HomeMy WebLinkAboutIR 7342 INFORMAL REPORT TO CITY COUNCIL MEMBERS No.- 7342 p.1
1J.T 14,
J?;,0 To the Mayor and Members of the City Council January 3, 1989
4
X, Subject: FISCAL IMPACT ANALYSIS
Over the past several years, the city of Fort Worth has experienced
substantial growth in population and land area. Although the rate of
growth in population and development has slowed compared to the
historical peaks reached a few years ago, we continue to have major
annexation and important development activities, Each new annexation
or development increases the demands on municipal government. At the
same time, new developments increase the tax base. Estimates of the
potential costs and benefits associated with new developments would
be valuable in analyzing the effects of growth on the City's budget
now and in the future.
The requirements for monitoring expenditures has become more
important as changes in the Texas economy, particularly with the
decline of the oil and financial service industries. As federal
spending reductions take effect, causing city program reductions, it
becomes necessary for the City of Fort Worth to control spending more
effectively. In addition, there is increasing concern experienced by
the City Council and the citizens over the level of expenditures and
property tax rate. In order to keep expenditures under control while
continuing to provide essential services to our citizens, the City of
Fort Worth has sought to develop a fiscal impact analysis model.
Fiscal impact analysis (FIA) is a methodology to estimate the direct
public costs and revenues associated with residential and
commercial/industrial development. This form of analysis provides
important information about the long term impacts on the City's
budget, the timing for delivering certain services to a new area, and
the potential revenues generated by new residents and businesses.
There are two generally accepted types of FIA. The first is the
average cost method in which costs for a new development are
determined by multiplying the average cost per service unit by the.
number of service units the development is estimated to produce.
Marginal costing, the second method, relies on the analysis of
existing demand/supply relationships for local governmental services.
It takes into consideration any existing excess or deficient capacity
that might exist for particular services. The City of Fort Worth
staff believes that the average cost of service model is the superior
of the two methods because the information/data is readily available
to build it. This model calculates revenues and expenditures based
on actual history rather than utilizing an econometric model .
In view of development trends, citizen concern regarding the property
tax rate, and the Council's concern about the impacts of development,
the Council approved M&C C-10978 to contract with Administrative and
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7342 p.2
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X Subject: FISCAL IMPACT' ANALYSIS
Fiscal Consulting Services, Inc. , (AFC&S) to develop a computer model
for fiscal impact analysis of potential developments and annexations.
Administrative and Fiscal Consulting Services, Inc. , and the office
of Management Services staff worked jointly to gather the initial
information necessary to build the model. The FY 1987-88 budget,
1987 taxable valuations, and assumptions about typical household size
and employees per square foot of commercial space form the
foundations. At the heart of the model lies the average cost of
services for each service-providing department. The heads of these
agencies were interviewed to determine the allocation of their
budgets and resources by residential, commercial, and industrial
properties. Indirect costs, from the David M. Griffith & Associates
Cost Allocation Study, were added to these allocations to reflect
full costs. This model , along with complete documentation and
training, has been delivered to the City and is ready to be included
in the development review process.
At the beginning of each fiscal year, Management Services will update
all budgetary information, the demographic assumptions underlying the
model , and the allocation of department resources using input from
all departments.
The fiscal impact model will provide supplemental information to be
used in the existing development/annexation review process.
Prospective developers will submit federal impact information on
developments of 100 acres or more with their applications to the
Development Department. This information will include specific
details about land use mix, projected absorption rates, and build-out
schedules. Development Coordination will send this data to
Management Services which will use it to calculate the projected
revenues and expenditures for the proposed developments over a multi-
year build out period.
The model specifically:
determines the average cost of services provided by the City
to residents and businesses;
identifies and calculates the cost of providing services on a
per unit basis;
uses demographic assumptions about population, employees per
square foot of commercial/industrial space, number and type
of housing units per land use category, tax base, and
acreage;
[ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7342 p.3
+,.P a To the Mayor and Members of the City Council January 3, 1989
Subject: FISCAL IMPACT ANALYSIS
* estimates the costs of service for various land use
categories in a prospective annexation;
* estimates the revenues associated with various land use
categories in a prospective annexation;
* projects the costs and revenues for a given development
through a thirty year "build out."
Management Services will incorporate this information in a detailed
report which will be returned to Development Coordination.
Development Coordination will then distribute this analysis to the
various departments involved in development/annexation review along
with regular development sent to the Planning and Zoning Commission
and finally, to the Council . This report is simply another piece of
information to be attached to the packet for review and is not
intended to be used to approve or deny a development.
If you have any questions, please contact Management Services
Director, Charles Boswell at 870-8511 .
4DougHarman
City Manager
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ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS