and!or capital improvements. Relate the develop­
ment-induced expenditures to existing local service
outlays.
Projecting Revenues. Indicate the revenues that
were projected-local property, local nonproperty,
and intergovernmental-and give an illustrative ex­
ample of lhe projection, especially with respect to the
property tax. Most people are familiar with this reve­
nue source. Summarize the dollar amounts generated
from the different revenue sources and provide the to­
tat; relate the total to the existing total revenue base.
Net Fiscal Impact. Restate the population-induced
service costs, development-generated revenues, and
the resulting net fiscal effect and immediately discuss
the net fiscal effect in terms of what it signifies to the
local budget and taxpayer (e.g., added/reduced an­
nual property taxes of $50 per household).
It is also important to discuss, where appropriate,
the conservative nature of the fiscal impact approach.
The analyst should stress that fiscal impact analysis
overstates the development-induced population and
costs but undercounts revenues. To illustrate; the ana­
lyst might state, "While official school enrollment
studies use a multiplier of 1.0 for single-family de­
tached homes, the cost-revenue report factored a
value of 1.1 derived from the PUMS. This means that
an additional $15,000 in school outlays was attributed
to the project." Similarly, the analyst should under­
score the confidence level of the fiscal impact finding
by stating, "Even if the development-induced costs
are twice as high, a fiscal impact surplus will still re­
sult."
Summary. It is opportune at the concluding point
in the presentation to summarize the interim and final
demographic and fiscal results of the cost-revenue
analysis and to discuss their significance. It is useful
to prepare a summary sheet!board that arrays the
critical project-induced effects against the commu­
nity's current population and financial parameters.
Such a presentation places the project-induced effects
in perspective.
The art of effectively presenting the results of a fis­
cal impact study cannot be overstressed. A fiscal im­
pact report cannot be presented in the abstract by
merely stating the net result without an explanation
of the intermediate calculations and base assump­
tions. Such an approach compromises credibility. On
the other hand, too much emphasis on numeric and
methodological detail will lose the audience. An effec­
tive presentation achieves a balance of appropriate
technical detail and narrative that can be clearly fol­
lowed by the audience.
One way of fostering effective communications is
to use boards and!or handouts that illustrate some of
the assessment's critical assumptions, calculations,
141
and findings, These materials should include graphics
(i.e., bar and pie charts) that add vitality to and en­
hance the understanding of the presentation (see
chapter 2 for further details).
Another suggestion is to anticipate common ques­
tions and address underlying concerns in the body of
the presentation. To illustrate, when a fiscal impact re­
port shows that attached housing yields a surplus, at
least one member of the audience is likely to ask,
"How can that occur? Don't such units cost less than
detached homes?" Rather than waiting for the query,
the analyst should include an appropriate explana­
tion when such a fiscal impact finding is first pre­
sented. This explanation would point out that
attached housing is often a good ratable because it in­
troduces relatively small households with rew school­
age children. As such, attached units generate
relatively modest serVice costs. Another audience
member is likely to ask, "How can an expensive de­
tached unit yield a deficit?" (The explanation is the
converse of the one just given for attached units.)
Similarly, the basis of the demographic multipliers
and the reliability of the multipliers over time (see Ap­
pendiX II) are often the subject of still more questions.
In sum, thorough preparation is needed to ensure
lhe effective public presentation of a cost-revenue
study. The material is technical, and the public forum
is often adversarial and controversial. The delivery of
an accurate yet convincing presentation requires care­
ful treading through a minefield of questions and
challenges.
Future Directions
This chapter began with a discussion of how fiscal
impact analysis has evolved over the past half-cen­
tury and will continue to evolve during the 1990s.
The follOWing changes are anticipated with respect to
applications, data, and teChniques.
Today, fiscal impact analysis is most commonly com­
missioned by a developer to study an individoal project.
In the future, the focus of the analysis will expand to an
areawide level that encompasses several developments
and overall land uses. (Such change parallels the shift in
EIS evaluations frum project-specific to regional.) In­
creasingly, the public sector-agencies that prepare mas­
ter plans, capital facilities projections, impact fee
schedules, staffing need projections, and the like-will
undertake fiscal inlpact assessments.
The mid- and late 1990s will also see improve­
ments in data. Traditional fields of information such
as demographic multipliers will be refined, AppendiX
II of this handbook, for example, uses PUMS and
AHS data. New types of multipliers will also be devel­
oped. For instance, interest is growing in the infra­
structure consequences of growth. Accordingly, just
as demographic cuunts are now associated with differ­
ent type and size housing units, "counts" of average
water use, sewage generation, road use, and park and
library facility needs will, in the future, be attributed
to different categories of incoming growth. These
"multipliers" will provide a more precise measure of
the financial impacts of growth, specifically its capital
improvement needs.
The development of infrastructure profiles has also
been sparked by the growing interest in impact fees,
As practiced today, fiscal impact analysis and impact
fee determination are distinct fields. Fiscal impact
analysis compares all development-induced costs­
both operahng and capital-to all development-in­
duced revenues, Impact fee determination focuses
only on capital costs and credits a share of revenues
against the development-induced infrastructure ex­
penditures. Further, fiscal impact analysis is typically
used exclusively as an evaluation technique, but im­
pact fees go beyond planning considerations to a
charging mechanism.
Given the relationship between fiscal impact and
impact fee analysis as it exists today, the question is
whether such a differentiation is appropriate. If the
raison d' etre of the impact fee is that"growth should
pay its way," then the findings of the broader fiscal
impact equation are germane to the impact fee calcula­
tion. Some jurisdictions are already beginning to inte­
grate the two fields of analysis, and the future will
witness greater overlap (see chapter 10 for a discus­
sion on strategies for integration).
The coming decade will also see changes in the tech­
nique of fiscal impact analysis. The per capito approach
will slill dominate but will incorporate the best features
of the other methods. The per capita technique, echoing
the case study approach, will increasingly build in sensi­
tivity to deficient and surplus service capacity condi­
tions and will adjust development-induced service costs
accordingly. The per capita technique will also begin to
incorporate the multiyear, interactive study of the
econometric method-a proce" facilitated by the grow­
ing use of the desktop computer.
A further modification in the per capita technique
involves increased application of comparable city or
community refinement. Here
f
the fiscal experience of
jurisdictions as they change in size and direction of
growth (e.g., gaining or losing population) is incorpo­
rated into the analysis as, for instance, in the specifica­
tion of per capita costs. The experience of comparable
commwlities offers important inSight into future fis­
cal changes and the impact of growth.
Finally, the discipline of fiscal impact analysis will
have to confront the issue of reliabillty. The field to
date does not test its results; the projected impacts of
growth undprgo no evaluation after development to
measure the actual costs incurred and revenues gener­
ated. While such a study is inherently technically diffi­
cult, the field of fiscal impact analysis will remain
vulnerable to charges that its methods have not been
empirically verified-at least until retrospective analy­
sis becomes part of the process.
142

About ULI-:
the Urban Land Institute

ULI-the Urban Land Institute is a nonprofit educa­ tion and research institute that is supported and di­ rected by its members. Its mission is to provide responsible leadership in the use of land in order to enhance the total environment. ULI sponsors educational programs and forums to encourage an open international exchange of ideas and sharing of experience; initiates research that an­ ticipates emerging land use trends and issues and pro­
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About the Center for Urban Policy Research, Rutgers University
The Center for Urban Policy Research at Rutgers University is among the nation's oldest and most ac­ tive research organizations dedicated to the study of urban policy. CUPR has specialized in studies of hous­ ing, development impact, economic development, ur­ ban and suburban land use, transportation, and the environment. Founded in 1969, the center brings to­ gether a highly experienced full-time faculty of plan­ ners, economists, geographers, and computer and systems experts. The center also supports an in-house publications department. The center has carried out more than $4 million in research grants, published more than 100 books, and organized many national conferences. CUPR has con­ ducted research for federal, state, and local agencies, foundations, and private sector clients. Recent studies conducted by the center include the economic assess­ ment of the New Jersey State Development and Rede­ velopment Plan; analysis of national housing mobility strategies; preparation of an urban transportation masterplan; development of a model subdivision and
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provides advisory services; and publishes a wide vari­
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Established in 1936, the Institute today has some 13,000 members and associates from 46 countries rep­ resenting the entire spectrum of the land use and de­ velopment disciplines. They include developers, builders, property owners, investors, architects, pub­ lic officials, planners, real estate brokers, appraisers,
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and librarians. ULI members contribute to higher standards of land use by sharing their knowledge and experience. The Institute has long been recognized as one of America's most respected and widely quoted
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New Jersey and Westchester County, New York; and a multiyear investigation of community involvement in the siting of hazardous waste facilities.

growth, and development. Richard M. Rosan Executive Vice President

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Recommended bibliographic listing:
Burchell, Robert W _/ David Listokin, et al. Development
Impact Assessment Handbook. Washington, D.C.: ULI-the
Urban Land Institute, 1994.

