Fiscal Impact Assessment: Definitions

Fiscal impact assessment is, in many ways, an accounting tool. But since the comparison is primarily internal (change between two times) and there is little reason to assure comparability across jurisdictions, the definitions of the various terms are not as rigorously defined as they are in accounting. There are a few terms with specific or technical meaning, and their definitions follow:

Average Cost = Total Cost / Number of Employees

The marginal cost approach takes into account the possibility of under-or over-utilization of current resources, and calculates the cost of each additional unit of service based on the additional (rather than average) costs imposed. There is no single way to calculate marginal cost; the two models which use it in this chapter use two different approaches.

Average cost techniques are most appropriate for analyzing small projects for jurisdictions which have neither a great surplus nor a severe shortage of available capacity. If the project is large (in which case it will create a shortage just by its size), or if the local jurisdiction has been experiencing strong growth (thus already putting pressure on its service capacity) or strong decline (in which case there might be considerable unused capacity), marginal cost techniques are more appropriate.

Since there are three distinct models in this chapter, the mathematical basis of each will be discussed, when appropriate, in the discussion of the calculation process for each.


© 1996 A.J.Filipovitch
Revised 15 November 96