Fiscal Impact Analysis:

Methods, Cases, and Intellectual Debate

Zenia Kotval and John Mullin
With research assistance from Maureen Lempke

September 2006





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Contents


I nt r oduct i on


Met hods f or Est i mat i ng Fi scal I mpact s
Aver age Cost i ng
Mar gi nal Cost i ng

Local Fact or s I nf l uenci ng Choi ce of Met hod
Pr oper t y Tax St r uct ur e
Nat ur e of t he Communi t y
Type of Devel opment
Pur pose of Anal ysi s
Level of Exper t i se Requi r ed
Accur acy and Avai l abi l i t y of Dat a

Di mensi ons of t he Gr owt h Debat e
Compact Devel opment vs. Spr awl
Resi dent i al vs. Nonr esi dent i al Devel opment
Agr i cul t ur e vs. Resi dent i al Devel opment
I nf i l l vs. Edge Devel opment
Cost of Communi t y Ser vi ces St udi es

Li mi t at i ons of Tr adi t i onal Met hods

I nt el l ect ual Debat e over Fi scal I mpact Assessment
Aver age Cost i ng
Mar gi nal Cost i ng
Cr i t i ques of Cur r ent Met hods

New Appr oaches t o I mpact Anal ysi s
Fi scal Equi t y Techni ques
Economet r i c Techni ques
Conj oi ned Model i ng Techni ques
Feder al Reser ve Fi scal I mpact Tool

Ref er ences







3
Introduction
Pr oper t y i nvest ment swhet her a new mal l , i ndust r i al pl ant , or r esi dent i al
devel opment i nevi t abl y have pl anni ng and economi c consequences f or t he l ocal
communi t y. Fi scal i mpact anal ysi s, a t ool i nt r oduced i n t he 1970s, seeks t o
connect pl anni ng and l ocal economi cs by est i mat i ng t he publ i c cost s and
r evenues t hat r esul t f r ompr oper t y i nvest ment s. The f i scal i mpact of
devel opment i s t he ef f ect of new i nvest ment , new const r uct i on, new
empl oyment , new popul at i on, new school enr ol l ment and ot her changes on a
gover nment ' s budget . When new busi nesses st ar t , new houses ar e bui l t , and new
peopl e move i nt o a communi t y, l ocal gover nment s r ecei ve addi t i onal r evenue.
The busi ness owner s and homeowner s pay new pr oper t y t axes. New r esi dent s pay
new l ocal i ncome t axes and mot or vehi cl e t axes. New peopl e and busi nesses
pay mor e char ges, f i nes and f ees. However , t hese new peopl e and busi nesses
al so cr eat e new cost s. New busi nesses and housi ng devel opment s may r equi r e
new r oads, sewer s, pol i ce and f i r e pr ot ect i on. New r esi dent s may demand new
par ks. Gr eat er t r af f i c congest i on may r equi r e mor e r oads, t r af f i c l i ght s and
pol i ce pat r ol s. Mor e chi l dr en i n school s may r equi r e mor e t eacher s and even
new school bui l di ngs. Thus f i scal i mpact anal ysi s enabl es t he compar i son of
new r evenues t o new cost s. I f new r evenues exceed new cost s, t he f i scal
i mpact i s sai d t o be posi t i ve. The l ocal gover nment can mor e t han meet new
demands f or ser vi ces, and ( per haps) pr ovi de a t ax r educt i on f or exi st i ng
t axpayer s. I f new r evenues f al l shor t of new cost s, however , t he f i scal
i mpact i s negat i ve. The l ocal gover nment must r ai se t axes t o meet new
ser vi ce demands, and ( per haps) r educe t he quant i t y or qual i t y of exi st i ng
ser vi ces.
Fi scal i mpact anal ysi s can be used on t wo l evel s:
At the macro level, t o anal yze gr owt h as i t af f ect s an ent i r e
j ur i sdi ct i on, such as a count y or ci t y. Thi s j ur i sdi ct i on- wi de model
al l ows exami nat i on of al t er nat i ve devel opment scenar i os by f ocusi ng
upon l and use pat t er ns, gr owt h r at es, ser vi ce cost s, and capi t al
f aci l i t y spendi ng.
At the micro level, t o det er mi ne t he ef f ect s of speci f i c pr oj ect s on
t he over al l communi t y. For exampl e, a communi t y can anal yze t he pr i ci ng
and absor pt i on r at es of a pr oj ect t o det er mi ne i t s mar gi nal cost s
bef or e gr ant i ng a bui l di ng per mi t , var i ance, or zoni ng change.
Benefits
The benef i t s of f i scal i mpact anal ysi s ar e i mpr essi ve. At t he most basi c
l evel , t hese anal yses br i ng a r eal i st i c sense of t he cost s of gr owt h i nt o t he
pl anni ng di scussi on. I ndeed, t hey can pr ovi de an obj ect i ve scr een so t hat al l
par t i es i n t he devel opment pr ocess have a cl ear er under st andi ng of t he l i kel y
r esul t s. Mor eover , t he anal ysi s hel ps deci si on- maker s l i nk pl anni ng t o t he
l ocal annual budget . For exampl e, communi t y l eader s woul d know i f t he
compl et ed pr oj ect woul d make mor e t ax money avai l abl e f or muni ci pal needs or
i f t he t own coul d cut pr oper t y t axes.

I n an abst r act sense, f i scal i mpact anal ysi s t ends t o r emove myt hs and hel ps
t o mi ni mi ze t he emot i onal i smt hat can accompany publ i c debat e. On one si de,
an anal ysi s may show t hat not al l gr owt h i n t he communi t y i s posi t i ve at i t s
pr esent r at e. On t he ot her , i t may show t hat a pr oj ect such as mar ket - r at e
housi ng woul d not over bur den exi st i ng school s.

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Fi scal i mpact anal ysi s t hus pr ovi des a knowi ng publ i c t he i nf or mat i on
r equi r ed t o make a f ai r deci si on. Thr ough t he dat a col l ect ed as par t of a
f i scal i mpact anal ysi s, t he communi t y i s bet t er pr epar ed t o exami ne i t s l ong-
t er mneeds. The r esul t s hel p i mmensel y i n cr eat i ng a capi t al i mpr ovement s
pl an and maki ng a communi t y s abi l i t y t o pay t r anspar ent . Mor eover , t he
knowl edge cr eat ed t hr ough f i scal i mpact anal ysi s i s f undament al f or pr epar i ng
a bond r at i ng and submi ssi on package.
Fi nal l y, f i scal i mpact anal ysi s hel ps communi t i es bet t er under st and t hei r
val ues. For exampl e, a smal l r ur al communi t y mi ght want t o r educe t he
pr oper t y t ax bur den by r ezoni ng some pr oper t y t o al l ow hi ghway busi ness.
Af t er l ooki ng at t he const r uct i on and l and cost s, however , t he communi t y
r eal i zed t hat such a devel opment woul d over whel mi t s r ur al char act er and
deci ded t o embr ace t he i nconveni ence of a heavy r esi dent i al t ax base.

Limitations
At t he same t i me, sever al f act or s l i mi t t he appl i cat i on of f i scal i mpact
anal ysi s, i ncl udi ng:
1. Need f or some t r ai ni ng t o appl y a par t i cul ar t echni que and i nt er pr et
t he r esul t s. Many smal l er communi t i es, most of t en wi t hout pr of essi onal
pl anni ng exper t i se, do not have ci t i zen pl anner s who have t hi s
exper i ence.
2. Usef ul onl y when t her e ar e cl ear cost i mpl i cat i ons f or t he
muni ci pal i t y. Typi cal l y, t he cost of a newl y const r uct ed smal l st or e
al ong Mai n St r eet or a new si ngl e- f ami l y home, by t hemsel ves, wi l l have
mi ni mal f i scal i mpact s on t he communi t y.
3. Pr esence of pol i t i cal f act or s. For exampl e, when pr omot i ng a Wal - Mar t
i n hi s/ her home t own, a mayor wi l l ar gue t hat r et ai l pr i ces wi l l be
l ower , shoppi ng mor e conveni ent , j obs wi l l be added t o t he empl oyment
base, and t ax r evenues wi l l i ncr ease. Agai nst t hi s backdr op, i t i s
of t en di f f i cul t t o convi nce a pol i t i cal l eader t hat Wal - Mar t pay r at es
may not pr ovi de a l i vi ng wage, t hat t he downt own mi ght l oose
busi nesses, t hat new i nvest ment s i n a pol i ce cr ui ser may be r equi r ed,
and t hat , at t he end of t he day, t he new st or e may be a t ax l i abi l i t y.
4. Lack of consi der at i on f or soci al and envi r onment al f act or s. Some
anal yst s ar gue t hat one shoul d not si mpl y l ook j ust at t he f i scal
i mpl i cat i ons of devel opment , but al so i mpact s associ at ed wi t h
envi r onment , t r af f i c, and communi t y char act er . These assessment s can be
cost l y and t i me- consumi ng.

To addr ess t hese l i mi t at i ons, sever al r esear cher s pr ef er t o l ook at
envi r onment al i mpact st at ement s, cost of ser vi ces st udi es and mor e i nt egr at ed
economet r i c model s. Al t er nat i ve t o f i scal i mpact anal yses wi l l be di scussed
l at er i n t hi s r epor t .

Methods for Estimating Fiscal Impacts

Si nce Li st oki n and Bur chel l s ( 1978) semi nal vol ume out l i ni ng 6 met hods f or
f i scal i mpact anal ysi s, t hese model s have been appl i ed and r ef i ned and wi l l
be out l i ned, wi t h cr i t i ques of t he benef i t s and l i mi t at i ons of each model
bel ow. ( Bur chel l et . al , 1994; Bur chel l et . al , 1985) . To begi n however , i t i s
necessar y t o pr ovi de a gener al under st andi ng of how t o measur e t he r evenues a
devel opment pr oj ect gener at es agai nst t he cost s t he communi t y i ncur s i n
ser vi ci ng t he pr oj ect .

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A communi t y has t hr ee basi c r evenue sour cespr oper t y t axes, st at e ai d, and
mi scel l aneous t axes and f ees such as t hose pai d f or t own gover nment ser vi ces.
Wi t h t he r ecent cut backs i n st at e ai d, pr oper t y t ax r evenues now account f or
t he l ar ge maj or i t y of muni ci pal r evenues. On t he cost si de, t he t hr ee basi c
cat egor i es ar e school s, ser vi ces ( such as r oad mai nt enance, gover nment ,
pol i ce, f i r e pr ot ect i on, sewer , wat er , r ecr eat i on, wast e r emoval ) , and debt
ser vi ce.

Calculating Revenues
Revenues t o be consi der ed ar e ( a) pr oper t y t axes gener at ed by t he new
devel opment , ( b) mi scel l aneous r evenues based on cur r ent pat t er ns and
pr opor t i ons, and ( c) st at e ai d ( mai nl y f or educat i on) , al so based on cur r ent
pat t er ns and pr opor t i ons.

The f ol l owi ng exampl e i l l ust r at ed t he r evenue cal cul at i ons f or one si ngl e
f ami l y home i n a t ypi cal subur ban communi t y.

REVENUE FROM NEW RESIDENTIAL DEVELOPMENT
Revenue from Property Tax on Development
Mar ket Val ue of Devel opment $350, 000. 00
mul t i pl i ed by
Assessment Rat i o 100. 00%

Act ual Assessed Val ue $350, 000. 00
mul t i pl i ed by
Resi dent i al Tax Rat e / $1, 000 $16. 01
Estimated Property Tax Revenue $5,603.50

Miscellaneous Revenue
Mi scel l aneous Revenue $10, 609, 073. 00
mul t i pl i ed by
Resi dent i al Pr opor t i on of Al l Pr oper t y 75. 00%

Mi scel l aneous Revenue f r omResi dent i al Use $7, 956, 804. 75
di vi ded by
Number of Resi dent i al Uni t s 7, 610

Mi scel l aneous Revenue per Housi ng Uni t $1, 045. 57

Number of New Homes 1. 00
Estimated Additional Miscellaneous Revenue $1,045.57

Additional State School Aid
St at e School Ai d $12, 430, 645. 00
di vi ded by
Number of School Chi l dr en 4, 904. 00

School Ai d per St udent $2, 534. 80
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mul t i pl i ed by
Number of St udent s i n New Devel opment 0. 89
Estimated Additional School Aid $2,255.97

Total Estimated Revenue $8,905.04


Calculating Costs
The t wo cost est i mat i on appr oaches t hat pr act i t i oner s most of t en use i n
f i scal i mpact anal ysi s ar e aver age cost i ng and mar gi nal cost i ng. Each of
t hese appr oaches i ncl udes t hr ee speci f i c est i mat i on t echni ques.

