“'54. v- "a » .WGW WWIWHC’H-Hflflfifl w wwmuimmmswm rxww‘mm. I 1‘14! " FISCAL IMPACT ANALYSIS I Revenues l Expenditures_ m_——-_—-—_—.———-. a.—_v.-———-_-cnowoo—a l; Own.Source- 1. General Govervment " A.Twws B. Charges 2. Public:Safety , - 3. Public Works 2. Intergovernmental Transfers I I I I I I A; State I I I I I I I I I 4. Heaflfih.& Welfare 5} Recreation.& Culture B» Federal School Distriet .. {mm-:ME n‘IAIB‘fi’JLMT'a-rpx 33-. 1“}l-i’mu‘im .zfyh" "' Kim I 5-451? - .57. ' 4 J' V \n ‘- 1’”. of A 49 3132.1an -'!‘. cvm‘a-i 14.7%" Michigan State University School of Landscape Architecture and Urban Planning Fiscal Impact Analysis UP 898 — Masters Research Plan.B Option ; by James W. Clark '1'. -. arr-"h. East uaflSlng? wicnigan June 1979 — ._.....—__. _-—.—‘. fl. .7 TABLE OF CONTENTS INTRODUCTION 0 O O O O O O O O O‘ 7.. ”I O O O O O O J. O .. i. .I 1.. 1 LEGAL BASIS FOR FISCAL IMPACT CONSIDERATIONS . . ,',". 3 7 ' O O O O. O O. O FISCAL INTACT ANALYSIS TECHNIQUES ’. I , 'Revenue‘Projections ‘ I Cost Projections VPer Capita.Multiplier Iservice Standard ’_Oomparable City' PreportICnal Valuation 'Case Study ' Employment Anticipation GREENVILLE FISCAL IMPACT APPLICATION . . . . . o . . . 22 Selection of Analytic Technique ' Data Requirements Assumptions A Discussion of Resultant Fiscal Impact I ’ COMMUNITY GROWTH AND LCCAL FISCAL POLICY . .1. . . . . 25 ' APPANDIA.1 - FISCAL IMPACT ANALYSIS, GREENVILLE., MICHIGAN APPENDIX 2 - ABSTRACT from.the Greenville, Bélding, &.Montcalm A-_ . _-__ - _ _ __ _ __ _ 7 77‘ _ ‘ av is evident in the North Central region. Fiscal impact studies have been most often used in.states which represent growth centers within their respective regions, e.g. New Jersey and California. The emergence of impact analysis has raised serious questions regarding the legal standing of such considerations as a foundation upon which to base local land use decisions. As the police power is delegated to.local units of government through state enabling legislation, a.review of that legislation is in order. 'Police power application in land use regulation is inseparable from the comprehensive planning process authorized by state enabling legislation. The develOpment of a comprehensive plan is the planning process by which a rational basis for future growth is provided. Most state .enabling legislation respecting comprehensive planning specifies as one of its purposes "the promotion of efficiency and economy in land development".1 Fiscal impact considera- tidns are thus inferred to be an important factor in determining the nature of future growth.. Analyzing the fiscal impact of land use alternatives thus appears to comply with the intent of state comprehensive planning enabling legislation. The physical aspects of.deve10pment and purpose for which land may be used are usually controlled by state zoning enabling legislation. Zoning is inherently.based on.the, state's power to act so as to promote the public health, safety, and welfare. Fiscal impact considerations are legal A ’ 1 _ Twentywseven states require the promotion.of "efficiency and economy" in their comprehensive planning enabling statutes. Fourteen provide only that the plan include a proposal for the physical development of the community. Eleven require a plan for provision of public facilities in addition to the phySical develOpment plan. a) "I only to the extent that they are judged to be a prOper activity within the scope of the police power. In states where specific reference to protection of the tax base is made in the enabling legislationl, judicial interpretation of the validity of fiscal impact considerations as part of the land use regulatory process is less in doubt. The Standard State Zoning Enabling Act states that promotion tr the public health and general welfare includes the adequate provision of transportation, water, sewerage, park, school, and other public facility requirements. In most jurisdictions, the zoning power appears to be at least implicitly limited by the need for adequate public facilities. "Zoning to ensure the provision of adequate public facilities or to protect the tax base would appear to be a reasonable ‘ interpretation of the intent of the state police power.2 l" Stronger legal arguments for considering the fiscal ‘ impact of developments in.arriving at land use decisions can be made on the basis of subdivision regulations, planned unit development statutes, and annexation legislation. Subdivision controls eXplicitly include the right to require various public improvements be provided by the developer and dedicated to the local governmental unit for future use. a" Planned unit developments were created as a special.use control mechanism to facilitate the more efficient use of. . land ‘ Under special use permit procedures, the fiscal and‘“ ‘environmental effects of proposed develOpments are evaluated as part of the permit application process. Fiscal impact considerations are mandatory in the majority of annexation . regulations. " ' (Ty. Sixteen states permit zoning_decisions on the basis of 1 2This conclusion raises a serious social question. Do fiscal considerations, granting the analysis is accurate and made in good faith, justify land use regulations that are so _Georgia, Ohio, Utah, and Tennessee. weighted as to be exclusionary? the adequacy of public facilities.1 Federal courts have endorsed zoning on.this basis. The concept has firmly ‘ established by a landmark case in the State of New York, Golden v. Planning Board of the Town of Ramapo." Zoning in Ramapo was tied to the town's eighteen year capital improvement program} Michigan is among those states having significant rulings against the use of fiscal impact ”considerations as.a basis for land use control. p —The legal support for fiscal impact considerations as a component of the public land use decisionemaking process appears to be growing with increased public concern over the fiscal impact of development. 