1. Fiscal Impact Analysis and Comprehensive Planning 1 Fiscal Impact Analysis and the Financial Feasibility of Comprehensive Plans ROBERT W. BURCHELL, Ph.D. Professor and Co-Director Rutgers University National Impact Fee Round Table (NFIR) National Conference Arlington, Virginia 5 October 2006

2. Fiscal Impact Analysis and Comprehensive Planning 2 The Typical Calculation COSTS:Budget cost per entrant times the number of new entrants REVENUES:Property tax, nontax and intergovernmental revenues times the number of units of residential or 1,000s ft. 2 of nonresidential FISCAL IMPACT: Revenues minus costs to local/county jurisdictions TYPE OF ANALYSIS:Overwhelmingly average costing

3. Fiscal Impact Analysis and Comprehensive Planning 3 The Typical Fiscal Hierarchy POSITIVE 1.Research Office Park 2.Office Development 3.Industrial Development 4.Retail Development 5-6.Vacation Home -Age-Restricted BREAK-EVEN 7.Open Space 8.Town House (2 BR) 9.Single-Family (3 BR) 10.Garden Apt. (1 BR) 11.Town House (3 BR) 12.Single-Family (4 BR) 13.Garden Apt. (2 BR) 14.Mobile Home (2 BR) NEGATIVE 15.Affordable Housing (3 BR)

4. Fiscal Impact Analysis and Comprehensive Planning 4 197019902000  70-00 Single-Family (4 BR) (Change) Household Size4.673.703.54 -24% Schoolchildren1.921.181.02 -47% Town House (3 BR) Household Size4.072.692.50 -39% Schoolchildren1.330.530.41 -69% Garden Apartment (2 BR) Household Size2.562.222.12 -17% Schoolchildren0.270.340.26 -3.7% Conclusion: There are significant decreases in demographics. This makes for positive fiscal impacts. Altering the Typical Result—New Data

5. Fiscal Impact Analysis and Comprehensive Planning 5 19702000  70-00 Mobile Home (3 BR) (Change) Household Size (HHS)3.872.98 -23% Schoolchildren (SC)1.080.72 -33% Affordable Housing (3 BR) Household Size3.963.17 -20% Schoolchildren0.950.86 -9% Garden Apartment (3 BR) Household Size3.843.20 -17% Schoolchildren0.890.85 -4.5% Age-Restricted (55+) (3 BR) Household Size2.101.91 -9% Altering the Typical Result—New Data

6. Fiscal Impact Analysis and Comprehensive Planning 6 Altering the Typical Result—Procedures BANDING DEMOGRAPHICS BY PROPERTY VALUE/RENT (2000 MULTIPLIERS) Single-Family (Value) (4 BR) HHS SC 75 th Percentile or above3.350.90 Average3.541.02 25 th Percentile or below3.711.15 Garden Apartment (Rent) (2 BR) 75 th Percentile or above1.960.15 Average2.120.26 25 th Percentile or below2.180.34 Conclusion(s): Demographics decrease with increasing value/rent. This makes for positive fiscal impacts.

7. Fiscal Impact Analysis and Comprehensive Planning 7 Altering the Typical Result—Procedures INCLUDING SECONDARY EFFECTS -New workers (from nonresidential development) who reside locally (@ 5%) decrease positive fiscal impacts by about 15%. -New residents (from residential development) who spend locally and create nonresidential space decrease negative fiscal impacts by about 10%. -Nonresidential development often causes significant school intergovernmental transfer loss.

8. Fiscal Impact Analysis and Comprehensive Planning 8 Altering the Typical Result—Settings CHANGE IN OWN-SOURCE REVENUES (% OF TOTAL) 195019802000  50-00(%) Intergovernmental 32 44 39 +22 Own Source Taxes 57 37 37 -36 Impact Fees 11 19 24 +118 Total100100100 0 Conclusion(s): Dramatic changes are taking place in how local governments fund operating and capital expenditures. This creates positive fiscal impacts.

9. Fiscal Impact Analysis and Comprehensive Planning 9 Altering the Typical Result—Settings HISTORICAL HIGH/LOW PROPERTY TAX STATES High Property Tax States (>50% Revenues) Rhode Island (59%)Maine (51%) Connecticut (53%)New Jersey (51%) Low Property Tax States (<25% Revenues) Alabama (11%)Louisiana (15%) New Mexico (13%)California (17%) Florida (21%) Conclusion(s): Florida is in the low property tax states but the property tax is increasing per capita and growing in importance as a revenue source.

10. Fiscal Impact Analysis and Comprehensive Planning 10 Altering the Typical Result—Packaging PACKAGING DEVELOPMENT Fiscally negative uses can be packaged with fiscally positive uses to alter outcomes Type of UnitAnnual Fiscal Impact 1,000 units 2 BR Garden Apts. $ - 0.6 mil 500 G.A. + 500,000 ft. 2 Office $ + 1.2 mil 500 G.A. + 500 Age-Restricted $ + 0.2 mil Conclusion(s): Packaging development can render negative effects more positive.

