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F.I.A. for Planners

Fiscal Impact Analysis for Land Use Planners - Terms and Concepts

Economic Impact Impacts to the economy
Fiscal Impact Impacts to a government's bottom line. The analysis projects operating and capital costs without consideration of whether revenue is sufficient. The analysis then compares the revenue to costs to determine the fiscal impact.
Economic v. Fiscal Impact Much of the positive cash flow demonstrated in an economic impact analysis does not make its way into local government coffers, and the economic impact analysis does not take into consideration the costs of services that the local government
L. Carson Bise II, AICP Author of Fiscal Impact Analysis: Methodologies for Planners. Much of this study stack is direct quotation of his book, or based upon this book.
Economic Impact Analysis (EIA) Considers: - Direct Spending - Construction Phase Spending. - Indirect Effects. - Induced Effects - Income (all sources) - Jobs created
Direct Spending In EIA: This represents dollars spent within the local economy by residents of the development as well as expenditures for goods and services by the nonresidential users.
Construction Phase Spending In EIA: This represents the wages, salaries, and purchases of construction materials during the construction of the project.
Indirect Effects In EIA: These consist of the “respending” of the direct expenditures in a community’s economy. Indirect spending arises from the need of one industry to purchase goods or services from other industries to produce its output.
Examples of Indirect Effects In EIA: -industry, as purchases of food and merchandise products are made; -transportation industry, as the products are shipped from purchaser to buyer -manufacturing industry, as products used to service the restaurant are produced.
Induced Effects In EIA: these represent all of the additional economic benefits that are driven by the local spending of household income. Construction workers spending on services trickles throughout the economy.
Income In EIA: Largely salary and wages, but may include\labor income, proprietor's income, rental income, etc.
Jobs In EIA: AN analysis will estimate the number of direct and secondary (spin-off) jobs that are supported as a result of direct spending of the development project.
Shortfalls of many Economic Impact Analysis EIA rarely accounts for increased need for services and facilities that local gov. will be expected to provide (vehicle trip generation, police, fire, sanitation, schools, healthcare, parks, etc.)
Disproportionate Impact Some land uses require more services than other. Ex. retail usually does more than office.
Tax structure Unless tax (sales, income, etc) revenue is remitted to the local jurisdiction, it has no FISCAL impact for their budget.
FIA v. Budget Forecasting In forecasting, operating and capital expenditures are constrained . As a result, operating and capital expenditures are constrained by the amount of revenue available. A fiscal impact analysis does just the opposite.
FIA v Budget Forecasting Methodologies Operating and capital costs are projected differently. FIA projects current levels of service (or desired?). But they may be underfunding roads overlays or programs and s.ubsidizing others.
Say what?! Fiscal impact analysis occurs on a very limited level in local government decision making. When local governments undertake fiscal impact analyses, the focus tends to be on land-use-related issues and the evaluation of specific development projects.
Six PLANNING Applications for FIA 1. Land Use Policies and Development Patterns 2. Demographic and Economic Changes 3 Economic Development Incentives 4. Rezonings and Specific Development Projects 4.a. Timing of Impacts 5. Annexations 6. Infrastructure Planning
Marginal costs Expenditures necessary to build new facilities and provide additional services to accommodate growth beyond existing municipal capacities.
Sensitivity Analyses Sensitivity analysis is the study of how the uncertainty in the output of a mathematical model or system (numerical or otherwise) can be apportioned to different sources of uncertainty in its inputs. - Could be used in rezones
Multiple Scenarios "It is also in the local government’s best interest to evaluate multiple scenarios. Local governments often accept a developer’s absorption schedule at face value without considering alternatives. "
Leveraging Public Dollars Fiscal evaluations can help local officials who are considering how to promote economic growth decide how to invest limited funds so as to maximize the return.
FIA in Budgeting/FINANCE In contrast, an FIA projects the demand for services and facilities (usually based on current levels of service) without regard for expected revenue. If projected revenue does not cover projected expenditures, a deficit will be incurred.
Six FINANCE Applications for FIA 1. Capital Improvement Programming (CIP) 2. Revenue Forecasting 3. Fiscal Planning 4. Budget Projections (services, ex. police) 5. Level of Service Changes(the basic levels of public services that citizens want and are willing to pay for)
Level of Service One of the main variables in FIA.
Fixed Costs see "Budget Tools"
Variable Costs see "Budget Tools"
"Shadow Citizens" Those located outside the city but use it as their primary service provider. They take advantage of city services, but do not pay for it.
Impact Fees / Assessments FIA - determine realistic levels for assessments against new development. Development shouldn't be charged for services at higher level of service than already exists in a community; charged its proportionate share of the cost at existing service levels.
Relevance to Planners Quote "Planners have many opportunities in the planning process and in their day-to-day work to influence the fiscal sustainability of their community." - L. Carson Bise II
Six Essential Steps of FIA and Planning A Revenue Strategy Based on its Findingss 1. Assign Overall Authority to One Department. 2. Identify Tasks to be Completed (see tasks card). 3. Subsequent Strategies
Why should the Planning Division be in charge of FIA? The planning department is the most common choice because most planning departments develop and regularly update forecasts of land uses, and planners are familiar with many of the data sources used in completing fiscal impact analyses.
What is the importance of multi-department cooperation? Other departments will need to provide information about current levels of service and current cost and revenue factors, usually in one or two interviews taking a few hours in total.
What is the role of elected officials important that these officials be involved in early discussions of the process the local government will follow, the alternative scenarios that will be evaluated, and preliminary results of the analysis (after staff review).
What tasks need to be completed in an FIA? 1. Identifying Alternative Scenarios 2. Defining Level of Service 3. Collecting Local Cost/Revenue Factors 4. Preparing Clear Explanations of the Factors 5. Calculating Results 6. Analyzing Findings 7. Presenting Findings 8. Eval. Rev. Strategies
Average v. Marginal-cost approach The more simplistic approaches use average costs; the marginal-cost approach may be more helpful if there are existing capital facility capacities not being used or differences in services among geographic subareas.
Advantages of hiring a consultant 1. Time frame 2. Alleviate personnel resources 3. Provide expertise 4. Minimizes bias 5. Marginal Cost Basis is tricky
Use of Local Data Since conditions can vary widely from community to community, it is crucial that analysts use local data, rather than regional or national averages.
Making all Assumptions Explicit The report should make all assumptions explicit and describe how alternatives were chosen. The levels of service and cost and revenue factors should be clearly defined.
Developing a Revenue Strategy The revenue strategy recommends ways to fund alternative growth scenarios. The completion of the revenue strategy addressing the local government’s longer-term fiscal needs will also complete the fiscal analysis effort.
Quote on Difficulty of FIA for Planners "Preparing a fiscal impact analysis can be a daunting task ...the variety of methodologies that can be employed and the sheer number of assumptions that must be made make FIA both an art and a science." - L. Carson Bise
How is FIA a science? " It is a science in that there are mathematical projections and a methodology involved. "
How is FIA a art? "It is an art in that there is a great deal of subjectivity involved in devising level-of-service standards (LOS) and cost- and revenue-factor assumptions."
How to judge the value of an FIA? " An FIA is only as good as the methodology and assumptions used in preparing it."
How should assumptions be treated? " This is why it is important that the process and the assumptions be clearly explained and included as part of the written work product."
Created by: mjtaylor100