Fiscal Impact Assessment: Comparable Cities Method
The second fiscal impact assessment method, Comparable Cities, is a marginal cost analysis for residential projects. The model is, in many ways, similar to the Service Standard method: You describe the project, the current cost structure for providing services, the current rates at which revenue is generated, and calculate the multipliers which will be used to project future costs. The major difference lies in the way the multipliers are calculated.
The first part of the worksheet develops the Project Description (Figure 7). Since the Comparable Cities method calculates fiscal impact differently than the Service Standard method, the information requested is also different. "Current size of the city" is the same as before. "Project size" is the population increase which the project is designed to accommodate. The worksheet also requests information about the time it will take to complete the project and the current rate of change in city size. Current city size and rate of change need only be entered once; the spreadsheet will automatically enter it in the other rows. The worksheet will calculate the projected city size (current size plus the projected size of the new development) and the projected annual rate of change (the ratio of projected to current size, divided by the number of years over which the increase will occur). Notice that this model assumes that all future growth will be channeled through the project; in other words, all other future growth is ignored. This simplifying assumption is necessary for calculating the impact of the project on the city's budget. It also guarantees that the model will not give an accurate estimate of the future budget of the city, but only of the increment in the budget which will be needed to service the project.
PROJECT DESCRIPTION YEARS CURRENT CURRENT PRJECTED PRJECTEDALT'NTIVE PROJECT TO CITY % POP CITY % POPNUMBER SIZE COMPLET SIZE CHANGE SIZE CHANGE 1 ...... ...... ...... ...... xxxxx xxxxx 2 ...... ...... xxxxx xxxxx xxxxx xxxxx 3 ...... ...... xxxxx xxxxx xxxxx xxxxx Figure 7
The Current Costs worksheet (Figure 8) is a very simple table for entering operating and capital costs by service function. Because of the calculations required for obtaining the multipliers, the costs are only broken into the five major categories; the subcategories are not calculated separately.
CURRENT COSTS OPERATING CAPITAL FUNCTION COST COST GENERAL GOVERNMENT ...... ...... PUBLIC SAFETY ...... ...... PUBLIC WORKS ...... ...... HEALTH & WELFARE ...... ...... RECREATION ...... ...... Figure 8
The Revenue Projection worksheet for the comparable cities approach is similar to the one for service standards (Figure 4), except that there are only three alternatives listed rather than four and property taxes should be entered as the average tax per person.
The heart of the comparable cities model is the way in which it calculates the multipliers for future costs. The multipliers for both current and future costs are drawn from a single set of tables. Each table is similar to the capital and operating expense tables for the service standards method; but rather than a single table for operating expenses, there are nine tables distinguished by rate of growth. These tables are also built on information from the Census of Governments, as were the tables for the service standards method. The nine tables are arranged in a set of columns on the spreadsheet immediately to the right of the worksheets. Similarly, there are a set of nine tables for capital expenses, arrayed to the right of the operating expense tables. It would be nice to have the spreadsheet choose the appropriate table and the appropriate value within the table, as it did for the service standards model. But that is a fairly complex technique, and you will have to transfer the information yourself (use the "Copy" command to avoid keyboard errors).
The information from the tables enters the model through two worksheets, one for current multipliers and one for future multipliers. Figure 9 presents the Current Multiplier worksheet; the Future Multiplier worksheet is identical in format. For the current multiplier worksheet, you must use the current percent population change (growth rate) of the city to determine the appropriate table for operating and capital costs for each alternative. Select the column from the appropriate table which corresponds to the current population of the city, and copy those values into the appropriate columns of the current multiplier worksheet. For the future multiplier worksheet, repeat the process, only this time use the projected percent population change to select the table, and use the projected city size to determine the appropriate column. For each project alternative, you will have to select a column of multipliers for operating expenses and for capital expenses.
MULTIPLIER WORKSHEET: CURRENT COMPARABLE CITY MULTIPLIERS ALTERNATE 1 ALTERNATE 2 ALTERNATE 3 OPERAT CAPITL OPERAT CAPITL OPERAT CAPITAL FUNCTION MULTIPL MULTPL MULTIPL MULTPL MULTIPL MULTPLGENERAL GOVT ...... ...... ...... ...... ...... ......PUBLIC SAFETY ...... ...... ...... ...... ...... ......PUBLIC WORKS ...... ...... ...... ...... ...... ......HEALTH & WELFR ...... ...... ...... ...... ...... ...... RECREATION ...... ...... ...... ...... ...... ...... Figure 9
The spreadsheet calculates the annual operating and capital costs due to the project in a three-step process:
- Future per capita costs: The marginal change in future costs are determined by the ratio of future to current multipliers. This ratio, multiplied by current per capita costs, provides the future per capita costs:
- Future per capita Costs = (Future Multiplier/Current Multiplier) X (Current Costs/Current Population)
- Future Total Costs: The total future cost for services (holding all other growth constant) is the future per capita cost multiplied by the future population:
- Future Total Costs = Future per capita Costs X Projected City Size
- Net Annual Cost: The net annual cost due to the project is the difference between current costs and future total costs:
- Net Annual Costs = Future Total Costs - Current Total Costs
These calculations must be made for both operating and capital costs. You must enter a value for the multiplier of each function within any alternate, even if only a dummy value of "1." If you do not, it will cause an error message in the worksheet because the spreadsheet will attempt to divide by "0." The results of the calculations are presented for each alternative in the Projected Annual Costs worksheet (Figure 10).
PROJECTED ANNUAL COSTS ALTERNATE 1 ALTERNATE 2 ALTERNATE 3 ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL ANNUAL OPERAT CAPITL OPERAT CAPITL OPERAT CAPITAL FUNCTION COSTS COSTS COSTS COSTS COSTS COSTSGENERAL GOVT xxxxx xxxxx xxxxx xxxxx xxxxx xxxxxPUBLIC SAFETY xxxxx xxxxx xxxxx xxxxx xxxxx xxxxxPUBLIC WORKS xxxxx xxxxx xxxxx xxxxx xxxxx xxxxxHEALTH & WELFR xxxxx xxxxx xxxxx xxxxx xxxxx xxxxxRECREATION xxxxx xxxxx xxxxx xxxxx xxxxx xxxxxTOTAL xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx Figure 10
Finally, the spreadsheet includes a Summary worksheet (Figure 11) which is very similar to the one provided for the service standards method. This summary only presents three alternatives, and it expresses the size of the project in terms of population rather than housing units.
SUMMARY OF FISCAL IMPACTS TOTAL TOTAL NETDEVEL'MNT PROJECT ANNUAL ANNUAL FISCALALT'NTIVE SIZE COSTS REVENUE IMPACT 1 xxxxx xxxxx xxxxx xxxxx 2 xxxxx xxxxx xxxxx xxxxx 3 xxxxx xxxxx xxxxx xxxxx Figure 11
© 1996 A.J.Filipovitch
Revised 15 November 96