Public Finance for Planners Jeff Levine Adam Gaudette

1. Public Finance for Planners
Massachusetts Association of Planning Directors
2012 Annual Meeting
Springfield, MA
Presenters:
Jeff Levine, AICP
Director of Planning & Community Development, Town of Brookline, MA
Adam Gaudette, AICP
Town Administrator, Town of Spencer, MA

2. Why Should Planners Care?
Adam’s Top 10 reasons:
1)Finance Committees will seek budget line item explanations as part of Budget Process
2)Revenues dictate the Town’s ability to fund your existing budget
3)Revenues dictate the Town’s ability to increase your budget to fund new technology (GIS, etc.)
4)Revenues dictate the Town’s ability to increase your budget to add staff to handle work
overloads
5)Town’s borrowing position (ability to pay, reserves, etc.) will dictate cost of borrowing and
willingness to fund capital improvements – for that downtown revitalization project, for that sewer
line to the industrial park, etc.
6)Town’s financial position will dictate the need/desire to apply for grant assistance
7)Town’s financial position determines ability to self fund or to rely on Regionalization efforts
8)You will be asked about impact of possible new revenue streams (leasing land for Solar, Wind,
Cellular; Recycling; etc.)
9)You will be asked “What does Fiscal Impact Really Mean?”
10)One day the Chairman of the BOS may ask you to fill in as TA because the TA just got fired!

3. The Role of the Planner
So how does the planner affect all of this?
Land use=money
Most common model is that
new development =new property or sales tax
but reality is more complicated.

4. The Role of the Planner (2)
A recent debate on the MassPlanners listserv:
“The ethical dilemma that I'd love planners-at-large to consider is whether there's a "vested interest" in seeking "new
growth revenues". With the huge pressure to encourage growth in tax revenue, there is huge pressure on the planner to
help developers stuff as much building onto a property as possible, despite the impact to the community.
Obviously, any humanistic planner would consider the cost to the overall community of "the growth" when "assisting the
client". But my observation is/was that planners spend a lot of time defending growth and convincing neighbors that there
will be little or no impact, and not much time helping reduce the number or size of the buildings. That may just be my
observation limited to what experience I may have.
For example, I have noticed the MAPC's announcements focused on "accommodating" growth, "facilitating" and
encouraging. And I ask myself...who exactly is going to pay for this growth. Certainly not the developers. And certainly not
the new tax payers.
With so much pressure on the planners to create "new growth revenues" by managers who are trying to balance budgets,
how can the planner really and truly consider the impact on the neighbors in terms of traffic and other negative value
factors? In other words, with such vested interest is in growth, and shouldn't the question be whether planners should be
subject to that pressure, when their "duty" is to serve all citizens, not just the developers and the town manager?
Shouldn't that be the ethical question of the decade?
With our cities crumbling after decades of the promise that growth will eventually pay, when are we going to stop the
charade? There's obviously some kind of incentive tied to growth that goes beyond whether cash is trading hands in a
shady bribe”.

5. The Role of the Planner (3)
“Not only do elected officials concern themselves with the impact of growth on a community, but this is a definite concern of
Planners.
I think part of the dilemma is that who is it exactly that gets to decide whether growth is good or bad? I think that question is
answered based on the potential or experienced negative impacts of growth, which is not to say that growth is always a
negative for a community. Also the question would be to what extent is a community willing to put up with the byproducts of
growth? Shouldn't the answer to this question be found in the Master Plan? Isn't that what Master Plans are for?
I don't think it's unethical for a Planner or a community to help a developer maximize the value of a property, or for that
matter encourage growth, especially if the tradeoff is that other natural or historic resources get to be preserved. There is
nothing wrong with the strategy to broaden the tax base, as long as the negative impacts of growth can be managed and/or
mitigated.
Not all decisions will be cost/benefit, the people in the community have the final say on plans and planning, and property
rights always trump.”

