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04-04-95 CCM
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04-04-95 CCM
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Analyzing the Fiscal Impact <br />of Development <br />DEFINING FISCAL IMPACT ANALYSIS <br />A fiscal impact analysis projects the net cash flow to the <br />public sector (the local government and, in many cases, the <br />school district) resulting from new development — <br />residential, commercial, industrial, or other. It is similar to <br />the cash flow analysis a developer conducts in order to <br />project costs and revenues likely to result from a proposed <br />development for two to ten years in the future. <br />A fiscal impact analysis projects the <br />net cash flow to the public sector <br />The dynamics of fiscal impact are shown in Exhibit 1. <br />In evaluating the costs associated with providing the <br />acceptable levels of service, the local government should <br />consider existing unused capacities of public services and <br />programs, especially of capital facilities. The new <br />development, or new demand, will be expressed in terms of <br />changes in population, employment, or land use projected <br />to result from the scenarios being evaluated. <br />Since a fiscal analysis will indicate whether and when a <br />jurisdiction could face deficit budgets, the local government <br />is able to weigh land -use policy decisions, acceptable levels <br />of service, plans for capital investments, and long-term <br />borrowing needs. In addition, a projected fiscal deficit can <br />prompt local officials to evaluate current and future <br />revenue sources. Even if a fiscal evaluation indicates a <br />surplus, the local government may wish to change its use of <br />revenue sources to fund infrastructure replacement or <br />higher levels of service. <br />The goal ... is to forecast all relevant <br />operating expenses, capital costs, and <br />revenues <br />Fiscal impact analysis identifies the increases in annual <br />and cumulative expenses for all services that will result <br />from new development. This includes annual operating <br />expenses (including new staff needed per year) and capital <br />expenses associated with constructing or expanding <br />facilities. The fiscal impact statement can also summarize <br />the jurisdiction's bonded debt; its bonding capacity as a <br />percentage of the increase in the tax base; the increase in the <br />tax base; and the fiscal surplus or deficit when general <br />revenues are applied against the net of all special revenues <br />and expenses associated with the development. <br />Paul S. Tischler, president of Tischler & Associates, <br />Inc., authored this report. Tischler and Associates, <br />Inc., is a Bethesda, Maryland consulting firm <br />specializing in fiscal impact and related economic <br />analysis, capital programming, and revenue strategies, <br />The firm developed and uses a PC -based fiscal impact <br />software package either as MUNIES or FISCALS. <br />Mr. Tischler has a B.A. in economics and an M.B.A. <br />in real estate and urban development. He lectures and <br />writes on fiscal impact analysis and related topics. <br />EXHIBIT 1 — The dynamics of fiscal Impact. <br />Changes in <br />Land Use <br />Service Levels <br />KDemographics <br />Costs/Revenues etc. <br />77. <br />c <br />0 <br />Changes in Changes in <br />Public Service Revenue <br />0 <br />m <br />Demands Sources <br />a <br />c <br />m <br />E <br />c <br />- <br />m` <br />0 <br />Cho hges in Changes in <br />a <br />Expenditures Revenues <br />0 <br />J <br />FISCAL <br />S <br />IMPACT <br />Source: Tischler & Associates, Inc. <br />APPLICATIONS FOR FISCAL IMPACT ANALYSIS <br />Fiscal impact analysis is helpful in short- and long-range <br />land -use policy planning and finance planning. Its applica- <br />tions for decision making are discussed below. <br />Planning Issues <br />A fiscal impact evaluation can be used as an effective plan- <br />ning toot. Many local governments view the planning <br />process as monitoring and enforcing land -use decisions and <br />regulations, and pay too little attention to long-range <br />planning issues, including whether future growth will be <br />affordable. The six applications below indicate how fiscal <br />analysis can be an effective policy tool for long-range <br />planning. <br />Land -use policies. Should a jurisdiction encourage higher <br />density land use or allow an overlay district in a certain <br />
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