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Colie, Dennis G.
Fiscal impact modeling research
h [electronic resource].
i At head of title:
[Tampa, Fla. :
b Center for Economic Development Research, College of Business Administration, University of South Florida],
1 online resource (58 p.) :
Title from PDF of caption (viewed Sept. 4, 2009).
Memorandum from Dennis G. Colie and Alex A. McPherson to Tampa Bay Regional Coalition.
"September 22, 2004."
"This memorandum is a report of research commissioned by the Tampa Bay Regional Coalition and presented to the Coalition on September 15, 2004"--P. 1.
McPherson, Alex A.
University of South Florida.
Center for Economic Development Research.
Tampa Bay Regional Coalition.
t Center for Economic Development Research (CEDR) Collection
1 MEMORANDUM Date: September 22, 2004 From: Dennis G. Colie, Ph.D. and Alex A. McPherson Research Economists To: Tampa Bay Regional Coalition 6107-B Memorial Highway Tampa, Florida 33615 Subject: Fiscal Impact Modeling Research This memorandum is a report of research commissioned by the Tampa Bay Regional Coalition and presented to the Coalition on September 15, 2004. A copy of the presentation slides is at Appendix A. The Tampa Bay Regional Coalition is a trade association of land development, construction, building materials and related businesses. The objective of the research is to replicate, and then analyze, one of the nine development examples from the April 7, 2004 staff demonstration to the Hillsborough County Board of County Commissioners of the Hillsborough County Fiscal Impact Analysis Model (FIAM). Selected pages from the County staff report are in Appendix B. Fishkind and Associates, Inc. developed the FIAM (version 3.0 rev) for Hillsborough CountyÂ’s use. The FIAM is a Microsoft Excel-based spreadsheet. In order to perform the research, a copy of the FIAM used for the staff demonstration was obtained from Hillsborough County. We chose development example #2 for replication and analysis. Example #2 is a Â“Medium Lot SubdivisionÂ” in Lutz with 152 units at an average value of $250,000 per unit. The FIAM allows for development in any of three Â“areasÂ” within the County: urban core, urban services area, or rural area. Lutz is in the urban services area. Required data for input into the FIAM is the number of units, average value per unit and Â“area.Â” After inputting the required data, the results variables are immediately displayed. All 152 units are assumed to be constructed in the year 2003.
2 The main result-variables are the CountyÂ’s changes in Operating Costs, Operating Revenue, Capital Costs, and Capital Revenue due to the development project. We traced the calculation for each result-variable throughout the spreadsheet to determine if the results were accurately calculated. Because the calculations rely on data already included in the FIAM, we also reviewed this data. Including such data upon which the calculations are based is sometimes referred to as Â“calibratingÂ” the model and the included data are often thought of as part of the modelÂ’s Â“assumptions.Â” The baseline for the modelÂ’s calculation of the stream of annual operating revenues and operating costs is a version of Hillsborough CountyÂ’s detailed 2003 budget. (The 2003 budget in the model is similar to, but not identical with, the approved 2003 Hillsborough County budget. Possibly, at the time the model was calibrated only a proposed, but not yet approved, budget was available.) Only those budget lines that presumably change with a change in population, labor force, or visitors are included in the model. We did not analyze the selection of budget lines included (or excluded), but do note that this is a discretionary process that could vary from calibration to calibration. The fiscal impact results we obtained for the example #2 replicate the results reported in the Hillsborough County staff report and shown in Appendix B. Total Operating Revenue is $18.824 million for the 20-year period of analysis and the present value of this Revenue is $7.146 million. The FIAM was already calibrated to use a discount rate of 10% to calculate present values. Total Operating Cost is $9.422 million for the 20-year period of analysis and the present value of this Cost is $3.737 million. Total Capital Revenue, which consists of impact fees, is $0.333 million. The modelÂ’s calculation assumes impact fees are collected at the end of year 2003. Therefore, the present value at the beginning of year 2003 is $0.302 million. Total Capital Cost is $0.631 million, all of which the model assumes is spent at the end of year 2003. The present value of this Cost is $0.573 million. (The FIAM and County staff report also display the economic impacts of development project. We did not address economic impacts during this research.) The FIAM inflates operating revenues and costs based on historical County data, which is calibrated in the model for years 1993 to 2001. We verified the accuracy of the historical data from FloridaÂ’s Department of Financial Services on-line data center. We also note that revenues from the CountyÂ’s Community Investment Tax Â– a voter-approved 0.5% sales tax and mandated for use to acquire, construct or improve general government, public education and public safety infrastructure Â– are included in the stream of operating revenues. County government receives a portion of this tax revenue each year. Because this revenue is palpably intended to supplement impact fees, it should arguably be included with Total Capital Revenue rather than Total Operating Revenue. The FIAM does calculate other result-variables that were not mentioned in the Hillsborough County staff report. The other result-variables are School Capital Revenue
