Agenda - 01-10-1994 - Laserfiche WebLink

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The Fiscal Impact of Commercial Development IBy Kim Newel i I Assessi7io t17c public ne consequence of the last few I volves several problems about what years'economic slowdown and cost and revenue items should be in- i costs a7zd beuc,fits of recession is that fiscal impact is- eluded,how they should be measured, sues have lost much of their and what time frame should be adopt- j dcvelopiuvit is a I 0 contentiousness. It is probably ( ed.Even though the states and munic- safe to assume, however, that both I tpalttses empowered to impose impact c0771plex but municipal officials and builders would fees have settled these matters legisla- !t prefer to see the economy and local fis- tively, the issues nevertheless continue 17ZC1`east776V cal impact battles heat up again. In to crop up, especially when builders preparation for that day,this article re- feel squeezed or development is i777ponxlt process visits a widely publicized conflict over booming. the costs of development in one of the A second set of issues goes deeper. j f07- both developen country's fastest-growing counties— These issues focus on the basic as- DuPage County,Illinois.The discus- sumption that underpins fiscal impact a7zd co77i77iu7zities. sion lays out some of the likely direc- analysis and ask if it is reasonable to } tions the overall fiscal impact debate expect a close connection between de- will take during this decade. velopment and specific attendant costs 1 Traditional fiscal impact analysis, and benefits. Critics argue that each i developed primarily by Robert$urchell new development must be considered and David Listokin of Rutgers Univer- as part of a region's overall growth. sits and practiced by many others,has Thus, as a region changes in nature III come to some fairly well-established due to ongoing development,a multi- conclusions. M'hile the exact magni- tude of factors is likely to change,each tudes of fiscal impact vary from case to affecting the costs and revenues of case,certain types of development con- subsequent development. It is impos- sistently generate more revenues than sible to link these changes to a specific costs. In rough sequence, office build- development on a clear-cut, one-to- ings, industrial uses,warehouses,retail one basis. Only a comprehensive, operations,and high-density apart- macro-level analysis can shed light on ment buildings with small units gener- the exact relationship. ate net revenues, while lower-density One example of such a comprehen- apartments,townhouses, and single- sive study is the 1990 analysis of the family homes impose net costs. Obvi- Elkwood Downs commercial and in- ousiy,the demand for schools and oth- dustrial development in Culpeper er residential services is relatively more County,Virginia. Carried out by the expensive than the traffic and protec- Government Finance Research Center tive services required for nonresidential {GFRC), the study is a response to a development. traditional fiscal impact analysis that proiected a large positive cash flog+ in Fiscal impact Analysis Critiqued count}' revenues. By constructing an _ ! Critics of fiscal impact analysis have alternative model that takes into ac. raised two sets of issues. The first in- count the induced service employ- I 10 Land Development/Spring-Summer 1993