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ii

In the 19705. Chapter 8 FISCAL IMPACT ANALYSIS Introduction Fiscal impact analysis compares the public costs and public revenues associated with residential and!or nonresidential growth (Burchell. its work eventually led to computerized cost-revenue ap­ proaches such as the Municipal Impact Evaluation System (MUNlES) developed by Tischler and Associ­ ates. The 1970s also saw the rise of fiscal impact models. 1991). In the 1960s. 1972). element of develop­ ment impact and planning assessment (Montasser and Tischler. By the 198Os. county. Department of Housing and Urban Development 701 planning assistance The 1970s also marked the publication of The Fiscal Impact Handbook by Rutgers University (Burchell and Listokin. and any special districts (Marcou and Tischler. a deficit is in­ curred. 1977). Listokin. township. and others. Over time. During the massive suburbanization movement of the 1950s. Expenditures for the program were tivities (Lewis and Hoffman. albeit not universal. 1976). fiscal impact analysis was similarly used in the context of urban re­ newal programs to demonstrate the local fiscal advan­ tages of the new land uses that would replace the old.. Inc. fiscal impact analysis was used to evaluate the economic effect of master plans. 1980). Publication and dis­ semination of the Handbook led to Widespread use and acceptance of fiscal impact analysis. and Dolphin. A cost-revenue projection was 125 . supported by U.. cost-revenue analysis. The Urban Insti­ tute was a pioneer in this regard (Muller. if revenues exceed expenditures. 1978). In the early 1940s. Planners first employed fiscal impact analysis in the 1930s to examine the effects of the nascent public housing program. developers. a surplus is generated. It started with a narrow application and over time has broadened to encompass a wide range of uses. Public jurisdictions such as the Association of Bay Area Governments began to incorporate cost­ revenue assessment into their planning and other ac­ the planning profession for over half a century. 1978). school district. the locus and context of fiscal impact analysis broadened (Levin. the techniquc emerged as an almost universal large-scale development accompaniment ­ either undertaken voluntarily by the deVeloper or re­ quired by the municipality (Levin. Cuthbertson.s. The growing breadth of cost-revenue assessment is evi­ dent from the following historical synopsis. justified on the basis that public housing projects yielded a net local fiscal surplus compared to the slums they replaced. cost-revenue studies were effected to gauge the impact of new sin­ gle-family detached homes and apartments on local school districts and municipal service providers. cost-revenue projection was also applied to weigh the costs versus revenues of annexation tu both the annexing and annexed jurisdictions. 1975. Building on earlier work conducted at Rutgers in a publication entitled Housing Development and Municipal Costs (Sternlieb et aI. 1975). 1975). as it has sometimes been called. The Handbook brought greater methodological consistency to a field that was characterized by divergent and often questionable approaches. Fiscal impacts are projected for the public jurisdiction(s) where growth is taking place---the mu ­ nicipality. During this same period. If costs exceed revenues.has been part of funding. the Hand­ book was developed as a baseline document for wide application by planners. Fiscal impact analysis-or. cost-revenue assessment had become a common.

Tennessee. These changes make for a much more ac­ curate analysis today than in years past.ical weaknesses con­ tinue today. environ­ mental. The state of New Jersey commis­ sioned a study by Rutgers University to analyze the revenue implications of a state plan that will modify existing development patterns (Burchell. average-costing procedures that typically employed the per capita multiplier technique. Fiscal impact analysis was also increasingly used in a policy context ranging from decisions on the expenditure of economic development funds (i. 1989). the per capita method-still the most common technique-­ is applied much more unifonnly. In Florida. it is likewise in­ 126 . 1990). rapidly growing communities ranging from Germantown. and employees) would be de­ rived and then applied to the devetopment-generated population (persons/pupils/ employees). Similarly. Neither did it factor in interactive effects such as the impact of local ratable additions on inter­ governmental assistance. Delaware. It usually did not consider the effects of devel­ opment over time as opposed to merely at final buildout. whether the public subsidy would be recouped from the project-induced fiscal surplus) to the location of military facilities. Fiscal impact analysiS is also becoming an element in many community planning processes that tradition­ ally have never incorporated cost-revenue considera­ tions. the level of staffing various city depart­ ments would need to accommodate expected growth. Fiscal impact analysis is also being used in the context of personnel planning. service costs per unit of popula­ tion (persons. Other refinements are obvious as well. Burchell and Listokin. In the movement to more standardized approaches. Virginia (Listokin. the authors observed several characteristics. In the mid-1970s. fiscal impact analysis has changed from an ad hoc and overly simplistic projection that em­ ployed the same methodology in all cases to a more standardized and comprehensive assessment that en­ compasses different approaches suitable to varying handbook to assess rezoning and other land use changes. fiscal impact analy­ sis favored direct. While many of these methodolol. Flor­ ida communities such as Venice have conducted fiscal impact studies of future growth to help satisfy their CIE planning requirement. Such impacts are often determined from case study interviews of local public officials knowledgeable of service needs and ca­ pacities. In Maryland. 1986). 1989. for in­ stance. noticeable improvements have emerged. fiscal impact analysis has evolved from a technique narrowly applied to justify public housing and urban renewal spending to a tool that today is broadly used in a wide variety of planning contexts. Illinois. state law man­ dates communities to prepare a capital improvement clement (CIE) that must include a projection of both future infrastructure needs and the revenues required to finance the identified capital improvements. for instance.e. In the 1990s. such a projection was required with respect to larger or in other ways atypical projects such as developments of regional impact (ORIs) in Florida. Illinois. fiscal impact analysis is finding appli­ cation in still-emerging planning contexts. 1988. routinely prepared technical guides to evaluate the fiscal effects of annexation on their borders (Tischler and Associates. As important as it is to define a development's fiscal consequences at buildout. and into the development of prof­ fer charges in Virginia Beach. Under this technique. Another change is that the time frame of the analysis has shifted from exclusively end-state to peri­ odic. Plymouth. Annexation was often reviewed on its fiscal merits. the fiscal impact assessment's analytic state of the art has evolved over the past half-century as noted in the discussion below. An example is a capital facilities needs assessment. These costs were then matched against growth-induced revenues to yield the net fiscal impact. Minnesota. to Naperville. Even though average costing is still the most common application. 1981). applied a commu­ nitywide cost-revenue assesslnent to determine. Newark. typically focused on the end-state and was overly sim­ plistic. fiscal impact analysis impact fees. consequences of land use altematives. Emphasis on growth management has intensified interest in comparing the fiscal effects of development under a planned or managed land use system to the impacts of growth under sprawl or trendline conditions (American Farmland Trust. Com­ munities are also recognizing that fiscal impact conse­ quences should be factored into the determination of applications. among other things. In addition to the ab­ sence of standardization. For in­ stance. At that point. and the per capita ap­ proach was applied arbitrarily. growth resulting in a revenue surplus should receive a credit in the calibration of the impact charge. Tischler and Associates. the cost-revenue analysis was performed in a singular case-by-case fashion. pupils. 1992)..typically included in the socioeconomic section of en­ vironmental impact statements (see chapter 5). In most instances. developed a cost-revenue Evolving State of the Art Over time. This fiscal impact-impact fee linkage has been incorporated into the formulation of impact fees for NaperVille. along with other social and environmental effects. the authors considered the national state of the art of fiscal impact assessment (Burchell and Listokin. both Montgomery and Howard Counties have considered the fiscal as well as the traffic. 1988. 1978). In assessing the state of the art as of the mid-1970s. it is tempered with an en­ hanced sensitivity to marginal impacts. In short. Naperville. and other effects of alternative future land use patterns (Montgomery County. Planners considering changes to a community's master plan also factored in the various fi~cal For instance.

as local fees and charges and intergovernmental aid (Stein. high-rise units. 1978). in terms of their revenue projections and comparison of costs to revenues. 1980. The revenue side of the fiscal impact equation has also been marked by improved accuracy. In addition to developing a better sense of how such development influences public Projecting Population It is important to identify the aspects of growth that affect public service provision. Improvement is also evident in the analysis of non­ The three fiscal impact metllods-per capita. Demographic multipliers-a key in­ put in the estimation of public service costs-have been updated periodically by the authors in The Practi­ tioner's Guide to Fiscal Impact Analysis series (Burchell and Listokin. While it is not appropriate to duplicate the detail of the several procedural gUides. even reduced by proposed development. These nonproperty tax revenues are impor­ tant sources of income and may be enhanced and. the number of techniques available to the analyst has expanded. The sources 127 . The most compre­ hensive guide is the Rutgers University publication entitled TIre Fiscal Impact Halldbook (Burchell and Lis­ tokin. fiscal impact analysiS has evolved from an ad hoc assessment to a more standardized and accu­ rate discipline. at times. The differences will be­ come evident from the following discussion of the proce­ dures and methods of cost-revenue assessment. and school-age children. researchers are continually searching for an improved definition of the public service cost consequences of nonresiden­ tialland uses. garden apartments. and Dolphin.. and employees. Current applica­ tion of fiscal impact analysis incorporates such changes into revenue flows. case study. detached single-family units are~ on average. and • compare development-induced costs to revenues: if costs exceed revenues. 1980.r sightful to trace its year-by-year effects on the way to completion--often through the econometric modeling application of cost-revenue analysis. for municipal services. To­ day. • project the revenues induced by growth. a deficit is incurred. reduce the state school aid received by a locality. 1985) and by other sources such as the Illinois School Consulting Service. 1985). 1988). etc. To date. In addition. 1976). Fiscal Impact Analysis: Methodology Fiscal impact analysis is a studied. a useful overview of the different techniques is pro­ vided in a 1988 report published by the International City Management Association and entitled"AnalYZing the Fiscal Impact of Development" (Tischler. it is instructive to sum ­ marize the substantive content of cost-revenue assess­ ment. Four basic procedures guide all fiscal impact methods as follows: • determine the population generated by growth ­ people. Step-by-step procedures to carry out the per capita. only one method was available for application-a sim­ ple version of the per capita multiplier approach. refined applications of both the per capita approach and intensive case study analysiS hold the greatest promise of enhancing the analysis of the fiscal effects associated with the development of arc most population-intensive place the greatest cost nonresidential facilities. The Halldbook has been synthesized and updated in a periodic series called The Practitioner's Guide to Fiscal Impact Analysis (Burchell and Listokin. if revenues exceed expenditures. • translate this population into consequent public service costs. Ongoing efforts at­ tempt to derive accurate demographic multipliers­ the average number of people and school children associated with different type and size configurations of housing units. In addition. As discussed in chapter 6. Finally. The fiscal impact analyst uses demographiC multi­ pliers to predict the poputalions that will result from new housing development. Listokin. technical under­ taking. school-age children. In sum. to a lesser extent. the population and pupil generation associated with different housing configurations is a major influence on municipal and school district oper­ ating and capital obligations. For in­ stance. burden on the public sector in terms of accommodat­ ing growth. The mul­ tipliers for household size represent the average num­ ber of persons living in a housing unit and vary according to the type and size of housing units. townhouses. size is expressed by number of rooms or bedrooms. In years past. The housing types that revenues and affects local nonproperty and property tax collections and intergovernmental aid. a surplUS is realized. Listokin. associated with larger household sizes than are attached multifamily units while larger units house more household members. the introduction of a significant nonresidential ratable or certain types of residential development (such as an age-restricted housing complex) may. by increas­ ing the local property valuation per pupil. the base data employed in fiscal impact cost projections have been refined. but the analysis gives greater consideration to nonproperty tax revenues such I in a number of procedural guides. For residential development. Not only is the property tax more precisely estimated by considering ac­ tuallocal assessment practices. multipliers calculate the number of the two principal users of local services: people. residential facilities. case study. indud­ lng the case study and econometric approaches. the per capita method has been refined and supplemented by additional methodologies. Burchdl. Burchell. and other methodologies are detailed As might be expected. and econometric--<liffer mainly in the "transla­ tion" of population into public selvices and costs and. and Dolphin. for school services. Hous­ ing type refers to single-family (detached) homes.

