WCEL > Issues > Urban Growth and Development > Smart Bylaws Guide > Part 7 > Fiscal Impact Analysis

Smart Bylaws Guide – Part 7  – Fiscal Impact Analysis

In most communities, growth is viewed as desirable because it contributes to economic development, a broader tax base, and the cultural life of a city or town.  However, many communities are increasingly aware that not all growth is equal.  Growth imposes costs on a municipality such as increases in expenditures for public services and infrastructure, traffic management, and loss of open space.  The costs and benefits of new development are complex and dependent on many changing factors, and evaluation methods vary.  Decisions about growth are often made without sufficient understanding of the long-term fiscal impacts of new development.  It is important for municipal councillors and staff to understand how to assess the accuracy of project information and have a real picture of the long-term impacts of proposals for new development.

Development impact assessment, and specifically fiscal impact analysis, provides a framework for reviewing the additional costs and benefits new development will bring to a community.  This technical analysis allows municipal decision-makers to review projects in light of community goals set out in the official community plan and other documents.

More specifically, some project assessment tools developed by municipalities also address the potential fiscal impacts of new developments depending on geographic location.  For example, the Smart Growth Matrix from the City of Austin, Texas, gives better credits to developments that: include densities high enough to support transit; are oriented to the pedestrian network; and provide structured or underground parking.  For more details, see Austin’s Smart Growth Matrix and the Smart Bylaws Guide – Assess the Merits of Development.

Tools to Assist in Understanding Fiscal Impact Analysis:

Fiscal Impact Analysis - Methodology

The National Resources Defense Council published a primer for local governments on the basics of fiscal impact analysis to assist decision-makers with understanding the potential revenues and costs of development. Developments and Dollars: An Introduction to Fiscal Impact Analysis in Land Use Planning describes how different types of developments have different revenue-to-cost characteristics. Costs and revenue patterns differ as well if developments attract different types of residents or business activities. This guide provides citizens, planners, local officials and others concerned with growth issues with an explanation of the accounting practices used to value new development.

The author of the Community Guide to Development Impact Analysis (Mary Edwards) devotes a chapter to fiscal impact analysis and presents a hypothetical development to walk readers through a simple calculation.

Servicing Impacts of Different Types of Development

Most municipal development cost charge regimes are structured to treat all residential or commercial or industrial developments as having similar impacts on the long-term servicing costs assumed by a municipality because of new development.  This assumption does not adequately reflect the significantly higher costs of development outside the urban core.  The report Do Development Cost Charges Encourage Smart Growth and High Performance Building Design? An Evaluation of Development Cost Charge Practices in British Columbia demonstrates how municipalities can fine tune their development cost charge calculations to better reflect the true cost of new development.

Transportation

The Online Transportation Demand Management Encyclopedia contains a detailed chapter on transportation evaluation methods and how they can be used to evaluate the value of transportation demand management programs.

Annotated Bibliography

Fiscal Impact Analysis: An Annotated Bibliography for California Planners