1. Per Capita 2. ServiceStandard 3. Proportional Valuation
Average Costing Methods
1. CaseStudy 2. ComparableCities 3. EmployeeAnticipation
Marginal Costing Methods
Fiscal Impact Assessments

Average Costing Methods
Aver age cost i s most of t en used i n f i scal i mpact anal ysi s because i t i s easy
t o appl y and appear s mor e equi t abl e t o publ i c of f i ci al s and ci t i zens. Cost s
assi gned t o new devel opment ar e based on t he aver age cost of pr ovi di ng t he
ser vi ce per uni t ( i . e. , per househol d, st udent , or empl oyee) t i mes t he number
of new ser vi ce uni t s. Thi s met hod wor ks best when t he pr oj ect r epr esent s an
i ncr ement al demand f or ser vi ces wi t hi n t he cur r ent capaci t y of l ocal
i nf r ast r uct ur e. The t hr ee t echni ques t hat f al l wi t hi n t hi s met hod ar e:

1. Per capita multiplier technique. The most common cost est i mat i on
t echni que, t he per capi t a mul t i pl i er was f i r st used i n t he 1950s t o det er mi ne
whet her cer t ai n t ypes of devel opment pay t hei r own way. I t was al so t he
f i r st l ar ge- scal e st at i st i cal st udy t o pr edi ct publ i c expendi t ur es ( Mace
1961) . Ear l y anal yses used per pupi l mul t i pl i er s t o est i mat e educat i on cost s.
I n t he 1960s and 1970s, t he t echni que evol ved t o i ncl ude demogr aphi c pr of i l es
of r esi dent s and chi l dr en associ at ed wi t h di f f er ent housi ng t ypes, l i nki ng
t hi s i nf or mat i on wi t h aver age muni ci pal oper at i ng cost s per per son and school
di st r i ct oper at i ng cost s per pupi l t o est i mat e t he l ocal cost s of popul at i on
change.

The per capi t a t echni que i s appl i ed on a j ur i sdi ct i on- by- j ur i sdi ct i on basi s
f or al l of an ar ea s maj or ser vi ce pr ovi der s, i ncl udi ng muni ci pal i t i es,
school di st r i ct s, and count y gover nment . Gr owt h- i nduced publ i c ser vi ce cost s
ar e det er mi ned by mul t i pl yi ng t he per capi t a cost by t he t ot al number of
peopl e, empl oyees, and pupi l s i nt r oduced by devel opment .

Assumptions
Over t he l ong r un, cur r ent aver age oper at i ng cost s per capi t a and
per st udent ar e t he best est i mat es of f ut ur e oper at i ng cost s
occasi oned by gr owt h.
Cur r ent l ocal ser vi ce l evel s ar e t he most accur at e i ndi cat or s of
f ut ur e ser vi ce l evel s, whi ch wi l l cont i nue on t he same scal e.
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The cur r ent composi t i on of t he popul at i on cont r i but es t o cost s, and
t he f ut ur e popul at i on wi l l cont r i but e t o cost s i n a si mi l ar manner .
The di st r i but i on of expendi t ur es among t he var i ous muni ci pal
ser vi ces wi l l r emai n const ant i n t he shor t r un and ser ve as a gui de
t o al l ocat i on of f ut ur e expendi t ur es.

Outputs of Analysis
Cur r ent publ i c ser vi ce cost s on a per uni t basi s ( per pupi l f or t he
school di st r i ct , and per capi t a/ per empl oyee f or t he muni ci pal i t y) .

Applicability
I deal f or eval uat i ng f i scal i mpact s of r esi dent i al devel opment
pr oposal s, l and use al t er nat i ves wi t hi n a pr oposed gr owt h st r at egy,
and annexat i on or r ezoni ng pr oposal s, as wel l as f i scal segment s of
subur ban envi r onment al i mpact st at ement s ( Bur chel l and Li st oki n
1978) .
Appr opr i at e f or communi t i es wher e f ut ur e demand f or ser vi ces i s on
par wi t h t he scal e and scope of exi st i ng ser vi ces.

Benefits
St r ai ght f or war d, r el at i vel y easy t o accompl i sh, and usual l y pr ovi des
a qui ck under st andi ng of devel opment i mpact s.
Dat a ar e easy t o gat her .
Most wi del y accept ed f i scal i mpact met hod avai l abl e, par t i cul ar l y
f or pr i vat e pl anni ng consul t ant s.

Limitations
Lack of r i chness of det ai l , wi t h est i mat es onl y t o t he l evel of
muni ci pal and school di st r i ct ser vi ces.
May be t he l east accur at e cost est i mat i on met hod, gi ven t hat i t does
not account f or t he cur r ent ser vi ce capaci t y, whi ch new devel opment
may maxi mi ze ( decr easi ng per capi t a cost s) or exceed ( i ncr easi ng per
capi t a cost s) , or t he possi bi l i t y t hat a new devel opment mi ght cal l
f or maj or new capi t al const r uct i on.
Resul t s may be i naccur at e i f based on out dat ed decenni al census
i nf or mat i on. ( The l at er i n t he decade t hat t hi s i nf or mat i on i s used,
t he l ess accur at e i t wi l l be. )

Example
Of t he t hr ee t ypes of cost s associ at ed wi t h r esi dent i al devel opment , t he
most si gni f i cant i s f or school s. These cost s ar e cal cul at ed by appl yi ng
t he cur r ent cost per st udent t o t he est i mat ed number of new st udent s. The
second cost el ement r el at es t o ser vi ce cost s, whi ch i s cal cul at ed based on
exi st i ng ser vi ce cost s appl i ed i n a pr opor t i onat e manner t o new
devel opment . The t hi r d cost el ement comes i nt o ef f ect i f devel opment
t r i gger s some sor t of capi t al expendi t ur e. Agai n, t he capi t al cost s ar e
appl i ed i n a pr opor t i onal manner .
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COSTS DUE TO NEW RESIDENTIAL DEVELOPMENT
School Costs Due to Development
Cur r ent School Cost per St udent $6, 039. 04
Number of St udent s i n New Devel opment 0. 89
Total School Cost per Year $5,374.75

Service Costs Due to Development (Library, health, recreation,
etc.)
Town Expendi t ur es Excl udi ng School s $28, 921, 822. 00
mul t i pl i ed by
Resi dent i al Por t i on of Al l Pr oper t y 75. 00%
Ser vi ce Cost s Due t o Resi dent i al Devel opment $21, 691, 366. 50
di vi ded by
Number of Resi dent i al Uni t s 7, 610. 00
Ser vi ce Cost per Uni t $2, 850. 38
Number of Homes i n New Devel opment 1. 00
Town Service Costs for Residential Units $2,850.38

Total Costs Due to Development $8,225.13


2. Service standard technique. The ser vi ce st andar d t echni que uses aver ages
of manpower and capi t al f aci l i t y ser vi ce l evel s, obt ai ned f r omt he US Census
of Gover nment s, f or muni ci pal i t i es and school di st r i ct s of si mi l ar si ze and
geogr aphi c l ocat i on. The anal yst det er mi nes t he l ocal oper at i ng cost f or
addi t i onal per sonnel t hat cont r i but e t o l ocal oper at i ng out l ays ( sal ar y, pl us
st at ut or y and equi pment expendi t ur es) per empl oyee by ser vi ce f unct i on ( e. g. ,
$14, 500 per pol i ceman) , and t o an annual expendi t ur e f or capi t al f aci l i t i es
speci f i c t o t he ser vi ce f unct i on. The annual capi t al expendi t ur e i s obt ai ned
t hr ough capi t al - t o- oper at i ng ser vi ce r at i os der i ved f r omcensus i nf or mat i on,
and appl i ed t o t he t ot al l ocal oper at i ng cost per empl oyee.

The ser vi ce st andar d t echni que has been used si nce 1940s, but i s not as
pr eval ent as per capi t a and case st udy t echni ques because i t i s not easy t o
obt ai n and appl y nat i onal st andar ds t o l ocal muni ci pal and school di st r i ct
expendi t ur es. Thi s appr oach uses mean empl oyment l evel s and medi an capi t al
t o- oper at i ng r at i os obt ai ned at a r egi onal l evel .

Assumptions
Cur r ent aver age ser vi ce l evel s f or bot h manpower and capi t al
f aci l i t i es of compar abl e ci t i es can be used t o assi gn cost s t o
f ut ur e devel opment .
Ser vi ce l evel s f or bot h manpower and capi t al f aci l i t i es var y
accor di ng t o popul at i on.
Geogr aphi c l ocat i on af f ect s publ i c ser vi ce l evel s.
Aver age ser vi ci ng l evel s f or t he cur r ent popul at i on can be used f or
t he new devel opment .

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Outputs of Analysis
Tot al number of addi t i onal empl oyees by ser vi ce f unct i on ( f i nanci al
admi ni st r at i on, gener al cont r ol , pol i ce, f i r e, hi ghways, sewer age,
sani t at i on, wat er suppl y, par ks and r ecr eat i on, and l i br ar i es)
r equi r ed as a r esul t of gr owt h.

Applicability
Most usef ul i n communi t i es wher e cur r ent ser vi ce capaci t y i s cl osel y
al i gned wi t h ser vi ce demand, wi t hout consi der abl e excess or
def i ci ency.
Most sui t ed f or mi d- si ze, moder at el y gr owi ng subur ban ar eas or
sl ower - gr owi ng ci t i es. Mor e i nf or mat i on about t hese ar eas i s
avai l abl e t han f or r api dl y gr owi ng or decl i ni ng ones, maki ng mean
empl oyment l evel s and medi an capi t al - t o- oper at i ng r at i os mor e
r el i abl e.
Usef ul f or gener al f i scal pl anni ng and f or pr oj ect i ng i mpact s of
annexat i on, gi ven t hat publ i c per sonnel cost s make up t he l ar gest
shar e of cost s i n t hese cases.

Benefits
The onl y t echni que, ot her t han case st udi es, t o pr ovi de i nf or mat i on
on per sonnel r equi r ement s.
Not onl y pr edi ct s t he f i nanci al consequences of popul at i on change,
but al so t r aces speci f i c changes needed f or each publ i c ser vi ce
cat egor y.
Resul t s ar e easy t o under st and and wi del y accept ed.
Rel at i vel y si mpl e and l ow cost t o i mpl ement , r equi r i ng no knowl edge
of i nt er nal muni ci pal oper at i ons.

Limitations
Assumes t hat cur r ent l ocal per f or mance i s si mi l ar t o cur r ent
expendi t ur e pat t er ns i n ci t i es of si mi l ar si ze and l ocat i on.
Di f f er ences i n act ual per f or mance ( e. g. , i n t er ms of weal t h, l abor
r ul es or publ i c ser vi ces) may r esul t i n under - or over est i mat es of
cost s.
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Example
Cal cul at e ser vi ce st andar ds f or a communi t y i n t he Nor t heast wi t h a
popul at i on of 22, 166

Mul t i pl i e
r
Per 1, 000
Popul at i o
n
Est i mat ed
Empl oyees
General Government
Fi nanci al Ser vi ces 0. 45 10
Gener al Cont r ol 0. 61 14

Public Safety
Pol i ce 2. 08 46
Fi r e 0. 99 22

Public Works
Hi ghways 1. 15 25
Sewer 0. 32 7
Sani t at i on 0. 59 13
Wat er Suppl y 0. 4 9

Recreation and Culture
Par ks and Recr eat i on 0. 34 8
Li br ar i es 0. 26 6

School District Functions
Pr i mar y and Secondar y
School s
85 85



3. Proportional valuation technique. The pr opor t i onal val uat i on t echni que i s
per haps most used t o est i mat e t he i mpact s of nonr esi dent i al devel opment . The
t echni que assi gns cost s at t r i but abl e t o t he shar e of t he r eal pr oper t y val ue
t hat a nonr esi dent i al use adds t o a communi t y s pr oper t y t ax base. The
pr opor t i onal val uat i ons appr oach was f i r st used i n t he ear l y 1950s t o assess
whet her nonr esi dent i al devel opment as a l and use had l ocal f i scal benef i t s,
and l at er t o anal yze t he i mpact of speci f i c cl asses of i ndust r i al and
commer ci al devel opment .

Assumptions
Muni ci pal cost s i ncr ease wi t h t he i nt ensi t y of l and use.
Change i n r eal pr oper t y val ues i s a subst i t ut e f or change i n l and
use i nt ensi t y.
Aggr egat e i mpact s of commer ci al and i ndust r i al l and uses on
muni ci pal ser vi ces ar e si mi l ar enough t o be gr ouped i nt o a si ngl e
nonr esi dent i al use cat egor y.

Outputs of Analysis
Fi scal i mpact of nonr esi dent i al pr oj ect s t hat f i t cur r ent
devel opment pat t er ns i n t he communi t y ( i . e. , t hat do not t r i gger
excessi ve demands on muni ci pal ser vi ces) .

11
Applicability
Best used as a qui ck, st r ai ght f or war d t echni que when t he pr oposed
nonr esi dent i al devel opment r equi r es nei t her ver y hi gh nor ver y l ow
empl oyment l evel s.
Val i d when a r easonabl e est i mat e i s suf f i ci ent and/ or when t i me and
f i nanci al r esour ces ar e l i mi t ed.

Benefits
May be compl et ed qui ckl y and i nexpensi vel y.
Dat a r equi r ed ar e i nexpensi ve and r eadi l y avai l abl e.
Accept abl e f or assessi ng i mpact s of nonr esi dent i al f aci l i t i es.