3 and Cost as well as State Roads Capital Cost. For School Capital Revenue, the model is calibrated to calculate a one-time impact fee of $195 per dwelling unit in addition to annual ad valorem tax revenues and payments from the State based on the increase in student population. (The model also calculates the anticipated increase in students due the 152 new units.) The model keeps the annual ad valorem tax revenue for school capital constant, i.e. there is no allowance for rising property values and the concomitant increase in tax revenue. School Capital Cost is a stream of payments on bonds assumed to finance land purchase and construction costs for the number of student stations generated by the new dwelling units. Furthermore, the model designer assumed that annual operating revenue and cost for schools must be equated, thus no calculation of these items is contained in the FIAM. The modelÂ’s results for School Capital Revenue and Cost are present values of $592,519 and $632,318, respectively. The modelÂ’s calculation method assumes that 30year bonds finance capital investment at 5% per annum resulting in a 20-year stream (only 20 of the 30 years is used in the modelÂ’s calculation) of repayments, which comprise the School Capital Cost. Finance costs are not calculated, although the model is calibrated for a 30% financing fee on the capital investment. We tried another method for calculating School Capital Revenue and Cost. We let annual ad valorem tax revenue for School Capital Revenue increase through time at the same rate as the modelÂ’s increase for the CountyÂ’s ad valorem tax for operating revenues, thus simulating rising property values. We also assess the 30% financing fee and extend the calculations over a 30-year period. Our result for School Capital Revenue and Cost are present values of $832,195 and $812,293, respectively. The FIAM calculates State Roads Capital Cost using a level-of-service/use method for calibrating the model. No revenue source is identified in the model for State Roads. The modelÂ’s result for State Roads Capital Cost is a present value of $191,245. In the model, Local road costs are a component of Total Capital Cost. The model is calibrated with Capital Location Factors for calculating both state and local road costs. We were unable to discover the source of the factors and do not have expertise in transportation engineering to assess the efficacy of the factors. The FIAM does not consider municipal (Tampa, Temple Terrace, and Plant City) revenues and costs. The model also does not consider revenues or costs of constitutional officers, such as the Sheriff or the Supervisor of Elections, as well as other special taxing entities as the Tampa Port Authority or Southwest Florida Water Management District. We conclude that the FIAMÂ’s 1) concept is consistent with practical fiscal impact estimation, 2) calculations are correctly performed in their intent, and 3) calibration is transparent. However, there are certain issues that should be expertly appraised, such as the most acceptable calculations for School Capital Revenue and Cost. Also, the omission of several revenue and cost streams, such as the Sheriff, from the model needs to be addressed. Likewise, State Roads Capital Costs and potential revenue streams to meet the Cost should be considered. Fortunately, the FIAM is flexible in design and
4 improvements to the model can be decided in appropriate forum and readily implemented in the open-code format of the modelÂ’s spreadsheet. Last year, NAIOP of Florida commissioned USF Â– CEDR to analyze the strengths and weaknesses of the Fiscal Impact Analysis Model (FIAM), which is customized by Fishkind and Associates, Inc. for local governments in Florida. At that time, we had Prototype Version 3.0 for the City of Hollywood. We transmitted our report to NAIOP of Florida by MEMORANDUM, dated June 30, 2003, with subject: Fiscal Impact Analysis Model (FIAM). Highlights of the report are available for download from http://cedr.coba.usf.edu/projects.htm In that report we stated our belief that Â“the most important issue is training and certificationÂ” of analysts who use fiscal impact estimation for land-use decisions. We still think that this is a vital issue and recommend that the Tampa Bay Regional Coalition endorse the creation of a statewide process for standardized training and certification of fiscal impact analysts.
