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8 Community and Economic Development Bulletin 2 3 will need local government services as a result of the development project. The specific methods used to calculate average costs include the following:ls • The per-capita multiplier is the most common technique, in which the current cost of public services per resident, household, or pupil is multiplied by the expected increase in population, housing units, or school-aged children the new development will create. In practice, some analysts prefer to use a modified per capita approach that estimates the full- time equivalent functional population of a jurisdiction based on the amount of time people spend in a community as workers, residents, and/or visitors.14 The functional population methodology accounts for the fact that persons who both reside and work in a jurisdiction require public services for a fu1124-hour period, while those who just reside, work, or visit the jurisdiction will utilize services only for the portion of the day they are physically present. • The service standard uses data for a comparable group of jurisdictions to derive ratios of average government staffing per persori by functional service category. These service standard ratios are applied to the number of new residents anticipated as a consequence of a development project to determine the number of additional government employees that will be needed. This number is multiplied by the average operating cost per employee. The service standard approach is rarely used in practice. • Proportional valuation is a technique for estimating the local government costs associated with nonresidential development 15 Average costs are estimated by first determining the share of local government budget expenditures that goes to nonresidential land uses by multiplying the ratio of nonresidential real property valuation to total real property valuation by annual operating costs. The average local government operating costs for nonresidential land uses are then multiplied by the ratio of the new development's property valuation to that of all nonresidential real property. The average cost approach makes sense to use when it is expected that historical cost patterns accurately reflect current and future service costs, a scenario more likely in communities with average or moderate growth rates. However, in a rapidly growing community with high service demands and an already strained public infrastructure, the costs of providing expanded services could very well be higher than the norm. Likewise, areas experiencing economic decline and 13. Robert Burchell, David Listokin, and William Dolphin, The Ajew Practitioners Guide to Fiscal ImpactAnalysis (New Brunswick, N.J.: Center for Urban Policy Research, Rutgers University, 1985); George Erickcek, "Preparing a Local Fiscal Benefit-Cost Analysis," ICMA IQ Report 37, no. 3 (2005); L. Carson Bise, "Fiscal Impact Analysis: How Today's Decisions Affect Tomorrow's Budget," ICMA IQ Report 39, no. 5 {2007). 14. Arthur C. Nelson and James C. Nicholas, "Estimating Functional Population for Facility Planning," Journal of Llrban Planning and Development 118, no. 2 (1992). 15. An alternative approach is to use a jurisdiction's "functional population" as the basis for determin- ing how local government expenditures should be allocated between residential and nonresidential uses on any type of project. See Mary M. Edwards and Jack R. Huddleston, "Prospects and Perils of Fiscal Impact Analysis," Journal of the American Planning Association 76, no. 1 (2010). The idea is that a devel- opment project of any type-residential or nonresidential-will bring new people into a community who will require and utilize public services to varying degrees based on how much time they are physically present as workers, residents, or visitors. In addition, this change in population is more strongly linked to the actual provision of services, even for nonresidential projects, than proportional property values. ©2010 School of Government. The University of North Carolina at Chapel Hi11