Limitations
The proportional valuation method includes some underlying assumptions which may be overly simplistic
including:

Costs increase with the intensity of land or as land is more developed. This may or may not be the case
Groups industrial and commercial development into to one land use category, thus assuming that
impacts on these two different types of land use are similar..


Example
Pr oj ect t he pr opor t i on of i ncomi ng f aci l i t y t o t ot al l ocal
nonr esi dent i al pr oper t y val ue and mul t i pl y i t by t ot al exi st i ng
muni ci pal expendi t ur es at t r i but ed t o exi st i ng nonr esi dent i al uses t o
det er mi ne addi t i onal expendi t ur es due t o new devel opment .

Proportional Cost from New Development

Tot al Muni ci pal Expendi t ur es $3, 726, 407. 00
mul t i pl i ed by
Pr opor t i on of Nonr esi dent i al Val ue 17. 35%
equal s
Tot al Expendi t ur es At t r i but ed t o
Nonr esi dent i al Uses
$646, 531. 61
Val ue of New Devel opment $90, 000, 000. 00
di vi ded by
Val ue of Exi st i ng Nonr esi dent i al
Devel opment
$82, 427, 260. 00
equal s
Pr opor t i onal I ncr ease i n Nonr esi dent i al
Val ue
109%
Tot al Expendi t ur es At t r i but ed t o
Nonr esi dent i al Uses
$646, 531. 61
mul t i pl i ed by
Pr opor t i onal I ncr ease i n Nonr esi dent i al
Val ue
109%
equal s
Costs Allocated to New Facility
$705,929.63
12


Marginal Costing Methods
Mar gi nal cost i ng met hods di f f er f r omaver age cost i ng met hods because anal yst s
or l ocal of f i ci al s use subj ect i ve j udgment ( and possi bl y l ocal economi c
i ndi cat or s) t o adj ust t he est i mat es t o r ef l ect speci f i c changes expect ed f r om
t he new devel opment . The mar gi nal appr oach gener al l y uses pr ot ot ypes or case
st udi es as gui des t o est i mat e f ut ur e cost and r evenue i mpact s f or si mi l ar
t ypes of devel opment i n a communi t y.

I n pr i nci pl e, t he mar gi nal cost s and r evenues of a change i n t he st r uct ur e of
a r egi onal economy ar e t he r el evant measur es f or deci si on- maki ng. I n
pr act i ce, however , obt ai ni ng t hese measur es f or a speci f i c change, such as a
l and use deci si on, i s pr obl emat i c and r el i es on car ef ul anal ysi s of t he
exi st i ng suppl y of and demand f or ser vi ces. I n shor t , whi l e mor e r eal i st i c,
t hi s t ype of anal ysi s i s al so mor e di f f i cul t t o under t ake. As wi t h aver age
cost i ng, t hr ee t echni ques f al l under t he cat egor y of mar gi nal cost i ng.

1. Case study technique. The case st udy t echni que i s t he cl assi c mar gi nal
cost appr oach t o pr oj ect i ng t he ef f ect s of popul at i on on muni ci pal and school
di st r i ct cost s. The t echni que was f i r st used i n 1930s as a t ool f or cost -
r evenue assessment s i n decl i ni ng ar eas. I t was t hen used f or publ i c housi ng
f i scal i mpact st udi es i n t he 1940s, f or HUD- assi st ed mast er pl anni ng and
communi t y capi t al f aci l i t y pl anni ng i n t he 1960s, and gr owt h/ no- gr owt h
al t er nat i ves f r omt he 1970s t o t he pr esent . Case st udi es r el y on i nt er vi ews
wi t h publ i c of f i ci al s t o assess pl ans t o expand or mai nt ai n l ocal ser vi ces,
and t hen det er mi ne cat egor i es of ei t her excess or def i ci ent ser vi ce capaci t y.

Assumptions
Communi t i es di f f er i n t he degr ee t o whi ch t hey exhi bi t excess or
def i ci ent ser vi ce capaci t y.
Local ser vi ce l evel sr at her t han nat i onal st andar dsar e t he cr i t er i a
agai nst whi ch t o cal cul at e excess and def i ci ent capaci t y.
Local depar t ment heads ar e most f ami l i ar wi t h ser vi ce del i ver y
i ssues and, when pr oper l y appr oached, wi l l pr ovi de t he most accur at e
i nf or mat i on about f ut ur e expendi t ur es.

Output of Analysis
Fi scal i mpact s of bot h r esi dent i al and nonr esi dent i al devel opment wi t h
det ai l ed est i mat es based on a par t i cul ar pr oj ect .

Applicability
Best used when ei t her excess or def i ci ent ser vi ce capaci t y i s
suspect ed. For exampl e, a ci t y i n decl i ne t hat i s deci di ng on a
publ i c housi ng pr oj ect may have excess wat er suppl y. The case st udy
can t ake i nt o account t hese el ast i c condi t i ons, whi ch make cost l y
i nvest ment s unnecessar y i n t he shor t t er m. I n si t uat i ons wher e
r esour ces ar e al r eady st r ai ned, t he case st udy can pai nt a vi vi d
pi ct ur e of t he i mmedi at e i mpact s of i ncr eased devel opment .
Most appl i cabl e f or admi ni st r at or s, such as t he head of a wat er and
sewer depar t ment , l ooki ng f or i mmedi at e i nsi ght s i nt o pot ent i al
i mpact s ( e. g. , how much equi pment or manpower a speci f i c pr oj ect
mi ght r equi r e) .
Benefits
Of f er s speci f i c and uni que i nsi ght s i nt o t he i mmedi at e and l ong- t er m
i mpact s t hat ot her met hods may not pr ovi de. For exampl e, case
13
st udi es can det ai l manpower and capi t al f aci l i t y needs as a
pr er equi si t e f or assi gni ng cost s.
Mor e sensi t i ve t han ot her t echni ques t o absor pt i on capaci t y of
exi st i ng ser vi ces.
Gener al l y wel l accept ed si nce f i ndi ngs ar e pr esent ed i n t er ms t hat
peopl e can under st and.

Limitations
Cost l y and t i me- consumi ng t o i mpl ement because of t he det ai l
i nvol ved.
Accur acy depends on t he abi l i t y of l ocal of f i ci al s t o pr edi ct t he
consequences of gr owt h i n a speci f i c ar ea.
Requi r es t he cooper at i on of and di r ect knowl edge of publ i c
of f i ci al s.
Requi r es sophi st i cat ed anal yst s/ i nt er vi ewer s t o di scer n r espondent s'
bi ases.

Example
Each maj or depar t ment i s asked t o ant i ci pat e addi t i onal capi t al and
oper at i ng cost s f or a new r esi dent i al devel opment .

Total Costs due to Capital Improvements
Publ i c Wor ks $200, 000. 00
Pol i ce and Fi r e $50, 000. 00

Number of Years that Costs will be Spread Over
Publ i c Wor ks 5
Pol i ce and Fi r e 2

Finance Rate per Year
Publ i c Wor ks 6%
Pol i ce and Fi r e 6%

Debt Service per Year (principal + interest)
Publ i c Wor ks $47, 479. 28
Pol i ce and Fi r e $27, 271. 84

Percentage Attributed to New Development
Publ i c Wor ks 10%
Pol i ce and Fi r e 10%

Capital Improvement Costs Due to Development $7,475.11

Addi t i onal Annual Oper at i ng Cost s $100,000.00
Per cent age At t r i but ed t o New Devel opment 100.00%
Additional Annual Costs Associated with Development $100,000.00

Total Estimated Costs $107,475.11
14
2. Comparable city technique. Whi l e si mi l ar t o a case st udy, t he compar abl e
ci t y t echni que i s usef ul when admi ni st r at or s have no pr ecedent f or t he t ype
or scal e of devel opment on whi ch t o pr edi ct cost s. Thi s appr oach l ooks at
si mi l ar pr oj ect s i n si mi l ar communi t i es and ant i ci pat es cost i mpact s based on
compar abl es. Fi r st used i n t he 1970s, t he compar abl e ci t y t echni que
r epr esent s a pr opor t i onal r el at i onshi p of aver age expendi t ur es of ci t i es of
var i ous si zes and gr owt h r at es. The averaging comes from the creation of
multipliers calculated from the U.S. Census of Governments. The multipliers are based on growth rates
and community size. The method estimates increases or decreases in future gross expenditures for the
five basic municipal services (general government, public safety, public works, health and welfare,
recreation and culture)

Assumptions
Municipalities of similar size and with similar growth rates will have similar changes in their
municipal costs by category.
The ci t y s gr owt h r at e af f ect s l ocal ser vi ce expendi t ur es.
Cur r ent expendi t ur e pat t er ns of t he muni ci pal i t y or school di st r i ct
ar e a key i ndi cat or of f ut ur e expendi t ur es.

Outputs of Analysis
Ef f ect s of popul at i on change on muni ci pal and school di st r i ct cost s
and r evenues.

Applicability
I nt ended f or communi t i es wher e popul at i on gai ns or i ncr eases i n
gr owt h r at e ar e l i kel y because of l ar ge- scal e devel opment or
school / muni ci pal r edi st r i ct i ng.
Of t en appl i ed when anal yst s bel i eve t hat t he exper i ence of ot her
communi t i es under goi ng popul at i on change suppor t s or cor r obor at es
t he ant i ci pat ed changes i n t he communi t y under st udy.
Al so usef ul f or communi t i es exper i enci ng decl i ne because t he
mul t i pl i er s t ake popul at i on decr eases as wel l as i ncr eases i nt o
account .
Not appr opr i at e f or l ocal budget pl anni ng because i t does not
consi der speci f i c per sonnel r equi r ement s.

Benefits
Gi ven avai l abi l i t y of r equi r ed dat a, can be under t aken qui ckl y and
i nexpensi vel y.

Limitations
Val i di t y of expendi t ur e mul t i pl i er s i s quest i onabl e because t hi s
t echni que assumes l ocal and capi t al expendi t ur es r el at ed t o gr owt h
ar e si mi l ar f or ci t i es of compar abl e si ze and gr owt h r at e. These
aver age expendi t ur es may not , however , exact l y mat ch t hose of t he
communi t y under st udy. For exampl e, a communi t y t hat i s mor e
concer ned about cr i me wi l l spend mor e on pol i ci ng t han one t hat i s
l ess concer ned.
I f conduct ed at t he st at e l evel ( e. g. , f or housi ng) , t he anal ysi s
i nvol ves some degr ee of gr oupi ng of j ur i sdi ct i ons or bi nni ng.
Bi nni ng occur s when t he bi ns ar e so l ar ge t hat t hey obscur e
r el evant dat a. Regar dl ess, t he pr ocess of cat egor i zat i on means t hat
some dat a may be l ost .
15
Each muni ci pal i t y has i t s own pr i or i t i es, popul at i on mi xes,
gover nment st r uct ur es, and t axpayer pr i or i t i es, r ef l ect i ng
var i at i ons i n t he needs, wi shes, and spendi ng. Any compar i son t hat
t r i es t o f i t var i ous muni ci pal i t i es i nt o si mpl e cat egor i es mi sses
t hese var i at i ons.

Example
I f communi t y A wer e t o bui l d a 15, 000 squar e f oot mal l wi t h a f i scal cost
benef i t r at i o of 1: 3, a compar abl e communi t y B, devel opment
char act er i st i cs bei ng equal , coul d assume t he same benef i t s.


3. Employee anticipation technique. Thi s t echni que, based on t he
ant i ci pat ed needs f or new wor ker s, was devel oped at t he I nst i t ut e of Ur ban
St udi es i n Char l ot t e, Nor t h Car ol i na i n 1976 and t hen r ef i ned by t he
Cent er f or Ur ban Pol i cy Resear ch at Rut ger s Uni ver si t y. The empl oyee
ant i ci pat i on t echni que pr edi ct s changes i n muni ci pal cost s based on t he
expect ed change i n l ocal commer ci al / i ndust r i al empl oyment .

Assumptions
Local commer ci al or i ndust r i al empl oyment l evel s af f ect t he
magni t ude of l ocal muni ci pal expendi t ur es.
I mpact s of addi t i onal empl oyment wi l l var y f or communi t i es of
di f f er ent popul at i on si zes and gr owt h r at es.

Outputs of Analysis
I mpact s of nonr esi dent i al gr owt h on l ocal muni ci pal cost s and
r evenues.

Applicability
Usef ul f or i dent i f yi ng t he i mpact of nonr esi dent i al devel opment
on muni ci pal cost s.
I deal f or f ast appr oxi mat i ons, maki ng i t a good t ool f or
eval uat i ng al t er nat i ve nonr esi dent i al l and uses.
Shoul d be used i nst ead of t he pr opor t i onal t echni que i f t he
empl oyment si t uat i on may be uni que ( e. g. , a l ar ge i ndust r i al use
such as power st at i on, whi ch woul d have r el at i vel y f ew
empl oyees) .

Benefits
Expr esses f ut ur e muni ci pal cost s as a f unct i on of expect ed
empl oyees of a nonr esi dent i al f aci l i t y.
Pr ovi des gr eat er det ai l cost s t han t he pr opor t i onal val uat i on
t echni que.
Qui ck and i nexpensi ve t o i mpl ement .