The discussion thus far has focused on the attribute of residential growth-population (residents and pub ­ lic school-age children)-that prompts a public serv­ ice response.14 NA NA NA 3.000 square feet of nonresidential space. An illustrative exam­ ple is shown in Exhibit 8. all things being equal.571 NA NA NA NA $30. have concluded that it is the employment intensity of nonresidential development that prompts public service costs (Bea­ ton.975 Noles In this example. (For the illustrative example.000 square feet of nonresidential space. the school-age children projection of 192 students is not reduced to a public school-age pupil increment. a nonresidential facility that introduces more jobs into a community will generate a more significant and costly public service response for both operating and infrastructure development outlays than a sister non ­ residential project that is less labor-intensive.000 square feel) Project-Generated Population2 Cost per Unit 3 Project-Generated Cost Development Composition Residential lhree-Bedroom Four-Bedroom Number of Units (in square feet} People1 Pupils! Employees People Pupils Employees reople Pupils Employees People I Pupils Employees Total Single-Family DC'tached 100 100 3.0 309 377 67 114 NA NA NA 300 125 425 $581 $581 $581 $6.529 $219.l1 205 11 Nonresidential Office Retail Total NA NA NA NA NA NA NA NA 2.e.571 $6.1. 3Cakulated as shown in Exhibit 8.000 square feet of office space and 2.77 0.632 $104. Data sources for the num­ ber of employees per 1. The residential component includes 200 three. Employment intensity is typically expressed in terms of the number of employees per 1.571 NA NA NA $247 $247 $247 $179.281 NA NA NA $74.000 square feet of retail space yields a projection of 425 employees from the nonresidential component of the mixed-use development. The hypothetical mixed-use development encompasses 300 residential units and 150. Several studies.1: EXAMPLE OF A PER CAPITA FISCAL IMPACT METHOD: NUMERIC EXAMPLE Popul<ltion (per unit or 1.875 $1. .DOD 2.037 $119. In reality. formal fiscal impact analysis. the public school-age children figure would be the basis for calculating public education costs. the nonresidential sector. Exhibit 8. It is higher for certain categories of use such as office development than for warehousing. As in the social impact assessment. In a comprehensive study. In other words.09 3.05 !J. the de ­ bate over the corresponding nonresidential "unit" continues.0 employees per 1.5 employees per 1.5 NA NA $581 NA NA $6. the analyst typically focuses on public school-age chil­ dren or the share of school-age pupils attending pub ­ lic schools.000 square feet of retail space. pupils. NA = Not applicable I Derived from the demographic multipliers obtained from the American Housing Survt'lJ (see Appendix II).261. 9-12). 7--<l.094 $72. Applying household size and school-age children multipliers for the different type and size housing units planned for the project yields a development-induced population estimate of 891 peo­ ple and 192 pupilS.671 $1.257 $749.105 $4~0.000 square feet are discussed shortly. In conducting a fiscal impact study that considers effects on public services..000 50. In a full.571 $6.67 1. 2 Equals number of units/square feet multiplied by the respective population/employee profiles.) Applying a ratio of 3. The multipliers for school-age children represent the average number of children of school-attending age and are generally specified according to grade category (i.000 square feet of office space and 50.and four-bedroom single-family detached homes and 100 two-bedroom townhouses.2 128 .278 891 192 $517.for demographic multipliers are detailed in Appendix II of this handbook and are summarized shortly. 100. and employees. this last step would be in­ cluded. the former will typically be 80 percent to 90 percenl of the latter. 1983). however.. these population projections serve as the starting point for the identification of attendant ef­ fects. K-<i. public school-age children are assumed for illustrative purposes to equal the school-age children count. The demographic multipliers for different type and size housing units and the employment-intensity lev­ els for the different nonresidential land uses are ap­ plied against the matrix of the project pro forma to yield the anticipated project-induced population­ people.884. While agreement is Widespread that demographics are the appropriate "unit" to be consid­ ered with respect to residential development.100 Townhouse Two-Bedroom 100 100. for example.

Parcels $17. The per student expense is therefore $6. Expenditure Parameters Estimated Share of Residential-Associated Expenditures ~stimated 85. and any special districts (i. Assessed Value Total Assessed Value Residential Parcel Assessed Value $80G. Per Capita Method The per capita method first determines current public service costs on a per unit basis-per pupil for the school district and per capita and per em­ ployee for the municipality..000/25.000. fire. respectively.571. Expenditures Total Municipal Expenditures 2. village. and the other reference volumes cited earlier all detaU several techniques for deriving the associated services and expenditures while the ma­ values and the number of parcels. the next step is to translate the increment of people. The local tax base. township.465 million + 10.000 and workforce of 10. municipal outlays totaled S17 million. respectively.000/10.515.5 percent.000) $23 million 3. The calculation produces the residential percent of the resi­ dential/ nonresidential parcels and the residential per ­ cent of the residential/nonresidential property value. Exhibit 8.000) Total Local Population Municipal Expenditure per Capita Total School Expenditures Total School Population School Cost per Pupil Total Nonresidential-Associated Expenditures Total Local Employees Municipal Cost per Employee Source: Municipal and school district budgets.465 Il\illion is as­ signed to services associated with nonrestOentialland uses.2. for a com­ bined average of 85.0GO Total Parcels Residential Parcels 9. and workers into added public serv­ ices and costs. the service outlay per worker amounts to $247 ($2.600 residential parcels were valued at $600 million.600 96% Residential Parcel Percentage 3. park. With noneducational services.465.000. community college).535 million. The residential share of all residential and nonresidential service costs is estimated by divid­ ThlS analysis can be illustrated by referring to the example presented in Exhibits 8. The local school dis­ trict incurred outlays of $23 million to educate a stu­ ing the residential property value and number of par­ cels by the residential and nonresidential property dent population of 3.535 million) 10. and the combined value is then applied to the total local mWlicipal costs to de­ rive the estimated residential-associated share.000 parcels. The 85. jor methods are summarized below. it is incor­ rect simply to divide incurred outlays by the local population because such services benefit both residen­ tial and nonresidential land uses. The Practitio­ ner's Guide series.571 $2. 9.535. The Fiscal Impact Handbook. Service costs must therefore be apportioned between these two types of development. The two results are averaged. the municipal costs per capita to­ tal $581 ($14.000 25.000 residents and 10. comprising 10.e. 129 .000 75% Residential Value Percentage <1.500 $6. county.2: DETERMINATION OF FISCAL IMPACT COST PARAMETERS FOR THE PER CAPITA METHOD APPLICATION 1.000 employees. amounted to $800 million. The per student outlay is read ­ ily determined. Of this total. and 400 nonresidential parcels were valued at $200 million.535 million + 25.000 $581 ($14. however. With a local population of 25.000).000 $247 ($2. students. the remaining $2.Goo.5% (96% + 75%) Municipal Residential-Associated Expenditures (lx4) $14.$14.5 percent figure is applied to the total municipal outlay of $17 million to yield estimated residential-associated expenditures of $14.000 em­ ployees. Per pupil costs in the illu~trative community are calculated much more Simply.000 1O. The residential share of total valuation and total parcels was there­ fore 75 percent and 96 percent.465 million ($17 million . Total school costs or the total school property tax levy is divided by the total pupil en ­ rollment to yield the total cost or property tax ex­ pense.Projecting Costs Once the population introduced by growth is deter­ mined.500. respectively.000 $600. In the hypo­ thetical community of 25.1 and 8. per student.000).

