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Toolbox for Regional Policy Analysis Report (2000)

Impact Methodologies - Fiscal

Overview

Fiscal impacts can be measured from two perspectives:

  1. The overall costs of infrastructure associated with alternative forms of transportation and development, including costs to both the public and private sector; and

  2. Expenditures and revenues for specific localities or government agencies, including the costs of providing infrastructure as well as tax or other revenues that result from development.

The first perspective - overall costs - can be weighed in conjunction with the other costs and benefits of alternative transportation and development patterns, such as travel benefits and environmental impacts. The second perspective is primarily one of distribution of costs and benefits. This perspective can assist in developing equitable financing schemes, appropriate tax and land use policies, etc.

Overall infrastructure costs are made up of regional and local infrastructure costs. Regional costs include arterial roads and highways, as well as regional utilities such as water supply facilities. Local costs include local roads, sidewalks, and utilities. At both levels, the density and design of development can affect the infrastructure cost per unit of development.

Fiscal impacts to specific localities are driven by:

For any specific locality, the existing infrastructure of schools, utilities and services may or may not have the capacity to absorb more growth without the addition of more costly capital investment. Thus, localized impacts can be very important to understand. On the other hand, balanced regional growth (denoting a normal mix of residential, commercial and industrial activity) will tend to grow all forms of expenditure demands (costs) and taxes (revenues) in the same proportion, and hence will tend not to shift the public revenue-expenditure balance.

Case Studies

Salt Lake City, Utah

Based on engineering analysis, cost functions are developed for transportation and utility infrastructure for different development densities and types. From these functions, the overall infrastructure costs of alternative development scenarios are estimated.

Forecasting Methods

Method 1. Fiscal Accounting Systems

Fiscal accounting systems forecast how changes in population, employment, and income patterns will lead to changes in expenditures and revenues for government agencies. Expenditures typically include police, fire, schools, social services, utilities, etc., and revenues typically include various taxes and fees. Fiscal impact models normally focus on the effects of projects which are either very localized or very skewed in terms of the affected sectors of the economy. For instance, a new residential development or a new office park, either one made possible by transportation improvements, can lead to very different effects on school demands, property tax revenues and local service demands.

Method 2. Specialized Cost Models

Infrastructure cost models estimate the costs of infrastructure - roads, water, sewer, etc. - as a function of the characteristics of development. Types of infrastructure modeled include transportation (roads, sidewalks, transit), water and sewer, telecommunications, gas, and electric utilities. Specialized cost models may rely on some of the same data or cost functions as fiscal accounting systems. They differ in that their focus is on the total costs of infrastructure, rather than the cost and revenue impacts to specific government units. The models may also track the level at which costs are accrued (site developer, municipal service provider, or regional agency). Examples include:

Method 3. Simulation Models

Simulation models are integrated modeling systems that include an input-output (I-O) model to predict economic impacts of different policies, which in turn affect fiscal impacts. Simulation models include:

The REMI simulation model, primarily used for economic forecasting, also contains a fiscal element. Because of the regional level of analysis (county or greater), expenditures and revenues generally grow at the same rate. In fiscal analysis, REMI is primarily used as a driver for fiscal accounting systems (Method 1).

References

Transit Cooperative Research Program (TCRP) Report 39, The Costs of Sprawl Revisited, (Burchell et al., 1999) examines the literature on the relationship between urban form parameters (such as density of development) and infrastructure costs.

Updated: 04/24/2012
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