Limitations
Rel i es on coef f i ci ent s t o expr ess change i n per capi t a muni ci pal
expendi t ur es f or cat egor i es of ci t i es def i ned by popul at i on si ze.
Uses a si ngl e mul t i pl i er f or cat egor i es of ci t i es def i ned by
popul at i on si ze.
Does not pr ovi de coef f i ci ent s f or ci t i es wi t h popul at i ons over
150, 000.
Example

The empl oyee ant i ci pat i on t echni que appl i es coef f i ci ent s t hat show t he per cent age i ncr ease i n publ i c cost s
at t r i but abl e t o commer ci al or i ndust r i al empl oyment changes. I n t hi s exampl e, t he anal ysi s i s based on t he
addi t i on of 3, 000 new empl oyees.

CATEGORIES
Government Public
Safety
Public
Works
Health &
Welfare
Recreatio
n
Other Debt
Service
Total

Annual Municipal
Expenditures
$838, 829. 0
0 $1, 268, 15
5. 00
$601, 093. 0
0
$42, 108.
00
$121, 938.
00
$831, 866.
00 $1, 437, 84
9. 00
di vi ded by
Popul at i on Est i mat e 4, 978 4, 978 4, 978 4, 978 4, 978 4, 978 4, 978
equal s
Per Capi t a Cost 168. 51 254. 75 120. 75 8. 46 24. 50 167. 11 288. 84

Number of Additional
Employees
3, 000 3, 000 3, 000 3, 000 3, 000 3, 000 3, 000
mul t i pl i ed by
Cost Mul t i pl i er s 0. 0000015
0. 0000180
0. 0000332
0. 000039
8
0. 0000503 0. 0000865 0. 0000444
equal s
Percent Increase in
Cost/Municipal Employee
0. 0045 0. 0540 0. 0996 0. 1194 0. 1509 0. 2595 0. 1332
mul t i pl i ed by
Per Capi t a Cost 168. 51 254. 75 120. 75 8. 46 24. 50 167. 11 288. 84
equal s
Dollar Increase in
Costs/Municipal Employee
0. 76 13. 76 12. 03 1. 01 3. 70 43. 36 38. 47
mul t i pl i ed by
Exi st i ng Popul at i on 4, 978 4, 978 4, 978 4, 978 4, 978 4, 978 4, 978
equal s
Cost Increase $3, 774. 73 $68, 480. 3
7
$59, 868. 86 $5, 027. 7
0
$18, 400. 4
4
$215, 869.
23
$191, 521.
49 $562,942.8
2

Not es: Cost mul t i pl i er s ar e f r omRober t Bur chel l , Davi d Li st oki n and Wi l l i amDol phi n, The New
Practitioners Guide to Fiscal Impact Analysis, 1985. Mul t i pl i er s ar e der i ved f r omcase st udy r esear ch on
17
i mpact s of i ndust r i al commer ci al uses on muni ci pal budget s and ar e now accept ed i ndust r y st andar ds. I n t hi s
exampl e, one addi t i onal publ i c saf et y empl oyee i n a st abl e or gr owi ng communi t y, wi t h a cur r ent popul at i on
bet ween 2, 500 and 5, 000, wi l l i ncr ease per capi t a publ i c saf et y expendi t ur es by 0. 000018%.
18
Applications of Alternative Cost Estimation Methods
The f ol l owi ng t abl e summar i zes t he met hods pr esent ed above and t hei r appl i cabi l i t y. Pl ease not e,
t hese met hods ar e not mut ual l y excl usi ve.




Technique


Residentia
l
Developmen
t


Nonresident
ial
Development

Steady
or
Moderate
- Growth
Substant
ial
Decrease
/
Increase
in
Growth


New
Developmen
t


Redevelopme
nt or
Infill
Developmen
t
Consistent
with
Existing
Character
Developme
nt
Catalyst
for
Change
AVERAGE
COSTING

1. Per
Capi t a
X X X X
2. Ser vi ce
St andar d
X X X X
3.
Pr opor t i ona
l Val uat i on
X X X X

MARGINAL
COSTING

1. Case
St udy
X X X X X X X
2.
Compar abl e
Ci t i es
X X X X X X
3.
Empl oyee
Ant i ci pat i o
n
X X X X X

Not e: When sever al t echni ques can be used, t he most appr opr i at e appr oach depends on l ocal
f act or s.



19
Limitations of Traditional Methods

Hei kki l a and Davi s ( 1997) chal l enge t he si x f i scal i mpact met hods set f or t h
by Bur chel l and Li st oki n. ( The t hr ee aver age cost i ng appr oaches i ncl ude t he
per capi t a, ser vi ce st andar d and pr opor t i onal val uat i on t echni ques, whi l e
mar gi nal cost met hods i ncl ude t he case st udy, compar abl e ci t i es and empl oyee
ant i ci pat i on t echni ques. )

Whi l e Li st oki n and Bur chel l f ocus on f i scal i mpact s, l i t er at ur e dur i ng t he
l at e 1980s and 1990s expanded t o i ncl ude a di scussi on about i mpact f ees.
Si nce Nol an v. Cal i f or ni a Coast al Commi ssi on, t he semi nal l egal case over t he
val i di t y of i mpact f ees, est abl i shed t hat exact i ons i mposed must r el at e t o
and pr ovi de some benef i t f or t he devel opment i t sel f , t echni ques f or set t i ng
t hese f ees wer e al so st udi ed. ( Conner l y 1988, Nel son 1988, St r oud 1988) .

Accor di ng t o Hei kki l a and Davi s, met hods t o di scer n f i scal i mpact s and exact
devel opment f ees have nat ur al l y cr eat ed a need t o r edef i ne what i s meant by
f i scal i mpact s. Of t he f i scal i mpact met hods, t he per capi t a mul t i pl i er i s
most of t en empl oyed because of i t s ease of use and st r ai ght f or war dness.
Hei kki l a and Davi s asser t t hat t hese met hods pl ace t oo much emphasi s on t he
i nput pr oxi es as opposed t o out put s. Out put s ar e r eal l y a dynami c f unct i on of
t he uni que r el at i onshi ps of space and f or m, economi c and demogr aphi c
composi t i on, and l evel s of ser vi ce.

A met hod must t her ef or e be used t o account f or t he at t r i but es of t he
devel opment ar ea bef or e and af t er . For exampl e, convent i onal met hods woul d
r el y on a const ant st at e of expendi t ur e on a per capi t a or per househol d
basi s. Thus, i f popul at i on gr ows by 5%, so do expendi t ur es. I t i s t he change
i n expendi t ur es r equi r ed t o mai nt ai n a const ant per capi t a r at e of i nput s
t hat i s t he basi s f or convent i onal i mpact measur es. Agai n, t he emphasi s i s on
t he i nput s.

What i f a nei ghbor hood has uni que char act er i st i cs? For exampl e,
gent r i f i cat i on i s occur r i ng or i t i s an ar ea becomi ng subur bani zed by
f ami l i es. Accor di ng t o Hei kki l a and Davi s, i t i s i mpossi bl e t o use st andar d
f i scal i mpact met hods t o di scer n t he di f f er ent i al i mpact s of i ndi vi dual
descr i pt or s on ser vi ce l evel s.

The aut hor s r ef er t o a mi ssi ng model of pr oduct i on i nher ent i n st andar d
f i scal i mpact met hods. I n t he Hei kki l a and Davi s appr oach, t he pr oduct i on
r el at i on bet ween l ocal gover nment expendi t ur es i n i nput s and l evel s of
ser vi ce i s r epr esent ed by a pr oduct i on f unct i on, a vect or of nei ghbor hood
char act er i st i c ( 202) . Consi der at i on of t hi s dynami c al l ows f or t he
di scer nment of i mpact s by speci f i c gover nment ser vi ces ( i ncl udi ng wat er
suppl y, st or mand sani t at i on sewer s, educat i on, and f i r e pr ot ect i on) .
20
Dekel ( 1995) al so cont ends t hat convent i onal f i scal i mpact anal ysi s has
f ai l ed t o addr ess t he spat i al di mensi ons of devel opment al t er nat i ves and, i n
par t i cul ar , t he cost s associ at ed wi t h housi ng densi t y. Hi s assessment
addr esses t he f ol l owi ng:
Si nce anal yst s usual l y appl y f i scal i mpact anal ysi s on a case- by- case
basi s, t her e can be a t endency t o l ose t he bi g pi ct ur e spat i al l y.
Convent i onal appr oaches al so t end t o emphasi ze one di mensi on of
var i at i on of devel opment ( usual l y r el at i ng t o t he t ype of devel opment ) .
However , l and devel opment i mpl i es t wo i ndependent var i abl esl ocat i on as
wel l as t he t ype. By combi ni ng t hese di mensi ons, t he densi t y di mensi on
emer ges.
Rut h Mace ( 1961) and Kushner ( 1992) suppor t t hi s vi ew. I n par t i cul ar ,
Kushner not es t hat hi s economi es- of - scal e cost anal ysi s makes no
r ef er ence t o t wo i mpor t ant el ement s: t he i mpact of devel opment densi t y
and of l ocat i on var i at i on ( 102) . Fai l i ng t o consi der densi t y i mpl i es
t hat t he f i scal i mpact of densi t y i s not pr esent ed on a cont i nuum
basi s, whi ch af f ect s t he accur acy of t he est i mat ed devi at i on f r omt he
cur r ent budget bal ance.
Si nce mar ket val ue pr oper t y assessment s do not f ol l ow t he spat i al
pat t er n of cost s, t ax r evenues do not al ways cover expendi t ur es on
ser vi ces. I n ot her wor ds, some subdi vi si ons may car r y hi gher t ax-
ser vi ce r at i os t han ot her s. A muni ci pal i t y may t hus have hi dden
def i ci t s and sur pl uses.
Cor r ect i ng t hi s met hodol ogi cal shor t comi ng and det er mi ni ng, i n budget ar y
t er ms, t he opt i mal l evel s of housi ng densi t i es, can el i mi nat e t he gap bet ween
t axat i on l evel s and t he cost s of ser vi ces.
Fi scal i mpact assessment s onl y l ook at di r ect i mpact s of devel opment on
j ur i sdi ct i onal ser vi ces and school s, wi t h no consi der at i on f or i ssues of
soci al or f i scal equi t y, desi r ed l and uses, or wi der economi c i mpact s on
ei t her t he pr i vat e sect or or i ndi vi dual r esi dent s. Sever al schol ar s and
pr act i t i oner s have i dent i f i ed t he f ol l owi ng concer ns and l i mi t at i ons of usi ng
t he t r adi t i onal aver age and mar gi nal cost i ng appr oaches.

Overlapping City, County, and Service Districts
Local gover nment ser vi ces ar e pr ovi ded by mor e t han one publ i c ent i t y at
var i ous j ur i sdi ct i onal l evel s. For exampl e, a househol d may r ecei ve f i r e
pr ot ect i on ser vi ces f r omt he ci t y f i r e depar t ment , but di spat ch, 911, and
sear ch- and- r escue ser vi ces f r omt he count y sher i f f . Or , a school di st r i ct may
be r esponsi bl e f or a par t i cul ar l ocal school , but a separ at e r egi onal
aut hor i t y pr ovi des wat er and sewer ser vi ces.
St andar d appr oaches t o f i scal i mpact anal ysi s t ypi cal l y exami ne t he ef f ect s
of devel opment on a si ngl e uni t of gover nment . I f t he st udy i ncl udes onl y one
21
of many over l appi ng gover nment al ent i t i es, t he anal ysi s may not yi el d a
compl et e pi ct ur e of devel opment i mpact s. At t i mes, mul t i pl e i mpact
assessment s must be per f or med t o get t he most accur at e r esul t s.
Some devel opment s may pr ovi de a f i scal benef i t t o count i es/ r egi ons, but not
f or l ocal t axpayer s. For exampl e, a pr oposed devel opment mi ght be benef i ci al
f or a count y gover nment but f i scal l y negat i ve f or t axpayer s. Tr adi t i onal
met hods do not al ways capt ur e t hi s mi x of f i nanci al wi nner s and l oser s. I n
addi t i on, t hey pr ovi de no f or mal mechani sms f or est i mat i ng i mpact s beyond t he
communi t y.
Cumulative Impacts in Changing Communities
Tr adi t i onal met hods t end t o addr ess t he i mpact of onl y one pr oj ect at a t i me
and i n i sol at i on f r omot her pr oj ect s. Resul t s may t her ef or e be mi sl eadi ng,
gi ven t hat t he combi ned f i scal i mpact s of many new pr oj ect s di f f er
si gni f i cant l y f r omt he sumof t hei r i ndi vi dual i mpact s.
A cumul at i ve appr oach t hat consi der s al l ant i ci pat ed pr oj ect s wi t hi n a
j ur i sdi ct i on over t i me can pr ovi de a f ul l er vi ew of how new devel opment can
af f ect a j ur i sdi ct i on' s f i scal posi t i on. Thi s or di nar i l y cor r esponds t o
f ul f i l l ment of t he communi t y' s compr ehensi ve pl an and may somet i mes be
r ef er r ed t o as t he " bui l d- out " anal ysi s ( Bl ack 1993) .
Service Costs in Rapidly Growing Jurisdictions
The shi f t i n a j ur i sdi ct i on s r evenue base or ser vi ce demands i s gener al l y a
f unct i on of r api d new devel opment . Thi s t ends t o be di f f er ent f r omt he r at e,
t ype, char act er , l ocat i on, or i nt ensi t y of pr evi ous devel opment . As a r esul t ,
ser vi ce pr ovi si on wi l l i ncr easi ngl y r ef l ect t he char act er i st i cs and
pr ef er ences of new r esi dent s and busi nesses. Ser vi ce cost s r ar el y r emai n
const ant on a per capi t a basi s over an ext ended per i od.