6. The Role of the Planner (4)
“” I would echo Ray's comments, but add that what Master Plans do is identify the need for balancing public and private
interests as the community proceeds toward its future, and how to achieve that balance. Professional developers and
property owners (including neighbors) will always seek to maximize their own benefit and minimize their own costs (real or
conceptual). They will always represent their own tribe's interests first. Very few citizens are capable of keeping the wider
public interest--the moving balance of community needs--in view. It is that moving balance that represent who "all citizens"
consist of, not just the aggrieved neighbors who find intolerable the prospect of a different view out their kitchen window.
There is as much danger to legitimate local democratic process from giving self-identified victims too much power as there is
from letting development interests bulldoze the community. Neither represents the community's true interest.
For my part, maintaining that precarious balance between all of the legitimate interests is the real ethical question of the
decade, and in fact the challenge of this century. Without that balance, genuine local self-governance is frustrated. There is
no functional difference between giving development interests too much latitude, and giving the minority of professional or
avocational victims too much of a veto over the needs of the wider community. If there is no real balance, then none of it is
working and we are wasting our time.
When we use balance as the template, then the choices are no longer unfettered slash-and-burn growth vs. perpetually
stymied growth. Self-determined smart (or even wise) growth becomes possible. While perfection will always be denied us,
the key is maintaining that balance.”

7. The Role of the Planner (5)
"There can always be a good debate about what a Planner's role is or might be in the community development process and
about the ethics questions that revolve around that role. Obviously, bylaws and ordinances, rules, best practices, master
plans, and - yes - basic well established and publicized ethics rules are among the many things that guide a planner's actions
and recommendations. In my work, I do not see special biases influencing outcomes such as pressures or desires to
maximize growth for revenues, or forces to thwart growth so as to avoid impacts. Sure, the voices are out there just like all
the many other sound bites for or against anything imaginable and debatable in our society - or like commercials just vying
for attention. They do not influence me much individually. But, in the aggregate they probably do. After all, we humans act
from within and in reaction to the times that we live in.”
“Good responses so far to the value of master planning to help pre-determine priority areas for development and priority
areas for preservation. However, it is always site specific development that can spur controversy and I wanted to take
exception to the notion that planners help to maximize the density of development on a parcel. Yes the planner's role is to
guide applicants through the application process, but also to ensure that there is a public input component to that process,
and to assist any abutters or other interested parties with questions about the proposal. However the size of the proposal is
usually predetermined long before the planner sees it (speaking from 15 years in the private sector before jumping over the
fence to the municipal sector in 1990). The developer hires an engineer/surveyor with a directive to design the biggest
building that can be built. The engineer reviews the various local requirements for setbacks, buffers, heights, FAR, parking,
landscaping, etc and designs a concept for local approval. I see planners being pressured in the other direction, to downsize
the proposal or even make it go away (even in business friendly communities), but if allowed by the local zoning, then the
best you can do is condition it to minimize the impacts. The issues raised about community impacts are considered in the
review processes I have seen, and some communities are more successful than others in the extent of mitigation obtained
from developers. Planners do not defend growth so much as the bylaws that regulate land use and any master plans under
which such bylaws were created. If there is general concern that submitted projects are too large, then you need to review
and revise your zoning bylaw and other local regulations to better control the destiny of your build-out. Just because it has
been a tight economy for municipal budgets, the added suggestion that planners are involved in shady dealings is totally
uncalled for. Land use planning and decisions made thereunder are not a popularity contest, but a process based on
specific state and local rules and procedures, on top of which are a code of ethics that planners need to follow, which are
sometimes at odds with what the public might want to be done. Planners and the boards we serve usually cannot say "no",
so we have to focus on "how“. I think your observations on the role of a planner and the process of "how" decisions are
made are misinformed.”

8. The Role of the Planner (6)
What is the role of planning in public finance?
Is it our job to make sure it doesn’t all become
about money?
What about long term vs. short term?
What about net vs. gross?
What’s so bad about revenue anyway?

9. Municipalities as Choices
Municipalities can be seen as a “package
deal” you can “purchase”
For $x a year, you can get a certain set of
goods and services. Some will pay more to get
more, some will pay less to get less.
You can change a package from within (by
voting for change) or by choosing a different
package (by moving.)

10. Tiebout Hypothesis
Also known as the Tiebout Model, Tiebout
sorting, etc.
Coined by economist Charles Tiebout in 1956
Basically views communities as baskets of
goods and that people choose their basket
based on their preferences.
Assumes a lot- perfect mobility and perfect
information.

11. Mobility by Voting
You can change the community you live in
without moving- by electing officials you agree
with
Solves issue of having perfect mobility but still
need perfect information- how will that person
actually change things (or not.)

12. Mobility by Mobility
If you don’t like the place, move!
People do this all the time for one particular
public service, often without perfect
information
Who moves?
Those with money
Those who feel comfortable in a variety of
communities
Those who aren’t tied to a specific place

13. Municipalities as Clubs
Similar to the Tiebout Hypothesis
People like to be with people they are like
Explains “peoples’ republic” communities like
Cambridge, Madison, Austin
Not just a fiscal issue – but has fiscal impacts
(tend to affect expenditures and also how local
regulations affect the market.)

14. INPUTS OUTPUTS
Property Tax Public Works
Excise Tax Education
Rooms Tax Public Services
Meals Tax Public Safety
Sales Tax Building Inspections
Fees Planning
Fines
Intergovernmental Transfers
Borrowing
Inputs and Outputs

15. Types of Inputs
●
Annual receipts – estimated in prior year
●
Long Range Financial Forecasts –
estimated several years in advance
●
Grants (usually received annually)
●
“Leftover” money – such as Free Cash
●
Bonds and other borrowing – need to be
credit worthy

16. Types of Outputs
●
Operations
●
Capital
●
Reserves
●
Generally operations should be funded out
of funds received annually and capital from
a mix of sources. Reserves are designed to
smooth out rough patches such as revenue
shortfalls

17. Town of Spencer
How does a Town Budget work?

18. Types of Revenue:
Property and Sales Tax
1) A town’s only guaranteed revenue is tax levy (state aid
and local receipts not guaranteed). Collection success rate is
key!
2) Economic market dictates the ability of taxpayers to pay
their taxes.
3) Economic market dictates the ability of taxpayers to fund
debt exclusion requests (major capital expenditures)

19. Property Tax Limits
●
California did it first with Proposition 13 in
1976.
●
Massachusetts passed Proposition 2 ½ in
1980 (went into effect in 1982)
●
Many more followed and continue to follow
●
Limit levy, rate (mills) increase, and/or
expenditures

20. Proposition 2 1/2
●
Limits total levy increase to 2.5% a year
●
Also limits increase in rate to +2.5 mills/year
●
Exceptions: voter override; “new growth”
●
In practice, background growth in
government spending goes up more than
2.5% a year
●
What are the planning implications of this?

21. Brookline New Growth
FY New Growth
98 $ 1,144,308
99 $ 1,475,516
00 $ 1,741,773
01 $ 1,727,664
02 $ 1,908,929
03 $ 2,491,979
04 $ 2,491,073
05 $ 2,386,251
06 $ 2,232,945
07 $ 1,989,683
08 $ 2,584,680
09 $ 1,828,261
10 $ 1,762,212
11 $ 1,829,084
12 $ 1,984,224

22. Spencer New Growth

23. FY07 FY08 FY09 FY10 FY11
Meals Tax 504,079 915,797
Hotel/Motel Excises 799,339 742,744 788,531 907,474 1,244,887
Meals Tax and Hotel Tax
Brookline Examples

24. Types of Revenue:
Fees, Excise Taxes, Bonding
1) Economic market dictates the ability of
taxpayers to pay user fees – sewer & water . Again,
collection success rate is key!
2) Economic market dictates excise tax income,
building permits, etc.
3) Bond rates and Investment Income – cost of
borrowing is low, but trade-off is return on
investments is low, or even non existent.

