Economic Development Flashcards
Fiscal Impact Analysis
Also known as cost-revenue analysis is used to estimate the costs and revenues of a proposed development on a local government. For example, if a developer plans to build a regional shopping mall, what will be the cost to extend and maintain infrastructure, provide police service, or increase transit access? the answers are then compared to the sales, property, and income ta generated from the new development. The fiscal impact is the difference between the revenues and expenditures generated by a proposed development, and is also known as the net fiscal impact. If revenues are greater than expenditures, a development has a positive fiscal impact.
The most common form of fiscal impact analysis is for a development project. However, fiscal impact analysis can also be used to examine the cumulative impact of land use decisions. For example if a city is considering an annexation or new zoning policy, a fiscal impact analysis may be conducted.
Fiscal impact analysis should be used with caution due to the challenges of accounting for numerous non-fiscal factors. For example, multi-family housing or affordable housing may show a negative fiscal impact, but there are substantial social, economic, and environmental benefits that fiscal impact analysis may not account for (e.g., promotion of compact development, which reduces auto emissions and land consumption).
Another major challenge for fiscal impact analysis is how to split costs. For example, capital purchases, such as roads, may occur in one year but are financed over time. Another issue is that multiple developments share the use of many others. How much of the cost of the road should be attributed to the new development can be calculated by determining either the average cost per capita or the capacity of the facility (e.g., if a library is designed to serve 20,000 residents, the cost is divided by 20,000)
Average Per Capita Method: (Of Fiscal Impact Analysis
This is the simplest method of fiscal impact analysis, but it is also the least reliable. It divides the total local budget by the existing population in a city to determine the average per capita cost for the jurisdiction. The result is multiplied by the expected new population associated with the new development. The major problem with this method is that it assumes the cost of service to a new development is the same as the cost to service to the existing community, which may not necessarily be true.
Adjust per Capita Method (Of Fiscal Impact Analysis)
The Adjusted per Capita method uses the figure calculated from the average per capita method and adjusts based on expectations about the new development
Disaggregated Per Capita Method
Estimates the costs and revenues based on major land uses, for example, the cost of servicing a shopping center versus an apartment complext
Dynamic Method
Applies statistical analysis to time-series data from a jurisdiction. This method determines, for example, how much sales tax revenue is generated per capita from a grocery store and applies this to the new development. This method requires more data and time to conduct than other methods.
Economic Development
Economic development is about supporting the economy of a community, region, state or nation. This includes, job creation, private business expansion, tax base expansion, wealth creation, quality of life, and standard of living.
Eonomic development works by using government inducements and assitance to increase private investment. This private investment is exptected to create new jobs, reduce unemployment and increase incomes, thus increasing demand for goods and services. THe private investment recycles into additional private investment, creating a multiplier effect.
Multiplier Effect
describes how certain types of jobs will drive demand for even more jobs.
Multipliers, which measure the interdependence or linkage between industry sectors within a region, provide an esimate of the “ripple effect” due to a local change in economic activity. For example, if a new industry creates 10 new jobhs directly, and there are an additional 15 jobs that are indirectly created as a result of suppliers needed for that industry, and then there are 12 induced jobs related to services needed for the enw workers (e.g., haridressers and grocers), the result is that the 10 direct jobs created by the new indsustry resulted in a net total of 37 new jobs in the region.
the role of local government is to provide incentives to businesses to locate or expand, to create a positive business environment, and provide quality city services.
Businesses looking to locate in a community want access to development sites and/or buildings, labor, financial capital, transportation, utilities, a high quality of life for employees, and a supportive regulatory environment.
Enterprise Zones (EZs)
are geographic areas in which companies can qualify for a variety of subsidies. The original intent of most EZ programs was to encourage bnusinesses to stay, locate, or expand in depressed areas and thereby help to revitalize them. EZ subsidies often include a variety of corporate income tax credits, property tax abatements, and other tax exemptions and incentives to encourage businesses to locate in low-income areas of a city or county.
Most states and the federal government have their own versions of enterprise zones. Zones range in size from hundreds to several thousand acres. As an example, the city of Chicago has six Enterprise Zones. State zone programs are usually called enterprise zones or empowerment zones but some states have their own names, such as New York’s Empire Zones or Michigan’s Renaissance Zones. States began enacting enterprise zones in the United States in the earlty 1980s.