'The validity of those considerations, as they affect land use decisions, may ultimately depend upon their acceptance as a planning endeavor. ' .. ' ' lAlabama, Georgia, Washington, New Hampshire, New York, Ohio, Tennessee, Kentucky, North Carolina, Mississippi, Minnesota, Kansas, Connecticut, Louisiana, Nebraska, and Maryland. f" FISCAL IMPACT ANALYSIS TECHNIQUES Fiscal impact analysis is a cost-revenue analytic technique used to determine the net governmental surplus or deficit resulting from specific development prOposals. -Relatively simple ratio or multiplier techniques are'used to project'local revenues. The primary sources of local income are intergovernmental transfers, payments from state and federal sources, and "own source“ revenues, including property, sales, and income taxes, charges and fees for services. The revenue projection techniques‘ presented herein are used, universally, by each of the cost projection.methods described below. Atleast sixtechniques are available for projecting the impact of specific development prOposals on government expenditures. Cost projection methods involve two basic approaches to public cost allocation. The growth/cost? relationship is assumed to be linear in the average costing approaCh. Costs are asSigned to development prOposals'onf the basis of average service cost per unit. ‘The marginal -costing approach assumes that the cost of public services fluctuates in,a cyclical, non-linear fashion with growth.‘ Marginal costing requires a detailed analysis of the existing supply/demand relationships of public services. Unlike the average costing approach, marginal costing accounts for the site specific service requirements. Average costing, however, is by far the more common.field application.l Three average cesting methods are reviewed here, including the per capita multiplier, service standard, and preporticnal valuation techniques. The case-study, comparable city, and employment anticipation methods are also covered as marginal costing approaches. - ' lRobert w. Burchell and David Listokin, The Fiscal Impact Handbook; Rutgers Center for Urban.Policy Research, New York; p. 260. Revenue Projections in important first step in forecasting revenues is to ’determine which revenue sources make a significant contribution to the total local income. There has been a steady trend toward diversification of local revenue Sources and an increasing reliance on intergovernmental transfers. TBurchell and Listokin point out that in view of the staggering number of revenue sources, the analyst needs to weed out those revenues that are relatively insensitive to growth and that are not worth.detailed analysis.1 ‘ _' Intergovernmental transfers accounted for nearly'3O percent of municipal, and more than 44 percent of schcol district revenues in 1972. Those transfers include, at the federal level, direct federal grants, manpower grants, and grants for housing and community development. State level assistance includes grants and state levied, locally shared taxes. State government transfers are by far the more important source of income for local units of » government. A complete listing of "common" sources of ' 1ntergovernmental transfers is provided in the pages that follow. ' . : 0 Of the ”own source" income, the property tax is the most heavily used tax type.' Property taxes are also the largest component of loCally generated income. ‘School ‘ districts are heavily dependent on the prOperty tax. Sales, income, per Capita, business and occupation, and real estate transfer taxes provide relatively minor shares of locfl general revenue, in decreasing amounts i reapectively. Charges and miscellaneous revenues provided nearly 24 percent of all general revenues for municipalities in 1972. Local governmental units appear to be moving toward the increased use of this type of revenue source. The complete range'of local revenue sources is also listed below. ' “' ' ' ' "‘ llbid, p 153. . b" TABLE,1.;LOCAL1REVENUEMSOURCES.(own.source) t PrOperty, Income, and Sales Taxes 1. Real PrOperty Tax 2. Personal Property Tax" 3. Income Tax 4. "saleS' 933:: Other Taxes - 5. Property Transfer Tax 6. Occupation and Business Privilege Tax 7. Per Capita Tax 8. Transient Occupancy Tax Miscellaneous Revenues 9. Interest Earnings. lO. Fees and Permit Revenue - ll. Fines, Forfeitures, and Penalty Revenue User Charges 12. Recreation, Health and Property Services . 13. Water, Sewerage, and Solid Wastes Charges Sourceé The Fiscal Impact Handbook, Exhibit 9-1, p 180. To project real prOperty tax income, the eXpected assessed valuation is multiplied by the existing local millage rate. Gross rent or income figures can also be used to determine property value. A multiplier is applied to annual gross income/rent to provide an estimate of prOperty value. The multiplier used is based on the type of unit proposed, i.e. garden apartments or‘shOpping‘ center, and.the region of the country in which the analysis is being performed. An alternate technique involves multiplyingthe true or market value of the improved - preperty times the state equalized taxgrate and the number ,of units under consideration. ,Income tax revenues are estimated using the ratio of' family income to be provided by the develOpment, to the" total predevelopment family income times a factor