571) in public service outlays. in the illustrative example. The econometric approach goes beyond the "one-snapshot-in-time" analysis to a "moving pic­ ture" of the community and its development profiles and tKe profiles' changing effects and interactions over'time. The cost and reve­ nue parameters embodied in the equation typically start at the existing average levels----€.191 (2. To this equation are introduced historical and current data matrices that allow past steady-state and current development conditions (both the target development under study and other simultaneous development) to affect future projections. For instance. the proposed development would require municipal outlays of about $0. estimates of annual expenditure. etc. a slightly different result is obtained when each type of single-family home is con­ sidered individually.11 x $6. however. It employs a basic equation that relates a ju­ risdiction's public service expenditures to its revenue parameters-tax base. pupil.6 million to serve the new residents and added workforce and about $1. the single­ family detached unit contains an average of about 3.914---less than one-quarter of the expenditure for the single-family detached home.11. Case Study Method The case study approach relies on intensive site-spe­ cific interviews of public officials knowledgeable of lo­ cal service conditions and capacities as the primary means of determining the effects of population growth on public services and costs. tax rate. especially with respect to the volunteer squads. and employee. The case study. $247 per employee. etc. public service costs amount to $1. growth will add to costs atlower-than-average per cap­ ita/ student/employee levels. Data matrices may include local expenditure and revenue levels per capita. the case study approach estimates school costs at about $1. including build­ out by type of land use.. respectively. relatively easily ef­ fected. step-by-step procedures for imple­ menting the per capita method are incorporated into the preview model. reveals a higher municipal serv­ ice outlay than that indicated by the per capita ap­ proach-$0.91 school-age children.91 x $6. and.and four-bedroom single­ family detached units. average assessed value per unit. The per capita method is the classic average-cost­ ing approach.43 x $581 + 0. For the townhouse unit.571.973 (3. growth will add to costs at higher-than-average per capita/stu­ dent/employee levels. and $6.Growth-induced public service costs are then fac­ tored by multiplying the per capita cost by the total number of people. As described earlier. value by category of land use. In the case of deficient ca­ pacity (capacitY below that needed to accommodate the existing population at current service levels). For these and other rea­ sons. For the illustrative project. 'The technique is straightforward. which has a lower household size and school­ age children yield (2. 425 workers.571) for schools for a total outlay of $1. and estimates of annual expenditure.3 million to provide public education. and pupil. which is detennined ar­ ithmetically by dividing local service costs by the cur­ rent service population.7 million compared to $0. These fig­ ures were based on the existing local costs per capita. Service costs are projected at the aver­ age per unit outlay per capita. respectively). According to the per capita ap­ proach. the per capita method would project costs of about $0. The level of detail of anticipated effects is revealed only by application of the case study method. revenue. At a per unit cost of $581 per capita. The per capita technique projects population-induced costs at the average per unit outlay. The econometric approach yields a picture of devel­ opment impact at the end of the development period as 130 . the illustrative mixed-use development was projected to add 891 peo­ ple.571 per pupil. According to the case study ap­ proach. As such. respectively. it is the most common technique employed in the field. which will require municipal outlays for capital equipment. employees. These differences are illustrated by the application of the case study approach to the hypothetical mixed­ use development. in most cases. The interviews identify the anticipated marginal costs of growth given conditions of excess or deficient service capacity.6 million to serve new residents and employees and school outlays of about $1.) At a per capita and per pupil cost of $581 and $6. (This discus­ sion aggregates the three. revenue. and real property valuation change under target and other development conditions.3 million to accommodate new pupilS. yields a quick handhold on the impacts of development. and pupils introduced by development.05 and 0. Econometric Method Both the per capita and case study approaches translate population into service costs in terms of a given set of service conditions and cost parameters de­ termined either arithmetically or through site study. average costs per capita. expenditures would be ascertained from inter­ views that would detail the specific personnel and capital equipment necessary to accommodate the pro­ posed growth.05 x $581) for mu­ nicipal services and $723 (0. Service costs can also be expressed on a per unit ba­ sis. employee. and 192 students. The case study method thus departs from the per cap­ ita approach in both its assumption and approach.6 million.1 million-$0. the development's pro forma schedules.g. In the case of ex­ cess capacity (capacity beyond that needed to accommo­ date the existing population at current service levels). The added cost reflects deficient municipal service capac­ ity.2 million less than the per capita ap­ proach because of the system's excess capacity. By contrast. the case study ap­ proach focuses on defining the marginal response to growth through intensive field-level investigation. the single-family detached home generates $7. and real property valuation change under steady-state condi­ tions.43 people and 0.

and automo­ biles. Slate Aid B.000 (38 x $6. the econometric approach would apply a year-by-year cost analysis to municipal outlays. rents. fines and penalties. as such. and steady-state conditions interact into the furure. Personal property 3. Thus. utility use. The most significant tax is commonly the levy on property.400 per pupil outlay in the second year. the case study identified some slack school capacity and. collect 131 . Real property 2. if the hypothetical project added 38 pupils a year over a five-year buildout. while extralocal sources pertain to intergovemmental transfers from the state and federal governments. To illustrate. the econometric approach allows fiscal comparisons of growth with and without the target development and thus presents an unfolding and often-changing perspective on the fiscal consequences of growth. case study. Other II Intergovernmental Revenues A.571). In considering growth-induced revenues.400). etc. many govern­ ments receive income from the sales tax. Other B. to population size.400 (76 x $6.500 per srudent factor in the first year of the projection. first-year schaul expendirures would total $247. The econometric approach. a property tax is also imposed on personal property as well as on the value of automobiles. For its part. a $6. unlike the per capita and case srudy applications. Charges for services 4. or econometric-the translation of population growth into public service costs yields one side of the fiscal impact calculation.700 per pupil cost to educate the 192 project-induced students. the analyst first determines the assessed value of the development in terms of its property tax constituent components-real. To calculate growth effects.well as at multiple interim stages. As growth adds to the population base. Federal Aid In projecting specifically how growth affects both local and extralocal revenues. For example.3 project revenue collections associated with the other revenue sources. Similar step-by-step calculations shown in Exhibit 8. In some jurisdictions. Income 5. property tax base) that can be invested. Thus. charges for services. con­ sumer sales. the development would at completion introduce 192 stu­ dents and incur projected growth-induced school costs of $1. Whatever tedmiquc is applied-per capita. the fiscal impact analyst first considers the basis for each revenue source and then examines how development will affect each source. In certain instances. royalties 2. To illustrate. personal. Similarly.500). Charges and Miscellaneous Revenues 1. in each case factoring how the target development affects local expendirures over and above steady-state trends and other develop­ ment impacts.500 pupils. revenue collections are related. projected total school outlays of$1. and income.1 million at the deVelopment's completion or a $5. Other taxes in­ clude levies on personal property. the full ma­ trix of public revenues should be examined as follows: I Own-Source Revenues A. and so on to the development's end-state. $486. the per capita approach used a $6. many local governments raise funds from fines/lioenses and pennits. The hypothetical example is useful in illustrating the differences among the three fiscal impact tech­ niques. would incorporate the year-by­ year differences into its annual forecasts. Given that the scltool district spent $23 mil­ lion to educate 3. To project the property tax revenues from growth. The local interest earnings from growth can be determined by calculating how development adds proportionately to local revenue re­ sources (i. second-year expendirures.571 per srudent cost factor but modi­ fies the cost over time as the target development. the community will levy more traffic violations and overdue library charges. Local sources comprise a variety of levies.3 million (192 x $6. By contrast. Licenses and permits 3.571 average per pupil cost parameter to pro­ ject growth-induced school outlays for the end-state and miscellaneous revenues. The assessed valuation is then multiplied by the prevailing property tax rate. In contrast to the typically fixed view af­ forded by the per capita and case srudy approaches. These costs must then be matched against development-induced revenues. Taxes 1. In addition to taxes. Sales of fixed assets 6. The local levies are usually the more significant sources of income and encompass taxes and charges applicable sales tax rate. and so on. Another source of local in­ come is interest earnings typically derived from in­ vesting major revenues before they are disbursed to pay for local expenses. government jurisdictions receive income from fees and assorted revenues from interest earnings. mits. per­ of development. other development.e. the econometric approach starts with the eXisting average $6. the population "flows" that result from the incre­ mental addition of new households might yield a $6. the property tax is a percentage levy on the value of land and improvements (real property). nus technique also compares steady-state and other-than-target develop­ ment conditions to those of the development under examination. Interest. the analyst estimates how develop­ ment will add to local sales and then projects the con­ comitant gain in sales tax revenues based on the Projecting Revenues Public service jurisdictions rely on revenues that in­ clude both local and extralocal sources. Utitity 4.. By introducing a more efficient service popu­ lation. Fines 5.

B.A.b. Other Local Taxes I. Other State Aid x .A..A. I. a. Real Estate Transfer Market value of property x Transfer tax rate x Annual turnover percent Real estate transfer sales tax revenue I.. Transient Occupancy Tax Number of motel rooms x Daily occupancy rate x Daily rate per room Nwnber x of rooms rented daily x occupancy lax LB. Motor Vehicle Sticker Vehicle ownership by type / size of housing unit x Vehicle sticker fee per automobile Transient Motor vehicle sticker tax revenue Transient occupancy tax revenue I.4. Income Tax Redistribution Population by type / size of x housing unit Population by type / size of x housing unil Population by type / size of housing unit Per capita income tax redistribution Per capita motor fuels redistribution Per capita "other" state aid Income lax revenue Motor fuels revenue Other state aid revenue II.Exhibit 8. Charges and Miscellaneous Revenue Interest Earnings Assessed value of growth + Existing community tax base x Existing interest income Interest revenue I.A.4.I.A.3. per kWh) Utility tax revenue I. Utility Tax Utility consumption (Le. Charges for Services Population by type/size of housing unit x Per capita service charge income Per capita automotive fine revenue Per capita library fine income Service charge revenue Automotive 1.I. Property Tax REVENUE FORMULA Market value x Assessment factor Assessed val ue Property tax revenue Assessed value x Property tax rate I. Licenses and Pennits Population by type /size of housing unit x Per capita license and permit income License and permit revenue I.3.2.3: FISCAL IMPACT ANALYSIS: MUNICIPAL REVENUE CALCULATION EXAMPLES REVENUE SOURCE I Own-Source Revenues I.4.B.e.B.A. Taxes I. Fines and Forfeits (Examples) Vehicle ownership by type /si. Sales Tax Added local sales x Sales tax rate Sales tax revenue I. kWh consumption) X Utility tax rate (i.c.A.2.ze of housing unit Population by type / size of housing unit x fine revenue library fine revenue x II Intergovernmental Revenues State Assistance II. Motor Fuels Redistribution II.A.4.8.B.c.A.4.

