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In its simplest form, fiscal impact assessment is an estimation
of the difference between the public costs and the public
revenues generated by a development project. Usually, the
model attempts to estimate only direct, current, and public
costs and revenues, and only those costs and revenues which
affect the jurisdiction in which the development occurs. In
this form, fiscal impact assessment is similar to any cost-revenue
analysis. It is not the same as cost-benefit analysis,
since it does not consider indirect and intangible costs, does
not consider externalities (costs imposed on other parties), nor
does it return a ratio of the costs to the benefits. The
model further simplifies the assessment by assuming that current
costs and revenues are the best estimate of the future costs
and revenues of similar activities.
This chapter is based on a family of fiscal impact models developed
by Robert Burchell and David Listokin (1978). They developed
six models: Employment Anticipation, Service Standard, Comparable
City, Proportional Valuation, Per Capita Multiplier, and Case
Study. Several of them serve similar purposes, but differ in
their data requirements. The three models in this chapter were
selected for their flexibility and accessibility of necessary
data.
The Service Standard Method estimates the impact of development
through its effect on service levels (measured in terms of manpower
and capital facilities). In other words, it assumes that every
additional person requires some fractional increase in manpower
and facilities for each of the city services. This approach
is called "average costing," since it divides the total
budget for providing a service equally among current employees
(thus arriving at an "average cost per employee" for
providing a service). The new demand for services is expressed
in terms of the number of new employees, and the cost of services
is determined by multiplying the demand by the average cost
per employee. Since the method is based on population increase,
it is primarily used for residential development projects.
It is similar to the Per Capita Multiplier Model, but where
the per capita approach provides a single estimate of increased
costs, the service standards approach provides an estimate of
costs for each service function.
The Comparable City Method is a "marginal cost" approach.
Based on a city's projected size and growth rate, a comparison
is made to comparable cities in the same region. The
cost increments are calculated as a percentage increase (or
decrease) over current costs, accounting for the possibility
of under- or over-use of existing capacity; hence the term
"marginal cost." This method is suitable for particularly
large projects. Such projects break from the historical growth
pattern, making past local experience inapplicable. The strategy
here is to identify cities which are similar in size and growth
to what the city is becoming, and to project local costs based
on the comparable city's experiences.
The Employment Anticipation Method is a marginal cost approach
for evaluating the impact of commercial and industrial
development. Increased local costs are calculated on the basis
of the increase in employees which the development will bring
in. Like the comparable city method, employment anticipation
uses multipliers derived from the experience of cities
of comparable size with similar growth rates. There is another
method, the proportional valuation method, which arrives
at similar results based on the property value of the commercial
or industrial development.
There is one more method, the Case Study Method, which is not modeled here. The case study approach is the most accurate of the six, and it is the approach of choice when the new development is unique or sufficiently different that comparisons with past trends or comparable cities would be misleading. It is also the most expensive. Burchell and Listokin estimate that the other five approaches require 30-40 hours of staff time to develop; the case study approach requires about 300 hours. In the case study method, the analyst interviews key officials to determine the excess or deficiency in operating and capital capacity for each department. A service-standard method is then used to estimate the change in the demand for services attributable to the new development. The key officials are again interviewed to determine how they will respond to the demand, and the cost of the response is then calculated.
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