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2006 Land Use Update Purdue Extension, Agriculture & Natural Resources Educators. September 14, 2006 Indianapolis: (317) 347-0211. FISCAL IMPACT OF DEVELOPMENT by Gregory T. Guerrettaz. THE MODEL. What is the model supposed to do?

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2006 Land Use Update Purdue Extension, Agriculture & Natural Resources Educators

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2006 land use update purdue extension agriculture natural resources educators

2006 Land Use UpdatePurdue Extension, Agriculture & Natural Resources Educators

September 14, 2006

Indianapolis: (317) 347-0211

FISCAL IMPACT OF DEVELOPMENT

by Gregory T. Guerrettaz

Financial Solutions Group, Incorporated


The model

THE MODEL

  • What is the model supposed to do?

  • Why even have a model and compute the cost or benefit of new development?

  • Now that we have computed the cost or benefit, what do we do with it?

Financial Solutions Group, Incorporated


Balance the interest of all parties

BALANCE THE INTEREST OF ALL PARTIES

  • As the tax situation becomes more and more complex, there comes a time when a balance needs to be struck between new development and the current burden of taxes on current residents (2% Circuit Breaker)

  • Maybe abatement isn’t the only thing costing the County and other taxing districts money…

Financial Solutions Group, Incorporated


What the model does

WHAT THE MODEL DOES

  • The model is designed to compute the “overall cost or benefit” of new development.

  • The first attempt was made by BAGI (Builders Association of Greater Indianapolis).

  • The BAGI model showed that most taxing entities made money from new development. This simply is not true!

Financial Solutions Group, Incorporated


Entities being covered by the computations

County

Townships

Fire District

Public Library

Schools

ENTITIES BEING COVERED BY THE COMPUTATIONS

Financial Solutions Group, Incorporated


The model required us to ponder just about everything for instance

THE MODEL REQUIRED US TO “PONDER” JUST ABOUT EVERYTHING…FOR INSTANCE,

  • You ship by truck and send cargo by ship;

  • We have noses that run and feet that smell; and

  • You park on driveways and drive on parkways.

Financial Solutions Group, Incorporated


One of the most complex items was school funding

ONE OF THE MOST COMPLEX ITEMS WAS SCHOOL FUNDING

This included such things as:

  • Target Revenue

  • Cost per Student

  • Rate and Levy Controlled Funds

  • Tuition Support

  • Basic Grants

Financial Solutions Group, Incorporated


Target revenue

Target Revenue

Less:

Property Tax Levy

Motor Vehicle Excise Tax, CVET and FIT

Tuition Support

$ 4,724.15

1,566.46

178.53

$ 2,979.16

TARGET REVENUE

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Cost per student

Preschool

General

Debt

CPF

Transportation

Bus

Total

- $ 37.62

- 6,030.72

- 2,293.45

- 989.13

- 389.94

- 221.78

- $ 9,962.64

COST PER STUDENT

Financial Solutions Group, Incorporated


On the county level

Items that were taken into account:

• The Sheriff’s Department budget and the significant increase in both manpower and number of runs which occurred as population grew

Total

Calls Adult

DispatchedArrests

1999 31,481 2,885

2000 35,038 3,365

2001 34,629 3,398

2002 37,686 3,494

ON THE COUNTY LEVEL

Financial Solutions Group, Incorporated


Jail population increase

JAIL POPULATION INCREASE

The “Jail Dept.” was analyzed to review the increased demand placed on the jail facilities as a result of the increase in population. Most Sheriffs believe that there is a direct correlation between the increase in the population and the price range of the homes in the new subdivision. We’re hoping to develop this correlation factor as we continue to expand this analysis.

Financial Solutions Group, Incorporated


Jail population increase con

JAIL POPULATION INCREASE (CON.)

YearAverage Daily Population% Increase in Avg. Daily Pop.

2002 207.33 1.44%

2001 204.39 19.91%

2000 170.45 5.54%

1999 161.51 3.27%

1998 156.39 9.91%

1997 142.29 2.57%

1996 138.73 15.91%

1995 119.69 61.70%

1994 74.02 -17.66%

1993 89.90

Financial Solutions Group, Incorporated


Highway funding and road impact

HIGHWAY FUNDING AND ROAD IMPACT

The road impact and improvements have historically been reviewed in a traffic impact study. Here, we are developing cost impacts based upon the total vehicle miles, as a direct comparison to population increase. We believe that specific improvements will be necessary and required, but as vehicle miles increase with new development, the impact on roads is quite significant.