25. Fees- Brookline Example
FY Sign/Façade Subdivision/ANR Preservation ZBA Fees Plan Review TOTAL
2007 NA NA $ 4,812 $ 15,300 $ 45,315 $ 65,427
2008 NA NA $ 4,605 $ 10,125 $ 54,445 $ 69,175
2009 NA $ 1,200 $ 5,565 $ 15,095 $ 81,355 $ 103,215
2010 $ 19,695 $ 1,235 $ 4,268 $ 20,650 $ 28,232 $ 74,080
2011 $ 18,514 $ 2,235 $ 5,675 $ 27,600 $ 41,947 $ 95,971
2012 (to date) $ 7,175
$
600 $ 2,607 NA NA $ 10,382

26. Fees- Spencer Example

27. Local Aid- Spencer Example

28. Types of Revenue:
Special Assessments, DIF’s, Capital Planning
1) Special Assessments and DIF's
2) Capital Planning – reliance of Free Cash to
fund capital programs when turnbacks and fees are
low

31. Free Cash - Spencer Example

32. Looking at Fiscal Impacts of
Development
1) Lack of user fees in Massachusetts
2) Student population – changes in Ch. 70
3) Impact on municipal services, ability to
handle (sewer capacity, etc.)

33. Mullin’s Strengths
•Removes emotion from discussion- that
project won’t bankrupt the schools or public
safety
•Also can dispel notion that all growth is good,
esp. under property tax caps where growth
allows an exception

34. Mullin’s Weaknesses
•Need to know what you are doing
•Need to have credibility
•Useful on larger projects where margin is less
ambiguous – not for a single-family home
•Need for political, social and environmental
factors that can’t be easily quantified
•Also- though he doesn’t mention it – the
inherent need to point out uncertainty.

35. Mullin’s Methods
•Average Costing Methods vs. Marginal
Costing Methods
•Average costing methods- per capita; service
standard; proportional valuation (for
nonresidential)
•Marginal Costing Methods- Case study;
comparable city (good when no precedent);
Employee anticipation technique

36. Local Costs
•Schools, schools, schools – Both marginal
costs of new students and fixed costs of new
students. Books and paper are marginal;
buildings are fixed; teachers are somewhere in
between. Can use an average cost per student
as a combination
•Public safety costs- how many fire and police
calls will take place? Will ne building type need
new equipment?
•Fixed costs can be financed

37. Local Benefits
• Property tax revenue
• Excise tax revenue
• Sales tax revenue
• Consumer power
• Value of human capital
• Usually just the tax revenues…

38. Exacations
• Pay to play
• If your project is going to cost my city money,
I want you to pay for it
• Some see as an end-run around taxes, but
its as much an attempt to assign costs directly
to those requiring that the city incur those
costs.
• Also sometimes used as a growth
management tool.

39. Brief History
• As old as Euclid vs. Ambler Realty Co.
• Only began being used for costs external to a
project (roads, schools, parks) in the 1950’s
• Picked up steam in reductions in federal aid
and as taxes became less of an option
• Linkage fees (such as inclusionary housing)
are the newest trend in exactions

40. Types of Exactions
1. Dedications (donate for public uses)
2. “Tap fees” (to hook up to utilities)
3. Fee-in-lieu (if you need a park but can’t
provide it)
4. Linkage fees (such as inclusionary)
5. Impact fees (pay for an appropriate fraction
of a need)

41. Federal Basis for Exactions
• Nollan and Dolan
• Nollan- 1987 case Nollan vs. California
Coastal Commission ruled that some
excations could be takings if no “reasonable
relationship”
•Dolan- 1994 case Dolan vs. City of Tigard
ruled that there needed to be a “rational
nexus” between what was exacted and the
project, and the amount given had to be in
“rough proportionality” to the impact

42. In other words…
•Don’t just shake them down, have a plan for
exactions
•Study what your costs really will be and ask
for a proportional cost with a nexus to the
impacts.
•Thus the need for good fiscal impact studies.

