FISCAL IMPACTANALYSIS
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Transcript of FISCAL IMPACTANALYSIS
FISCAL IMPACT ANALYSIS
TOPICS
• What is a FIA
• FIA methodologies
• FIA Shortcomings
• Rethinking FIA
• FIA and economic development policy
WHAT IS A FIA
• A tool to determine whether or not a given decision on urban development is fiscally sound (i.e. Costs=Revenue)
• A tool to evaluate the efficiency of different urban models (sprawl vs. compactness)
• A tool to guide public decision regarding the advantages or disadvantages of pursuing a specific decision (e.g. to subsidize a specific development such as sport arena)
• A tool to evaluate the fiscal impacts of a given industry coming to or leaving the town
FIA METHODOLOGIES
AVERAGE COST APPROACH 1. Per capita multiplier: (Assumes that the best
estimate of future costs is current per capita cost multiply by the future population increment)
2. Service Standard: (Estimates future costs increases based on average per capita costs for
comparably cities) 3. Proportional valuation: (It is an average cost
approach applied to non-residential development)
FIA METHODOLOGIESMARGINAL COST APPROACH • Comparable city method: (Uses a cross-sectional
sample of average expenditures of cities in varying size and from there infers the marginal costs of development)
• Employment anticipation method: (It uses multivariate regression analysis to predict the change in municipal expenditures attributable to variation in commercial and industrial employment)
• Case study method: (It uses qualitative methods-interview- to gather information)
Cost function of public services
$
Q (pop)
TC
MC
MC
Cost function of public services
$
Q (pop)
AVERAGE VS. MARGINAL
COSTS TP POP AC MC CAPACITY WAST PC=5 Excess
100000 10000 10.00 ---------------- 150000 50000 100000
100000 12000 8.33 0 150000 60000 90000
100000 15000 6.67 0 150000 75000 75000
100000 20000 5.00 0 150000 100000 50000
100000 22000 4.55 0 150000 110000 40000
100000 25000 4.00 0 150000 125000 25000
100000 26000 3.85 0 150000 130000 20000
100000 30000 3.33 0 150000 150000 0
150000 33300 4.50 15.5 300000 166500 133500
AVERAGE COST FUNCTION
0.00
2.00
4.00
6.00
8.00
10.00
12.00
0 5000 10000 15000 20000 25000 30000 35000
POPULATION
SOME IMPLICATIONS
• Average costs would be fine as long as there is some excess capacity of public service
• Marginal costs approach become important in fast growing cities under pressure to accommodate additional growth which requires expansion of public services
FIA SHORTCOMINGS (G. Bunnell)
• It takes into account only direct costs and revenues but does not take into account the spillover effects (costs and benefits) of development
• Costs are often over emphasize than benefits because they are easy to calculate
• Some expenditures consider as costs such as education bring benefits but they are solely considered as costs
• We may come to perhaps wrong conclusions such as that communities are better off not growing taking into account that the costs of any development (commercial or residential) are more than what it generates in revenue.
FIA SHORTCOMINGS (G. Bunnell)
• Evidence suggests that impact fees have not produced more compact cities or smarter growth patterns of urban development
• Impact fees have fostered the “secession of the successful” and overlook social issues that are important to society regardless of fiscal effects (affordable housing, good education, etc.)
• FIA should be used only to educate and generate debate regarding public policy instead of being the ends of public policy
RETHINKG FISCAL IMPACTS• FOCUS SHOULD BE PLACED ON OUTCOMES
INSTEAD OF INPUTS (Heikkila) • Planners should focus more directly in the relationship
inputs and outputs which is also called the production function
• An example of production function could be represented by the combination of trucks (capital) and employees (labor) needed to collect all the garbage in a neighborhood or city.
s = f(x,n) s= level of serviceX= inputs N=neighborhood attributes
Source: Heikkila, 1996
FIA IN PRACTICE
REVENUE SOURCE TOTAL RESIDENTIALCOMMERCIAL/
INDUSTRIALFARM/FOREST/ OPEN
SPACE
Property Taxes $11,588,855.00 $8,003,775.00 $3,572,253.86 $12,826.14
Excise Taxes $850,687.39 $655,005.30 $195,682.09 $0.00
Penalties/Interest $63,427.34 $48,796.96 $14,578.04 $52.34
Payments in lieu of taxes $169,019.32 $130,032.71 $38,847.13 $139.48
Charges for service $33,000.00 $25,388.10 $7,584.67 $27.23
Fees $296,954.59 $228,457.97 $68,251.56 $245.06
Licenses/Permits $153,878.13 $118,384.05 $35,367.10 $126.99
Investment Income $319,086.68 $245,484.99 $73,338.36 $263.32
Special Assessments $7,022.90 $5,402.97 $1,614.13 $5.80
Fines/Forefeits $73,487.50 $56,536.61 $16,890.25 $60.64
Misc. $55,499.71 $42,697.95 $12,755.96 $45.80
State Aid: Education $1,212,329.00 $1,212,329.00 $0.00 $0.00
State Aid: General Govt $808,445.00 $621,966.16 $185,811.69 $667.16
Total $15,631,692.56 $11,394,257.77 $4,222,974.83 $14,459.96
Source: http://www.littletonma.org/MasterPlan/Chap10
EXPENDITURE TOTAL RESIDENTIALCOMMERCIAL/
INDUSTRIALFARM/FOREST/ OPEN
SPACE
General Gov't. $1,135,722.00 $873,752.26 $261,032.50 $937.23
Police $834,888.00 $642,309.72 $191,889.30 $688.98
Fire $403,525.00 $310,446.47 $92,745.53 $333.00
Control Center $247,207.00 $190,185.34 $56,817.66 $204.00
Other Safety $16,306.00 $12,544.80 $3,747.74 $13.46
Building Commissioner $64,472.00 $49,600.66 $14,818.14 $53.20
Health & Sanitation $29,274.00 $22,521.55 $6,728.29 $24.16
Highways $935,818.00 $719,958.84 $215,086.89 $772.27
Pensions $1,174,849.00 $903,854.09 $270,025.39 $969.52
Other $235,437.00 $181,130.25 $54,112.46 $194.29
Assessments $42,729.00 $32,872.97 $9,820.76 $35.26
Debt & Interest $777,906.00 $598,471.39 $178,792.65 $641.95
Weights & Measures $2,198.00 $1,692.40 $505.60 $0.00
Board of Appeals $4,412.00 $3,397.12 $1,014.88 $0.00
Water Department $852,466.00 $656,374.78 $196,091.22 $0.00
Cemetery $40,873.00 $40,873.00 $0.00 $0.00
Veterans' Services $4,565.00 $4,565.00 $0.00 $0.00
Library $246,961.00 $246,961.00 $0.00 $0.00
Council on Aging $64,873.00 $64,873.00 $0.00 $0.00
Parks and Rec. $63,979.00 $63,979.00 $0.00 $0.00
School $7,595,500.00 $7,595,500.00 $0.00 $0.00
Total $14,773,960.00 $13,215,863.65 $1,553,229.02 $4,867.33
Source: http://www.littletonma.org/MasterPlan/Chap10
Residential Commercial/Industrial Farm/Forest/Open Space
Revenues Expenditures Revenues Expenditures Revenues Expenditures
$11,394,257.77 $13,215,863.65 $4,222,974.83 $1,553,229.02 $14,459.96 $4,867.33
$1.16 $0.37 $0.34
Source: http://www.littletonma.org/MasterPlan/Chap10