How much does a new development expand a local government’s tax base? Does one type of development produce more tax revenue than another? What about services needed for the new development? How much will they cost?
Five Kenton County jurisdictions will soon be able to answer these questions and others regarding growth being experienced within their boundaries. The tool that provides these answers will be made available through the Ohio Kentucky Indiana Regional Council of Governments’ (OKI) Fiscal Impact Analysis Model.
Fiscal impact models estimate the revenues and costs associated with land use changes. They can compare alternative development scenarios and analyze effects of specific development projects. The estimates are based on revenue and expenditure trends for the jurisdiction.
The City of Independence has utilized the OKI tool since 2010 and will continue in the program.
“This tool has given us another layer of information for our decision making. It’s important to understand the city’s costs to provide services whenever there’s a development proposal on the table,” says Mayor Chris Reinersman of Independence.
PDS staff will work with OKI over the coming months to provide this tool to four additional cities in Kenton County—Covington, Edgewood, Crestview Hills, and Taylor Mill. This pilot program will run for one year after which the cities will be asked for feedback regarding the model’s usefulness.
When new businesses locate in a community or new homes are built, the new employees and residents pay new taxes. New employees pay new local income taxes. New property owners pay new real estate taxes.
These new businesses and residents also create new costs. New developments may require new roads, sewers, police and fire protection. New residents may demand new parks. Greater traffic congestion may require more roads and traffic lights.
Fiscal impact analyses use local government budgetary trends (both revenues and expenditures) as well as land use, and population and employment trends to project costs and revenues associated with new residential or non-residential growth in the community.
If new revenues exceed new costs, the fiscal impact is said to be positive. The local government can meet new demands for services. If new revenues fall short of new costs, the fiscal impact is negative and the local government must take steps to meet new service demands, or the quality of overall existing services may be impacted.
OKI’s Fiscal Impact Analyses Model can be used to compare alternative development scenarios for a jurisdiction—for example, to see whether a community will benefit more from a single family residential development or mixed use development. It can also analyze effects of specific development projects—for example, what impact will a zoning change or development approval have on the specific need for fire protection.
OKI developed the Fiscal Impact Analysis Model to give decision makers a better understanding of the budgetary implications of land use proposals. The need for a fiscal impact analysis tool was identified as part of OKI’s Strategic Regional Policy Plan, adopted in 2005.
The Fiscal Impact Analysis Model is an educational tool. Information generated from the Model will help local governments understand better the revenues and costs associated with new development and the jurisdiction’s ability to provide public facilities and services.