11. Fiscal Impact Analysis and Comprehensive Planning 11 Altering the Typical Result—Packaging FISCAL IMPACTS CAN BE CHANGED 1,000 units Garden Apartments (Age-Restricted) Typical Arrangement—Tax Rate Allocated between Municipality and School District Fiscal Impact to Municipality to School District $ - 0.5 million $ + 1.5 million Payment in Lieu of Taxes (PILOT) Arrangement Fiscal Impact to Municipality to School District $ + 0.5 million $ + 0.5 million Conclusion(s): Payment in lieu of taxes (PILOT) can render negative effects more positive.

12. Fiscal Impact Analysis and Comprehensive Planning 12 The New Fiscal Hierarchy POSITIVE 1. Industrial Development (3) 2. Research Office Park (1) 3-4.Vacation Home/Age-Restricted(5-6) 5. Retail Development (4) 6. Office Development(2) 7. Town House (2 BR)(8) 8. Town House (3 BR)(11) 9. Open Space(7) BREAK 10. Garden Apt. (1 BR) (10) EVEN 11. Single-Family (4 BR) (12) 12. Single-Family (3 BR) (9) 13. Garden Apt. (2 BR) (13) 14. Mobile Homes (2 BR) (14) NEGATIVE15. Affordable Housing (3 BR) (15)

13. Fiscal Impact Analysis and Comprehensive Planning 13 Summary - Part 1 SUMMARY -Demographic changes are lessening the negative fiscal impacts of residential uses. -Technique changes also mitigate negative effects. -Impact fees, state payments for local schools, and impact fees further mitigate negative effects. -Development packaging or mixed-use development (often the reality of a comprehensive plan) also render negative impacts as neutral or positive.

14. Fiscal Impact Analysis and Comprehensive Planning 14 Fiscal Impact Issues ADOPTED VS. DE FACTO LEVELS OF SERVICE (1) A dopted levels of service are difficult to achieve. If adopted levels of service are not addressed in the capital budget and do not appear in the operating budget as increased debt service, fiscal impact analysis has difficulty addressing this new level of service.

15. Fiscal Impact Analysis and Comprehensive Planning 15 Fiscal Impact Issues EXISTING DEFICIENCIES/EXCESS CAPACITY (2) Time plays a factor here. In the very long run (comprehensive planning period), existing deficiencies and excess capacities are assumed to return to zero. Although it is not usually a component of average costing, capacity can be modeled to increase/decrease over time.

16. Fiscal Impact Analysis and Comprehensive Planning 16 CHANGING LEVELS OF SERVICE – RE: DEFICIENCY AND EXCESS CAPACITY (3) Changing levels of service can be modeled. Modeling could include addressing existing deficiencies or existing excess capacities. In changing levels of service are we not required to model the effects of in-place residential and nonresidential uses. Fiscal Impact Issues

17. Fiscal Impact Analysis and Comprehensive Planning 17 OPERATING EXPENDITURES AND EXPANDING CAPITAL NEEDS (4) Expanding capital expenditures have operating revenue consequences. If trends in existing capital expenditures are available, these can be modeled. Anytime costs (outside existing levels and distributions) require modeling, additional revenues must also be modeled. Fiscal Impact Issues

18. Fiscal Impact Analysis and Comprehensive Planning 18 COST VARIATIONS DUE TO SPATIAL LOCATION OR COMPACTNESS (5) This is one of the most difficult modeling chores. Differing costs by location can be modeled. There are few revenue equivalents that can be modeled. This may not be necessary because costs alone might suffice to show variation. Fiscal Impact Issues

19. Fiscal Impact Analysis and Comprehensive Planning 19 DEBT MANAGEMENT CONSIDERATIONS (6) Debt management may not provide timely revenues. Debt obligations can be modeled, but this may not affect the cash flow of a particular jurisdiction in the short run. Properly modeled increases in debt service can lead to better debt management. Fiscal Impact Issues

20. Fiscal Impact Analysis and Comprehensive Planning 20 PLAN HORIZON (A) VS. FACILITY LIFE (B) (7) This issue is at the frontier of fiscal impact analysis. At what point do the assumptions of current data have to be modeled into the future? If B is shorter than A, replacement is necessary. Other entities such as police-vehicle staffing may be more important! Fiscal Impact Issues

21. Fiscal Impact Analysis and Comprehensive Planning 21 BUILDOUT VERSUS TIME HORIZON (8) This is a zoning-driven versus market-driven issue. This is an issue of what could happen versus what might happen. One may have nothing to do with the other, especially if zoning is fiscally driven. Fiscal Impact Issues

22. Fiscal Impact Analysis and Comprehensive Planning 22 Summary - Part 2 SUMMARY -Florida is beginning to move into highly sophisticated uses of fiscal impact analysis. -This will require techniques to adjust to situations on the ground, including the existing population. -This will also require taking into account current conditions that must be trend-modeled into the future. -As modeling becomes more encompassing and sophisticated, the ability for users and the public to understand decreases.