Fiscal Impact Analysis: Does Method Matter?

Abstract

Fiscal impact analysis, which is intended to estimate the impact of a development or land use change on the costs and revenues of governmental units serving the development, is used in a variety of planning contexts. The technique is commonly utilized by community practitioners to project the fiscal consequences of alternative development proposals, boundary changes, and annexations. Furthermore, it is often used as an advocacy tool to preserve farmland or to promote growth management. There are a number of standard approaches to conducting a fiscal impact analysis. Each approach is based on different assumptions, and each differs essentially in the manner in which population change or land area change is translated into local costs and revenues. Does the approach used matter to the final outcome of the analysis? This is an important question from a community perspective, as it is often the bottom line or the net fiscal impact that allows proponents and opponents of development to argue their cases. This study applies three standard fiscal impact approaches to the same development situation and finds that method docs matter and offers suggestions on how to approach fiscal impact analysis in light of this finding.