I n shor t , f i scal i mpact anal ysi s f or a r api dl y gr owi ng j ur i sdi ct i on shoul d
consi der t he ext ent t o whi ch ser vi ce l evel s ar e l i kel y t o change as a r esul t
of cumul at i ve devel opment and t o account f or t hese changes i n t he eval uat i on
of cost s and r evenues.

Service Costs in Fully Developed Communities
The pat t er n of i ncr easi ng cost s f or new devel opment does not necessar i l y
appl y i n ci t i es t hat ar e al r eady bui l t out si nce new ( usual l y i nf i l l )
devel opment t ends t o t ake advant age of exi st i ng ser vi ce pat t er ns and
i nf r ast r uct ur e. For exampl e, an anal ysi s of 29 Mi nnesot a count i es f ound t hat
t he over al l per capi t a cost f or count y- owned and - mai nt ai ned r oads t ends t o
decl i ne as t he per cent age of peopl e r esi di ng wi t hi n a count y' s ci t i es
i ncr eases. Thi s i s pr obabl y due t o t he concent r at i on of new devel opment and
t r af f i c i n ar eas wi t h excess capaci t y and al r eady hi gh l evel s of ser vi ce
( Duncan Associ at es 1999) .
22

Revenues in Rapidly Developing Jurisdictions
The r evenue si de of t he budget i s al so sensi t i ve t o changes i n devel opi ng
j ur i sdi ct i ons. Local r evenues may be sensi t i ve t o t he i ncomes of new
r esi dent s, t he mar ket val ue of newl y devel oped pr oper t y, and changes i n t he
t ype and amount of empl oyment wi t hi n t he j ur i sdi ct i on. I f new r esi dent s have
hi gher i ncomes on aver age t han cur r ent r esi dent s, and t he per capi t a mar ket
val ue of new devel opment i s gr eat er t han t hat of exi st i ng devel opment ,
r evenue sour ces ar e al so l i kel y t o i ncr ease over t i me on a per capi t a basi s.

Residential Impacts from Commercial Projects
Convent i onal wi sdomdi ct at es t hat commer ci al pr oj ect s make money f or
l ocal i t i es because t hey gener at e pr oper t y t axes and busi ness t ax r ecei pt s as
wel l as i mpose l ower cost s t han r esi dent i al devel opment s. But commer ci al
devel opment may al so gener at e demand f or homes f or t he new wor ker s, whi ch i n
t ur n br i ngs addi t i onal cost s t hat t he devel opment may whol l y or par t i al l y
of f set t he f i scal benef i t s. J ur i sdi ct i ons shoul d consi der t he combi ned f i scal
i mpact s, par t i cul ar l y i f t he new commer ci al devel opment i s t o r ecei ve any t ax
br eaks or ot her subsi di es.

Overly Optimistic Projections from Commercial Development
Some f i scal i mpact anal yses not onl y under est i mat e cost s but al so
over est i mat e t he r evenues associ at ed wi t h a pr oj ect . Ther e ar e t wo gener al
r easons f or t hi s. Fi r st , devel oper s may have unr eal i st i c expect at i ons about
t hei r abi l i t y t o capt ur e a shar e of t he l ocal or r egi onal mar ket f or housi ng
and commer ci al space. For exampl e, a commer ci al devel oper may base t he
pr oj ect ' s f i scal i mpact on t he space bei ng100%devel oped and occupi ed.
Second, l ar ge pr oj ect s ar e of t en " phased i n, " wi t h l at er por t i ons devel oped
over t i me onl y i f t he pr evi ous phases ar e successf ul and l ocal economi c
condi t i ons ar e f avor abl e. Thi s i s especi al l y t r ue of mal l s.

Interaction of Land Uses
A maj or l i mi t at i on of f i scal i mpact anal ysi s i s t hat i t does not capt ur e t he
i nt er act i ons among l and uses when devel opment occur s. For exampl e, an
i ndust r i al devel opment may show a net posi t i ve f i scal i mpact . But i t may al so
gener at e cost s out si de of t he devel opment t hat ar e not necessar i l y capt ur ed
i n t he f i scal anal ysi s, such as i ncr eased t r af f i c congest i on t hat l eads t o
hi gher expendi t ur es f or st r eet mai nt enance and r epai r . Thi s same t ype of
i ndust r i al devel opment may al so af f ect t he val ue of adj acent pr oper t i es,
whi ch i s not i ncl uded i n t he f i nal anal ysi s.

"Outputs are only as good as the inputs"
The most f r equent l y ment i oned weakness of f i scal i mpact anal ysi s i s r el at ed
t o t he i nher ent l i mi t at i ons of any model i ng t echni que and speci f i c
appl i cat i ons t o t he subj ect communi t y. For exampl e, many model s r el y on
popul at i on dat a f r omt he decenni al census. The quest i on r emai ns whet her t hi s
23
can pr ovi de an accur at e por t r ayal of t he communi t y i n t he i nt er veni ng year s
bet ween census r epor t s.

Expertise in Fiscal Impact Methods
Al l f i scal i mpact model s r equi r e a cer t ai n l evel of know- how, bot h t o make
t he necessar y i nput s as wel l as t o anal yze and i nt er pr et t he r esul t s. Cor r ect
cal i br at i on and r unni ng of t he chosen model ar e especi al l y cr i t i cal . I n
addi t i on, model s r equi r e t he i nput of a l ar ge amount of numer i cal dat a t hat
must be ver i f i ed bot h f or f act and ent r y i nt o t he spr eadsheet . I deal l y,
anal yst s have some knowl edge of account i ng or f i nanci al economi cs t o
i nt er pr et r esul t s.

Outputs Are Not The Answer
Whi l e f i scal anal ysi s can pr ovi de i mpor t ant i nf or mat i on about t he di r ect i on
or t endenci es of i mpact s, pol i cy deci si ons of t en " get bogged down by r at her
t han i l l umi nat ed by number s. Out put s ar e al ways subj ect t o debat e, r egar dl ess
of t he qual i t y of t he model . Pl anner s wor r y t hat f i scal f act or s may become
t he sol e det er mi nant of pol i cy deci si ons, r at her t han si mpl y one of many
i nput s i n t hose deci si ons. Mor eover , t hey may be war y of pot ent i al
r eper cussi ons f or suggest i ng a l and use f or whi ch t he model pr edi ct s t hat
cost s exceed r evenues.

Skepticism of the Public
The publ i c, t oo, may di st r ust t he r esul t s of f i scal i mpact anal ysi s.
Taxpayer s may assume t hey shoul d quest i on t he number s emanat i ng f r omt he
anal ysi s si mpl y because t he model r epr esent s a bl ack box desi gned by t he
gover nment .



Inaccurate Assumptions about Residential to Nonresidential Land Use Ratios
Par t i cul ar l y when usi ng pr opor t i onal val uat i on met hods, nonr esi dent i al cost s
ar e based on cur r ent r at i os of r esi dent i al - t o- nonr esi dent i al uses. Thi s
appr oach does not consi der i mmi nent [ ???] changes i n l and use or t he act ual
cost s associ at ed wi t h di f f er ent l and uses. For exampl e, does exi st i ng
r esi dent i al devel opment account f or a gr eat er shar e of cer t ai n ser vi ce cost s
t han nonr esi dent i al uses?[ ???]

Support for Exclusionary Zoning
Si nce pr oper t y t axes l ar gel y det er mi ned r evenues i n a f i scal i mpact st udy,
expensi ve homes yi el d mor e r evenue t han af f or dabl e homes. Aver age cost i ng
appr oaches, however , at t r i but e t he same ser vi ce cost s t o al l homes, t her eby
maki ng expensi ve homes f ar mor e f i scal l y vi abl e t han af f or dabl e ones.
Communi t i es may use anal yses l i ke t o excl ude cer t ai n t ypes of devel opment
f r omt hei r boundar i es.

24
Tradeoff Between Expediency and Accuracy
Some t echni ques ar e bet t er sui t ed t han ot her s f or anal yzi ng var i ous
devel opment t ypes and scenar i os. A concer n i s t hat anal yst s woul d opt f or t he
easi est and f ast est met hod r at her t han t he most appr opr i at e one. I n f act , t he
newer model s t hat consi der mor e t han j ust t he f i scal i mpact s of devel opment
ar e used l ess f r equent l y t han t r adi t i onal model s because of t he compl exi t y
i nvol ved.


Alternative Methods

Cost of Community Service Studies

Tr adi t i onal f i scal i mpact anal ysi s met hods consi der 3 component s j oi nt l y:
housing and population, the local economy and local government finances, and project public costs and revenues
from different land development patterns Critics of traditional methods assert that the findings tend to show that
residential development is a net fiscal loss for communities and recommend commercial and industrial development
as a strategy to balance local budgets. Working (agricultural )or open land uses are rarely included in such analyses.
The American Farmland Trust (AFT) developed COCS studies in the mid-1980s to provide communities with a
straightforward and inexpensive way to measure the contribution of agricultural lands to the local tax base as an
alternative to other fiscal impact methods

Cost of communi t y ser vi ces ( COCS) st udi es anal yze t he f i scal i mpact t hat
cur r ent l and uses have on l ocal gover nment budget s. These st udi es det er mi ne
t he cost and r evenues associ at ed wi t h di f f er ent l and uses t o det er mi ne i f
each l and use pays i t s own way. Rat her t han pr escr i be a cour se of act i on,
t hese st udi es si mpl y pr ovi de an assessment of a communi t y s f i scal si t uat i on
wi t h r egar d t o di f f er ent t ypes of l and use at a par t i cul ar poi nt i n t i me.

The r esul t s of t he COCS st udi es ar e consi st ent wi t h t hose of convent i onal
f i scal i mpact anal yses document i ng t he hi gh cost of r esi dent i al devel opment
and r ecommendi ng commer ci al and i ndust r i al devel opment t o bal ance l ocal
budget s. I n ever y communi t y st udi ed, f ar ml and gener at ed a f i scal sur pl us t hat
of f set t he shor t f al l cr eat ed by t he r esi dent i al demand f or publ i c ser vi ces.
Thi s was t r ue even when l and was assessed agr i cul t ur al l y.

Assumptions
Wor ker s and r esi dent s who may l i ve on f ar ms ar e appor t i oned t o ot her
l and uses, usual l y r esi dent i al .
No ser vi ce cost s, such as st r eet mai nt enance, gar bage col l ect i on, or
f i r e pr ot ect i on, ar e assi gned t o agr i cul t ur al uses.

Outputs of Analysis
Set of r at i os compar i ng annual r evenues t o annual expendi t ur es f or a
communi t y s uni que mi x of l and uses.
25

Applicability
Analyzes, at the municipal level the cost and revenues associated with different land use to
determine if each land use 'pays its own way'.

Benefits
Assesses t he cost - r evenue i mpact s of br oad l and use cat egor i es on a
communi t y, as opposed t o t he f i scal i mpact s of a speci f i c
devel opment .
Usef ul t o begi n t he debat e about t he f i scal consequences of l and use
al l ocat i on.
Rel at i vel y uncompl i cat ed and qui ck t o accompl i sh.

Limitations
Does not pr edi ct f ut ur e t r ends or account f or di f f er ences i n pat t er n
and densi t y wi t hi n l and use t ypes.
No cost s, such as st r eet mai nt enance, gar bage col l ect i on or
pr ot ect i ve ser vi ces ar e assi gned t o agr i cul t ur al uses, even t hese
ser vi ces may be r equi r ed. As a r esul t , over al l cost s associ at ed wi t h
t hese uses woul d be l ow or non- exi st ent , whi ch may not be t he case
i n r eal i t y.
May not di f f er ent i at e bet ween di f f er ent t ypes of open space ( i . e. ,
f ar ml and vs. f or est or vacant l ot s) , whi ch may have di f f er ent cost s
and r evenues.
Does not account f or ameni t y val ue or economi c act i vi t y of l and
uses.
Does not account f or t he i nt er act i on of mul t i pl e l and uses.
Does not measur e t he f i scal i mpact of a pr oposed devel opment on mor e
t han one communi t y. Dependi ng on a var i et y of f act or s, a r esi dent i al
devel opment may be of f i scal benef i t t o one communi t y and a f i scal
dr ag on anot her .
Does not exami ne economi c benef i t s or secondar y i mpact s of a gi ven
l and use t o t he communi t y or r egi on.
Does not di st i ngui sh new, ext ensi ve r esi dent i al uses f r omol der ,
cent r al i zed or compact r esi dent i al pat t er ns, whi ch may have
di f f er ent cost s.

