City Council Agenda and Packet 2024 05 14 - SP

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10 Fiscal Impact Analysis: How Today's Decisions Affect Tomorrow's Budget ratio, say 2.5 police officers per 1,000 persons, and mul- tiplying it by the average operating cost per police officer for the jurisdiction (obtained from local data). Then, with average capital -to -operating -ratio data obtained from the Benefits of Fiscal Impact Analysis Fiscal impact analysis has many benefits, whether the analysis is used for budgeting or for land -use or capital or financial planning. Encourages anticipation of change One of the major benefits of fiscal impact analysis is that it describes what happens to a jurisdiction when change occurs. The fiscal analysis measures the impact of growth (or decline) on a local government's services, including capital facilities, and the resulting costs and revenues. This is different from the preparation of the next year's budget. In most cases, a fiscal analysis does not replicate the budget; it projects marginal changes in the budget given possible land -use, demographic mix, and employment changes. Helps define achievable levels of service To quantify levels of service, department heads and managers must choose an indicator as a basis: the number of residents or jobs in the community, the number of average daily trips on local roads, or some other appropriate denomi- nator. Defining the level of service promotes discus- sion about the adequacy of services and enables the local government to determine through fiscal analysis whether the community can afford various levels of service, in terms of both the costs of new or expanded capital facilities and the annual operating costs. Projects capital facility needs A fiscal impact analy- sis can incorporate information on the available capacity of current capital facilities and project when additions or new facilities will be needed for each development alter- native being evaluated. The evaluation of capital facilities needs can be help- ful in developing or revising the local government's CIP. The costs and staging of facilities included in the CIP are often based on independent best estimates of the depart- ments whose activities or programs are affected by the proposed capital improvements. In some cases the pro- jections made by the different departments affected by growth are similar; at other times they vary widely. Clarifies development policy impacts In most cases, fiscal impact analysis focuses on the effects of growth or development, which are usually defined in a develop- ment scenario. Many local governments never trans- late their policies or major land -use plan changes into estimates of annual revenues and expenditures. The process of describing in narrative form how and why the numbers were developed is a very important aspect of a fiscal impact analysis that provides local officials with U.S. census, capital costs can be estimated. Because a fundamental assumption of this method is that personnel growth within one community is equivalent to average growth in the region, a community that is not perfectly information to evaluate the logic of the assumptions underlying policies or proposals. Under an optimistic development scenario, for example, a community may project population growth of 25,000 over a twenty-year period. The fiscal impact analysis can be used to project how the various types of housing that could accommodate this growth (gar- den apartments, townhomes, single-family homes, and condominiums) would affect the need for services over time. Because this scenario projects job growth as well, the fiscal analysis could also assess the fiscal impact of alternative job growth pictures (for example, mostly offices with some retail versus industrial growth with some office and retail). Using this process, local officials can review existing and proposed policies from a more informed perspective. Calculates revenues; helps in the development of revenue strategies A fiscal analysis can show the magnitude of the revenues that would be collected under different development scenarios and can show whether there would be a surplus or deficit of revenues over expenditures on an annual as well as a cumulative basis for each alternative considered. This enables local officials to consider alternative sources of revenues. Fiscal impact analysis presents a wealth of informa- tion that a local government can use to develop revenue strategies. Obviously, if the fiscal analysis indicates that existing plans for the community's growth will result in a deficit, the plans may need to be adjusted to arrive at a neutral or positive position. The first area to evaluate is the structure of rates for various revenue sources. Revenue formulas that are used to set user fees, utility rates, and property taxes should be reviewed as part of developing a revenue strategy. Possible new revenue sources can also be evaluated. Encourages "what if" questions A good fiscal impact analysis with a narrative explaining all assumptions and inputs encourages managers to ask a number of "what if" questions. Alternative scenarios can be described for service levels, for the cost and revenue factors, for growth itself, or for almost any other aspect of the analysis. Decision makers find that major benefits of fis- cal analysis are the definition of all the different service level factors and cost and revenue factors as well as the ability to change assumptions and quickly see the impact of the changes. This makes fiscal analysis an effective policy tool. 17