the first-year tax rate could be $2. if they fall short of revenues. a $2. the cost-revenue com­ parison is usually presented as a series of annual net ance. Thus. is attributable to the property tax. in the case study approach.804 $2.85 in the third year.0 school-age child multiplier for "blended" 3. local in­ come from fines and licenses can be expected to in­ crease as a proportionate share of population Intergovernmental income is projected similarly.00 but could decline to $1.2 mil­ lion in revenues. Where school aid fonnulas are more complex and. the next step is to determine the basic values for a fis­ cal impact assessment by translating the forecasted population into costs and estimating the development­ generated revenues..3.000 square feet) Project Component Residential Number Units/ 1. if a state granted $100 per pupil for textbooks. the tax assessor. when the econometric technique is used..and four-bedroom units) gener­ ate about $7. incorporate ratios between the local versus state average equalized valuation per student. the single-family SUMMARY OF THE FISCAL IMPACTS OF THE ILLUSTRATIVE EXAMPLE Fiscal Impact per Unit (per residential unit! per 1. 133 . the ana­ lyst would then ascertain how these relationships would change with the onset of development and thus how state support fonnulas would be altered. and 50 on as ensuing develop­ ment results in a fiscal surplus.e. a deficit i~ incurred.000 Square Feet Costs Revenues Net Impact ($783) $1. In determin­ ing revenues.600) $189. the single-family detached homes (combining the three. case study. the hypothetical example generates a total $2.778 Total Project Net Fiscal Impact ($156. the lower­ priced townhouses yield $3. The result is a net fiscal surplus of approximately $0. Of this amount. i.5 bedroom single-family detached units. To illustrate. This interactive rela­ tionship over time between development and the tax rate differentiates the econometric approach from the per capita and case study methods.253 $1.973 $1. a surplus is realized. $1. the cost-revenue comparison is typically expressed as ray of local nonproperty and intergovernmental aid sources described above. the analyst applying the econometric approach starts with a tax value such as the property tax rate but would modify the rate annu­ ally into the forecasting period as the target develop­ ment.2 million. These figures would typi­ cally be disaggregated to the unit level.8 million reflects the ar­ opment. for example. established tax parameters (i. the largest share. in both the per capita and case study approaches. the analyst typically spends the most time interviewing public officials responsible for revenue-municipal and school business administrators. Thus.5 household size and 1.993 $2. etc. Therefore. Thus. uses a 3. The result is a composite of the different fiscal impacts of the respective project components.190 $3. application of the per capita approach yielded total annual service costs ap­ proaching $1. In the hypo­ thetical example. By contrast.4 million or about two-thirds.9 million versus annual revenues of about $2. tax collector. if they exceed revenues.800 in total annual revenues. results. fundamental differences may be observed among the per capita.000 Single-Family Detached 1 Townhouses Nonresidential 200 100 100 50 $7. the remaining $0. By applying the formulas depicted in Exhibit 8.3 million. and steady-state conditions affect the jurisdiction's fiscal posture and annual prop­ erty tax levy.200 in total annual revenues. the differences are more a matter of nu­ an end-state value at development buildout.and four-bedroom units.914 $740 $616 $7.300 $88900 $346. The results are typically expressed for both the overall project and the individual development categories. In projecting growth-induced costs. other development. Costs are matched against reve­ nues. Further.more bicycle registration fees. Comparing Costs to Revenues Once the growth-induced population is projected.394 Office Retail Rounded to Note 1 Averages the results of three.90 in the second year.00 property tax rate) are applied to forecast the growth-induced revenues at the end-state of devel­ In the illustrative example. etc. to $1. the development-associated income for such aid would be equal to the number of new students multiplied by $100. When the per capita and case study approaches are applied.000 $225.890 $2. and econometric approaches. as shown below.e.600 $347.

it is not appropriate for the specialized condi­ tions best handled by the case study. The net fiscal surplus would therefore be $0. would be appropriate. developers. the case study estimated a lower service outlay of $1. Another consideration is that the advent of desktop computers permits the increasingly sophisticated application of the per capita method. that method can now incorporate some of the features that were once unique to the econometric technique. which is most sensitive to local conditions and anticipated effects. In other words. and other nonresidential develop­ ment that does not lend itself to Simple average per unit cost projections. Simi­ larly. energy plants. large-scale projects often produce differ­ ent impacts over the course of their buildout.g. and other sources. is attached to the use of the econometric method. The technique requires consider­ able setup time for the basic modeling and is there­ fore much more expensive than the other techniques discussed. especially the per capita method. once typically limited to show­ ing only end-point results. may now incorporate inter­ mediate fiscal outcomes as well. For instance. In the field. The former in­ clude the Public Use Microdata Sample (PUMS) of the decennial census and the American Housing Survey (AHS). They are available from national data sources and local surveys.. but the loss is more than offset by the surplus associated with the attached townhouse units and the project's office and retail uses. schools. applies the econometric approach as opposed to the per capita technique to the analyses of unusually large developments with commen­ surately long build-out periods (e. For instance. The econometric Demographic Multipliers Demographic multipliers indicate the average num­ ber of people and school-age children residing in differ­ ent type and size housing units. the local school-age population and reliance on local versus intergovernmental revenue).detached homes with high household and school-age children profiles produce a fiscal deficit. Un­ der what conditions would the analyst use the per capita.9 million. First. When the service system capacity bears a close relationship to service demand and the average cost of providing services to current users is a reasonable approximation of the cost to provide serv­ ices to future users. For similar reasons} the case Data Sources Whichever method is selected. aver­ age per unit service costs would misstate the true ef­ fects of growth. however. the case study. case study. the finding would be somewhat different. several data ele­ ments must be collected. study is suited to assessing the fiscal impacts of atypi­ cal residential development such as group homes or other facilities for special needs populations. It therefore serves as the basis for the preview model.. which stresses average per unit service com­ mitments. The very size of the developments might alter some of the basic condi­ tions affecting a community's cost and revenue pa­ rameters (e. When is the econometric method applied? As an average-costing approach. pacity and would understate the expensive service re­ sponse necessary under conditions of deficient capacity. the econometric method should not be used in situations where considerable slack or deficient capacity has been identified.8 million-Dr $0. The average would overestimate the needed service commitment in instances of slack ca­ per capita approach. A price. the per capita method is by far the most commonly applied of all fiscal impact tech­ niques. The most critical informa­ tion sources are discussed below. including military bases.1 million more by applying the case study method or a total of $0. wherever the per capita approach esti­ mated annual service costs at about $1. a planned unit development comprising thousands of units that will enter the market over a decade). the discussion turns to requisi­ te data sources for conducting a fiscal impact study. a appropriate and dictates use of the per capita ap­ proach. But it is important to consider the basis for their selection. By contrast in jurisdictions with considerable slack or deficient service capacity. the same general con­ ditions that dictate the selection of the per capita method apply as weB to the econometric method. In addition. the average-cost approach is most fects over time. however. As a result. The above discussion shows the fiscal impact re­ sult derived from the per capita method. it is most suitable for ascertaining the impacts of large. the three fiscal impact methods have been described in terms of their application. The case study is also the best method for deter­ mining the impact of specialized nonresidential facili­ ties. Accordingly.g.4 million. Because the econometric technique's equation incorporates a jurisdiction'S interactive and evolving cost-revenue ef­ Selecting an Appropriate Fiscal Impact Method Thus far. multiyear projects. 134 . method is instead used in "standard" development cases where average per unit costing reflects public service realities. Or econometric technique? One consideration relates to the appropriateness of average costing. Local data are available from the municipality.1 million less-due to the method's consideration of considerable excess school capacity. regional shopping centers. The analyst. however. With other methods.

generated by growth-are often the single greatest source of controversy and thereby frequently call into question the credibility of the results of a fiscal impact assessment. The use of locally derived demographic multipliers offers several advantages. These hurdles are compounded with respect to the overall project-generated population because no coun­ terpart to a school district keeps records on the number of people in different types of housing.. demographic multipliers from the PUMS or AHS may be dated by a culation of the operation-phase direct employment impacts in the economic impact analysis (chapter 7). In practice. and ond. Population An accurate count of the public jurisdiction's cur­ rent population is necessary for determining accurate 135 . economic de­ velopment. The pupil counts are available from busing.e.. can disarm much of the controversy.OOo-square-foot module can be derived from the data contained in the Census ofRetail Trade.g. For instance. A local survey is conducted as follows. the latter differentiated by grade level. at­ tendance. typically of the school-age children profile. The discussion thus far has focused on local pupil counts. retail. In addition to these published materials... or census region as opposed to a local com­ mtmity or school district). particularly when a fiscal impact assessment is applied to specialized housing types.g. and tax offices (e. in projecting the number of school-age children generated by a proposed town­ house development in a ski resort. information on the number of retail employees per 1. These sources can be used as a rough gauge to determine the average household yield per unit. the analyst should consider the school yields of similar vacation-oriented housing developments in the area. First. for the same school district under study). high. the nwnber of units and bedroom distribution of the development in question­ especially the latter--are frequently difficult to ascer­ tain. A local survey adds to the fiscal impact assessment's credibility and is especially compelling when considering atypical housing types such as vacation homes.e. and other records maintained by the local schools The third and final step is to divide the total number of school-age children by the total number of units to derive the average number of school-age chil­ dren per unit for the project under examination (i. however. demographic infor­ mation on household size is locally available from renter and housing purchaser applications as well as from other marketing information maintained by de­ velopers. Locally derived multipliers. By contrast.Appendix II of this handbook contains the most current demographic information available from such macrolevel sources as the rUMS and AHS. how­ ever.. Sec­ biased sample. Metropolitan Statisti­ cal Area. recently completed ski-area va­ cation homes) along with information on the number of housing units and their bedroom distribution. the analyst usually has to rely on national sources-the rUMS or AHS. marina or golf course). particularly school-age children.and low-end developments (i. In summary. In fact. despite the several advantages associ­ ated with locally derived demographics. First. not the general few years and/or may be available only on a larger geographic scale (e. the fiscal impact analyst should usc a local survey to validate the multipliers obtained from the rUMS or AI-lS.. demographic multipliers-used to de­ termine the number of people. the analyst may wish to contact trade and research organizations such as the Urban Land Institute and the International Council of Shopping Centers and local planning. In some instances. Even if school yields from com­ pleted projects can be obtained. and industrial devel­ opment. Whenever possible. is local surveys usually conducted by or in cooperation with the school board or school superintendent and based on busing or at­ tendance records. obtaining local demographic data is often problematic. estate homes and very low-income housing). Finally. a com­ mon problem with available sources of local informa­ tion is insufficient sample size Of.g. a county. the number of school-age children (K-12) for each of the identified housing developments is ob­ tained. certain jurisdictions im­ pose a "head tax" per employee and thus keep records on employment intensity). the analyst should seek out local information. Inlormation on the number of school-age children generated by specific types of development may not be recorded or may be held confidential and kept from the analyst. worse.OOO-square-foot module and are de­ rived from the sources noted in conjunction with the cal­ ski-area vacation homes containing two and three bed­ rooms). local surveys typically provide the most current information and the most jurisdiction-specific data (e. It presents the average household size and average number of school-age children.e.e. reliance on a school-age children counts derived from the rUMS or AHS. Another source of multipliers. The multipliers are typically expressed as the worker count per l.. units clustered around a spedal use (i. Office em­ ployment intensity is indicated in Trip Generation pub­ lished by the Institute of Transportation Engineers. The information is organized around the most common housing types and sizes (as expressed by number of bedrooms). Second. with respect to fiscal im­ pact assessment. Nonresidential Multipliers Nonresidential multipliers indicate the number of employees associated with different types of nonresiden­ tialland uses such as office. [t is much more difficult to determine local household size. a list of housing developments similar to the project under study is compiled (i. For instance.