Steps and Data Requirements
The f ol l owi ng r epr esent t he key st eps and dat a r equi r ement s necessar y t o
compl et e t he COCS:
Def i ne l and use cat egor i es.
Col l ect i ni t i al l ocal dat a ( or gani ze f i nanci al r ecor ds t o assi gn t he
cost of muni ci pal ser vi ces t o wor ki ng and open l ands, as wel l as t o
r esi dent i al , commer ci al and i ndust r i al devel opment ) .
26
Cal cul at e a def aul t per cent age f or al l ocat i on of var i ous cost s and
r evenues.
Al l ocat e expendi t ur es by l and use cat egor y.
Al l ocat e r evenues by l and use cat egor y.
Comput e t he cost - r evenue r at i os f or each l and use t ype.


27
Local Factors to be Considered

Whet her ut i l i zi ng t r adi t i onal or Cost of Communi t y Ser vi ces model s, si x key
f act or s shoul d be consi der ed: pr oper t y t ax st r uct ur e, t he nat ur e of t he
communi t y, t he t ype of devel opment pr oposed, pur pose of t he anal ysi s, l evel
of exper t i se avai l abl e, and accur acy and avai l abi l i t y of i nf or mat i on.

Property Tax Structure
Regar dl ess of what met hod i s empl oyed t o ant i ci pat e cost s, t he r evenue
assessment i s pr edomi nant l y based on pr oper t y t axes. Pr oper t y t axes pl ay such
a cr i t i cal r ol e i n f i scal i mpact st udi es because t hey ar e st i l l t he pr i mar y
f undi ng sour ce f or l ocal gover nment s. Si nce pr oper t y t ax st r uct ur es di f f er
f r omst at e t o st at e, so wi l l t he appl i cat i ons of i mpact assessment s.

Sever al poi nt s r el at i ng t o pr oper t y t axes ar e i mpor t ant :
The per cent age f i gur e used t o assess val ue f or t ax pur poses var i es
acr oss t he nat i on.
The cost of muni ci pal oper at i ons det er mi nes t he amount of t axes
r equi r ed.
Some st at es have pr oper t y t ax caps t hat onl y vot er s can over t ur n.
Whi l e sever al st at e const i t ut i ons set a maxi mumassessment of 100
per cent , sever al ot her s set l ower maxi mums ( e. g. , Okl ahoma s i s 35
per cent , and Loui si ana s 10 per cent . )
The use of assessment r at i os has a pol i t i cal pur pose. Most l ocal t ax
j ur i sdi ct i ons choose t o assess at a l ower r at i o t han t he st at e maxi mum
al l ows. Pol i t i ci ans encount er l ess r esi st ance t o pr oposed i ncr eases i n
assessment r at i os t han t o pr oposed i ncr eases i n nomi nal pr oper t y t ax
r at es. Local of f i ci al s can t her ef or e r ai se r evenue t hr ough hi gher
assessment r at i os whi l e st i l l cl ai mi ng t hat t he pr oper t y t ax r at e i s
unchanged.

Nature of the Community
Anot her set of f act or s t hat i nf l uence t he appr opr i at eness of a par t i cul ar
f i scal i mpact anal ysi s model i s t he nat ur e of t he communi t y. Thi s i ncl udes
such var i abl es as popul at i on si ze, l and ar ea, and popul at i on densi t y;
hi st or i c and cur r ent gr owt h pat t er ns; l and uses and gr owt h pr essur es; ser vi ce
del i ver y mechani sms ( i . e. , vol unt eer based, publ i c sect or f unded, or
pr i vat i zed) ; and communi t y val ues.

I n gener al , aver age cost i ng met hods wor k wel l i n mi d- si zed communi t i es t hat
ar e exper i enci ng sl ow t o moder at e gr owt h and wher e ser vi ce del i ver y i s st eady
and i n sync wi t h demands. Mar gi nal cost i ng met hods ar e bet t er sui t ed f or
communi t i es wher e gr owt h i s r api d or unexpect ed and new devel opment has t he
pot ent i al t o change t he l and use char act er as wel l as ser vi ce del i ver y
mechani sms. I n such cases, t he subj ect i ve j udgment s of admi ni st r at or s and
28
ser vi ce pr ovi der s can hel p bui l d a mor e accur at e scenar i o f or devel opment
i mpact s. For exampl e, i f r api d gr owt h causes a communi t y t o swi t ch f r om
vol unt eer f i r e pr ot ect i on t o a per manent sal ar i ed f or ce, mar gi nal cost i ng
met hods wi l l pi ck up t he i ncr eased cost s associ at ed wi t h t he change whi l e
aver age cost i ng met hods wi l l not .

Type of Development
The most sui t abl e model depends on t he t ype of pr oj ect bei ng anal yzed. For
exampl e, a model t hat uses t he number of new empl oyees as a maj or i nput i s
best sui t ed t o empl oyment - gener at i ng pr oj ect s such as a commer ci al mal l or
i ndust r i al par k r at her t han a r esi dent i al subdi vi si on. Si mi l ar l y, a
r esi dent i al i nf i l l devel opment wi l l have a di f f er ent i mpact on a communi t y s
r esour ces t han a new subdi vi si on t hat r equi r es addi t i onal i nf r ast r uct ur e and
ut i l i t i es.

Agai n, i n gener al t er ms, mar gi nal cost i ng met hods ar e bet t er sui t ed t han
aver age cost i ng met hods t o anal yze pr oj ect s t hat wi l l dr amat i cal l y al t er t he
ser vi ce suppl y and demand dynami cs i n a communi t y. I n addi t i on, some
t echni ques ( wi t hi n bot h t ypes of met hods) ar e mor e sui t abl e f or anal yzi ng
r esi dent i al devel opment s t han nonr esi dent i al pr oj ect s. Wi t hi n aver age
cost i ng met hods, per capi t a and ser vi ce st andar d t echni ques ar e appr opr i at e
onl y f or r esi dent i al devel opment pr oj ect s, whi l e t he pr opor t i onal val uat i on
t echni que i s used pr i mar i l y f or nonr esi dent i al or mi xed- use scenar i os. Wi t hi n
t he mar gi nal cost i ng met hods, t he empl oyment ant i ci pat i on t echni que i s used
onl y f or nonr esi dent i al devel opment whi l e t he case st udy and compar at i ve
ci t i es t echni ques may be appl i ed t o any t ype of devel opment .

Purpose of Analysis
Whi l e easi er , f ast er , and l ess expensi ve t o i mpl ement , aver age cost i ng
met hods pr ovi de onl y est i mat es at best . I f t he assessment i s f or i nf or mat i on
and educat i onal pur poses ( f or exampl e, t o pr omot e bal anced l and use) and
est i mat es ar e appr opr i at e, such t echni ques ar e i deal . I f t he assessment i s t o
pr ovi de f i scal r el i ef ( e. g. , adj ust t ax br eaks and negot i at e t ax i ncr ement
f i nanci ng agr eement s) or t o mi t i gat e a f i scal bur den ( e. g. , pr omot e
negot i at ed devel opment and devel oper gi vebacks) , mar gi nal cost i ng met hods may
pr ovi de a mor e accur at e pi ct ur e.

Level of Expertise Required
Some model s r equi r e anal yst s t o have mor e exper t i se t han ot her s. The aver age
cost i ng met hods ar e easi l y i mpl ement ed wi t h avai l abl e dat a and a basi c
under st andi ng of how muni ci pal budget s wor k. Mar gi nal cost i ng met hods ar e
mor e t i me- consumi ng and r el y on pr of essi onal exper t i se and knowl edgeabl e
j udgment s about pot ent i al i mpact s. Al t er nat i ve met hods such as cost of
ser vi ce st udi es and economet r i c model i ng, whi ch i s descr i bed bel ow, , al so
var y i n t er ms of exper t i se r equi r ed, wi t h t he l at t er bei ng r el at i vel y easy
29
t o i mpl ement and t he f or mer as t i me consumi ng, expensi ve and f ai r l y
sophi st i cat ed.

Accuracy and Availability of Data
Any anal yt i cal met hod or t echni que pr oduces r esul t s t hat ar e onl y as accur at e
as t he dat a i t uses. Dat a f or aver age cost i ng met hods ar e usual l y mor e
r eadi l y avai l abl e f r ompr i mar y and secondar y sour ces, whi l e dat a f or mar gi nal
cost i ng met hods depend mor e on i ndi vi dual assessment s or j udgment s about
appr opr i at e cost s.




Political Dimensions of Fiscal Impact Methods: Dimensions of
the Growth Debate

The sheer number of f i scal i mpact anal ysi s met hods r ef l ect s bot h a need and
desi r e f or bet t er under st andi ng about t he cost s associ at ed wi t h gr owt h.
Sever al st udi es or debat es subst ant i at e or r ef ut e t he cost s of speci f i c t ypes
of gr owt h ( whet her r esi dent i al , commer ci al , or i ndust r i al ) and i t s l ocat i on
( whet her ur ban, subur ban or r ur al ) . Regar dl ess of t he met hod used or t he
nat ur e of t he devel opment , t he pol i t i cal nat ur e of f i scal i mpact st udi es i s
cl ear .


Compact Development vs. Sprawl
The gener al consensus i n t he pl anni ng l i t er at ur e i s t hat l ow- densi t y
devel opment i s mor e expensi ve t han compact devel opment . Per haps t he most
f amous of t hese st udi es i s t he The Cost s of Spr awl by t he Real Est at e
Resear ch Cor por at i on ( 1974) . Thi s was f ol l owed by st udi es by a t eamt hat
i ncl uded Rober t Bur chel l and Ant hony Downs, among many ot her s, i n Costs of
Sprawl Revisited ( 1998) and Costs of Sprawl 2000 ( 2002) . One mot i ve f or t hese
l at t er st udi es was t o t r ansf or mt he di scussi on of spr awl f r oman emot i onal
debat e among advocat es t o a r easonabl e est i mat e of act ual cost s and benef i t s
by a gr oup of obj ect i ve anal yst s, i . e. , not a si mpl e- mi nded r ej ect i on of
spr awl , but an obj ect i ve l ook at t he al t er nat i ves ( Downs 2004) .

One f or mof gr owt h t hey anal yzed was a cont i nuat i on of uncont r ol l ed spr awl ,
i . e. , l ow- densi t y gr owt h wi t h unl i mi t ed out war d ext ensi on, domi nat ed by
aut omot i ve t r anspor t at i on, and l eapf r og devel opment i nt o open space. The
al t er nat i ve was a mor e compact f or mof gr owt h wi t h hi gher densi t i es, l i mi t ed
out war d ext ensi on, mor e i n- f i l l devel opment , and mor e emphasi s on mass
t r ansi t . The st udy f i r st sought t o measur e cost savi ngs f r ommor e compact
devel opment on a nat i onal scal e f or t he per i od 20002025. The aut hor s al so
i dent i f i ed t he benef i t s t hat made spr awl so domi nant i n t he 50 year s af t er
Wor l d War I I , gi ven t hat spr awl di d and, i n many ways st i l l does wor k. I n
30
par t i cul ar , spr awl al l ows unl i mi t ed use of t he aut omobi l e, r el i eves i nner
subur ban and ur ban congest i on, r educes subur ban- t o- subur ban t r avel t i mes,
pr ovi des physi cal di st ance f r omur ban pr obl ems, and guar ant ees i ncr easi ng
pr oper t y val ues and good publ i c ser vi ces ( Bur chel l et al . 2002) .

The st udy assumes t ot al popul at i on gr owt h f r om2000 t hr ough 2025 of 60
mi l l i on. The Sout h and West woul d gai n 48 mi l l i on peopl e, an i ncr ease of 23
mi l l i on househol ds. Under uncont r ol l ed devel opment , 742 of t he nat i on' s 3, 091
count i es woul d exper i ence mor e spr awl . I f compact gr owt h wer e adopt ed
nat i onwi de, spr awl coul d be gr eat l y r educed i n 57%of t hose count i es. Thi s
r educt i on woul d r equi r e r edi r ect i ng 11%of addi t i onal househol ds and 6%of
addi t i onal j obs i n t hose 25 year s. The West and Sout h woul d exper i ence t he
most r edi r ect i on of peopl e and j obs.

The compact gr owt h scenar i o saves a l ot of money because i t i nvol ves shor t er
t r unk l i nes f or r oads and ut i l i t i es, and keeps mor e l and i n open space uses.
I n addi t i on, housi ng uni t s bui l t at hi gher densi t y woul d be smal l er i n si ze
and use l ess l and. The aut hor s concl ude t hat t hese savi ngs ar e bot h ver y
l ar ge and ver y smal l l ar ge f or st at e and muni ci pal gover nment s, but smal l
when compar ed t o nat i onal budget f i gur es. For st at e and l ocal gover nment s
pr ovi di ng publ i c ser vi ces, t ot al savi ngs of $550600 bi l l i on over 25 year s
( $2224 bi l l i on per year ) mi ght be possi bl e. These f i gur es do not i ncl ude
savi ngs by pr i vat e i ndi vi dual s f r omt r avel i ng l ess each year .