Financial Solutions Group, Incorporated


Other county funds

OTHER COUNTY FUNDS

Other departments which are impacted as a result of

new development in County Government are:

  • Auditor’s office;

  • Commissioner’s budget;

  • Assessor’s office;

  • Drainage budget;

  • Records and Engineering Depts.;

  • Animal Control; and even

  • An increase in County Home Expense

Financial Solutions Group, Incorporated


County court costs

COUNTY COURT COSTS

As we explore additional impacts as a result of new development, it becomes quickly apparent that caseloads (just ask your local Judge and be ready for a half hour dissertation) increase in direct proportion with the increase in population and dispute cases continue to increase. At least new court cases can be appealed.

Financial Solutions Group, Incorporated


Estimated money spent as a direct result of corn production

ESTIMATED MONEY SPENT AS A DIRECT RESULT OF CORN PRODUCTION

Impacts three main areas:

TOTAL SPENDING IMPACT - $57,000

LOST WAGES - $31,298

INCOME IMPACT - $34,605

LOST TOTAL IMPACT - $122,903

Financial Solutions Group, Incorporated


Multiplier effect

MULTIPLIER EFFECT

The Multiplier Effect is quite substantial when new development arrives

in your County. This impacts the following areas:

  • The spending to construct the residence, for materials;

  • The construction salaries;

  • The boost to the local economy as a result of the construction; and

  • The boost to the disposable income as a direct result of the increase in households and the household’s impact on development of additional commercial areas.

    IMPORTANT NOTE: ‘What portion stays in your County versus

    the portion which gets on the train and leaves the station?’

Financial Solutions Group, Incorporated


Multiplier effect con

MULTIPLIER EFFECT (CON.)

With help from one of our County Commissioners, we have added (into the Multiplier Effect component) the estimated incomes which are required by mortgage companies (and usually reality) in direct correlation to the values of the homes being built by the developer.

Financial Solutions Group, Incorporated


The model required us to ponder even more items such as

THE MODEL REQUIRED US TO “PONDER” EVEN MORE ITEMS, SUCH AS….

  • How can the weather be ‘hot as hell’ one day and ‘cold as hell’ another?

  • When a house burns up, it burns down.

  • You fill in a form by filling it out; an alarm clock goes off by going on.

  • There is no egg in eggplant nor ham in hamburger.

Financial Solutions Group, Incorporated


Fiscal impacts we have seen so far

FISCAL IMPACTS WE HAVE SEEN SO FAR

In one report, regarding the impact of a 375-acre PUD with over 750 new residential units, with an increase in population of 1,931 and an anticipated increase in new students of 465, we have seen the following:

Financial Solutions Group, Incorporated


Fiscal impacts we have seen so far con

FISCAL IMPACTS WE HAVE SEEN SO FAR (CON.)

  • School Corporation Impact ($3,580,000)

  • County Impact ($144,000)

  • Township Impact ($189,000) (1)

  • Library Impact ($304,000)

  • Fire Territory $431,000 (2)

  • Includes fire building debt

  • Operating cost only; 1 new firefighter per 500 increase in population

Financial Solutions Group, Incorporated


Where we are going from here

WHERE WE ARE GOING FROM HERE

It is obvious, when reviewing a new development, that there may be numerous things both required of the developer and items which the developer has agreed or offered to do; therefore, in order to review new development in a comprehensive manner, we are developing a Point System to address items which we have experience with at this time.

Financial Solutions Group, Incorporated


Where we are going from here con

WHERE WE ARE GOING FROM HERE (CON.)

Such items are:

  • Offsite sewers;

  • Open space that will be provided;

  • Gifted land to School Corporations and others;

  • The actual fiscal impact;

  • Voluntary Impact Fee;

  • Traffic Improvements;

  • Drainage Improvements;

  • Additional Commercial Entities; and yes, maybe even

  • Above living wage salaries

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Recommendations

RECOMMENDATIONS

We recommend the following:

  • That the Counties should seek a legislative change to allow for a Fiscal Impact fee (covering the County, Schools, Townships and Libraries);

  • That the County Association should seek legislation for a Justice Center impact fee;

  • Require an impact analysis for every new development in excess of 200 homes;

  • Require an annual “compliance/monitoring” fee of $25.00 per acre, from the developers, for the development life of the area;

Financial Solutions Group, Incorporated


Recommendations con

RECOMMENDATIONS (CON.)

  • Require the developer to file an annual report on the development, in the first quarter of each new year;

  • That all County Planning Departments should develop a comprehensive “Developer Questionnaire” and “Check-Off List” before the development will be considered;

  • Compile a data base on the number of new students created by each new development;

  • Seek legislative authority for a payment “In Lieu of Taxes” covering services in the first year, when revenues are not received; and

  • Calculate the value of lost farm production income.

Financial Solutions Group, Incorporated


Thank you

THANK YOU!!!

Gregory T. Guerrettaz

FSG Corp.

Financial Solutions Group, Incorporated


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