City Council Agenda and Packet 2024 05 14 - SP

Home Browse Search

4 Fiscal Impact Analysis: How Today's Decisions Affect Tomorrow's Budget of property tax, the distribution and collection for- mulas for most revenues vary greatly from state to state. Some states where sales tax is collected allow communities to exact a local option sales tax, which is usually collected on a situs basis (point of sale). Other states collect sales tax at the state level and distribute the revenue to communities using a popu- lation -based formula. The same situation exists with income tax: some states allow a local income tax —a "piggyback" tax —on top of the state income tax. In certain states, as in Maryland, this tax is collected by place of residence. In others, as in Ohio, it is collected by place of employment. Levels of Service Another important factor in the fiscal equation is the levels of service currently being provided in a com- munity. The existing level of service is defined as the facility or service standard currently funded through the budget. Examples of level of service standards are pupil -teacher ratios (for example, one teacher per twenty-four students) and acres of parkland per capita. This is an important factor because levels of service vary from community to community. Capacity of Existing Infrastructure The capacity of existing infrastructure in a commu- nity also has a bearing on the fiscal sustainability of new development. One community, for example, may have the capacity to absorb a large number of addi- tional vehicle trips on its existing road network and a significant number of additional students in its high school. This community can absorb more growth than a community without excess capacity, without making additional infrastructure investments. Demographic and Market Characteristics of New Growth Next to a community's revenue structure, no other factor has as great an impact on the net fiscal results as the demographic and market characteristics of different land uses. Examples of demographic and market variables for residential development include average household size, pupil generation rate, market value of housing units, trip generation rate, density per acre, and average household income. Important demographic and market characteristics for nonresi- dential development include square feet per employee, trip generation rate, market value per square foot, sales per square foot (retail), and floor area ratio. The relative importance of the various demo- graphic and market factors depends on a community's revenue structure. For example, Figure 1 shows the annual net fiscal results for nine residential land uses. Data are from a TischlerBise study prepared for Holly Springs, North Carolina, where property tax is the largest source of revenue, accounting for almost 54 percent of general fund revenue in fiscal year 2000. The next largest source of revenue, the sales tax, provided 14 percent of total revenue. Because of this revenue structure, market value is the primary deter- minant of the fiscal results. Only two of the nine residential prototypes gener- ate annual net revenue to the city of Holly Springs. To understand the importance of market value in these fiscal results, one need look no further than the two five -dwelling -unit -per -acre prototypes, which include an "upscale" prototype as well as a "starter home" pro- totype. The demographic characteristics are the same for both of these residential prototypes; however, there is a difference of $115,000 in the market value (tax Figure 1 Annual Net Fiscal Results for Nine Residential Land Uses in Holly Springs, North Carolina, Fiscal Year 2000, Dollars per Unit $200 $100 $0 $-100 $-200 $-300 $-400 $-500 $-600 $-700 Source: TischlerBise, Inc. 11