Oki Fiam In Apa 10 22 09


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Overview presentation on fiscal impact analysis method and model developed with OKI for Greater Cincinnati region.

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Oki Fiam In Apa 10 22 09

  1. 1. Using Fiscal Impact Analysis to Build Sustainable Local Governments Della Rucker, AICP, CeCD Larisa Sims, AICP Indiana APA State Conference October 22, 2009
  2. 2. Today’s agenda <ul><li>What is Fiscal Impact Analysis? </li></ul><ul><ul><li>Why do it? </li></ul></ul><ul><ul><li>Why don’t people do it? </li></ul></ul><ul><ul><li>How does it work? </li></ul></ul><ul><li>Sneak Peek: The OKI Fiscal Impact Model </li></ul>
  3. 3. What is fiscal impact? <ul><li>How many times have you heard this: </li></ul><ul><li>Question: </li></ul><ul><ul><li>“Is growth good or bad for the property tax base in my community?” </li></ul></ul><ul><li>Answer: </li></ul><ul><ul><li>“Um… yes.” </li></ul></ul>
  4. 4. Huh?
  5. 5. What does a fiscal impact analysis do? <ul><li>Measures cash flow to and from the public sector </li></ul><ul><li>Compares alternative </li></ul><ul><li>development scenarios </li></ul><ul><li>Analyzes ramifications of </li></ul><ul><li>development proposals </li></ul>Asks: Are the revenues generated by new growth enough to cover the service and facility demands it will create?
  6. 6. Why Bother? <ul><li>If we can quantify the impact that land use and development decisions will have on their community’s financial health – if we can provide facts , not assumptions – our communities will be more likely to make land use decisions that build long-term fiscal health . </li></ul>
  7. 7. What Does Fiscal Impact Analysis not do? <ul><li>Does not directly calculate economic impacts (job creation, multiplier effects, etc.) </li></ul><ul><li>Does not calculate economic impacts resulting from multiplier effects. </li></ul><ul><li>Does not account for non-fiscal impacts of development. </li></ul>
  8. 8. <ul><li>Fiscal impacts are only one of many factors that may provide a reason for land use change: </li></ul>Keep in mind…
  9. 9. So how do we figure out the fiscal impact of a plan alternative or a development proposal? <ul><li>Revenues </li></ul><ul><ul><li>Actual </li></ul></ul><ul><ul><li>Unrealized </li></ul></ul><ul><li>Costs </li></ul><ul><ul><li>Public </li></ul></ul><ul><ul><li>Private (surrounding property owners) </li></ul></ul>
  10. 10. <ul><li>Two methods: </li></ul><ul><ul><li>Average costing or per capita multiplier method </li></ul></ul><ul><ul><li>Marginal costing method </li></ul></ul>= X AVG New = FI How do you do this? $ $ $ $
  11. 11. LAND USE DEPENDENT VARIABLES Budgets Revenues and Expenditures INDEPENDENT VARIABLES Population Traffic volumes Employment … etc. LU LU REVENUE and EXPENDITURE $/Unit $/Unit
  12. 12. The easy part first: estimating property taxes <ul><li>The parts: </li></ul><ul><ul><li>Assessed value (link) </li></ul></ul><ul><ul><li>Property tax rate (millage) </li></ul></ul><ul><ul><li>Adjustments, deductions, rollback, caps, etc </li></ul></ul><ul><li>The formula: </li></ul><ul><ul><li>Assessed Value X Millage – Adjustments = Property tax obligation </li></ul></ul>
  13. 13. Estimating income/earnings tax <ul><li>The parts: </li></ul><ul><ul><li>Estimated number of employees </li></ul></ul><ul><ul><ul><li>Actual (might be low) or </li></ul></ul></ul><ul><ul><ul><li>Potential based on national/regional average per square feet </li></ul></ul></ul><ul><ul><li>Income/earnings tax rate </li></ul></ul><ul><ul><li>Estimated percent of employees paying income taxes to locality (may be receiving reciprocity or abatement) </li></ul></ul><ul><li>The formula: </li></ul><ul><ul><li>(Employees X income tax rate) = income tax obligation </li></ul></ul>
  14. 14. Sales tax <ul><li>The parts: </li></ul><ul><ul><li>Estimated sales </li></ul></ul><ul><ul><ul><li>Actual (might be low) or </li></ul></ul></ul><ul><ul><ul><li>Based on typical local experience, or </li></ul></ul></ul><ul><ul><ul><li>based on national/regional average per square feet </li></ul></ul></ul><ul><ul><li>Sales Tax rate </li></ul></ul><ul><ul><ul><li>May differ from one county or city to next </li></ul></ul></ul><ul><ul><ul><li>May have different parts (part to state, part to county) </li></ul></ul></ul><ul><li>The formula: </li></ul><ul><ul><li>Estimated sales X sales tax rate = sales tax obligation </li></ul></ul>
