Transcript Capital Improvements Element & Development Impact Fees for

The Cost of Growth: It’s Not Just the
Capital Costs
2006 ACMA Summer Conference
Presented By:
L. Carson Bise II, AICP
Christopher Cullinan
Overview of Presentation

Overview of cost of growth vs. fiscal impact
analysis
–

L. Carson Bise II, AICP
Queen Creek/Maricopa, AZ case studies
–
Christopher V. Cullinan
Cost of Growth Studies

Landmark study
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Real Estate Research Corporation’s The Cost of
Sprawl
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Estimated public and private costs for a variety of
residential and nonresidential land uses/hypothetical
10,000 unit communities
Much of the cost of growth focus has been
on capital costs
–
–
Frequently upfront revenue is not enough to cover
infrastructure costs
Increased awareness since 1960’s and 1970’s
What We’ve Learned

Most studies indicate lower public
infrastructure costs for higher density
development
–
–
RERC study showed infrastructure costs for
higher density was 53% of the lower density
alternative
Streets and utility costs were 120% greater with
“sprawl”
What We’ve Learned (continued)

The capital cost per dwelling unit varies by:
–
–
–
–
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Density
Type of dwelling unit
Population characteristics
Proximity to service areas
Utility capacity utilization
Flaws

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
Focus on infrastructure costs
Community specific studies usually only
reflect the current growth trend
Capital costs are typically only 15-25% of a
jurisdiction’s total budget
Fiscal Impact Analysis

Cash flow to the public sector
•

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
Are the revenues generated by new growth enough to cover
the resulting service and facility demands?
Reflects operating expenses and capital
costs (debt service and pay-go)
All revenues
Revenue minus expenditures = net
surplus/deficit
Economic Impact Analysis

Reflects overall economy of the community
–
Residential

–
Primary factors are the construction phase and
consumer spending
Nonresidential

Primary factors are job creation and real disposable
income
Fiscal Impact Analysis


Growth Scenarios
Cost of Land Use
Observations


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
Most local governments do not know the true
cost of development decisions
Most local governments do not know if the
current land use plan is fiscally sustainable
Fiscal analysis is rarely required
Lack of formal standards
Considerable variation in methodologies
employed
Observations (continued)


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Overlap of governmental entities
Regional issues
Cumulative impacts in changing communities
–
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Project-level analyses are typically reviewed in a
vacuum
Costs can change over time
Does not address infrastructure replacement
Seldom reflect geographic differences
Methodologies
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
Case study-marginal approach
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Reflects fiscal reality
–
Dependent on local levels of service
–
Available capacity determines the staging of facilities
Versus the average cost approach
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Focuses on per capita/employee
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Doesn’t consider available capacities
–
Masks timing
Which Methodology is Best?


Case study-marginal approach
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City/Countywide analysis
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Area/corridor plans
–
Planned unit developments
Average cost
–
Small/medium scale developments
–
Cost of land use studies
General Perceptions

Residential development doesn’t pay
for itself

Nonresidential development is a cash
cow
Influencing Factors

Revenue structure
–
–


Levels of service
Infrastructure lifecycle
–

Sources
Distribution formulas
Existing capacities
Characteristics of new development
–
–
Demographic
Socioeconomic
Case Examples

Gross Receipts Tax
General Fund Net Revenues - Per 1,000 Square Feet
City of Scottsdale
$2,400
$2,083
$1,900
$1,400
$900
$887
$400
($100)
Resort
Retail
$75
$14
Office
Industrial
Case Examples

Income Tax by Place of Employment
Annual Net Fiscal Results - Per 1,000 Square Feet
City of Dublin Prototype Analysis
$3,000
$2,621
$2,500
$2,000
$1,412
$1,500
$1,000
$500
$0
($500)
($1,000)
Retail
($772)
Office
Industrial
Case Examples

Housing Characteristics
Net Fiscal Results-Residential Prototypes
Sarasota County Economic and Fiscal Impact Analysis
$1,724
(Per Unit)
$2,000
$1,494
$1,500
$1,000
$500
$230
$483
$178
$274
$229
($5)
$0
($500)
Bel-Air Estates
Greenfield
Summerwood
($177)
Summit Heron
($279) Apts.
($255)
($1,000)
($1,030)
($1,500)
($1,208)
($2,000)
($1,929)
($2,106)
($2,500)
General Fund
School District
Lazy River MHP
Total
Case Example

Overlap of governmental entities
Annual Net Impact-Residential Land Uses
Hempstead, New York
$1,000
$500
$407
$275
$164
$0
SFDU
($500)
($187)
Condo.
Apt.
($82)
($1,000)
($1,500)
($1,768)
($2,000)
Village
School District
Case Example

