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4 4 2 Simons, Magner and Baku of units affected by the positive externality where density was lower. Also, Cleveland's population of approximately 500,000 during the study period would place it in the upper -middle portion of the sample's population range. Overall, with these adjustments, and because of the many commonalities in real estate market behavior (especially when measured in percentage or proportional form), the Cleveland results were applied to the ten communities with confidence. Fiscal and Economic Modeling Fiscal and economic models were constructed to calculate the impacts of the projects on the local municipality. The fiscal model was prepared from the perspective of the local government entity, using a benefit -in and cost -out approach where each cost and benefit was entered in the appropriate year and discounted by a municipal discount rate to present value. Rehab projects initiated in 1996- 1997 were modeled, and benefits and costs were projected thirty years into the future. Fiscal costs and benefits were developed for each rehab project, then aggregated to form a case study for each CDC. Exhibit 3 shows some details of costs and benefits, how they were calculated and their underlying assumptions. The final measure is the present value of fiscal benefits received to fiscal costs incurred, from the governments' perspective. A detailed example of the methodology is provided in the Appendix. The community name has been changed to protect the confidentiality of the respondent. Modeling Costs In general, most costs were incurred the year the housing unit was rehabilitated, while the benefits accrued over time. On the cost side, many costs to the city (subsidies to the CDC) were one-time grants or in-kind items (administrative support, donated buildings, grants, infrastructure, technical expertise), that were applied in the year the rehab unit was built (that is, undiscounted in year zero in the present value model). Other items, mostly loans (first mortgage, deferred mortgages), were considered costs the year that the principal and/or interest was provided to the CDC. Tax abatement was considered an ongoing item for the duration of the subsidy period. Modeling Benefits On the benefit side (expense to the CDC or future occupant of the unit), most of the payments are of the on-going variety. Only construction income tax and material sales tax, both related to unit construction, were modeled as first year items. It was assumed that material sales tools place in the city in which the rehabilitations were performed. 22