. The current (1992) population would then be properly paired with current (1992) cost and revenue figures (e. the analyst must take advantage of the most current data. Costs and Revenues Cost information is obtained primarily from the budgets of the municipality. compares locally collected but state-distributed revenues (i. the fiscal impact analyst multi­ plies the expected assessed value of the incoming de­ velopment (as determined by the assessment ratios) by the property tax rate. informa­ tion on the status. First. assessor. Third. Thus. It is incumbent upon the analyst to update all population counts to the most current period by ex­ amining recent local housing production activity as in­ dicated by the number of certificates of occupancy that have been issued and by pairing production with the household sizes indicated by the demographic multipliers (see AppendiX II).g. ministrator of the respective public jurisdictions af­ fected by the development. such as costs to revenues to yield the net fiscal impact.per capita/per pupil costs that then become the basis for the per capita and econometric methods. To illustrate. Trends/Projections in Expenditures. Information is available from many of the source documents cited above as well as from interviews with public officials. For instance. in­ cluding a summary volume/section as well as de­ tailed backup materials on operating outlays (for staffing and support expenditures). each with an estimated household size of 3. or regional plan­ ning agencies. and so on. TIle analyst must consider the full set of budgetary documents. To project revenues from the real property tax. finally.. sales taxes) are transferred often must be obtained from the state treasurer's office. to­ tal municipal expenditures and total nonproperty tax income related to population) to derive valid fiscal im­ pact parameters (e. if a com­ munity reported an estimated 1990 population of 10. and/ or from state. Informa­ tion on population is available from the local plan­ ning department. capital costs (for major purchases). Revenue information is similarly available from the municipal. and county annual budgets as well as from the other documents mentioned above. toward the end of the tax year. Revenues. and debt service (for principal and interest repayment on preViously incurred liabilities). at one-quar­ ter of real value. For instance. figures on the total population are often out­ dated. must come from the state treasurer's office and/ or from federal program sources. The analyst should also consult other documents that reveal the jurisdiction's spending proclivities and needs. which may not always comport with the nominal official guide­ lines. This working ra­ tio must be incorporated into the fiscal impact calculation. county. the model projects the number of people/pupils/employ­ ees generated by growth. In considering anticipated property tax income.25. or business ad­ In using the population statistics. Similarly. Information on the tax rate and equalization ratio is available from the clerk. and other public jurisdictions affected by growth.g. a "working" equalization ratio may differ from the pub­ lished figure due to changing values.. information on how Preview and Quickway Models of Fiscal Impact Analysis The preview model of fiscal impact analysis fol­ lows the per capita methodology-the most widely applied fiscal impact technique-and encompasses the basic steps of cost-revenue analysiS. Typically. These ratios are important for indicating the share of true value at which a property is assessed. and future distribution of state and federal intergove=ental transfers. it translates the population increment into attendant public service costs by multiplying the development-generated population by the per person/pupil/employee expen­ diture factors. and Populations The econometric approach accounts for trends/pro­ jections in expenditures. Such documents range from the business ad­ ministrator's annual message that usually highlights changes in the immediate past and upcoming fiscal years to the jurisdiction's official capital facilities plan.000 and added 100 units of single-family detached homes over 1991 to 1992. the school district's vital statistics office. By con­ trast. revenues.5. equally as impor­ tant. especially in intercensal periods. school districts update their census of on-roll students on a quarterly or even more frequent basis. aid to education.5 means that a property is assessed for tax purposes at one-half its true value. the assessment-to-sales or equalization ratios. the school superin­ tendent should be queried with respect to anticipated enrollment trends and the receipt of state aid. and populations.350. school district. 1992 per capita municipal ex­ penditures and per capita nonproperty tax revenues). the analyst must consider the ac­ tual practice of the tax assessor's office. then the community's 1992 population would be estimated at 10. It is important to go beyond merely identifying the ju­ risdiction's sources of income to understanding how these monies are allocated. Second. a ratio of 0. school district.e. the preview model considers the revenues added by growth and. a ratio of 0. 136 . Property Tax Rate/Equalization Ratios The analyst must obtain the property tax rates for the relevant public jurisdictions and. flow.

the model generates the Quickway's results include a comparison of costs and revenues to the host municipality. revenues are expressed on Advantages and Limitations of the Preview Model The fiscal impact preview model offers numerous benefits. treasurer. The intergovernmental revenue generated by growth (output 11) is calculated through a similar procedure. respectively (inputs 16. 2. local nonproperty tax. etc. the input factors are either built into the either a per capita basis or a valuation-added basis 137 . The model then applies the property tax rate for the appli­ cable public jurisdictions (inputs 12 and 13) to the as­ sessed valuation to yield the development-induced property tax revenue by jurisdiction (output 9). school district. county. 9-12) (output 2). First. The resulting lyst enters the valuation and number of parcels . The inputs and outputs of the preview model are discussed in greater detail below. and other public jurisdictions. Revenue Generation (Outputs 8-12). In parallel.lnputs 1 through 9 encom­ pass the public service costs for the different public ju­ risdictions affected by growth. The net fis­ cal impact is determined by comparing the develop­ ment-induced costs versus revenues. school district. per $1. Net Fiscal Impact/Effects (Outputs 13-16). To project the development-in­ duced population and workforce. Obtained from the existing local budget. The model multiplies the project-induced population by the existing cost pa­ rameters contained in inputs 1 through 7 to generate ate. The model projects local nonproperty tax income (output 10) by multiplying the project-induced popu­ lation and valuation (outputs 1. service costs. including the municipality.000 of assessed value). or large. The property tax determination involves two calculations. The 23 input factors follow: Population Faclors. these factors are unique to each location. For the property tax. Included.Quickway approaches the cost side of fiscal impact analysis by using model factors for the development­ generated population and employment.000 valuation. and assessor. the as­ sessed valuation (output 8) is computed by applying the assessment ratio to the market value of the project (both previously entered as inputs 10 and 11).. The inputs include base data either built into the model (i. demographic multipliers) or added by the user (i. or employee. and inter­ governmental revenues. The preview model contains 16 outputs that are re­ lated to the input fields as follows: Population Generation (Olltputs 1-3). Its data demands are not bur­ densome. Cost Generation (Outputs 4-7). the model yields the number of employ­ ees (output 3). Revenue Factors (Inputs 10-23). Population and employment arc converted to costs of develop~ ment by applying other model factors for average costs per capila. and federal and state aid (outputs 9 through 11) yields the total income generated by growth (output 12). the project pro forma and the local property tax rate). pupil. 7-8. and county as well as a statement on the magnitude of the annual fiscal surplus or deficit: small.e. cific local values must be entered into the model. QUickway han­ dles development-generated revenues by applying av­ erage equalized tax rates to the development's market value. where nonresidential or mixed-use development is considered. the ana­ the project-induced outlays required of the municipal­ ity. The analysis in the preview model is effected through a series of inputs and outputs (see Exhibit 8. Inputs 10 through 23 include parameters for calculating the development­ induced property tax. To apportion municipal!county expenditures associated with resi­ dential and nonresidential uses. The values are readily available. the demographic and nonresidential multipliers were already applied to the project pro forma in the social impact compo­ nent of the model. too. the spe­ surplus or deficit figures are indicated individually for all the affected public service jurisdictions as well as in aggregate (outputs 13 and 14). (i. respectively. For local nonproperty income and inter­ gov€'mmental sources.e. rnoder~ number of people (output 1) as well as the number of children added.. and 21). The sum of the development-induced property tax. The data are readily available from the local business administrator. Cost Factors (Inputs 1-9}. which is the most applicable and widely used cost-revenue method. and 8) by the pre­ viously determined nonproperty tax revenue per capita and per $1. these values are entered as in­ puts 16 through 23. the latter differentiated by school grade level (K--{j. For the devel­ opment under exalnination. therefore. contributed by the two respective land use categories. and the net fiscal effect. revenues. As with local costs. These cost-reve­ nue outcomes are then placed in perspective by relat­ ing the figures to total revenues as well as to the property tax levy for each affected public jurisdiction (outputs 15 and 16).17. First.20.4).. The outputs include the interim and final cal­ culations of fiscal impact analysis such as the develop­ ment-induced population. nonproperty tax.e. are average relationships be­ tween property taxes generated and other sources of revenue. it is patterned after the per capita ap­ proach. The inputs therefore start with the public service expenditure profile. The level of the annual surplus or deficit is further presented as a share of total annual reve­ nues raised. the analyst obtains the applicable assessment-to­ sales ratio and the property tax rates from the asses­ sor's office for entry into the model as inputs 10 through 15. school district.