represent~ ing the residential portion of local sales tax revenues. Projections for non-residential developments are made by estimating the total sales volume of commercial activity r1 (‘35 ~State- 10 ' on'a per square foot basis, and then multiplying the result by the local sales tax rate. . User charges and miscellaneous revenues are projected on a ratio basis using average income concepts. The largest single source of miscellaneous revenues is earned interest on municipal investments. ‘ TABLE 2. INTERGOVERNMENTAL TRANSFL RS 1. Sales Tar.Redistribution 2. Income Tax Redistribution 3. Motor Fuels Tax Redistribution 4. Cigarette and Alcohol Tax Redistribution 5. Business Income Tax Redistribution 6. Road and Road Lighting Aid 7. Public Utilities Franchise Tax.Redistribution 8. Aid to Urban or Rural Areas 9. Homestead or Foregone Tax Rebate 10. Educational Basic Support (Flat Grants) 11. Educational Assistance via Variable Guarantees 12. Educational Categorical Aid 13. Elementary and Secondary Educational Act Subsidies Federal * l4. State/Local Fiscal Assistance Act 15.'Comprehensive Employment Training Act 16. Public Works Employment Act 17. Community Development Block Grants '18. Educational Assistance in Federal Impact Areas Source: The Fiscal Impact Handboqg, Exhibit 9-1, p 180. Intergove1nmental revenues are more difficult to project as they are often based on complicated allocation formulas which are based upon fluctuating demographic .characteristics beyond the contiol of_local government. Fen example, state school'aid is often gramted through an inverse relationship with local wealth. Sales tax revenues are dependent on the locality’s taxable retail sales The impact of a new develOpnent is measured in terms of the purchase pa 1ttcrns and proportions of income spent by new residents. State allocations to localities rt 11 fer roads and street lighting are based on the locality's weighted proportion of state road mileage and population. The state provides three major types of financial assistance to education: basic support, categorical aid, .and intergovernmental subsidies. Basic educational support is provided through flat grants based on the aVerage daily pupil membership, number of classrooms, or .o'number of teachers. Foundation grants are also available based upon anfiacceptable eXpenditure figure per student. Categorical aid programs are designed to meet special education.needs, like those involving the handicapped. TSubsidies are provided through the Elementary and Secondary Education Act for educationally disadvantaged and other ' special programs. Revenue projections are usually made ' On a current incometper student basis. Expenditure Projections- ;Per Capita Multiplier Method f Per capitaamultiplier is the_most versatile and widely need average costing eXpenditure projeCtion technique. Its popularity undoubtedly stems from the ease with which it .can be applied. The kind of refined community data needed ' to conduct per capita multiplier analysis is becoming increasingly available. The method assumes that, over the long run, current Operating cests per capita and per 'student represent the best estimate of future operating costs. It is also assumed that future service levels will be comparable to those demanded today, and that the influx of residents will not signifiCantly alter overall demand expectations. The number of students and residents is assumed to vary with the type and size of preposed dwelling Igunits. Finally, the distribution pattern of local govern— "ment expenditures is assumed to unaltered by community growth. The procedure projects annual Operating and capital 12 , Obtain Information on Budgets. vs Current POpulation and Assessments Categorize Local Expenditures into Municipal Service Categories .and School District Functions Obtain Total Annual- - . As sign Share of Annual Municipal and School’ Municipal Expenses to District“EXpenses'" “ Nonresidential Uses . Calculate Net Annual Per Capita and Per Pupil ExPenditures . Calculate Anticipated Total Resident and School Populations by Housing Type '1); Calculate Residentially Induced Calculate Municipal Costs Total Annual Municipal & Scho.ol for Inclusive Nonresidential A District Expenses , Uses t Determine Total Annual Public Costs by'Municipal Service and Type of Expenditiure . 4. Project Total Annual . Public Revenues Figure 1. Per Capita Multiplier increases in costs on the basis of detailed demographic information by housing type. A schematic diagram ofl the - technique is shown above. Note that the annual expenses ‘3 jars calculated on.a net annual per capita an.d per student ’ basis. The Per Capita.Multiplier cos ting technique is 433' 13 most applicable to suburban metrOpolitan area municipalities or freestanding nonmetropolitan cities of between 10,000 and ‘50,000 people and a moderate growth rate. Current local eXpenditures per capita are multiplied times the estimated shift in pOpulation.associated with the proposal under study. Costs for inclusive non- ~residential uses are calculated 'using the prOpOrtional valuation costing method described below. Revenues are calculated as previously discussed. . The‘Per Capita approach provides only long term, average impact costs. Perhaps its only drawback is its _1ack Of richness in detail. The technique has been widely ‘ acceptedphowever, and ”will most likely continue to be a . heavily used procedure. . Case Study'Method ‘ The case study is the classic marginal costing .eXpenditure pnojection technique. The method involves a _detailed interview process with knowledgeable'public officials and is accordingly more time consuming and expensive than other cost projection techniques. The procedure is particularly useful in communities having either considerable excess or deficient service capacities. The-approach provides a detailed, short range view of the‘ impact of growth on Operating andicapital expenditures by functional expense categories. . l The case study approach.is based on the assumption.' that future servicing costs are most accurately predicted' by the marginal Changes in the cost of those services.