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FISCAL IMPACT ANALYSIS

FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

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  • FISCAL IMPACTANALYSIS

  • TOPICSWhat is a FIA FIA methodologies FIA ShortcomingsRethinking FIA FIA and economic development policy

  • WHAT IS A FIA A tool to determine whether or not a given decision on urban development is fiscally sound (i.e. Costs=Revenue) A tool to evaluate the efficiency of different urban models (sprawl vs. compactness)A tool to guide public decision regarding the advantages or disadvantages of pursuing a specific decision (e.g. to subsidize a specific development such as sport arena) A tool to evaluate the fiscal impacts of a given industry coming to or leaving the town

  • FIA METHODOLOGIES AVERAGE COST APPROACH Per capita multiplier: (Assumes that the best estimate of future costs is current per capita cost multiply by the future population increment) Service Standard: (Estimates future costs increases based on average per capita costs for comparably cities) Proportional valuation: (It is an average cost approach applied to non-residential development)

  • FIA METHODOLOGIESMARGINAL COST APPROACH Comparable city method: (Uses a cross-sectional sample of average expenditures of cities in varying size and from there infers the marginal costs of development) Employment anticipation method: (It uses multivariate regression analysis to predict the change in municipal expenditures attributable to variation in commercial and industrial employment) Case study method: (It uses qualitative methods-interview- to gather information)

  • Cost function of public services$Q (pop)TCMCMCCost function of public services$Q (pop)

  • AVERAGE VS. MARGINAL

  • AVERAGE COST FUNCTION

    Chart1

    10

    8.3333333333

    6.6666666667

    5

    4.5454545455

    4

    3.8461538462

    3.3333333333

    4.5045045045

    POPULATION

    Sheet1

    COSTS TPPOPACCAPACITYWAST PC=5DIF

    1000001000010.0015000050000100000

    100000120008.331500006000090000

    100000150006.671500007500075000

    100000200005.0015000010000050000

    100000220004.5515000011000040000

    100000250004.0015000012500025000

    100000260003.8515000013000020000

    100000300003.331500001500000

    150000333004.50300000166500133500

    Sheet1

    0

    0

    0

    0

    0

    0

    0

    0

    0

    POPULATION

    Sheet2

    AV.COST

    Sheet3

  • SOME IMPLICATIONS Average costs would be fine as long as there is some excess capacity of public service Marginal costs approach become important in fast growing cities under pressure to accommodate additional growth which requires expansion of public services

  • FIA SHORTCOMINGS (G. Bunnell) It takes into account only direct costs and revenues but does not take into account the spillover effects (costs and benefits) of developmentCosts are often over emphasize than benefits because they are easy to calculate Some expenditures consider as costs such as education bring benefits but they are solely considered as costs We may come to perhaps wrong conclusions such as that communities are better off not growing taking into account that the costs of any development (commercial or residential) are more than what it generates in revenue.

  • FIA SHORTCOMINGS (G. Bunnell)Evidence suggests that impact fees have not produced more compact cities or smarter growth patterns of urban development Impact fees have fostered the secession of the successful and overlook social issues that are important to society regardless of fiscal effects (affordable housing, good education, etc.) FIA should be used only to educate and generate debate regarding public policy instead of being the ends of public policy

  • RETHINKG FISCAL IMPACTSFOCUS SHOULD BE PLACED ON OUTCOMES INSTEAD OF INPUTS (Heikkila) Planners should focus more directly in the relationship inputs and outputs which is also called the production functionAn example of production function could be represented by the combination of trucks (capital) and employees (labor) needed to collect all the garbage in a neighborhood or city.

    s = f(x,n) s= level of serviceX= inputs N=neighborhood attributes

  • Source: Heikkila, 1996

  • FIA IN PRACTICESource: http://www.littletonma.org/MasterPlan/Chap10

  • Source: http://www.littletonma.org/MasterPlan/Chap10

    EXPENDITURETOTALRESIDENTIALCOMMERCIAL/ INDUSTRIALFARM/FOREST/ OPEN SPACEGeneral Gov't.$1,135,722.00$873,752.26$261,032.50$937.23Police$834,888.00$642,309.72$191,889.30$688.98Fire$403,525.00$310,446.47$92,745.53$333.00Control Center$247,207.00$190,185.34$56,817.66$204.00Other Safety$16,306.00$12,544.80$3,747.74$13.46Building Commissioner$64,472.00$49,600.66$14,818.14$53.20Health & Sanitation$29,274.00$22,521.55$6,728.29$24.16Highways$935,818.00$719,958.84$215,086.89$772.27Pensions$1,174,849.00$903,854.09$270,025.39$969.52Other$235,437.00$181,130.25$54,112.46$194.29Assessments$42,729.00$32,872.97$9,820.76$35.26Debt & Interest$777,906.00$598,471.39$178,792.65$641.95Weights & Measures$2,198.00$1,692.40$505.60$0.00Board of Appeals$4,412.00$3,397.12$1,014.88$0.00Water Department$852,466.00$656,374.78$196,091.22$0.00Cemetery$40,873.00$40,873.00$0.00$0.00Veterans' Services$4,565.00$4,565.00$0.00$0.00Library$246,961.00$246,961.00$0.00$0.00Council on Aging$64,873.00$64,873.00$0.00$0.00Parks and Rec.$63,979.00$63,979.00$0.00$0.00School$7,595,500.00$7,595,500.00$0.00$0.00Total$14,773,960.00$13,215,863.65$1,553,229.02$4,867.33

  • Source: http://www.littletonma.org/MasterPlan/Chap10

    ResidentialCommercial/IndustrialFarm/Forest/Open SpaceRevenuesExpendituresRevenuesExpendituresRevenuesExpenditures$11,394,257.77$13,215,863.65$4,222,974.83$1,553,229.02$14,459.96$4,867.33$1.16$0.37$0.34