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 results
1. CEDBR Fiscal Benefit-Cost
Model 2010 - 2011
Kasey Jolly, Senior Research Economist
Center for Economic Development and Business Research
Wichita State University
2. 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
3. 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Old model outdated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
4. Two Versions of the Model
DESKTOP MODEL FULL MODEL
Given to regional partners CEDBR - $600 fee to run the
Returns output for City and model
County Returns output for
User Friendly City, County, State and School
District
Created to be flexible;
therefore, more complex
than Desktop model
5. Data Provided by CEDBR: Community Data
Tax rates LOB (local option budget) mill levy
rate
Mill levy rates
LOB percentage of general budget
Budget information
Capital outlay mill levy rate
Number of residents
Number of students
Number of employed residents
General Fund Budget
Avg. market value of new
residential property
Avg. wage all jobs
6. 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
7. 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
8. 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
9. 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
10. 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
11. Print Out Sheet
Project summary
Incentive summary
Tax abatement parameters
Construction impact
Substitution
Firm multipliers
Economic impact of firm operations
12. Fiscal Impact – Presented Using 3 Measures
Return on investment
Benefit Cost Ratio
Net Present Value
BENEFITS COSTS
Property Taxes Incentives
Retail Sales Taxes Cost of providing
Transient Guest Taxes city/county services
Other Fees & Taxes
13. 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