|
Fiscal Impact Analysis: How Today's Decisions Affect Tomorrow's Budget 5
<br />value), resulting in substantial net deficits on a per unit
<br />basis for the starter home prototype and modest net
<br />revenues for the upscale version of the prototype.
<br />The dynamics of fiscal impact are shown in Figure
<br />2. To assess accurately the fiscal impacts of chang-
<br />ing land use or demographics, the local government
<br />must first define an acceptable level of service for all
<br />relevant government services (for example, police,
<br />fire, public works, recreation). When evaluating the
<br />costs associated with providing the acceptable levels
<br />of service, the local government should consider exist-
<br />ing unused capacities of public services and programs,
<br />especially of capital facilities. The new development,
<br />or new demand, will be expressed in terms of changes
<br />in population, employment, or land use projected to
<br />result from the scenarios being evaluated.
<br />Using local information, and perhaps comparing it
<br />with regional or national average -cost information, the
<br />local government next estimates future capital costs,
<br />operating expenses, and special and general revenues
<br />that will result from providing the acceptable level of
<br />service to the potential new development. In other
<br />words, the local government projects the annual
<br />costs —department by department —of servicing new
<br />development, the annual revenues generated by the
<br />new development, and the net surplus or deficit.
<br />Figure 2 The Dynamics of Fiscal Impact
<br />Changes in land -use
<br />demographics,
<br />service levels, costs,
<br />revenues, etc.
<br />Changes in Changes in
<br />public service revenue
<br />demands sources
<br />c
<br />a,
<br />E
<br />L
<br />a Changes in Changes in
<br />expenditures revenues
<br />0
<br />J
<br />Fiscal
<br />impact
<br />Source: Tischler & Associates, Inc.
<br />The information can help local officials estimate a
<br />new development's specific impact on tax rates, bond-
<br />ing capacity, and bonding margin. If local officials
<br />are thinking about changing land -use policy, fiscal
<br />impact analysis alternatively can help them determine
<br />whether the proposed regulatory revisions will result
<br />in a fiscal surplus or in a deficit. If new infrastructure
<br />must be built early to serve growth, then local offi-
<br />cials can estimate the size of the short-term deficit
<br />and determine when revenues generated by growth
<br />should begin to enter the local government's budget.
<br />Because a fiscal analysis will indicate whether
<br />and when a jurisdiction could face deficit budgets,
<br />the local government is able to weigh land -use policy
<br />decisions, acceptable levels of service, plans for
<br />capital investments, and long-term borrowing needs.
<br />In addition, a projected fiscal deficit can prompt
<br />local officials to evaluate current and future revenue
<br />sources. If a fiscal evaluation indicates a surplus, the
<br />local government may wish to change its use of rev-
<br />enue sources to fund infrastructure replacement or
<br />higher levels of service.
<br />Population and Service Demand
<br />Let's look at a specific example of fiscal impact analy-
<br />sis: evaluating how an increase in population will
<br />increase the demand for a service such as recreation.
<br />A developer requests the rezoning of a 300-acre par-
<br />cel from a density of one unit per acre to four units
<br />per acre. First, as part of the process of ascertaining
<br />an acceptable level of service, the services provided
<br />by the recreation department must be defined. In this
<br />case, the level of service for a community park might
<br />be described in terms of the number and type of
<br />housing units or in terms of population. For instance,
<br />an acceptable level of service might be defined as
<br />one community park for every 3,000 single-family
<br />detached housing units, or for every 7,500 people.
<br />After the level of service is defined, the cost and
<br />revenue factors are determined. It is desirable to define
<br />the costs as precisely as practical. In our example, the
<br />capital costs for a community park could be defined in
<br />terms of acres of land required, plus equipment and
<br />other improvements per park. Operating expenses
<br />could be defined in terms of program personnel, mate-
<br />rials, supplies, and other related items used every year.
<br />The process might also consider the existing capacity
<br />of nearby parks, the different thresholds at which new
<br />services would be added to the existing parks, and the
<br />date when additional parkland would be required.
<br />Another step is the projection of any dedicated
<br />capital revenues associated with providing the service.
<br />In our example, the local government must anticipate
<br />impact fee revenue.
<br />12
<br />
|