Fiscal Impact Modeling The TexSAFE Experience

2. Fiscal Impact ModelingThe TexSAFE Experience Garen Evans Community Resource Development Mississippi State University

4. Tex$AFE • Decision-making • “What if” scenarios • Community Education • Linkages in a local economy • Policy Analysis

5. Review of Impact Models • Input-Output Analysis • Wassily Leontief • Computable General Equilibrium • Kraybill et al. 1992 • Econometric • Adams et al. 1975 • Simulation • Law and Kelton 1982

6. Input-Output Analysis • Wassily Leontief b. 1906 • Nobel Prize, 1973 …for the development of the input output method and for its application to important economic problems. x = (I-A)-1 y

7. Input-Output Analysis • Advantages • Inexpensive & ease of use • Disadvantages • Theoretical: CRS, fixed inputs, elasticities • Practical: lacks fiscal component, easily abused.

8. Integrated Modeling • “The theoretical motivation for integrating econometric models with input-output models stems from the restrictive assumptions of either component when used by itself.” • (Rey 2000) • Strategies: • embedding, linking, coupling

9. Tex$AFE: The Idea • Identify Direct Impacts • Estimate secondary impacts with input-output analysis. • Use total I-O impacts with Tex$AFE. • Estimate fiscal changes.

10. Secondary data for county Secondary data (254 counties cross-sectional) New jobs and earnings TEX$AFE IMPLAN Input-output model Regression equations Impacts:output value-added earnings jobs Coefficients Spreadsheet Baseline, project, and impacts

11. Tex$AFE: What’s Inside • Spreadsheet Model • Easy to use and maintain • Multiple spreadsheets • Base model data • Local data • Statistical estimators • Modular results

12. Tex$AFE: Data • Demographic • Population • Total, school-aged, elderly • Commuting • Economic • Jobs, earnings, income, unemployment • Fiscal • County revenues, expenditures • Rates: city, school district, special district

13. NETCMT =f(jobs, unemp) POP=f(jobs, netcmt) CLF=f(pop,hisp) SAC=f(pop,hisp) INCOME=f(pop,earn) RETAIL=f(income) PROPV=f(income) HOTREV=f(income) MIXB=f(income) CA_REVX=f(pop) CA_IGED=f(pop) CA_DEXP=f(pop) Tex$AFE: Estimators

15. Tex$AFE: Calibration

18. Tex$AFE: Output • Demographics • Property Revenues • Sales Revenues • Other Revenues • Expenditures • Accounts

23. Tex$AFE & Wind Turbines • 82.5 megawatts on 3200 acres • $180 million

24. Tex$AFE & Wind Turbines • Pecos Wind Farm • Property Taxes: • Buena Vista & Iraan ISDs: $22.8 million (25pv) • County Taxes: • $8.2 million without tax abatement • $2.4 million with tax abatement • Present Value of 10 year tax abatement: • $5,794,276

25. Tex$AFE & Cheese • $97.5 million • 1 cheese plant • 24 dairy farms

26. Tex$AFE & Cheese • The county property tax base increases by $109.5 million. • The net fiscal impact for all jurisdictions in the county is $1.275 million annually (nominal dollars). • The net present value of the fiscal impact over 20 years for all jurisdictions is $17.12 million (realdollars).

27. Tex$AFE & Space Transport • First commercial spaceport in Texas. • Fiscal impacts: • Promo/enabling • Economic impacts: • Ascender Project

28. Distribution of Sales Tax Revenues

29. Where to Start? Shields, M.. 1998. An Integrated Economic Impact and Simulation Model for Wisconsin Counties. Ph.D. Dissertation. University of Wisconsin. Madison. Swallow, B., and T. Johnson. 1987. A Fiscal Impact Model for Virginia Counties. Review of Regional Studies 17(1):67-74. Swenson, D., and D. Otto. 2000. The Iowa Economic/Fiscal Impact Modeling System. Journal of Regional Analysis and Policy 28:64-75. Community Policy Analysis Network http://rupri.org