basics of the fiscal desktop model
DESCRIPTION
With the release of the new model, CEDBR would like to invite you to an online webinar to either become familiar with or to refresh yourself on the following components of fiscal modeling: • Data preparation • Understanding multipliers • Interpreting the resultsTRANSCRIPT
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CEDBR Fiscal Benefit-CostModel 2010 - 2011Kasey Jolly, Senior Research Economist
Center for Economic Development and Business Research
Wichita State University
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History of Model Development Court of Tax Appeals (COTA) requires analysis for tax
abatements and IRBs State model developed and funded by Kansas Inc. and
Kansas League of Municipalities in 1993, but not kept up-to-date
GWEDC provided funding for development of new model
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Why was the new model developed? Old model outdated
SIC not NAICS Other limitations
Allow greater flexibility Local technical support Available for use throughout ED process
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Two Versions of the ModelDESKTOP MODEL FULL MODEL
Given to regional partners Returns output for City and
County User Friendly
CEDBR - $600 fee to run the model
Returns output for City, County, State and School District
Created to be flexible; therefore, more complex than Desktop model
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Data Provided by CEDBR: Community Data Tax rates
Mill levy rates
Budget information
Number of residents
Number of employed residents
Avg. market value of new residential property
Avg. wage all jobs
LOB (local option budget) mill levy rate
LOB percentage of general budget
Capital outlay mill levy rate
Number of students
General Fund Budget
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Multipliers Calculated by the US Dept. of Commerce, BEA Measure the impact of business operations on other
businesses in the community Measure the impact of payroll expenditures on other
businesses in the community Direct, Indirect and Total jobs/and or payroll
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Worker Spending Patterns A major source of revenue for taxing jurisdictions is retail sales
taxes To account for these revenues, we must know what percentage of
a company’s sales and purchases are subject to sales tax; it is also necessary to estimate these percentages for company employees/payroll
Captured retail sales County – “County Pull Factors” (KSU) City – city pop. is divided by county pop. State – the model assumes 100% is subject to tax
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Substitution Individual industries (each NAICS) have been given a predetermined
substitution rate Rates were based on the nature of the industry:
We have two types of industry:
Base – brings outside dollars in
Support – reshuffles existing dollars
Base industries and support industries may look very different from one community to the next.
In addition, specialization within the industry – specifically skill sets – impact substitution rates
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Data Needed from Company NAICS code Capital investment
Land, buildings, machinery and equipment Number of new jobs Average wages of new jobs Firm payments to the city or county
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Data Needed from Community: Incentives Dollar value of incentives by type and taxing
jurisdiction Tax abatement (years/percentage) Forgivable loan Training dollars Infrastructure improvement Cash value of all other incentives
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Print Out Sheet Project summary Incentive summary Tax abatement parameters Construction impact Substitution Firm multipliers Economic impact of firm operations
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Fiscal Impact – Presented Using 3 MeasuresReturn on investmentBenefit Cost RatioNet Present Value
BENEFITS COSTS Property Taxes Retail Sales Taxes Transient Guest Taxes Other Fees & Taxes
Incentives Cost of providing
city/county services
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Limitations Quantitative vs. Qualitative Relies on information given to us The desktop version purposely underestimates
benefits to the community Depending on the situation, can under- or over-
estimate impacts Example – large capital expenditure with tax
abatement may outweigh benefits seen from new jobs