Total municipal development-induced public revenues 9. Development-induced school property tax revenues 10. Municipal nonproperty taxes associated with population 18. Municipal fiscal impact perspective (total revenues) (Quickway) 15. a. Total municipal population 7. Development-induced school expenditure 7. Municipal intergovernmental revenues associated 11. Development-induced total expenditure 3. Development-generated residents 2. a.Exhibit 8. I\. Development-induced school nonproperty taxes 14. School property tax base 16. Development-induced municipal nonproperty taxes 11. Development-induced municipal intergovernmental revenues 12. Development-generated employees PUBLIC SERVICE EXPENDITURES (PREVIEW MODEL) 4. Development-generated employees PUBLIC SERVICE EXPENDITURES (PREVIEW MODEL) 1. Total education expenditures 9. School intergovernmental revenues associated with popUlation DEVELOPMENT NET FISCAL IMPACT (PREVIEW MODEL) 13. School fiscal impact perspective (total revenues) (Quickway) 16. Municipal nonproperty taxes associated with property value 17. Development-induced school net fiscal impact 14. Project value 11. a. School intergovernmental revenues associated with value 23. Development-induced municipal expenditure 5. Municipal property tax base 15. School nonproperty taxes associated with value 21. Development-induced municipal nonresidential expendihlre 6. Total school development-induced public revenues with property values 19. Development-generated school-age children 3. Property·tax-assessment-to·sales rate 12. Development·mduced municipal net fiscal impact 13. Development-generated school·age children 3. a. a.funicipal fiscal impact perspective (property taxes) 16. Development~induced total net fiscal impact 15. School fiscal impact perspective (property taxes) 138 . Development-induced school intergovernmental revenues 12. Development~induced assessed valuation 9. School property tax levy (rate) PUBLIC SERVICE REVENUES (PREVIEW MODEL) 8.4: PREVIEW AND QUICKWAY MODELS OF FISCAL IMPACT ANALYSIS INPUT DEVELOPMENT-INDUCED POPULATION (PREVIEW MODEL) 1. Total nonresidential valuation 6. Municipal intergovernmental revenues associated with population 20. a. a. Development-induced municipal property tax revenue 10. Development-generated residents 2. Total municipal expenditures 2. Total residential parcels OUTPUT DEVELOPMENT-INDUCED POPULATION (PREVIEW MODEL) 1. Municipal property tax levy (rate) 13. Total nonresidential employment 8. Total nonresidential parcels 4. Total re~identidl valuation 5. School nonproperty taxes associated with population 22. Total school enrollment PUBLIC SERVICE REVENUES (PREVIEW MODEL) 10.

as such. Most fundamen­ tally. including municipal and school expenditures. costs induced by the residential versus nonresidential com­ ponents of a project. a developer or consultant may wish to "run" the model to get a quick. and replicated. and location. and indi­ cates that a "shopping center will generate $1 million in property taxes upon buildout. Thus. the consultants retained by these boards. the developer often explores alternative development possibilities in terms of type. it is often instructive to present the findings of the preview analysis-provided the limitations of the model are made clear. and the public at large. cost figures. revenues by jurisdiction. When a project is first considered. the net fiscal effects by individual jurisdiction and the aggre­ gate public impact. in cases of severe excess or can proVide useful information. standalone cost-revenue study is per­ fanned. yields an approximation rather than the most accurate projection of develop­ ment-induced revenues. As a per capita methodology. Unbalanced Presentation The cost-revenue equation must be appropriately balanced across several dimensions. say a subdivision of 20 to 30 homes. the other cost and revenue parameters. it oversimplifies certain revenues--especially intergov­ ernmental transfers. reve­ nues differentiated into property.model or otherwise readily obtainable. a full fiscal impact study may not be required or even appropriate. General Considerations Inadequate Documentation The "numbers" in a fiscal impact report-the devel­ opment-induced residents and school-age children. finally. Nonetheless. the case study approach provides a more accurate picture of the impacts of growth. Revenue inputs are factored on a per capita or valuation-increment ba­ sis. This discussion points to the appropriate use of the preview model. other local source. A quick preview analysis of the fiscal effects of the vari­ ous scenarios can help the developer select the most promising options. are also readily collected from published budgetary documents and/or from con­ tacting the local business administrator and school superintendent. both revenues and costs must be presented. the model produces a full array of cost-revenue outputs. While such an approach is generally acceptable. provide a reasonably reliable depic­ tion of the order-of-magnitude fiscal impact of growth. For instance. the model is widely applicable though not always best suited to all situations. and so on-are often presented without sufficient back­ ground discussion and documentation. Despite its modest input data demands. includ­ ing a detailed breakout of the development-induced Such order-of-magnitude information is useful in several situations. the case study method offers a level of descrip­ tive detail on local conditions and service responses Critiquing a Fiscal Impact Analysis A fiscal impact study is reviewed by several indi­ viduals-the client paying for the report. and. costs by public service jurisdiction. and calculations that guided the analysis so that the study can be understood. None­ theless. plan­ ning/ zoning board members. an analyst presents only one side of the equation. scale. The preview model is not structured to reflect such a high level of specificity and." The revenue fig­ ures signify nothing in the absence of corresponding cost figures. The analysis would typically be undertaken in conjunction with parallel studies of eco­ nomic feasibility and environmental and traffic im­ pacts. The follow­ ing provides a checklist for such review: that goes far beyond the preview model's strictly nu­ meric outputs. In a few lingering cases. the model does not give a "black box" final result but arrays and shows all the calculations and intermediate products that lead to the calculation of the final fiscal impact. The preview model does. (These other exploratory studies could be assisted through use of the preview model in the vari­ ous substantive areas. 139 . This preview is useful because the full study may not be completed for many months. databases. Another shortcoming concerns the manner in which the model calculates revenues. To illustrate. slack capacity. report-length fiscal impact study that embodies case study detail. Similarly. typically the revenue side. On a smaller project. considers the nuances of each revenue source. the model does have some shortcom­ ings. the new increment of property taxes. and so on. The model does not substitute for a comprehensive. It is impera­ tive to detail the assumptions. however. Intergovernmental aid is often distributed according to complicated formulas that re­ late local to state parameters (local valuation per pu­ pil compared to a state foundation level) whose values themselves change annually. the fiscal impact preview model population. It is useful for quickly answering whether de­ velopment will approximately break even or likely generate a large or small surplus or deficit. followed. the assessment-to-sales ratio and property tax rates as well as the number and value of parcels by resi­ dential/nonresidential type are either posted in offi­ cial public documents such as the annual tax roll or are available from a telephone call to or interview with the tax assessor. In ad­ dition. and intergovernrnental categories. in-house sense of the final re­ sults.) Once a developer decides on a development option and applies to the appropriate public authorities for de­ velopment approval. Even when an independently commissioned.

60 percent or more). incorporate the field-level operating practices of the assessor and other tax officials? Are the revenues properly stated? For instance. con­ versely. Projecting Revenues Are the appropriate revenues counted? As stated ear­ lier. For in­ stance. The reviewer should also be sensitive to possible mathematical errors in the calculation of both costs and revenues. case study. and-as important-what was not covered in the analysis. Technical Checklist Demographic Multipliers Are the multipliers current? Do they reflect the lat­ est available information such as that contained in Ap­ Presentation The fiscal impact analysis report should contain the following components: A. Overview of the Report Outline of what was requested. D.g. The correct procedure is to use the same basis for both rate and assessment.g. and/or other local surveys. E. the advan­ tages associated with the chosen method. and intergovernmental allocation formulas? Are the revenues locally sensilive? Do they C. many factors must be moni­ tored in revieWing such a study. Large Order-of-Magnitude Impact A fiscal impact report is suspect if it shows a result that is extremely large in terms of its order-of-magni­ tude effect on the community-whether a significant surplus Dr deficit with a marked effect on the local ju­ risdiction (e. While it is theoretically possible that a project can yield a signifi­ cant result. development-in­ duced capital costs should be shown on an amortized rather than lump-sum basis. total costs/revenues. Applying the $2. certain revenues are generated annually. it is important to avoid further imbalances. to calculate a development's impact on the local school district..000 amount per unit annually would overcredit the development-induced revenues. consequently. public jurisdictions usually pay for infra­ structure over time. case study. site visits/personal interviews. general demographic sources should not be used for specialized housing types. if the analysis considers only the costs sup­ ported by the property tax (i. Summary of Findings Brief presentation on the number of people. the analyst should use the number of public school-age children and not the more encompaSSing school-age children figures. B. what (if anything) was added to the report. If other growth-induced revenues (i. it is more likely that a fiscal impact study is flawed by one of the above considerations (e. a fiscal impact analysis is a technical un­ dertaking and. intergovernmental aid) are added. permit and fee schedules. or econometric. com­ puter tapes. Methodology Employed Basic technique employed-per capita. Are the revenue factors clIrrent? Do they reflect the latest assessed ratios.e. and impact on local taxes. property tax rates. fiscal surplus or deficit. pendiX II? Are the multipliers correct? For instance.000. then it must focus exclusively on ad valorem revenue collections. Data and Data Refinement Information sources: published documents.e.. the per capita expense determined by dividing the property tax levy by the local population). either decreasing or increasing prop­ erty taxes by 40.. This difference in timing should be incorporated into the analysis. In short. a mismatch commonly oc­ curs in pairing the property assessment with the tax rate. school­ age children.. 50. Are the demographics locally sensitive? Has every effort been made to obtain local information and/ or feedback? Projecting Costs Is the appropriate method applied-per capita. if prop­ erties tum over an average of once in five years and the transfer tax on a sale is $2. or econometric? Are the cost factors cur­ rent? Do they reflect the latest budgets and popula­ tion estimates? Are costs properly stated? For instance.. costs are not correctly paired with revenues) or by one of the technical errors outlined below. For example. To illustrate. then the analysis is unfairly tilted to show a benefit from growth. Applying an equalized tax rate to the assessed tax base results in an undercount of income.Even when both costs and revenues are indicated. costs and revenues must be properly paired in terms of the property tax and non property tax compo­ nents. the latter includes stu­ dents attending nonpublic schools. then the expected transfer tax income per year is $400. the time at which a property is sold and the recording tax paid. Le. Development Costs What are they? What do they include (operating and capital)? How severe a test of the development are they? How do the estimated costs compare to the results from other studies conducted in either the same jurisdiction or elsewhere? 140 . as such. what the procedure covers. but others accrue on a periodic basis. multiplying the market value by the nominal tax rate overcounts revenue. Are the multipli­ ers appropriate? As discussed.