Multiple Entities/Housing Characteristics
Net Fiscal Results-Residential Prototypes
Sarasota County Economic and Fiscal Impact Analysis
$1,724
(Per Unit)
$2,000
$1,494
$1,500
$1,000
$500
$230
$483
$178
$274
$229
($5)
$0
($500)
Bel-Air Estates
Greenfield
Summerwood
($177)
Summit Heron
($279) Apts.
($255)
($1,000)
($1,030)
($1,500)
($1,208)
($2,000)
($1,929)
($2,106)
($2,500)
General Fund
School District
Lazy River MHP
Total
Evaluating Land Use Policy - Case Example

Anchorage, Alaska Comprehensive Plan
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Five land use scenarios evaluated
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Trends
Neighborhoods
Urban Transition
Slow Growth/Satellite Communities
Preferred
Each scenario was evaluated Ctiywide, as well as
for six discreet subareas, or fiscal analysis zones
Anchorage, AK (continued)
M u n ic ip a lity w id e A n n u a l N e t R e s u lts
S c e n a rio C o m p a ris o n s
M u n ic ip a lit y o f An c h o r a g e F is c a l An a lys is
$10,000
$5,000
(X 1,000)
($ 1 5 , 0 0 0 )
($ 2 0 , 0 0 0 )
($ 2 5 , 0 0 0 )
($ 3 0 , 0 0 0 )
Tre n d s
N e ig h b o rh o o d s
U rb a n Tra n s it io n
S lo w G ro w t h
P re fe rre d
20
19
($ 1 0 , 0 0 0 )
20
20
17
16
15
18
20
20
20
20
13
12
11
10
09
08
07
06
05
04
03
02
01
14
20
20
20
20
20
20
20
20
20
20
20
20
20
($ 5 , 0 0 0 )
20
20
00
$0
Anchorage, AK (continued)
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Revenue structure problem
City benefits from encouraging increased
densities in the Northwest FAZ
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
Existing Fire Station/School capacity
Southeast FAZ is the least desirable for new
residential development
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Existing schools are overcapacity
Hillsborough County, FL - Case Example
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Is comprehensive plan financially feasible
Annual Net Fiscal Impacts (x$1,000)
Current Growth Trend Scenario, 2003 to 2025
Hillsborough County Fiscal Impact Analysis
$0
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
($20,000)
($40,000)
($60,000)
($80,000)
($100,000)
($120,000)
($140,000)
($160,000)
Hillsborough County
School Board
Combined
2023
2025
Conclusions
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Cost of development analysis should:
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Address the complete fiscal picture
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All costs and revenues
Look far into the future to account for
infrastructure replacement
Calculate costs using a marginal cost approach
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Will capture geographic differences and existing
infrastructure capacity
Arizona Case Studies
City of Maricopa, Arizona
City of Maricopa, Arizona
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Incorporated in 2003.
Approximately 20 miles south of Phoenix.
Agricultural community rapidly transitioning
to a full-service, suburban community.
City of Maricopa, Arizona
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Planning considerations:
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2004 Population: 5,000
2010 Population: 92,000
Averaging 600 single family permits/month
Financial considerations:
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Primary revenue sources: local sales tax,
licenses and permits (no City property tax)
Low levels of service for operations and capital,
high expectations
City of Maricopa, Arizona
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Development fees 2005
Parks & Recreation, Library, General
Government, Police, Transportation
Plan-based approach with a higher level-ofservice for Library, General Government,
Police
City of Maricopa, Arizona
Single Family (per unit)
Current LOS
Higher LOS
NET DIFFERENCE
Library
$161
$436
$274
Public
General
Safety
Government TOTAL
$45
$98
$304
$140
$674
$1,250
$95
$576
$946
City of Maricopa, Arizona
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
Development fee must be assessed in a nondiscriminatory manner.
Cannot charge new growth for a higher LOS
than is currently being provided unless there
is a funding plan to raise the LOS for existing
development.
City of Maricopa, Arizona
Maricopa, AZ Projected Development Impact Fee Revenues Next Six Years
Compared to Funds Needed to Raise Existing LOS Deficit
$40,000
$35,000
$1,000's
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
Library
Public Safety
Development Fee Revenues
Library
Development Fee Revenues (6 years)
Existing LOS Deficit
$19,857
$1,038
Figures are expressed in millions of dollars.
General Gov't
Existing LOS Deficit
Public
Safety
$8,896
$591
General
Government
$36,369
$2,574
TOTAL
$65,122
$4,204
City of Maricopa, Arizona
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City dedicated construction sales tax to fund
LOS deficiency for existing development.
$1 construction sales tax = $15 development fee revenue
Town of Queen Creek, Arizona
Town of Queen Creek, Arizona
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
Planning Considerations:
– 1990 Population:
2,667
– 2000 Population:
4,316
– Current Population:
18,500
– 2010 Population:
34,667
Financial Considerations:
– Has been creating new departments, hiring staff
– Currently in the midst of building several, first-ever
municipal facilities (Town Hall, Parks, Library)
– Local sales tax is primary General Fund revenue
source
Town of Queen Creek, Arizona
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Development fees since 1997.
Added new development fee categories as Town
has increased LOS, developed master plans.
2002 fee update triggered questions about
operating impacts and whether Town could
afford to staff and maintain new capital facilities.
Fiscal impact analysis of growth scenarios (net
operating and capital impacts).
Town of Queen Creek, Arizona
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6 Development Scenarios
Residential
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Scenario 1. Accelerated Growth: Average annual growth of 1500
housing units.
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Scenario 2. Current Growth: Average annual growth of 1000
housing units.
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Scenario 3. Slower Growth: Average annual growth of 750
housing units.
Nonresidential
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Normal growth of nonresidential development to reflect the Town
of Queen Creek’s desired increase in jobs-to-population ratio
from .37 to approximately .5 (identified as a goal in the Town’s
General Plan) over time; and
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Slowed growth of nonresidential development maintaining a .37
jobs-to-population ratio.
Town of Queen Creek, Arizona
Annual Net Results
Scenario Comparisons: Normal Nonresidential Growth
Town of Queen Creek
$10,000
$5,000
$0
Surplus/Deficit (x$1,000)
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
($5,000)
($10,000)
($15,000)
($20,000)
($25,000)
1. Accelerated Growth: Normal Nonresidential Growth
2. Current Growth: Normal Nonresidential Growth
3. Slower Growth: Normal Nonresidential Growth
($30,000)
2020
Town of Queen Creek, Arizona
Annual Net Results
Scenario Comparisons: Slowed Nonresidential Growth
Town of Queen Creek
$10,000
$5,000
$0
Surplus/Deficit (x$1,000)
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
($5,000)
($10,000)
($15,000)
($20,000)
($25,000)
1a. Accelerated Growth: Slowed Nonresidential Growth
2a. Current Growth: Slowed Nonresidential Growth
3a. Slower Growth: Slowed Nonresidential Growth
($30,000)
2020
Town of Queen Creek, Arizona
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Major Findings
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The faster the growth, the deeper the deficits.
Deficits are brought about by the construction and purchase of
land for capital facilities such as the library, park and recreation
facilities, and the police facility to serve new growth.
 Cash financing of capital facilities.
 As more capital facilities come online, operating expenditures
start to increase without a corresponding increase in operating
revenues.
Town of Queen Creek, Arizona

