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Analyzing the Benefits and Costsof Economic Development Projects 13 2 S could be exceptions to the average COCS ratio within a particular category of land use, however. For example, aggregating all residential land uses together can mask the fact that housing for families with school-aged children typically requires more public services than housing units for empty nesters and retirees?' Summary Assessment and Limitations of Fiscal Impact Analysis As a method for determining the cost of economic growth and development to local govern- ment, fiscal impact analysis is an indispensible tool. Fiscal impact analysis can aid the decision- making process by helping a jurisdiction assess and quantify service levels and needs, evaluate the capacity of capital facilities and infrastructure, consider alternative development scenarios, and otherwise prepare for change (growth or decline) 28 Connecting growth and development decisions to budgetary and capital planning considerations is an important way fiscal impact analysis makes such decisions more thoughtful and systematic. Also, when it accounts directly for the costs of business incentives offered for a development project, fiscal impact analysis pro- vides amore comprehensive assessment of the public sector's return on investment. Using fiscal impact analysis appropriately requires an understanding of its limitations. In isolation, fiscal impact analysis provides information only about local government costs and revenues and does not explicitly examine how a development project will affect the larger economy in terms of business output, employment, and income. A project's economic and pri- vate benefits can be substantial even if it runs a net fiscal deficit relative to the local government budget. Moreover, fiscal impact models vary in the extent to which they consider the secondary or indirect economic effects of a development project, if they do so at all. Other limitations of fiscal impact analysis include misapplication of costing methods by users, exclusion of social and environmental impacts, failure to measure cumulative effects over time, and the tendency to focus on a single unit of local government and ignore the impacts on overlapping and neigh- boring jurisdictions.29 Finally, some research demonstrates that different fiscal impact meth- odswill produce different results.30 Therefore, decision makers should carefully consider the assumptions underlying each respective method and how each translates growth into costs and revenues for a particular development project. What about Qualitative Impacts? The typical approaches to economic and fiscal impact analysis do not address ho~~ growth and development might affect a community in ways that are difficult to quantify. For example, a development project can provide hope that prosperity will return to communities hard hit by job loss. It can restore self-respect to unemployed workers who need jobs to support their families. These socio-psychological benefits of development will not appear in the numbers produced by an economic or fiscal impact study. Likewise, these studies may not necessarily 27. Ibid. 28. L. Carson Bise, "Fiscal Impact Analysis: How Today's Decisions Affect Tomorrow's Budget;' ICMA IQ Report 39, no. 5 (2007). 29. Zenia Kotval and John Mullin, "Fiscal Impact Analysis: Methods, Cases, and Intellectual Debate" (working paper, Lincoln Institute of Land Policy, 2006), www.lincolninst.edu/pubs/dl/1252_Kotval%20 Mulling'o202%20Final.pdf. 30. Mary Edwards, "Fiscal Impact Analysis: Does Method Matter?"Journal of the Community Devel- opmentSociety 32, no. 1 (2001): 106-129. © 2010 School of Government. The University of North Carolina at Chapel Hill