I f t he savi ngs f r ommor e compact devel opment ar e desi r abl e, t he quest i on i s
what pol i ci es shoul d gover nment s adopt t o make t he shi f t f r omuncont r ol l ed
spr awl ? The aut hor s asser t t hat a change t o encour age r egi onal gover nance
t hough not necessar i l y r egi onal gover nment i s key. Thi s i nvol ves shi f t i ng
some power over l and uses f r omt he l ocal l evel t o t he r egi onal or st at e
l evel . Wi t hout such a change, many l ocal gover nment s wi l l cont i nue t o engage
i n excl usi onar y zoni ng t o avoi d hi gher - densi t y devel opment s. The al t er nat i ve
i s pr obabl y mor e a pol i t i cal t han t echni cal pr obl em: most el ect ed of f i ci al s
and t hei r const i t uenci es oppose any pol i ci es t hat mi ght af f ect home val ues
and t he abi l i t y of homeowner s t o keep cont r ol over who l i ves near by.

A second way t o pr omot e mor e compact gr owt h, t he aut hor s suggest , i s t o al l ow
const r uct i on of much mor e af f or dabl e housi ng i n communi t i es even i f t hat
means mor e apar t ment s, mul t i - f ami l y uni t s, or smal l er homes. I n many ci t i es,
r esi dent s must sear ch f or housi ng f ar t her and f ar t her f r omt he cent er ci t y,
si nce pr i ces f al l 1. 21. 5%per mi l e wi t h di st ance f r omt he Cent r al Busi ness
Di st r i ct ( Downs 2004) Agai n, many subur ban homeowner s r esi st t he addi t i on of
l ower - cost ( or hi gher - densi t y) housi ng near t hei r homes, si nce t hey want t o
pr ot ect t hei r hi gh mar ket val ues. Over comi ng t hi s l ack of pol i t i cal wi l l i s
not a t r i vi al chal l enge, despi t e t he al l ur e of si gni f i cant cost savi ngs at
t he st at e and l ocal l evel s.

31
Residential vs. Nonresidential Development
The Amer i can Far ml and Tr ust ( AFT) i s a l eader i n i nvest i gat i ng t he f i scal
i mpact s of agr i cul t ur al l and conver si on and has publ i shed dozens of cost of
communi t y ser vi ces ( COCS) st udi es acr oss t he Uni t ed St at es. As descr i bed
pr evi ousl y, COCS st udi es di vi de l and use i nt o t hr ee cat egor i es: r esi dent i al ,
commer ci al / i ndust r i al , and f ar ml and/ open space. One of t he most common
pr ocedur es i s t o cal cul at e a COCS r at i o f or each l and use cat egor y, compar i ng
how many dol l ar s of l ocal gover nment ser vi ces ar e demanded per dol l ar
col l ect ed. A r at i o above 1. 0 i ndi cat es t hat cost s exceed r evenues col l ect ed
f r oma gi ven l and cat egor y.

I n a r evi ew of 70 COCS st udi es, t he AFT r epor t s t hat r esi dent i al devel opment
r equi r es $1. 15 i n communi t y ser vi ces on aver age f or ever y $1. 00 of t ax
r evenues i t cont r i but es. Far mand f or est l and uses, i n cont r ast , r equi r e onl y
$0. 35 i n ser vi ces f or ever y $1. 00 of t ax r evenue gener at ed, whi l e commer ci al
or i ndust r i al uses demand j ust $0. 27.

St udi es r evi ewed f r omt he West er n Uni t ed St at es i ncl ude Har t mans and Meyer
( 1997) , Snyder and Fer guson ( 1994) , and t he AFT ( 1999) al so suppor t of t hese
nat i onal r esul t s, al t hough agr i cul t ur al and f or est l and uses i n I daho
cont r i but ed mor e per acr e on net t o count y r evenues ( 1: 0. 48) t han commer ci al
and i ndust r i al uses ( 1: 0. 83) .

The USDA al so f unded a st udy ( Coupal et al 2002) whi ch r evi ewed 88 COCS
st udi es and r epor t ed t hat , on aver age, r esi dent i al devel opment r equi r ed $1. 24
i n communi t y ser vi ces f or ever y $1. 00 of t ax r evenue gener at ed, whi l e
agr i cul t ur e demanded onl y $0. 38.

These st udi es show t hat , on aver age, commer ci al , i ndust r i al , agr i cul t ur al and
f or est uses pay f or t hemsel ves f r oma publ i c pol i cy per spect i ve, whi l e
r esi dent i al devel opment i s a net dr ai n on count y cof f er s. Ther e ar e a number
of r easons f or t hese r esul t s. Fi r st , r esi dent i al and commer ci al devel opment s
t end t o demand a hi gh l evel of ser vi ces per acr e whi l e agr i cul t ur al and
f or est l ands demand a l ower l evel . Commer ci al and i ndust r i al l and uses count er
t hese hi gher per - acr e ser vi ce demands by payi ng a hi gher t ax r at e, i n t ur n
gener at i ng hi gher t ax r evenues. Resi dent i al t ax r at es ar e l ower and
agr i cul t ur al t ax r at es l ower st i l l , di mi ni shi ng t he t ax r evenue gener at ed per
acr e.

The bot t oml i ne i s t her ef or e posi t i ve f or commer ci al , i ndust r i al ,
agr i cul t ur al and f or est l and uses, but not f or r esi dent i al uses. The
t r adi t i onal l ogi c i s t hat t axi ng bot h pl aces of busi ness and pl aces wher e
empl oyees of busi nesses r esi de amount s t o doubl e t axat i on. Thi s l ogi c i s
suppor t abl e as l ong as t he busi ness and r esi dences ar e wi t hi n t he same t ax
di st r i ct . The conf l i ct ar i ses when net r evenue- gener at i ng commer ci al
32
pr oper t i es and net ser vi ce- consumi ng r esi dent i al pr oper t i es l i e i n di f f er ent
t ax di st r i ct s.

Or gani zat i ons l i ke t he AFT asser t t hat COCS st udi es appear r el i abl e because
of t he way t axes and ser vi ce expendi t ur es ar e cal cul at ed and i mput ed. The
met hods used i n t he st udi es ar e cl ear l y l ai d out . Mor eover , t he st udi es
concl ude t hat t he l ar gest si ngl e expendi t ur e cat egor y f or communi t i es i s t he
publ i c school syst em, account i ng f or 6070 per cent of spendi ng. Si nce open
space and commer ci al devel opment do not di r ect l y pl ace any bur den on school s,
i t i s unsur pr i si ng t hat t hei r r at i os ar e l ess t han t he r esi dent i al cat egor y.

I t shoul d be not ed t hat t he r at i os acr oss st udi es do not var y subst ant i al l y,
wi t h unani mous agr eement t hat r esi dent i al l and use r at i os ar e above 1. 0 and
t hat t he ot her t ypes of l and uses ar e bel ow 1. 0. The pr i mar y r eason t hat t he
r at i os do show var i at i on i s t hat communi t i es ar e not i dent i cal . I f , f or
exampl e, many homes i n a par t i cul ar communi t y ar e ext r emel y hi gh pr i ced and
occupi ed by " empt y nest er s, " t he COCS r at i o shoul d be r el at i vel y l ow. I n
cont r ast , communi t i es domi nat ed by l ow- and mi ddl e- i ncome f ami l i es wi t h
numer ous chi l dr en woul d have a hi gher r at i o. Some communi t i es have gone
beyond si mpl y cal cul at i ng a COCS r at i o t o det er mi ne a " br eak- even" home val ue
f or t hei r communi t y. Not sur pr i si ngl y, t hese val ues t end t o be subst ant i al l y
hi gher t han t he medi an ( aver age) home val ue.

St i l l , t he AFT appr oach has been cr i t i ci zed as met hodol ogi cal l y i nadequat e
and as advocacy r esear ch r at her t han obj ect i ve sci ence ( see, f or exampl e,
Del l er 2001, Kel sey 1996, Ladd 1998, Hei kki l a 2000) . The pr i nci pal cr i t i ci sms
ar e t hat t he AFT appr oach i s:

Lar gel y a non- st at i st i cal account i ng cat egor i zat i on of r ur al and ur ban
f i scal f l ows ( AFT 1999) . Such case st udy appr oaches may not be
syst emat i c and t he r esul t s may be bi ased by[ ???] subj ect i ve assi gnment
of ser vi ce demands t o t he var i ous l and uses.
Resour ce- i nt ensi ve and gener at es r esul t s t hat ar e not usual l y
t r ansf er abl e t o ot her communi t i es.
Cal cul at ed at a par t i cul ar poi nt i n t i me r at her t han over a per i od of
year s t o account f or changes i n publ i c i nvest ment and var i at i on i n
ser vi ce demands.
Does not account f or pot ent i al economi es of scal e and t he publ i c good
aspect s of publ i c ser vi ces. That i s, once t he school bui l di ng i s bui l t ,
each addi t i onal st udent doesn t cost near l y as much as t he f i r st
st udent s t o occupy t he school ( at l east unt i l capaci t y i s r eached) .
Typi cal l y r epor t s aver age r at her t han i ncr ement al ( mar gi nal ) f i scal
i mpact s. That i s, t her e may be i nf r ast r uct ur e capaci t y suf f i ci ent t o
accommodat e t he f i r st 100 r esi dences at l i t t l e addi t i onal cost , but not
33
f or t he 101st , whi ch t hr ows t he account i ng i nt o t he negat i ve col umn as
new l ar ge f i xed i nf r ast r uct ur e cost s ar e r equi r ed ( Del l er 2001) .

I n t er ms of speci f i c exampl es, a st udy of t he f i scal i mpact s of al t er nat i ve
l and devel opment pat t er ns i n 18 Mi chi gan communi t i es of var i ous t ypes and
si zes f ound t hat compact gr owt h uses 13%l ess devel opabl e l and, 12%f ewer
r oad mi l es, 15%l ess wat er ut i l i t i es, 18%l ess sewer ut i l i t i es, 6. 4%l ess
cost s f or r esi dent i al devel opment , and 5. 2%l ess i n cost s f or nonr esi dent i al
gr owt h. Cost - t o- r evenue r at i os ar e 3. 2%l ess i n compact devel opment t han
si mi l ar spr awl - st yl e devel opment s. The same st udy compar es Mi chi gan s cost s
t o ot her f i ndi ngs.

Compar i son of Mi chi gan Resul t s wi t h Ot her Nat i onal St udi es
Savi ngs: Compact Ver sus Tr end ( Spr awl ) Gr owt h
Ar ea of I mpact Fi ndi ngs of t he Fi el d
Nat i onal l y
Fi ndi ngs of t he Mi chi gan St udy
Devel opabl e Land
Agr i cul t ur al Land
Fr agi l e Land
20. 5- 24. 2%
18- 19%
20- 27%
12. 7%
13. 2%
11. 9%
I nf r ast r uct ur e
Roads ( Local l ane mi l es)
Ut i l i t i es: Wat er
Ut i l i t i es: Sewer

14. 8- 19. 7%
6. 7%
8. 2%

11. 9%
15. 1%
18. 1%
Housi ng Cost s 2. 5- 8. 4% 6. 4%
Cost - t o- Revenue I mpact s 6. 9% 3. 2%
Sour ce: SEMCOG, Fi scal I mpact s of Al t er nat i ve Land Devel opment Pat t er ns i n Mi chi gan, 1997.


Agriculture vs. Residential Development
Ther e has been no shor t age of st udi es at t empt i ng t o est i mat e t he f i scal
i mpact s of r esi dent i al gr owt h vs. keepi ng l and i n agr i cul t ur al use. The
met hodol ogi es r ange f r omt he snapshot appr oach of COCS st udi es t o t he l ong-
t er mpr edi ct i ons of f i scal i mpact anal yses. Yet t hey al l show si mi l ar
r esul t s: r esi dent i al devel opment r equi r es mor e ser vi ces and cost s
muni ci pal i t i es mor e t han ot her t ypes of l and uses. I n t he l ong r un, open l and
r equi r es a much l ower l evel of ser vi ces t han devel oped l and, l i mi t i ng
i ncr eases t o muni ci pal budget s and associ at ed spendi ng over t i me.

I n t hei r st udy, Coupal and Sei dl ( 2003) anal yzed t he r el at i ve cost of
pr ovi di ng communi t y ser vi ces t o agr i cul t ur al l ands ver sus r ur al r esi dent i al
devel opment acr oss t he st at e of Col or ado. The obj ect i ve was t o t est i s
whet her r ur al r esi dent i al devel opment exact s a hi gher cost t o t axpayer s as
l and i s moved f r omagr i cul t ur e or f or est uses The anal ysi s pr esent s est i mat es
34
of t he f i scal i mpact s of r ur al r esi dent i al devel opment usi ng an economet r i c
model of count y r evenues, count y expendi t ur es, school di st r i ct r evenues, and
school di st r i ct expendi t ur es. Thi s appr oach cal cul at es i ncr ement al as wel l as
aver age cost s. The scal e of anal ysi s was t he count y l evel , wher e many i mpact s
of r ur al r esi dent i al devel opment ar e most f el t and wher e many l and use
deci si ons ar e made. Mor eover , i t at t empt s t o addr ess some of t he
met hodol ogi cal shor t comi ngs of t he AFT COCS st udi es by usi ng economet r i c
model s t o anal yze annual r evenue and expendi t ur e dat a acr oss al l Col or ado
count i es f or si x year s.