  15. 15. Other types of taxes: <ul><li>Business Establishment-type taxes </li></ul><ul><li>Tax on profits </li></ul><ul><li>Tax on personal property or inventory </li></ul><ul><li>Tax on holdings </li></ul><ul><li>Capital gains </li></ul><ul><li>Etc., etc., etc….. </li></ul>
  16. 16. Estimating Costs (externalities): <ul><li>Not so easy… </li></ul><ul><ul><li>Highly variable across local governments. </li></ul></ul><ul><ul><li>Depends on how you count. </li></ul></ul><ul><ul><li>They probably don’t know themselves. </li></ul></ul>
  17. 17. Typical types of costs: <ul><li>Public Safety </li></ul><ul><li>Health and Welfare </li></ul><ul><li>Public Service (Streets, water, sewer, etc.) </li></ul><ul><li>Courts and Incarceration </li></ul><ul><li>General Administration </li></ul><ul><li>Building and Development </li></ul>
  18. 18. Ways to estimate costs: <ul><li>Per unit costs based on what local government can tell you (eg: road maintenance per square mile, course load per social worker) </li></ul><ul><li>Per unit costs from comparable communities ( census of governments) </li></ul><ul><li>Proportional allocation of local budget. </li></ul>
  19. 19. Potential types of costs: <ul><li>Police/fire runs </li></ul><ul><li>Traffic congestion/management </li></ul><ul><li>Sewer/water/road infrastructure (note: this is often paid by the developer). </li></ul><ul><li>Stormwater runoff </li></ul><ul><li>Students in schools. </li></ul>
  20. 20. Potential costs <ul><li>General formula: average unit cost (per student, per lane mile of roadway, per fire run) X number of units added as a result of proposed activity =estimated public cost </li></ul><ul><ul><li>This “public cost” may not include any improvements that the local government is paying for directly. This “public cost” measures the impact on existing services, and may indicate whether or not existing services can fill the need, or if the development will necessitate adding service capacity in the future. </li></ul></ul>
  21. 21. What’s the difference between a fiscal impact analysis and a fiscal impact analysis model?
  22. 22. Model Challenges <ul><li>Interfacing between different data sets: </li></ul><ul><ul><ul><li>Land use </li></ul></ul></ul><ul><ul><ul><li>Assessment </li></ul></ul></ul><ul><ul><ul><li>Factors that influence fiscal impacts </li></ul></ul></ul><ul><ul><li>Different purposes </li></ul></ul><ul><ul><li>Different sorting criteria </li></ul></ul><ul><ul><li>Different levels of detail </li></ul></ul>
  23. 23. Model Challenges <ul><ul><li>Differences in governmental structure </li></ul></ul><ul><ul><ul><li>Cities, Counties, Townships </li></ul></ul></ul><ul><ul><ul><li>States </li></ul></ul></ul>
  24. 24. Model Challenges <ul><ul><li>Do the numbers we need exist ? </li></ul></ul><ul><ul><ul><li>Local data (budgets, assessments) </li></ul></ul></ul><ul><ul><ul><li>Regional/national sources </li></ul></ul></ul><ul><ul><ul><ul><li>Population census </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Census of governments </li></ul></ul></ul></ul><ul><ul><ul><li>Data discrepancies </li></ul></ul></ul><ul><ul><ul><li>Data suppression </li></ul></ul></ul>
  25. 25. Other Model Challenges <ul><ul><li>Net impacts (difference between existing impacts and proposed) </li></ul></ul><ul><ul><li>Default values and overrides </li></ul></ul><ul><ul><li>Administrative functionality </li></ul></ul>
  26. 26. Issues and Challenges <ul><li>The best model in the world will be useless unless it is easy and straightforward for the average professional planner/administrator to use </li></ul>
  27. 27. And now: the OKI Fiscal Impact Model:
  28. 28. <ul><li>Thank you ! </li></ul>
  29. 29. Della Rucker, AICP, CEcD National Lead for Economic Development [email_address] Jacobs 1880 Waycross Rd. Cincinnati, OH 45240 513-288-6613 www.j acobs.com/jacobsworld LinkedIn: Della Rucker Plaxo: Della Rucker Facebook: Della Rucker Aicp Cecd Twitter: dgottrucker Blog: dellarucker@wordpress.com Larisa Sims, AICP Regional Planning Manager [email_address] 720 East Pete Rose Way, Suite 420 Cincinnati, Ohio 45202 www.oki.org