FCA/FIA Summarized

1. FCA/FIA Summarized • Full Cost Accounting = Fiscal Impact Analysis • FCA/FIA generally refers to efforts to estimate the budgetary effects of various types of land uses on local governmental jurisdictions or other local service providers. FIA is a comparison of public costs and public revenues associated with a given project. • As the name suggests, FCA/FIA is used to determine the total fiscal impact (the “full costs”) of a given project on a jurisdiction. • There are three possible fiscal impacts from any project: 1) Positive: The surplus generated by the proposed project or scenario will allow local tax rates to be lowered, the level of locally funded services to increase, or a combination of the two. 2) Negative: The deficits generated by the project or scenario will require local tax rates to be increased, the level of locally funded services to be lowered, or both. 3) Neutral: There is no project-induced changes on tax rates or locally funded services.

2. FCA/FIA Simplified Formulas

3. Typical FCA Approaches • The most common FCA method is for an individual development project. Most such project-level analyses are prepared by or on behalf of a developer seeking regulatory approval for a project. • A second and much less common method is the evaluation of the cumulative impact of a jurisdiction-wide planning effort or development scenario. The cumulative impact approach attempts to deal with all expected development within a jurisdiction over time. Most such analyses are prepared by planning or environmental groups to determine the true costs for developing a large sector of a city or county. • Other issues complicate the use of FIA:1) The lack of consistent procedures or requirements for the preparation of fiscal impact analyses. 2) Such analyses are rarely subjected to outside review or judicial scrutiny.

4. FCA/FIA Methods • Typically, a fiscal impact analysis is prepared by an analyst with a background in public finance or economics. Depending on the chosen methodology, the outcomes can vary greatly. Typical Methods for the Determining Operating Costs --Average Per Capita Method or Adjusted Per Capita Method --Disaggregated Per Capita Method (by land use type) --Dynamic Method Typical Methods for the Determining Capital Costs --Average Per Capita Method (average costing using debt levels) --Design Capacity Approach (marginal costing using projected costs for new infrastructure elements) Revenues Sources Typically Considered in FCA/FIA --Operating Revenues (User Fees, Licenses, Tickets) --Property Revenues: Property Taxes, Fees --Capital Revenues: Impact Fees/Hookup Fees/Offsets--Sales Taxes, Employment Taxes, Business Fees (Non-Res) --Grants from State and Federal Gvts based on population

5. Elements of Good FCA/FIA Techniques Appropriate Context for the Analysis • The accrual of costs and benefits to different jurisdictions is recognized and accounted for. • The location of a proposed new development is taken into account. Realistic and Reasonable Development Scenario • Both revenues and costs are linked to demographic and economic characteristics of the project or scenario. • Realistic valuation data and build-out scenarios are used. Realistic and Reasonable Planning Environment • A reasonable basis for selection of service levels and revenues is provided. (LoS   Comp Plan; $$   Service Providers) • The basis for determining capital costs is explicitly stated. (CIP or average costs from previous capital expenditures)

6. Full Cost Accounting in FL • In 2001 Florida’s legislature funded an effort to “develop a uniform model for evaluating the true cost of development”. • This model is supposed to be the foundation for developing a financing structure for infrastructure that will capture the “true costs” of development Growth will pay for itself. • Reading from the GMSC’s Final Report (upon which the legislature’s decision is based): --“The tool should be designed to produce and apply better data to guide the planning and decision-making process.” --“The model should constitute a tool, not an automatic threshold for approval or denial.”

7. FL’s Proposed Full Cost Accounting Model • The model is supposed to becapable of estimating the operating and capital expenses and revenues for new development based on the type, scale and location of various land uses. • Costs should include those associated with impacts directly resulting from new development relating to school facilities and transportation facilities. • Costs will also include, but be limited to, other infrastructure as currently required by concurrency (water, sewer, stormwater and solid waste) and also including telecommunications. • Revenues should include all revenues attributable to the new development including impact fees, optional local taxes, ad valorem taxes, gas taxes, sales taxes, and any other taxes and fees generated by the new development.

8. FL’s Proposed FCA Model Cont’d • The model should only be applied prospectively (only to new infrastructure). • Developers should… 1) only be responsible for costs attributed to impacts of their own development project (Rational Nexus, Rough Prop.) 2) not be responsible for any infrastructure backlog that is the responsibility of the state or local government. • The model should apply to all public and private projects and all land use categories. • The model is being developed by Fishkind and Associates (www.fishkind.com) and prototypes of the model are now being tested. The model has been dubbed Florida’s Fiscal Impact Analysis Model (FIAM).

9. The Rationale for the Model • FIAM is aimed at a very important facet of growth management (and one of the concepts at the heart of this course):Linking land use decision making and local government budgeting • The ultimate goal is to make FIA a part of the decision making process on local land use decisions (rezonings, comp plan amendments, development proposal reviews). • The model projects the fiscal impact of a proposed land use change in the near term and in the longer term. • The prototypes have the following characteristics: 1) A large Excel workbook 2) Calibrated to local conditions (local data inputs) 3) Open model (can alter assumptions/formulas) 4) Based on a “modified per capita approach” 5) Capital Costs are calculated using a “capacity approach” Information derived from presentation by Fishkind and Assoc. available online:http://www.fishkind.com/dep/download/fiam_fac_61703.pdf

10. Example Output from FIAM: Orange Co. • An Orange County $175,000 SF home located within the Urban Service Area is projected to have the budget impact shown below. Information derived from presentation by Fishkind and Assoc. available online:http://www.fishkind.com/dep/download/fiam_fac_61703.pdf

11. Example Output from FIAM: Sarasota Co. • In Sarasota County, a single family home located in different areas of the county will need to have the following price level to “break even” (revenues attributable to the home will cover the costs associated with the home, as estimated by the model): • These findings illustrate that the model has (correctly) determined that homes located in the urban core are cheaper to service than suburban and rural homes. Information derived from presentation by Fishkind and Assoc. available online:http://www.fishkind.com/dep/download/fiam_fac_61703.pdf