‘ It assumes that the extent to which Communities exhibit excess or d.eficient service capacities diffiers from one cOmmunity .to another, and that existing service capacity is a.major _factor,in the cost of service extensions. ,Local service ' levels vice national criteria are assumed to more accurately represent the standards against which service excesses or deficiencies should be determined. Finally, service 14 .lContact Local Officials] 1’1 . , i .Categorize Public Service Functions and Delineate Responsibilities Determine Excess and Deficient Service Capacity t Project Population Increases - and Population Induced Demand Determine Anticipated Local Service Response LProject Total Annual Public Costsl __ ' 'n' a, * g 5 -[Project Total Annual Public Revenue '- . [Calculate the Cost Revenue Impact] 5' Figure 2. Case Study department heads are assumed to know what they are talking about. A schematic of the car e study approach is shown in Figure 2.4 ‘ ‘ To determine.service capacity status, excess or deficient, desired local service levels are first ascertained, e.g. one teacher per twenty-five students, on one uniformed police I officer per 1000 res idents Current service levels are then walyzed and compared with the desired levels. 7‘ _ POpulat ion.projections are computed using demographic multipliers, just as in the Per Capita Multiplier technique. 15 ;Regional public emplOyee service levels and capital—to— {operating'expenditure ratios are used to generate the “'p0pulation induced service demand. A second reund of “ interviews is then conducted to determine the anticipated ‘ local service response to increased demand. ‘ The case study approach has been criticized for its dependence on the subjective views of public officials. This and the ccmplexity and eXpense involved, have tended to limit the use of the case study method. Service Standard Method 4 The Service Standard Method represents another average . costingiteChnique. ThereXpected impact of proposed developments or land uses en municipal and school district eXpenditures is estimated on the basis of average National employments levels, and an annual capital-to-operating expense ratiouper service category. National standards are categorized by community size and geographic lOcation; The approach is most applicable t0'midési2e, moderately * ‘ growing communities Where existing servive capacity nearly .matches service demand. _ The Service Standard Method assumes that, over the long run, existing manpower and capital facility service levels.- at comparable cities can be used to aesign the additional costs induced by new development. Manpower and capital‘ facility service levels are assumed to vary according to community size and geographic location. As with all average. costing techniques, the procedure assumes that the best ‘ 'estimabe of future service costs can be obtained by projec+ ing current cost 9 on.a. per unit basis.' A diagram.of the Service Standard.Method is provided 'in Figure 3. The number of additional employees required. by the proposed development is determined by applying the eXpected population increase to national employment standards. Costs are then determined by multiplying the 16 Apply General Multipliers to Determine POpulation and Student IncreaSefiRe sulting from Growth [Project Number of Public Employees]. Calculate Average Operating Expenses Per Employee Project Annual Total ~ Operating Costs Project Total Annual Capital Costs Project Total Annual Public Revenues Figure 3;:ServiCe Standard the increased number of employees by local Operating salaries per service function. Capital costs are added by using a capital~to~operating expense ratio derived from.0ensus statistics. 'Revenues are obtained in a similar manner for all fiscal impact prediction techniques. The Se rice Standard method is easy to apply and easy to understand. Its major-shortfall, however, is that ' it ignores local peculiarities that tend to distort the local service picture. Local wealth, traditional public service emphases, and the presencezof service excesses or deficiencies will tend toIVnid the basic assumptions upon . which the method rests. The method has been someWhat” ‘3 limited in the past by the difficulty in obtaining and manipulating national standards for the various service categories of school and municipal expenditures. _._.....-- - .- -.1,.__-_. ..—_~,. 1.- - -< 1 .. 1. .. .r 1.- -- 1,-.. ‘, ..,,- ~.. ......a-......-.., 1. ”vs --.r.-.‘..i- ...—..,V_ w‘-.