The aut hor s f ound t hat t he mar gi nal cont r i but i ons t o r evenues f or cr op and
r angel ands exceed expendi t ur es. Thi s val i dat ed t he hypot hesi s t hat r ur al
r esi dent i al devel opment i s a net f i scal l oss t o t he count y gover nment and
school s, whi l e agr i cul t ur al l and i s a net f i scal gai n.

Infill vs. Edge Development
Di scussi ons about spr awl ar e not new, nor ar e debat es about ways t o cur t ai l
i t . For mor e t han 20 year s, Bur chel l and ot her s ( Bur chel l et . al 2002;
( Bur chel l and Li st oki n, 1995) have asser t ed t hat t he f i scal i mpact s of spr awl
ar e cost l y. I n par t i cul ar , t he capi t al cost s of r oads ar e 2. 0 t i mes t hat of
educat i on cost s, 2. 5 t i mes heal t h cost s, 8. 0 t i mes publ i c saf et y cost s, 8. 0
t i mes r ecr eat i on/ cul t ur e cost s and 8. 0 t i mes economi c devel opment cost s
( Bur chel l and Mukher j i . , 2003) Smar t gr owt h, t he ant i dot e t o spr awl , has
among i t s component s:
1. Cont r ol of out war d movement ( ur ban gr owt h boundar i es/ ser vi ce ar eas,
est abl i shment of compact gr owt h cent er s, and pur chase/ t r ansf er of
devel opment r i ght s) .
2. I nner - ci t y r evi t al i zat i on ( i ncl udi ng r edevel opment and i nf i l l ,
l ocat i on of publ i c empl oyment , st r eaml i ned per mi t t i ng, accel er at ed
br ownf i el ds r edevel opment , and i mpr oved publ i c saf et y and educat i on) .
3. Desi gn i nnovat i ons ( such as i nt egr at ed l i vi ng and wor ki ng envi r onment s,
and cr eat i ng cent er s and cent r al pl aces) .
4. Conser vat i on of l and and nat ur al r esour ces.
5. Encour agement of mul t i modal t r anspor t at i on al t er nat i ves.

The Brookings Institute review) of academic empirical literature to weigh the extent to which a new way of thinking
about growth and development can benefit governments, businesses, and regions during these fiscally stressed times
indicates that significant savings can be derived from more compact development. For example projected savings
nationwide between 2000 and 2025 include 11 percent, or $110 billion, from 25-year road-building costs; 6 percent,
or $12.6 billion, from 25-year water and sewer costs; and roughly 3 percent, or $4 billion, for annual operations and
service delivery. Muro and Puentes ( 2004).


35
Intellectual Debate Over Fiscal Impact Methods and New
Approaches

The above sect i on has shown t hat t he val i di t y and appr opr i at eness of usi ng
f i scal i mpact anal ysi s has numer ous i mpl i cat i ons. Thus t he debat e r el at i ng
t o any of t he f i scal i mpact met hodol ogi es cont i nues. New met hods seek t o
capt ur e, not onl y f i scal cost s, but soci al cost s as wel l , ot her s seek t o
f ur t her r ef i ne t he most commonl y used t echni ques ( Bur chel l ( 2002) and
Ti schl er ( 1988) ) . Ot her schol ar s cal l f or al t er nat i ve met hods t o t r ul y
exami ne t he dynami cs of gr owt h and devel opment on communi t y ser vi ces,
busi nesses, and r esi dent s.

Average Costing
Bur chel l s ( 2002) Costs of Sprawl 2000 i s t he best and most r ecent exampl e of
t he st at e- of - t he- ar t aver age cost met hod. I t exami ned t he i mpact s of t wo
devel opment pat t er nsspr awl and cont r ol l ed ( or smar t ) gr owt hf or ever y
count y i n t he Uni t ed St at es. The f i scal i mpact model s i ncl uded i n Cost of
Sprawl 2000 demonst r at e a number of i nnovat i ve f eat ur es f or aver age cost per
capi t a t ype model s. The model s
addr essed capi t al cost s separ at el y f r omoper at i ng cost s. Capi t al cost s
wer e expl i ci t l y exami ned f or l ocal r oads, wat er , and sewer syst ems and
oper at i ng cost s wer e anal yzed f or al l uni t s of l ocal gover nment combi ned.
i ncl uded some spat i al desegr egat i on. Each count y- l evel model est i mat ed
cost s and r evenues f or bot h devel oped and undevel oped ar eas.
t r acked t he conver si on of l and i n t he devel opment pr ocess, f aci l i t at i ng
t he compar i son of l and use i nvent or i esat an aggr egat e l evel t o cost s and
r evenues.
r ecogni zed t he di f f er ent i mpact s caused by empl oyees and by per manent
r esi dent s.

Cr i t i cs, however , poi nt out a l ack of sensi t i vi t y t o l ocal capaci t y i ssues
and t he di f f i cul t y of appl yi ng t he model t o nonr esi dent i al devel opment .

Marginal Costing
I n hi s Sar asot a Count y model , Ti schl er ( 1988) exami ned t he economi c and
f i scal i mpact s of 19 pr ot ot ype l and uses i n t he count y, r angi ng f r oma
subdi vi si on t o agr i cul t ur al l and. For each pr ot ot ype, t he st udy quant i f i ed
t he economi c i mpact s i n t er ms of j obs and i ncomes, al ong wi t h t he mul t i pl i er
i mpact s. Cost and r evenue ef f ect s wer e measur ed f or t he count y gover nment and
f or t he school boar d.

The most i nnovat i ve f eat ur e of t he model was i t s di r ect l i nkage of t he
economi c and f i scal i mpact s of each l and use. Whi l e t he model does est i mat e
t he cont r i but i on of gener al f und r evenues t o cost s r ef l ect ed i n t he capi t al
i mpr ovement pl an, i t exami nes no ot her cont r i but i ons t o capi t al cost s. I mpact
36
f ees and speci al assessment s wer e t r eat ed as of f set s, wi t h cost s assumed t o
equal r evenues gener at ed.

Cr i t i cs poi nt t o t he f act t hat pr ot ot ypes may not be t r ul y r epr esent at i ve of
t he l and uses r epr esent ed r egar dl ess of l ocat i on, pr i ci ng, or t ype of
const r uct i on. I n addi t i on, t he Sar asot a st udy r epr esent s a snapshot i n t i me,
wi t h no expl or at i on of t he ef f ect of i nf l at i on on t he cost s and r evenues
associ at ed wi t h t he l and use deci si on.
Other Dimensions of the Fiscal Impact debate
Fiscal impact analysis, and similar methods concentrate on assembling facts and examining alternatives;
they steer clear of looking at what is right and wrong. But values, principles and even ethics are often at
the heart of government decision-making, including new development. In fact the main principle
underlying fiscal impact analysis, as it is currently practiced, is weighing benefits in relation to costs. But
is cost-benefit the only principle governing decision-making? For example, if utilization of any FIA
method yields the result that it costs less to build new development on open farmland, does this mean
that the new development should indeed be placed there? There will be a loss of natural resources and
perhaps rural amenities, but these are values that are not captured in fiscal impact .An increasing number
of writers on public policy assert that efficiency is not a morally adequate principle to inform decision-
making (Tryzna, 2001; Amy, 1984; Glasser, 1994). Fiscal equity techniques do venture into the realm of
values by examining the relative impacts of development.
The premise of fiscal equity techniques is that new development affects different groups in different ways
that the standard fiscal impact analysis cannot easily incorporate. In many states, city and town taxpayers
must pay county t axes because t hey benef i t f r ommany count ywi de ser vi ces. These
r evenue st r uct ur es somet i mes l ead t o quest i ons of f i scal equi t y, i . e. ,
whet her t he cost of ser vi ces pr ovi ded i s commensur at e wi t h t he t axes pai d,
and whet her t he muni ci pal i t i es ar e payi ng t hei r f ai r shar e. Equi t y can al so
r el at e t o t he soci al i mpact s of new devel opment .

A pr omi si ng new t echni que i nvol ves devel opi ng a " soci al account i ng mat r i x t o
di saggr egat e t he r esul t s of i nput - out put economi c anal ysi s t o househol ds and
wor ker s by r ace, sex, age and i ncome. A compr ehensi ve anal ysi s of soci al
i mpact s woul d compar e changes i n t he l evel of communi t y wel l - bei ng bef or e
and af t er devel opment t akes pl ace. Thi s t echni que i s r ar el y appl i ed,
al t hough some communi t i es ar e begi nni ng t o document basel i ne qual i t y- of - l i f e
i ndi cat or s t hat wi l l make i t possi bl e t o moni t or change and t r ack f ut ur e
condi t i ons.

I n one case st udy appl i cat i on of t hi s met hod, t he Gover nor s Commi ssi on f or a
Sust ai nabl e Sout h Fl or i da ( GCSSF) wor ked f or sever al year s t o det er mi ne ways
t o r econci l e ur ban gr owt h needs wi t h t he r est or at i on of t he Ever gl ades
ecosyst em. The commi ssi on t ar get ed f or ur ban r evi t al i zat i on a t hr ee- count y
37
ar ea ext endi ng al ong t he east coast f r omMi ami t o West Pal mBeach. The
commi ssi on vi ewed t he r edevel opment and i nf i l l of t hi s East war d Ho ar ea as
essent i al t o r educi ng t he spr ead of devel opment t owar d t he Ever gl ades. Thi s
maj or st at e- sponsor ed gr owt h management i ni t i at i ve used bot h qual i t at i ve and
quant i t at i ve measur es t o consi der al l pot ent i al ef f ect s of pr oposed
devel opment act i ons, i ncl udi ng soci al , pol i t i cal and ecol ogi cal i mpact s;
economi c cost s and benef i t s; l egal cost s; and t echni cal f easi bi l i t y.
Gi ven t he i nt el l ect ual debat e on t he mer i t s of f i scal i mpact st udi es, i t i s
l i t t l e wonder t hat t r adi t i onal met hods ar e bei ng r evi si t ed and new ones bei ng
devel oped. Thi s sect i on l ooks at a var i et y of t echni ques t hat at t empt t o
capt ur e t he i mpact s of devel opment beyond l ocal pr oper t y t ax r evenues and
ant i ci pat ed muni ci pal cost s. These newer appr oaches l ook at devel opment f r om
an equi t y, l and use, or even br oader economi c per spect i ve.
Economet r i c Techni ques
Economet r i c t echni ques go beyond per capi t a and case st udy t echni ques t o
capt ur e t he i nt er act i on among component s of t he economy t hat det er mi ne suppl y
of and demand f or publ i c goods. St at i st i cal t echni ques r el at e publ i c
expendi t ur es t o t he f act or s t hat dynami cal l y dr i ve demand. The speci f i c f or m
of equat i ons can var y acr oss st at es dependi ng on t he l egal and i nst i t ut i onal
r ul es i n pl ace.

Conj oi ned Model i ng Techni ques
A number of r esear cher s have been wor ki ng t o devel op syst ems t hat l i nk l ocal
gover nment f i scal model s t o ot her economi c model s t o i ncr ease t hei r accur acy.
I mpor t ant r ecent advances i ncl ude conj oi ni ng an i nput - out put model wi t h
separ at e economet r i c model s t hat deal wi t h var i ous spher es of communi t y
economi c act i vi t y such as t he l abor mar ket , housi ng, and r et ai l sal es
( Schaf f er 1999) I n addi t i on J ohnson ( 1997) cr eat ed a st andar d pr ocedur e f or
conj oi ni ng i nput - out put model s wi t h f i scal and l abor mar ket model s.

Feder al Reser ve Fi scal I mpact Tool ( Feder al Model )
The f eder al model , i n t he f or mof an Excel wor kbook, aut omat i cal l y est i mat es
t he ef f ect s of pr oposed economi c devel opment pr oj ect s on l ocal sal es and
pr oper t y t ax r evenues and on cost s t o l ocal gover nment . Est i mat es ar e based
on user - pr ovi ded i nf or mat i on about t he pr oj ect ( such as l ocat i on and number
of j obs) and t he l ocal i t y ( such as t ax r at es and one- t i me gover nment cost s) .

Looking Ahead
The debat e concer ni ng f i scal i mpact assessment wi l l not end her e. I t i s cl ear
t hat t he publ i c has a t hi r st t o know t he l i kel y i mpact s of devel opment on
t hei r homes, busi nesses, and qual i t y of l i f e. Gi ven t he accel er at i ng pace of
gr owt h and t he i ncr eased concer n over cer t ai n l and use act i vi t i es, t hi s
i nt er est i s under st andabl e. Fi scal i mpact anal yses, i n essence, move t he
38
i mpact di scussi on f r omno concr et e knowl edge t o t he r eal mof l i kel y i mpact s.
We can do bet t er . Hopef ul l y, t he mat er i al s pr ovi ded above wi l l r epr esent
anot her st ep i n t hi s quest f or i mpr ovement .

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