43. Public-Private Partnerships
1) Infrastructure (Assembly Square MBTA
station, Gateway East/Village Square
circulation)

44. SUCCESSFUL PUBLIC-PRIVATE
PARTNERSHIPS
• An oft-abused term that can often be a
euphemism for public subsidies of private
development
•Key is negotiating a good deal, with good
meaning more than just good to the bottom
line
•Good may mean accomplishing public
purposes, having positive externalities, or
contributing to quality of life.

45. Six Tips for PPP’s
1. POLITICAL LEADERSHIP
2. ACTIVE PUBLIC SECTOR INVOLVEMENT
3. A ROBUST PLAN
4. DEDICATED INCOME
5. GOOD PUBLIC PROCESS
6. A GOOD PARTNER

46. Examples
CASE STUDY- WIFI IN BROOKLINE
Town offered lease for public poles for
Town-wide wireless. Company sets it up
for free, offers public safety and parking
meter access. Subscribers pay for monthly
subscription except in certain free spots.
Only works if demographics are right.
Town becomes dependent of private
infrastructure.

47. Federal Grants Over Time
2007
Enacted
2008
Enacted
2009
Enacted
2010
Enacted
2011
Enacted
2012
Enacted
Entitlement $2,592,790 $2,510,501 $2,544,477 $ 2,758,902 $2,307,224 $2,058,763
Non-
Entitlement
$1,111,196 $1,075,929 $1,090,490 $ 1,182,386 $988,810 $882,327
Insular $6,930 $7,000 $7,000 $6,930 $6,916 $7,000
Total CDBG $3,771,900 $3,865,800 $3,899,999 $4,450,000 $3,302,950 $2,948,090
(in thousands of $$$)

48. Examples
Fisher Hill Reservoir – Brookline
Town offered surplus Town reservoir site as a
site for mixed-income housing at a set price
(below market) with Town subsidies for
affordable units
Sale price paid for design and development of
park on adjacent property
Who held the risk? Who gained?

49. Intergovernmental Transfers,
Redistributive Policies
1) Reliance on grants to fund operating
costs (Spencer examples – library, police, fire,
COA, etc.)
2) Community Development Block Grant
funds

50. Tax Exempt Institutions
1) The big scary monster in the room
2) Solutions- depend on how much leverage
you have
• Land leasebacks
• Binding agreements
• PILOT’s
• Strategic planning and zoning

51. Capital Improvement Programs
•What is a Capital Project? Long lived
infrastructure, durable goods like vehicles,
housing developments, land acquisition.
•Can be anything over a certain cost, or
anything designed to last for more than 1 year.
•Can a study be a Capital Project? Yes, if
expensive enough, in some municipalities

52. How do you Determine One?
•What are your Capital Needs?
•How much money do you have to pay for
them?
•How do you put them together?
•Generally they are fiscally constrained
documents for a 5 year period. Year 1 is “real”
and the other years are enlightened guesses.

53. Who Runs the CIP Process?
•Usually Public Works and Finance
departments.
•In Massachusetts the Planning Board is
technically responsible for the CIP, but in
practice it is usually delegated to a City
Manager’s office

54. How Common Are They?
More common in a City Manager form than
strong Mayor. Any idea why that might be?
When they do exist, often loose connection to
land use planning.
When they do exist they may not always be
fiscally constrained.

55. Recommendations for Planners in
CIP process (Elmer)
1. Establish policies linking CIP to land use
plan
2. Develop support for land use plans through
capital investments
3. Influence others’ capital facilities
(externally)
4. Use conservation and other strategies for
environmental benefit
5. Increase public participation in process

56. Public Finance for Planners
Massachusetts Association of Planning Directors
2012 Annual Meeting
Springfield, MA
Presenters:
Jeff Levine, AICP
Director of Planning & Community Development, Town of Brookline, MA
Adam Gaudette, AICP
Town Administrator, Town of Spencer, MA