-i .,--‘w-' -1 w , ...... .._.,A‘ 17 Comparable City Method The Comparable City Method is a marginal costing eXpenditure techniques which relies on expenditure multipliers that vary by community size and growth rate. The technique is a recent develOpment andihas not, to date, been employed onfia.widespread basis, in standardized fashion. The ' procedure is primarily intended for situations in.Which large scale develOpments or municipal boundary changes are under consideration. The method assumes that public service expenditures vary significantly with community size and growth rate. -Expenditure multipliers developed on.data contained in the 1972 U. S. Census of Governments are founded on this premise. The municipal expenditure pattern after growth is assumed to be the best indicator of future local expenditures. O The approach involves seven procedural steps. In the first, the magnitude of the population shift is estimated jusing the type and configuration of propdsed housing units, and the same demographic multipliers employed in the Per Capita.Multiplier’Method. Next, expenditure multipliers are selected on the basis of-community size and growth rate. Separate multipliers are used to project Operating and capital expenditures. Multipliers are selected for both before-and after growth conditions. The ratio of before to after multipliers per cost category yields the expected cost trend in'those categories. For example, if , the appropriate multiplier for public works before growth for Operating expenditures is .86, and the after growth 'figure is .96, then the operating outlays for public works as a result of development would be expected to increase . by (.96/.86) 11.6 percent. The third step of the procedure involves determining current average operating and capital eXpenditures per capita. This is done in.each of the municipal and school .cost Cate gorieS'used. Current per capita outlays are then multiplied by the expected cost l8 trends to calculate future average cost expenditures per capita. These figures are then multiplied by the post growth pepulation statistics to determine the net costs attributable to the development. The last step in the process involves the calculation of revenues. ' The Comparable City Method is more sephisticated than many of the other cost projection techniques. Its heawy ’ reliance on.expenditure multipliers may cast doubt on result3eproduced. It is an attractive method from.the cost perspective, and appears to make more sense in a theoretical light. ‘ Proportional Valuation.Method . w The last EVerage coating technique to be reviewed, here is the Proportional Valuation Method. The method is used to project the fiscal impact of commercial and industrial developments. The technique employs a two~step process. First, nonresidential uses are assigned a Share of the total annual municipal costs. Then a preportion of these nonresidential costs are allocated to the proposed develOpment. .- The Proportional Valuation.Method presupposes that municipal costs increase with the intensity of land use. A dil sot proportional relationship is modified to account fer fluctuations in nonresidential property value relative to the average value of prOperty within the community. . The method treats commercial and industrial proposals in the same manner, assuming the impact from each to be asufficiently similar so as to be classified simply as nonresidential. Finally, the process assumes that non- ' ' residential develOpment has but a negligible impact on School district Operations. ' The method is sChematically shown in Figure 4. A shw of municipal er penditures is assigned to local nonresidential' uSes by multiplying the total municipal eXpenditures by the 19 the proportion of nonresidential—to—total local real property values. 'The new development's share of future ltotal expenditures is merely the ratio of tthe value of that development to the total value of local nonresidential 'j'uses. A refin =2men coefficient is used in.both of the above calculations to co rect for unusually high valued develOp— " ments or for low valued average community property values. Projected annual nonresidential costs are then allocated to component service categories based on.cost distribution experience. Typically, safety and public works account for Inearly 90 percent of the projected nonreSidential impact. f‘ Revenues are projected as before. L3 tie ” I Expenditures to Local Nonresidential Uses As wmble and Prepare Data.Base Assign a Share of Municipal] Project Future Total Municipal Operating Costs Induced by Future Nonresidential Use ‘L Assign Total Annual Nonresidential Facility Costs ~ to Component Service Categories Project Total Annual Public Revenue [Calculate the Cost Revenue Impactl 'Figure 4. Proportional Valuation ‘ 9f the three nonresidential costwrevenue-methods, ' Case Study, Preportional Valuation, and Employment Anti— 20 cipation, Proportional Valu.ation is perhaps the easiest to use. Both Proportional Valuation and Case Study techniques have been well accepted. Employment Anticipation.Method The Employment Anticipation.Method is a newly developed marginal costing technique for forecasting the impact of nonresidential growth. The method is based on relationships between local commercial and industrial employment levels and per capita municipal costs.‘ It predicts changes in municipal expenditures based on anticipated changes in local 'employment using multivariate regression analysis. The method was develOped in 1976uat the Institute for Urban Studies at Charlotte, North Carolina. The approach is founded on three assumptions. It is 'assumed that the magnitude of local expenditures is I . directly affected by the level of commercial/industrial employment, and that this relationship-can be adequately described by multivariate analysis. The impact of ' growth induced employment is assumed to vary with 'cormmmity populatiOn and the nature of grthh, positive or declining The precedure relies upon.developer estimates or employee—per-square—foot estimates s{to obtain the number of employees to‘be added by the nonresidential development. Given the nature of local growth and eurrent pOpulation,a' percentage increase in municipal service costs per employee, by service category, is found by reference to