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10 Community and Economic Development Bulletin <br />Estimating the public benefits of development <br />Fiscal impact analysis considers whether a development project will have a net positive effect on <br />a Local government budget by generating public benefits that exceed the operating and capi- <br />tal costs that will be incurred to provide expanded public services. The public sector benefits <br />resulting from growth and development are the increased revenues from property and sales <br />taxes, fees, user charges, utilities, and intergovernmental transfers. Different types of develop- <br />ment projects will affect these various sources of revenue in different ways. For example, a major <br />retail project might be expected to boost sales tax revenues to a greater extent than would a new <br />industrial facility. However, for a given development project, it is important to determine where <br />new residents and workers will live and shop and how they will affect the value of housing in <br />order to know which revenues will be most affected" It is also helpful to know the proportion <br />of any new jobs that will go to existing residents versus in-migrants in determining the extent <br />to which local government revenues will exceed costs. If most of the new jobs are taken by <br />in-migrants, the revenue impact will be diminished by the higher service costs associated with <br />population growth.18 <br />The technique used to estimate a particular revenue stream will depend on the revenue <br />source and how it is generated locally. The property tax is the most common local government <br />revenue source. Growth-related changes in property tax revenues are estimated by applying the <br />local property tax rate to the projected valuation of taxable property to be added in the juris- <br />diction due to the new development. One way to estimate changes in other revenues stemming <br />from growth is to allocate the different categories of revenue to land use types (residential or <br />nonresidential) and divide by the existing total population and local employment 19 The calcu- <br />lations will produce two figures: (1) residential revenues per capita, which is multiplied by the <br />increase in new residents expected from new development and (2) local nonresidential revenues <br />per worker, which is multiplied by the number of new employees the development project will <br />create. Revenues shared with other jurisdictions, such as the North Carolina sales tax, are dis- <br />tributed based on formulas (per capita and/or ad valorem) that revenue estimates must take into <br />account. <br />The revenue benefits for and costs to a local government resulting from a development project <br />may not occur within the same time period.20 In many instances, a local government will make <br />expenditures on project-specific infrastructure improvements and cash incentives up-front, <br />while new tax revenues may not materialize until much later in the project's life. Therefore, <br />decision makers must be able to estimate the future stream of benefits relative to the more cur- <br />rent expenditures. One way to do this is to discount the value of public benefits and revenues <br />17. George Erickcek, "Preparing a Local Fiscal Benefit-Cost Analysis," ICMA IQ Report 37, no. 3 <br />(2005): 11. <br />18. Kenneth Poole, George Erickcek, Donald Iannone, Nancy McCrea, and Pofen Salem, "Evaluat- <br />ing Business Development Incentives," National Association of State Development Agencies, 1999. Also <br />available at www.eda.gov/PDF/lg3_ebdi_report.pdf. <br />19. Mary M. Edwards, "Community Guide to Development Impact Analysis," Wisconsin Land Use <br />Research Program (2000): 20. Also available at www.lic.wisc.edu/shapingdane/facilitation/all resources/ <br />impactslCommDev pdf. <br />20. George Erickcek, "Preparing a Local Fiscal Benefit-Cost Analysis," ICMA IQ Report 37, no. 3 <br />(2005). <br />25 <br />©2010 School of Government. The University of North Carolina at Chapel Hi11 <br />