The analyst should stress that fiscal impact analysis overstates the development-induced population and costs but undercounts revenues. In general. the cost-revenue report factored a value of 1. where appropriate. describe in some detail how the devel­ opment-induced population was determined." Summary. Describe "fiscal im­ pact analysis" in simple terms and present the find­ ings for the case in question. Net Fiscal Impact Annual and! or cumulative annual difference be­ tween costs and revenues. Given that projections often become a point of contention. Development Revenues What are they? What do they include (local/inter­ governmental transfers)? How conservative is the analysis of revenues? How do the report's projections compare to studies of development revenue flows conducted in the same locale or elsewhere? G. A fiscal im ­ pact report cannot be presented in the abstract by merely stating the net result without an explanation of the intermediate calculations and base assump ­ tions. added/reduced an ­ nual property taxes of $50 per household)." H. the public presentation follows the report format de­ scribed above. Discuss the development-induced population within the context of the eXisting local population base. and unnecessary numeric detail. or econometric-produced the most rigorous pOSSible analysis. It is opportune at the concluding point in the presentation to summarize the interim and final demographic and fiscal results of the cost-revenue analysis and to discuss their significance. the ana­ lyst might state. Projecting Population. equipment. Summarize the dollar amounts generated from the different revenue sources and provide the to­ tat. local nonproperty. and so on combines the technical nature of the written report with the art of oral communications. "Even if the development-induced costs are twice as high. board of adjustment. Place the projected cost-revenue result in proper perspective by stating what it means to the local taxpayer. pupilS. An effec­ tive presentation achieves a balance of appropriate technical detail and narrative that can be clearly fol­ lowed by the audience.. the analyst must understate the surplus by add ­ ing a cushion for additional costs. F. Summarize the projected number of people. On the other hand. especially with respect to the property tax. 141 . To be conservative. Such an approach compromises credibility.000 in school outlays was attributed to the project. and workers generated by growth. One way of fostering effective communications is to use boards and!or handouts that illustrate some of the assessment's critical assumptions. too much emphasis on numeric and methodological detail will lose the audience. Such a presentation places the project-induced effects in perspective. The presentation should proceed as follows: Introduction and Summary. Restate the population-induced service costs.0 for single-family de­ tached homes. Indicate that the numbers were reviewed with local officials and in other ways checked against "real world" expe­ rience. Rigor of the Analysis The analyst should emphasize the extreme care taken to interpret the development and its impact and discuss how reliance on the chosen method-per cap ­ ita. the analyst should under ­ score the confidence level of the fiscal impact finding by stating.1 derived from the PUMS. relate the total to the existing total revenue base." Similarly. development-generated revenues. a fiscal impact surplus will still re­ sult. if the study demonstrates a significant positive revenue flow. Impact in Context What is the impact of the development in the con­ text of total local expenditures or in the context of all revenues raised through the property tax? What will it mean to the tax rate? How does it compare to other tax increases or decreases experienced historically? Projecting Costs. obscure meth­ odological discussion. Most people are familiar with this reve­ nue source. case study. It is useful to prepare a summary sheet!board that arrays the critical project-induced effects against the commu­ nity's current population and financial parameters. The public presentation of a cost-revenue report be­ fore a planning board. If the study demon­ strates a small net impact relative to earlier expenditures or the fiscal profile data. I. and the resulting net fiscal effect and immediately discuss the net fiscal effect in terms of what it signifies to the local budget and taxpayer (e. Describe the cost projections in simple terms and proVide an illustrative example of the calculation. and!or capital improvements. Relate the develop­ ment-induced expenditures to existing local service outlays. "While official school enrollment studies use a multiplier of 1. Describe briefly what the imputed costs will pay for-added staffing. Indicate the revenues that were projected-local property.. This means that an additional $15.g. Net Fiscal Impact. and intergovernmental-and give an illustrative ex­ ample of lhe projection. Explain why the technique was chosen. To illustrate. the conservative nature of the fiscal impact approach. Methodology. the analyst should not specify a trivial surplus or deficit but in­ stead call the net impact a "break even. The art of effectively presenting the results of a fis­ cal impact study cannot be overstressed. Outline the method used by relying on a general illustratiye example. Projecting Revenues. calculations. It should avoid jargon. It is also important to discuss.

interest is growing in the infra­ structure consequences of growth. road use. the basis of the demographic multipliers and the reliability of the multipliers over time (see Ap­ pendiX II) are often the subject of still more questions. These materials should include graphics (i. While such a study is inherently technically diffi­ cult." then the findings of the broader fiscal study.. bar and pie charts) that add vitality to and en­ hance the understanding of the presentation (see chapter 2 for further details). These "multipliers" will provide a more precise measure of the financial impacts of growth. "counts" of average ated. fiscal impact analysis is typically used exclusively as an evaluation technique. 142 . when a fiscal impact re­ port shows that attached housing yields a surplus. Further. be attributed to different categories of incoming growth. The coming decade will also see changes in the tech­ nique of fiscal impact analysis.) Similarly. For instance. the field of fiscal impact analysis will remain vulnerable to charges that its methods have not been empirically verified-at least until retrospective analy­ sis becomes part of the process. To illustrate. Fiscal impact analysis compares all development-induced costs­ both operahng and capital-to all development-in­ duced revenues.g. impact fee schedules. As practiced today. tions and address underlying concerns in the body of the presentation.) In­ creasingly. New types of multipliers will also be devel­ oped. will increasingly build in sensi­ tivity to deficient and surplus service capacity condi­ tions and will adjust development-induced service costs accordingly. the question is whether such a differentiation is appropriate. "How can that occur? Don't such units cost less than detached homes?" Rather than waiting for the query. in the future. If the raison d'etre of the impact fee is that"growth should pay its way. for example. and the public forum is often adversarial and controversial. in the specifica­ tion of per capita costs. Another audience The development of infrastructure profiles has also been sparked by the growing interest in impact fees. and the like-will undertake fiscal inlpact assessments. the projected impacts of growth undprgo no evaluation after development to measure the actual costs incurred and revenues gener­ ent type and size housing units. echoing the case study approach. sewage generation. Given the relationship between fiscal impact and impact fee analysis as it exists today. the analyst should include an appropriate explana­ tion when such a fiscal impact finding is first pre­ sented. The per capito approach will slill dominate but will incorporate the best features of the other methods.e.and findings. specifically its capital improvement needs. Today. In sum. The experience of comparable commwlities offers important inSight into future fis­ The mid. Here the fiscal experience of jurisdictions as they change in size and direction of f growth (e. Impact fee determination focuses only on capital costs and credits a share of revenues against the development-induced infrastructure ex­ member is likely to ask. This explanation would point out that attached housing is often a good ratable because it in­ troduces relatively small households with rew school­ age children. gaining or losing population) is incorpo­ rated into the analysis as. and the future will witness greater overlap (see chapter 10 for a discus­ sion on strategies for integration). attached units generate relatively modest serVice costs. AppendiX II of this handbook. A further modification in the per capita technique involves increased application of comparable city or community refinement. the public sector-agencies that prepare mas­ ter plans. the focus of the analysis will expand to an areawide level that encompasses several developments and overall land uses. just as demographic cuunts are now associated with differ­ cal changes and the impact of growth. In the future.. The follOWing changes are anticipated with respect to applications. Accordingly. ful treading through a minefield of questions and challenges. As such. Traditional fields of information such as demographic multipliers will be refined. (Such change parallels the shift in EIS evaluations frum project-specific to regional. thorough preparation is needed to ensure lhe effective public presentation of a cost-revenue penditures. capital facilities projections. The delivery of an accurate yet convincing presentation requires care­ impact equation are germane to the impact fee calcula­ tion. The per capita technique will also begin to incorporate the multiyear. but im­ pact fees go beyond planning considerations to a charging mechanism. for instance. and teChniques. interactive study of the econometric method-a proce" facilitated by the grow­ ing use of the desktop computer. Finally. The field to date does not test its results. "How can an expensive de­ tached unit yield a deficit?" (The explanation is the converse of the one just given for attached units. Future Directions This chapter began with a discussion of how fiscal impact analysis has evolved over the past half-cen­ tury and will continue to evolve during the 1990s. Another suggestion is to anticipate common ques­ water use. Some jurisdictions are already beginning to inte­ grate the two fields of analysis. the discipline of fiscal impact analysis will have to confront the issue of reliabillty. fiscal impact analysis is most commonly com­ missioned by a developer to study an individoal project. fiscal impact analysis and impact fee determination are distinct fields. data. at least one member of the audience is likely to ask. staffing need projections.and late 1990s will also see improve­ ments in data. The per capita technique. and park and library facility needs will. uses PUMS and AHS data. The material is technical.

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