the appropri- ‘ ate mul eiplier table in The Fiscal Implct Ha.dboog. *The ' ‘percentage increase in.oos ts, attributable to the new employees, is then multiplied by the existing municipal .per capitaerpenditures by service category to obtain dollar increases, per capita, per service. These per capita increases are next used_to determine the total annual increase inmservice costs associated with the new nonresidential facility. As with all other fiscal impact projection.techniques, 21 the final step in the analysis is a comparison of projected total costs with projected total revenues which yields a cost—revenue surplus or deficit. Although the method uses a more direct approach toward estimating the impact of nonresidential growth by expressingtfuture service cests as a function of employees, it is not a straightforward analytical technique. Anxi; understanding of multiVariate analysis is require for anything more than an entry level application, As a practical fiscal impact anaiysis tool, the method is _unproven and untried. IW‘ SREENVILLE EISCAL IMPACT APPLICATION ., ‘,,, t_:.° _‘J.- i "' Developer Earl LaBelle announced his intention to promote the develOpment of a community shopping Center- just west of Greenville at a city council meeting on March 20, 1979. As the author was involved in another class project which required fieldainvestigation_in Greenville area, the issue was quickly seized as a convenient, nonsacademic application.of fiscal impact analysis. The city is faced ’ with an annexation issue involving the develOpment. The builder is suggesting a 20 store shopping center and long- range plans for 100 middle income apartment units on.the 63 acre site. The prOposal is a significant one for the 8000 member community located some 40 miles northwest of iGrand Rapids. This study, however, will focus on.the most_ immediate impact of the development prOposal — the impact of a 20 store community shopping center on.municipal Operations; Neither school district nor county impact will be evaluated. Nor will the potential impact of Mr. LaBelle's residential plan.be investigated. ’ » ,1 Selection of Analytic Technique - The objectives of this case study are twofold. The first is related to the educational value to be derived from such an exercise. The second is to secure a gross estimate of the , impact of tne proposed deve10pment on.mnnicipal services. It was decided. early on, due to the political sensitivity'of‘the; _proposal, that the results of the analysis would not be made' readily available to interested groups in Greenville. The first task of the analysis is to select the most apprOpriate fiscal impact technique. The develOpment represents an area of approximately 2.5 percent of the_current land area of the. city. The site is bordered by famland-to the west and north, commercial strip develOpment along M57 to the south, and‘ 23 moderate to high income residential property to the east and southeast. Greenville's existing service capacity, for- purposes of the analysis is assumed to be at or near capacity. The community has been growing at a modest, but stable rate according to.U.S. Census reports. It would appear to fall into the "suburb" category fon*technique selection purposes. Given the above information, an average costing technique appears suitable for application. As the proposal involves nonresidential develOpment, the proportional valuation ‘ method will be used to evaluate fiscal impact. 'Had residential development been under consideration, the per capita multiplier technique could have been employed. Data.Requirements , The proportional valuation procedure relies upon three sources of information concerning the nature of development, information about the community's tax base and structure,e and municipal budget information. Development information ‘was obtained through an article appearing in.the Greenville pail; News on March 21,1979. It is partially reproduced im Appendix 2. Information regarding the community tax base and millage rate was obtained from the Assessor's Office. The City Manager provided a copy of Greenville's budget for the current fiscal year. Refinement coefficients and cost allocation.multipliers were derived from.The Fiscal .Impact Handbook, as indicated in Appendix 1. Assumptions To review the assumptions identified in an earlier section pertaining to the prOportional valuation method, 'the technique assumes that: (l) municipal costs increase with the intensity of land use; (2) refinement coefficients must be used to adjust the direct proportional relationship between nonresidential prOperty value and local average prOpcrty value in connection with the level of municipal services provided; and that (3) nonresidential develOpments 24 affect school district costs to an insignificant degree. During the course of the analysis, the vulnerability of the coefficient, cost allocation, and project valuation assumptions was disturbingly apparent. ,Discussion of Resultant Fiscal Impact Fiscal impact worksheets are contained in.Appendix l. The results of the analysis are tabulated below: Greenville Fiscal Impact Proposed 100,000 SF Community ShOpping Center by Traportional Valuation.Method Total Projected Costs . . . . . . . . . . . . ... . . 3 33,034 Total Projected ReVenues . . . . . . . . . . . . . . 8 30,160 Net Municipal.Defigit resulting from development .7. 3. 