Prospects and Perils of Fiscal Impact Analysis

Problem: Professional planners have used fiscal impact analysis (FIA) to assist in land use decision making for over three decades; yet, not since the late 1970s has research examined how practicing planners use the tool or how accurate this planning analysis technique is in everyday practice. Purpose: The purpose of this study is to understand how practicing planners use FIA today, how FIA informs current planning debates, and how sensitive FIA projections are to underlying assumptions. Methods: We surveyed planning directors across the country on their use of FIA, following up with interviews in 10 cases. We also applied standard FIA to a hypothetical mixed-use development in seven cities in Wisconsin to assess the sensitivity of FIA projections to assumptions about the local mix of residential and nonresidential development. Results and conclusions: Our survey and interview results show that planners deem FIA an important tool. Our sensitivity analysis allowing plausible variation in a key parameter shows that standard, off-the-shelf FIA can produce relatively large errors and even incorrectly predict whether to expect a fiscal surplus or deficit. Takeaway for practice: Planners are increasingly expected to project the likely fiscal impacts of various kinds of development. We show that current off-the-shelf FIA models and workbooks do not produce reliable results. Given this, planners and researchers should acknowledge the limitations of FIA, and conduct FIA in ways that reflect the uncertainty involved. Researchers should develop a better theoretical and empirical underpinning for this important planning analysis tool. Research support: This research was funded in part by the Lincoln Institute of Land Policy.