Major Findings (cont)
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Less nonresidential development detracts from the bottom line,
since sales tax revenue is the major revenue sources for the Town.
The majority of operating revenues are generated from sales taxes
from retail and construction. However, the construction sales tax is
a one-time revenue source.
The amount of commercial development—even assuming the
faster nonresidential growth—is insufficient to cover the shortfalls
brought about by the overall growth in the Town for all growth
scenarios over the long term.
Town of Queen Creek, Arizona
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Actions taken by the Town as a result
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Hired financial consultant to monitor long-term fiscal health of
Town (both operating and capital)
Developed comprehensive debt financing plan (built up fund
balances, now include financing costs in development fee
calculations)
Update development fees on an annual basis
Have adopted a dedicated sales tax for transportation projects
Focus on quality retail development for sales tax generation
Focus on operating costs of services and capital facilities and
alternatives for financing and delivery of services (Fire Services)
Key Ideas
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Integration of planning and finance
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The quality and specificity of the financial data and
projections are only as good as the planning data and
projections (Comprehensive Plans, Impact Fees, CIP)
Need to consider fiscal impacts of both operating
and capital
Consideration of current levels-of-service versus
higher levels-of-service
Know and evaluate options
Options

Revenue enhancement and/or diversification
Infrastructure Financing Funding Criteria
Revenue
Potential
Technical
Ease
Proportionate
to Demand
Public
Acceptance
Bonds
positive
negative
negative
negative
Special Districts
negative
negative
positive
positive
Developer Exactions
negative
neutral
negative
positive
Impact Fees
positive
negative
positive
positive
Excise Taxes
positive
neutral
positive
positive
Property Tax
positive
positive
negative
positive
Sales Tax
positive
positive
negative
negative
Transfer Tax
positive
positive
negative
neutral
User Charges
positive
positive
negative
negative
Options

Cost reduction
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Modify levels-of-service (both current and planned)
Delay or reduce construction of capital facilities
Spread out costs of capital facilities (debt financing, leasepurchase)
Integration of Planning and Finance Policies and
Procedures
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–
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Incorporate fiscal impact analysis in planning efforts
Set financial targets for permits and fees (% of costs
covered, annual review)
Update impact fees every __ years
Use of one-time revenues versus on-going revenues