2,874 The proposed development does not generate a significant deficit in direct cost-revenue terms, providing the assm nptions made are valid. It should be noted that the analysis does not address the devastating impact the development would 'probably have on the viability of the central business district. , i ' . ‘ From.an education perspective, the technique does not ' inspire overehelming con fidence in regard to accuracy. f PrOportional valuat ion.does, however, provide insight into the probable areas of fiscal impact of such a development, and th“ scope Of that impact. If plans for the development -materialize, the author would recommend that the city Conduct a more detailed analysis of the deve10pment issue, using perhaps the case study approach. ‘ 'GOMMUNITY GROWTH AND-LOCAL FISCAL POLICY Ecnnomy and efficiency have long been basic objectives of planning and land use regulations. Fiscal impact analysis might be used to furthur these goals. Fiscal impaCt considerations are becoming increasingly accepted as 'validiconsiderations.in the develOpment of community growth policies. The Ramapo case in New‘York, in which the validity of a zoning ordinance fOR‘residential development based on the availability of public facilities was approved, and a similar case in.Petaluma, California, in.which ‘ develOpment was tied to a capital facilities phasing plan, highlight thisstrend. It seems that-the relevant question is to what degree can fiscal considerations and.the financialstability of local government be an overriding factor in the community decision to limit growth. . . Fiscal impact analysis has most often been used to assess the economic impact of mixed use residential~ deve10pment proposals and land uses. About sixty percent of the fiscal impact analyses have been conducted in. ‘ States where case law limits their use. Attempts to ‘refuse certain types of residential develOpment because they did not generate a cost-revenue surplus have met with ’ court ordered restrictions. In the case of.National Land and Investment v. Easttown Township in.Pennsylvania, the enurt held unconstitutional a four acre minimum,£Single- family residential lot requirement based on fiscal ,considerations. Fiscal zoning has been ruled to be an exclusionary zoning practice here in.Michigan. Nor has the concept of controlling growth by withholding public utilities to outlying areas received court support. , ' It occurstn me that the fiscal impact of land use decisions on local financial stability is a vitally relevant local consideration. Government alone has been able to 26 ignore this aspect of land use planning. Fiscal impact, ought not to be the sole consideration in fonmllating community growth policies, but with the: advent of reliable and standardized projection techniques, it should be a part of the: decision making process. SELECTED BIBLIOGRAPHY Babcock, Richard F. The Zoninngame: Municipal Practices and Policies. Madison; University of Wisconsianress. I965. ' if I Burchell, Robert W. and Listokin, David. The Fiscal Impact Handbook.*‘New Brunswick; The Center for Urban Policy Research. 1978. Crawford, Clan Jr. Handbook of Zoning_and Land Use Ordinances with Forms. Englewood Cliffs; Prentice—Hall."I974 Greenville, City of. “Budget for Fiscal Year July 1978 to - June 30, 1979". ‘ _ ********** APPENDIX 1 FISCAL.IMPACT ANALYSIS, GREENVILLE, MICHIGAN Fiscal Impact of Proposed 100,000 SF Community Shopping Center by Preportional Valuation'Method Contents Gre ean—lle BaSic Data 0 O O O O O O O O O 0 O O O O O I 1 Computation Sheet for Cost Tabulation . . . . . . . . . 2' Computation Sheet for Revenue Tabulation . . . . . . . 3 Greenville Tax Assessor's Report of Assessment Roll Changes and Classification . . . . . . é . . . . . 4 Greenville Basic Data Fiscal Impact of Proposed 100,000 SF Community Shopping Center by Pr0portional Valuation Method l. 2. 3. 4. 5. 6. 7. 8. 9-» Municipal annual operating eXpenditures, ‘including debt service Total local equalized real property value Total number-of land parcels . Total nonresidential equalized pr0perty value Total number of nonresidential land parcels ’Average equalized real prOperty value per parcel Average nonresidential equalized real pr0perty value per parcel Real property (market value) of 100,000 SF shopping center Equalized real pr0perty value average nonresidential parcel to average local parcel ! lO..Real property value of facility to average nonresidential real property value 3 2,964,100 $41,705,200 3,588 $13,858,300 153 3 11,624 3 90,577 .r' 8 2,000,000 7.8 22.1 Sources: 1. 2. 3. 4. '50 8. Greenville Budgets for FY78-79, p 44. Derived from Greenville Tax Assessor's Report of Assessment Roll Changes and Classification From actual count ofi parcels using city plat map. From Greenville Tax AssessorPs Report of Assessment Roll Changes and Classifications Based upon list of commercial establishments found in Williams & Works Community Development and Future Land Use 'Plan for Greenville, and list of indistrial facilities by the Greenville Chamber of Commerce. Estimated on basis of comparable facility in North.Central Region listed in The Fiscal Impact Handbook. Greenville Fiscal Impact; Computation Sheet for Cost Tabulation Local Nonresidential Use Cost Prglection Total existing municipal eXpenditures attributable to nonresidential uses = 8 817,486 = 2,964,100 (13,858,300/41,706,200)(.83)1= 8 817,486 IncominggNonresider tial Use Cost Projection Municipal costs allocated to the incoming nonresidential facility = 8 33,034 = 817.486 (2,000,000/13,858,300)(.28)2= 8 33,034 Incoming Nonresidential Use Cost‘Distribution Distribution of Total Costs Percent3 Dollars General Government 6% 8‘ 1,982 Public Safety» 75% ‘ 8 24.775 Public-Works 15% 3 48955: Health.