Transcript
Page 1: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

FISCAL IMPACT ANALYSIS

Page 2: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

TOPICS

• What is a FIA

• FIA methodologies

• FIA Shortcomings

• Rethinking FIA

• FIA and economic development policy

Page 3: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

WHAT IS A FIA

• A tool to determine whether or not a given decision on urban development is fiscally sound (i.e. Costs=Revenue)

• A tool to evaluate the efficiency of different urban models (sprawl vs. compactness)

• A tool to guide public decision regarding the advantages or disadvantages of pursuing a specific decision (e.g. to subsidize a specific development such as sport arena)

• A tool to evaluate the fiscal impacts of a given industry coming to or leaving the town

Page 4: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

FIA METHODOLOGIES

AVERAGE COST APPROACH 1. Per capita multiplier: (Assumes that the best

estimate of future costs is current per capita cost multiply by the future population increment)

2. Service Standard: (Estimates future costs increases based on average per capita costs for

comparably cities) 3. Proportional valuation: (It is an average cost

approach applied to non-residential development)

Page 5: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

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)

Page 6: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

Cost function of public services

$

Q (pop)

TC

MC

MC

Cost function of public services

$

Q (pop)

Page 7: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

AVERAGE VS. MARGINAL

COSTS TP POP AC MC CAPACITY WAST PC=5 Excess

100000 10000 10.00 ---------------- 150000 50000 100000

100000 12000 8.33 0 150000 60000 90000

100000 15000 6.67 0 150000 75000 75000

100000 20000 5.00 0 150000 100000 50000

100000 22000 4.55 0 150000 110000 40000

100000 25000 4.00 0 150000 125000 25000

100000 26000 3.85 0 150000 130000 20000

100000 30000 3.33 0 150000 150000 0

150000 33300 4.50 15.5 300000 166500 133500

Page 8: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

AVERAGE COST FUNCTION

0.00

2.00

4.00

6.00

8.00

10.00

12.00

0 5000 10000 15000 20000 25000 30000 35000

POPULATION

Page 9: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

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

Page 10: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

FIA SHORTCOMINGS (G. Bunnell)

• It takes into account only direct costs and revenues but does not take into account the spillover effects (costs and benefits) of development

• Costs are often over emphasize than benefits because they are easy to calculate

• Some expenditures consider as costs such as education bring benefits but they are solely considered as costs

• We may come to perhaps wrong conclusions such as that communities are better off not growing taking into account that the costs of any development (commercial or residential) are more than what it generates in revenue.

Page 11: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

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

Page 12: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

RETHINKG FISCAL IMPACTS• FOCUS SHOULD BE PLACED ON OUTCOMES

INSTEAD OF INPUTS (Heikkila) • Planners should focus more directly in the relationship

inputs and outputs which is also called the production function

• An example of production function could be represented by the combination of trucks (capital) and employees (labor) needed to collect all the garbage in a neighborhood or city.

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

Page 13: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

Source: Heikkila, 1996

Page 14: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

FIA IN PRACTICE

REVENUE SOURCE TOTAL RESIDENTIALCOMMERCIAL/

INDUSTRIALFARM/FOREST/ OPEN

SPACE

Property Taxes $11,588,855.00 $8,003,775.00 $3,572,253.86 $12,826.14

Excise Taxes $850,687.39 $655,005.30 $195,682.09 $0.00

Penalties/Interest $63,427.34 $48,796.96 $14,578.04 $52.34

Payments in lieu of taxes $169,019.32 $130,032.71 $38,847.13 $139.48

Charges for service $33,000.00 $25,388.10 $7,584.67 $27.23

Fees $296,954.59 $228,457.97 $68,251.56 $245.06

Licenses/Permits $153,878.13 $118,384.05 $35,367.10 $126.99

Investment Income $319,086.68 $245,484.99 $73,338.36 $263.32

Special Assessments $7,022.90 $5,402.97 $1,614.13 $5.80

Fines/Forefeits $73,487.50 $56,536.61 $16,890.25 $60.64

Misc. $55,499.71 $42,697.95 $12,755.96 $45.80

State Aid: Education $1,212,329.00 $1,212,329.00 $0.00 $0.00

State Aid: General Govt $808,445.00 $621,966.16 $185,811.69 $667.16

Total $15,631,692.56 $11,394,257.77 $4,222,974.83 $14,459.96

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

Page 15: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

EXPENDITURE TOTAL RESIDENTIALCOMMERCIAL/

INDUSTRIALFARM/FOREST/ OPEN

SPACE

General Gov't. $1,135,722.00 $873,752.26 $261,032.50 $937.23

Police $834,888.00 $642,309.72 $191,889.30 $688.98

Fire $403,525.00 $310,446.47 $92,745.53 $333.00

Control Center $247,207.00 $190,185.34 $56,817.66 $204.00

Other Safety $16,306.00 $12,544.80 $3,747.74 $13.46

Building Commissioner $64,472.00 $49,600.66 $14,818.14 $53.20

Health & Sanitation $29,274.00 $22,521.55 $6,728.29 $24.16

Highways $935,818.00 $719,958.84 $215,086.89 $772.27

Pensions $1,174,849.00 $903,854.09 $270,025.39 $969.52

Other $235,437.00 $181,130.25 $54,112.46 $194.29

Assessments $42,729.00 $32,872.97 $9,820.76 $35.26

Debt & Interest $777,906.00 $598,471.39 $178,792.65 $641.95

Weights & Measures $2,198.00 $1,692.40 $505.60 $0.00

Board of Appeals $4,412.00 $3,397.12 $1,014.88 $0.00

Water Department $852,466.00 $656,374.78 $196,091.22 $0.00

Cemetery $40,873.00 $40,873.00 $0.00 $0.00

Veterans' Services $4,565.00 $4,565.00 $0.00 $0.00

Library $246,961.00 $246,961.00 $0.00 $0.00

Council on Aging $64,873.00 $64,873.00 $0.00 $0.00

Parks and Rec. $63,979.00 $63,979.00 $0.00 $0.00

School $7,595,500.00 $7,595,500.00 $0.00 $0.00

Total $14,773,960.00 $13,215,863.65 $1,553,229.02 $4,867.33

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

Page 16: FISCAL IMPACTANALYSIS. TOPICS What is a FIA FIA methodologies FIA Shortcomings Rethinking FIA FIA and economic development policy

Residential Commercial/Industrial Farm/Forest/Open Space

Revenues Expenditures Revenues Expenditures Revenues Expenditures

$11,394,257.77 $13,215,863.65 $4,222,974.83 $1,553,229.02 $14,459.96 $4,867.33

$1.16 $0.37 $0.34

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