With the release of the new model, CEDBR would like to invite you to an online webinar to either become familiar with or to refresh yourself on the following components of fiscal modeling: • Data preparation • Understanding multipliers • Interpreting the results

1. CEDBR Fiscal Benefit-Cost
Model 2010 - 2011
Kasey Jolly, Senior Research Economist
Center for Economic Development and Business Research
Wichita State University

2. History of Model Development
 Court of Tax Appeals (COTA) requires analysis for tax
abatements and IRBs
 State model developed and funded by Kansas Inc. and
Kansas League of Municipalities in 1993, but not kept
up-to-date
 GWEDC provided funding for development of new
model

3. Why was the new model developed?
 Old model outdated
 SIC not NAICS
 Other limitations
 Allow greater flexibility
 Local technical support
 Available for use throughout ED process

4. Two Versions of the Model
DESKTOP MODEL FULL MODEL
 Given to regional partners  CEDBR - $600 fee to run the
 Returns output for City and model
County  Returns output for
 User Friendly City, County, State and School
District
 Created to be flexible;
therefore, more complex
than Desktop model

5. Data Provided by CEDBR: Community Data
 Tax rates  LOB (local option budget) mill levy
rate
 Mill levy rates
 LOB percentage of general budget
 Budget information
 Capital outlay mill levy rate
 Number of residents
 Number of students
 Number of employed residents
 General Fund Budget
 Avg. market value of new
residential property
 Avg. wage all jobs

6. Multipliers
 Calculated by the US Dept. of Commerce, BEA
 Measure the impact of business operations on other
businesses in the community
 Measure the impact of payroll expenditures on other
businesses in the community
 Direct, Indirect and Total jobs/and or payroll

7. Worker Spending Patterns
 A major source of revenue for taxing jurisdictions is retail sales taxes
 To account for these revenues, we must know what percentage of a
company’s sales and purchases are subject to sales tax; it is also
necessary to estimate these percentages for company
employees/payroll
 Captured retail sales
 County – “County Pull Factors” (KSU)
 City – city pop. is divided by county pop.
 State – the model assumes 100% is subject to tax

8. Substitution
 Individual industries (each NAICS) have been given a predetermined
substitution rate
 Rates were based on the nature of the industry:
 We have two types of industry:
Base – brings outside dollars in
Support – reshuffles existing dollars
Base industries and support industries may look very different
from one community to the next.
 In addition, specialization within the industry – specifically skill
sets – impact substitution rates

9. Data Needed from Company
 NAICS code
 Capital investment
 Land, buildings, machinery and equipment
 Number of new jobs
 Average wages of new jobs
 Firm payments to the city or county

10. Data Needed from Community: Incentives
 Dollar value of incentives by type and taxing
jurisdiction
 Tax abatement (years/percentage)
 Forgivable loan
 Training dollars
 Infrastructure improvement
 Cash value of all other incentives

11. Print Out Sheet
 Project summary
 Incentive summary
 Tax abatement parameters
 Construction impact
 Substitution
 Firm multipliers
 Economic impact of firm operations

12. Fiscal Impact – Presented Using 3 Measures
Return on investment
Benefit Cost Ratio
Net Present Value
BENEFITS COSTS
 Property Taxes  Incentives
 Retail Sales Taxes  Cost of providing
 Transient Guest Taxes city/county services
 Other Fees & Taxes

13. Limitations
 Quantitative vs. Qualitative
 Relies on information given to us
 The desktop version purposely underestimates
benefits to the community
 Depending on the situation, can under- or over-
estimate impacts
 Example – large capital expenditure with tax
abatement may outweigh benefits seen from new
jobs