& Welfare 2% 8 _‘ 661 Recreation & Culture 2% 3 661 'Total 100% 3 33,014 Notes: 1Total municipal exPenditures = 82,964,100 ' I“ . Proportion of nonzesidentiaJ/total real. property value 1 (13, 858,300/41,706, 200) v.83: refinement coefficient from Ex ib it 6~3, The Fiscal Impact Handboo‘ _ ’ ' 2 Proportion of facility to total nonresidential pr0perty value = (2, 000 000/13, 858, 300) .28 - refinement coefficient from Exhibit 6-3. 3Typical cost allocation per Exhibit 5’4. Greenville Fiscal Impact Computation Sheet for Revenue Tabulation Municipal Own Source Revenues Taxes 1. Real Preperty. 3 2,000,000 (14.080)1= I 8 28,160 2. Other , " ' O Charges/Miscellaneous 1. User Charges (Sanitation) 3 1.00 (20 stores)2= 3 2, 000 Total Municipal Own Source Revenues 3 30,160 Intergovernmental Transfers State - 1. Sales Tax (none collected for city) '0. Federal ' " 1. Federal Programs (none applicable) 0 Total Intergovernmental Transfers '4 0 Total Revenues 3 30 160 . 9 . Notes: 1Greenville current city mrllage rate (on 50% of market value = assessed value = sta e equalized value) = 14.080 This fi.gure does not include school district or M rte...w County millage rates which are 28,550 and 7 264A51000 assessed value, respectively. Information from Groenville Tax Assessor's Office. Exlibit loml, The Fiscal Impact Handbook, note 15, p 228. 'i24VJJ/ L—LC 1979 / , ST rf”’ nzvoxr or ASSESSMENT ROLL CHANGES AND cLassrrIcarror (Assessing officers are required to report the total assessed value for each class of property and the assessment roll changes for each class of property for County and State Equalization) court? HONTCPLY crrr OR rouxsarr GREENVILLE 1978 ‘ 1979 .Board of ' +-or (-) Board of REAL PROPERTY Review Loss Adjustment fiew Revies 101 Agricultural 35,800 0 6.700 500 43:03 201 Commerctal 5,9594100 19,p00 63,000 117,600 6,110.19' 301 Industrial 8,120,200 * 630,500 34,400 224,100 7,746.20' ‘01 “€51dential 24.3821901 312,800 2,903,400 818,000 27,789.50' 501 Timber - Cutover 131900 0 1,503 0 15,4?» 800 TOTAL REAL . . . _ ' 138,506,900 * 969,900 3,009,003 1,160,200 , 41,706,20' 1978 , 1979 Board of + or (-) ' Board .5 PERSON/5L1- PROPER ' R8\'1C"p’ L053: Adiustment Nm- - vaja-j ' 9 151 Agricultural O . C 0 . 0 i C 251 C°m99’C181 . 213371200 231,200 3,400 649,500 2,558,91' 351 I“d“5‘r1“1 - §x€Pl.4““ * 53.920 0 482,000 6,31C,SQ 451 Residential 0 0 0 0 C 551 Utilit! 1.562110: 0 0 86,100 1,633,22' VBSO TOTAL PERSORAL ‘ r- . 9,585,700 ’.285,100 3,400 1,218,600 10,521.63. . i1r:in;ig lea: du:_;§ Act 964 IWjJStTiéJ Farll;;;-' #157: f\‘/:/// __“_‘. Tax Exemption with 1979 values entered it 1979 SICK “ if: A: ”, Ind~strial Facilities Tax Roll. *1: '7’ ,1 I —~ "” {/8 ‘II /’ (A53t551nt Ozficer‘ . (Certificate huzft' OEICIKAl~-TO STATE TAX COMHZSSIOF. (Tc be mailed-by thc Assessor immediately ups: adjournment of the Board of Reviexl FIRST COFX-TO COUNTX EQLALIZATIOK DEFAPTHE\.. (To be reVieved and approved by the Count} Equalization Department. If the report is found to be in error by ’the County Equalization Department, the errors should be corrected and a corrected copy should be sent to the State law Commission.) SECOND COPY-RETAINED BY ASSESSING OFFICEF A“? ‘35 €551DX officer ““0. BUbSiQuert to filing the OF‘ICINH and the F1??? COPY. f'""--fcp ob ' V ‘ o D O - (I ' .- . . . . . - A , , 1 ,, ., l , _ o, . . -11 71 1 _ . .V ._1_ . . . i . 1 ... _, _, . __. .. . -1. .. , r - i 1 _ ‘ ‘ , I s u v APPENDIX 2 Abstract from the Greenville, Belding, & Montcalm County Daily News; Wednesday, March 21, 1979: "Greenville4DevelOper Proposes Annexing for Shopping Center" ”What begm as a city council discussion about annexing school property and 40 acres of privatelyaowned land near. _ the American Legion turned into an appeal by downtown merchants to limit commercial expansion on west M57, where a deveIOper says he plans construction of a shopping center and apartments this year. Builder Earl LaBelle announced plans for the develOpment at the council meeting Tuesday night. But surrounding LaBelle was a vocal group of downtown retailers urging the city to 'support downtown development instead of commercial expansion in other areas of the city. - ' The development is planned for property that extends one-eighth mile from the west city limits on.M57. ' ‘ LaBelle told The Daily News he has purchased, or plane to purchase, 63 acres on.which a shopping center and rpartment' units would be constructed. On 27 acres of the pr0perty, La Belle said he is working with.Murnay Enterprises, a.nati0nal develOper, to construct the shopping center. Murray_ Enterprises also plans some apartments for that acreage he said. The Daily News was not able to contact Murray Enterprises today. - ;' LaBelle said he has long-range plans for about 100 middle-income apartment units and perhaps commercial develOpment. Claiming that the shopping center would serve 50, 000 people in o ltlying areas, LaBelle said it would consist of-_ two large anchor stores, a.national restaurant chain, and ' about 20 sicrzzs. LaBelle said ha would oversee construction while Murray Enrerpris es would recruit stores. - He ad;ed +hat arcgitectural drawings and retail commitment ,.-P not yet firm. He said an official announce— ment of pl:@ gs would come soon.’ LaBelle has requested the city to annex the area because water and sewe construction costs would be lower. If the area is not annexed, LaBelle would request the council to ' extend water and sewer outside the city limits, which would be much more costly. But if the council refused to i.nstall water and sewer in.that area, the shOpping center could be blocked by the public health department because of wastewater regulations, city manager Al Davis speculated. . . " 3 E a B a '2 g 1! 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