5 Appendix A Presentation Slides Overview of the Fishkind Fiscal Impact Analysis Model Hillsborough County FIAM v3.0 Presented to the Tampa Bay Regional Coalition September 15, 2004 Presented by: Dennis G. Colie, Ph.D., Director and Alex A. McPherson, Economist Center for Economic Development Research College of Business Administration University of South Florida
55 Appendix B Selected (three) pages from Â“A staff report presented to the Board of County Commissioners on April 7, 2004 from the Management and Budget Department regarding the Fiscal Impact Analysis Model.Â”
56 A staff report presented to the Board of County Commissioners on April 7, 2004 from the Management and Budget Department regarding the Fiscal Impact Analysis Model Sign-Off Approvals Department Director Date Management and Budget Â– Approved as to Financial Impact Accuracy Date County Attorney Â– Approved as to Legal Sufficiency Date Assistant County Administrator Date Consent Section Â– Informational purposes only. ( No discussion anticipated) Consent Section Â– Board requested report. ( No discussion anticipated) Staff Reports Section
57 Example Development Projects Several examples of actual development projects were selected for analysis using the fiscal impact model. These existing development projects were grouped into residential and non residential, and represent examples of the general scale and complexity of projects which the Board of County Commissioners reviews in property rezoning. The example projects are not exhaustive, but provide a cross section of different styles and components that comprise the overall pattern of development. The nine examples selected also have some geographic representation of what is occurring in various parts of the County. The example projects used are based on the best available data or estimates which would be characteristic of the type of development. The example projects are built or substantially complete; consequently, the data available are much better and more comprehensive than what is usually available at the time of project rezoning, and as such, the project examples are reliable as to the characterization of the development on the property. Development Examples Used in Modeling Residential Type Location Units 1. Small Lot Subdivision Seffner 233 Units, $100,000-140,000 range 2. Medium Lot Subdivision Lutz 152 Units, $190,000-250,000 range 3. Large Lot Estate Subdivision Keystone 36 Units, $850,000 range 4. Affordable Housing Subdivision US 301 Corridor 73 Units, $75,000 range 5. Residential Condominium Bloomingdale 278 Units, High Density, $100,000 range 6. Apartment Complex Citrus Park Large Infill complex 1, 2, 3, & 4 Bedroom Non Residential Type Location Units 7. Big Box Retail Citrus Park Wal-Mart with Out Parcel commercial and restaurants 8. Super Market Shopping Center Sun City Center Publix with adjacent commercial 9. Interstate Industrial Park Interstate I-4 Truckstop, Auto Dealership, Restaurant
58 EXAMPLE 2: MEDIUM LOT RESIDENTIAL SUBDIVISION Location Off Veterans Expressway, South of Van Dyke Road Number of Lots 152 Typical Lot size (sq. ft.) .25 Acre or 11,000 SF MOL Price Range(Estimated) <125K 0 125K-190K 0 190K-250K 152 Water County Wastewater County Plan Service Area Urban Development Area Land Use & Zoning FLUM R-2, Zoning =PD Residential RZ-98-0663 Typical Home Tax Bill $ 4,600 FISCAL IMPACT ANALYSIS SUMMARY SUMMARY OF PROPOSED LAND USE CHANGE Land Uses Measure Volume Average Value Single-family Units 152 $250,000 SUMMARY OF FISCAL IMPACTS Total Present Value Total Operating Revenue $18,823,655 $7,145,770 Total Operating Cost $9,421,747 $3,736,841 Net Operating Impact $9,401,908 $3,408,929 95% of Net Operating Impact $8,931,812 $3,238,483 Total Capital Revenue $332,576 $302,342 Total Capital Cost $630,814 $573,467 Net Capital Impact -$298,238 -$271,125 Net Total Impact @ 95% of Revenue $8,633,575 $2,967,358 Economic Impacts Direct Impacts Indirect Impacts Total Impacts Jobs 649 235 884 Output/Total Sales $33,866,961 $16,147,521 $50,014,482 Earnings $19,340,551 $5,651,632 $24,992,183