Estimating the Fiscal Impact of Land Development Projects

by Nick Hayward
Tri-County Regional Planning Commission

The Fiscal Calculator helps communities understand the true fiscal impact associated with growth and development.

An important responsibility of local officials is to foster the fiscal stability of their community. How a community grows, what policies it adopts, and how it invests in the future are all critical issues that officials face on a regular basis. With economic pressures on units of government at all levels, there is an increasing need for understanding the true fiscal impact associated with growth and development.

But developing this understanding can be difficult. While land development projects such as a residential subdivision or shopping center can generate property tax revenue and sales tax revenue for a community, the community also incurs expenses to provide services for these projects. How can it compare the revenues and expenses associated with land development to estimate whether a development project will pay for itself?

Using the Fiscal Calculator
Tri-County Regional Planning Commission (TCRPC) developed the Fiscal Calculator in order to help local units of government answer this question. The Fiscal Calculator is a spreadsheet-based tool that estimates the fiscal impact of a land development project for municipalities, counties and school districts in the Tri-County region. It’s an easy-to-use tool that can be deployed when gathering information about the potential impacts of proposed land development projects.

The Fiscal Calculator concept was pioneered by Peoria County in 2009 to help officials understand the fiscal impact of development projects in the County. TCRPC used a regional planning grant awarded by the U.S. Department of Housing and Urban Development to adapt this concept and work with a consultant to develop an expanded version that serves the entire Tri-County region.

The Fiscal Calculator was designed to be easy to use. To generate an estimate of the fiscal impact of a land development project, a user needs to complete the following four steps:

  1. Enter the number of acres of the existing land use;
  2. Enter the number of acres of the proposed land use;
  3. Enter the predicted total annual sales for commercial uses; and
  4. Enter any additional revenues or expenses associated with the development.

After entering these four inputs, the Fiscal Calculator generates an estimate of the fiscal impact of the proposed land development project.

A Powerful Tool—With Limitations
Among the benefits of the Fiscal Calculator is that it is customized to the individual units of government in our region. It was developed using financial information from the individual municipalities, counties and school districts in the region, so the fiscal impact estimates are based on the unit of government’s actual fiscal data, as opposed to national averages. Each unit of government’s current revenues, expenses, population and employees per acre of land use is used in the base analysis employed by the Fiscal Calculator. When information about a proposed development is entered into the Fiscal Calculator, new population and employment densities are estimated, and the costs of providing services to residents and employees are applied, resulting in an estimated fiscal impact of the proposed development for the unit of government.

One important caveat is that the Fiscal Calculator cannot replace a detailed fiscal impact analysis for an individual development project. The costs associated with land development can be complex, so while the Fiscal Calculator is a powerful tool, it has limitations. Its estimates can be used to help inform decisions pertaining to land development projects, and these estimates should be considered along with other potential impacts of a development project to arrive at the best decision for a community.

A Regional Solution
The Fiscal Calculator has been used locally in a variety of situations. Peoria County uses its version of the tool to provide information to the Zoning Board of Appeals when it is reviewing development proposals. In addition, the City of Peoria and Dunlap School District have used the tool to better understand the fiscal impacts of multi-family residential development.

The Fiscal Calculator is available for use by any municipality, county or school district in the Tri-County region. If you would like to use the tool, please contact me at nhayward@tricountyrpc.org or (309) 673-9330. I welcome your questions, feedback and the opportunity to work together to further identify tools that local governments can use to better understand the fiscal impacts of growth. iBi

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