Prepared by:

Project Team:
Project Leader, Roger K. Dahlstrom 148 North Third Street
Project Member, Theresa J. Wittenauer DeKalb, IL 60115
Phone: 815. 753.1907
Fax: 815.753.2305
www.cgsniu.org

Introduction

This report summarizes the projected fiscal impact of approved and future residential, commercial, office/research, and industrial development (Development) on four local public service providers. The service units addressed in this report are the City of Sycamore (City) and three other public service units: Sycamore Community Unit School District #427 (District #427), the Sycamore Park District (Park District), and the Sycamore Public Library (Library); collectively referred to as the Service Units. For each unit, public revenues that would be generated as a result of the Development and costs associated with providing public services are projected for a 10 year period.

As used in this report, the term Development is intended to include all significant land development projects active in the City and future land developments within the City's planning area. It is assumed that the great majority of active development projects are subject to an existing annexation agreement. A table prepared by City staff illustrating selected components of Development is included in the Technical Appendix.

All dollar figures presented in this report are expressed in constant 2005 terms. No assumptions have been made regarding appreciation in property values, inflation rates, revisions to tax rates, or changes in fee structures through the projection period. As a result, the potentially distorting influence of non-linear changes and conjecture with respect to these factors can be avoided, and dollar figures can be evaluated in consistent terms.

The analysis has incorporated several assumptions based on the City of Sycamore Comprehensive Plan (Plan) and the phasing of the Development in addition to other information provided by the City and the other Service Units. These assumptions include, but are not limited to, development components, absorption rates, land and building values, property tax rates, public revenue from miscellaneous sources, and the cost of providing public services. While the findings are based on assumptions that are deemed to be fair and reasonable, some assumptions may not hold true in the future. As a result, it is important to understand the limitations of the findings and, specifically, the relationship between assumptions and findings.

Whenever possible, the data utilized in this report are drawn from generally accepted sources presumed to be the most reliable that are available; and findings are based on the data. However, it is possible that the development components or schedule may be altered. Should that occur, modifications to the analysis would be necessary in order to obtain a reasonable estimate of the revenue and expenditure implications associated with the revised development components or schedule.

Because of the scale of the Development and the variations in impact that may result from active versus future development, this report has been prepared in three distinct sections with the last two focusing separately on active and combined (active and future) development. Although Section 1 is a general background explaining concepts relevant throughout the report, the components of development included in the last two sections have been analyzed independently. As a result, each of the last two sections, in conjunction with Section 1, may be considered a "stand-alone" element of the entire report.


Section 1
General Background


Demographic Profile

The population and student projections for the Development are provided on Table 2 in each section. The factors used for estimating the population per dwelling unit are from the Illinois School Consulting Service/Associated Municipal Consultants, Inc. (1996).

Real Estate Taxes

In order to provide an accurate projection of the real estate tax revenues likely to be generated by land development, it is necessary to make assumptions regarding the value of the Development and apply factors relevant to the local property tax structure. In Illinois, there is basically a four step process involved in the computation of real estate taxes as follows:

1. Determining fair market value (FMV).

2. Applying the local assessment factor.

3. Applying the state equalization factor to obtain the equalized assessed value (EAV).

4. Applying the real estate tax rate to the EAV.

This process is reflected in the figures included in Tables 2 and 3 in each section.

Due to the procedures for collection and distribution of real estate taxes in Illinois, there is a delay between the time of assessment and the receipt of revenue by local taxing districts. The figures included in this report are based on a one year delay.

Determining Fair Market Value

To determine the fair market value (FMV) of development, assumptions must be made regarding the value of land and improvements. For the most part, the estimate of FMV for residential development is based on anticipated average sale prices of homes. It should be noted that the Development includes a wide variety of housing types and sale prices.

Essentially, land valuation goes through four general stages in growth areas. In the first stage, land is valued for agricultural purposes. Land values for purely agricultural use vary based on productivity and access to markets. However, as infrastructure improvements and physical development approach, land values increase as a function of speculation regarding future development. That is the second stage of valuation. The third stage reflects the value of land annexed and zoned for development but lacking subdivision and public improvements. In the fourth and final stage of valuation, land is a component of the built environment with values reflecting the general market conditions for the area and type of development.

As land is annexed, the City realizes an increase in valuation associated with the addition of land to its corporate limits even though actual development can occur over an extended period of time. This report assumes that the annexation of active development parcels has taken place in a single action including all of the subject properties. As a result, the City experienced a one-time increase in EAV for the land generally reflecting the second stage of valuation. Consequently, Section 2 of this report includes an estimate of the real estate tax revenue generated from the undeveloped portions of the Development as well as the developed portions.

Assessment Factors

The assessed value of a property is the basis upon which its tax liability is computed. In DeKalb County, developed residential and non-residential property is assessed at 33.3 percent of its FMV. Owner-occupied residential property receives a homeowner's exemption of $3,500.

Because each county assessor in Illinois has a different technique for determining the assessed value of property, the actual ratio of assessed value to fair market value (FMV) may differ from county to county. By state law, overall county assessments for real estate are supposed to be set at a level of one-third (33.3 percent) of FMV regardless of use. In a given county, however, overall assessments for one year might be set at a true level of approximately 30 percent; while in a neighboring county, the assessment level might approach 33.3 percent because properties were recently reassessed or more accurately assessed.

To ensure that assessment levels throughout the state are approximately equal, the Illinois Department of Revenue (DOR) establishes an annual equalization factor. For the most recent year in which confirmed property tax data are available, the DeKalb County equalization factor was 1.0.

Considering "Tax Caps"

The Illinois legislature passed the Property Tax Extension Limitation Law (PTELL) in 1991. It is commonly called "tax caps". Under PTELL, corporate authorities have the ability to allow voters to determine if property tax extension increases should be limited. By a majority vote, the corporate authorities can require a referendum on PTELL.*1

Tax caps were imposed in the Chicago metropolitan area "collar counties". As a result, tax caps have been in effect for most local governmental bodies located in five of the six Chicago metropolitan area counties since 1992. Basically, the law limits the annual increase in property tax extensions to 5% or the percent increase in the national Consumer Price Index (CPI), whichever is less.

Exceptions are provided for annexation and "new property" as defined in the tax cap legislation. Since the limiting tax rate for determining the maximum tax extension is calculated using the assessed value of property in the taxing district in the previous year, annexation has no effect on the limiting rate for the current year. However, by definition, new property includes only new improvements or additions to existing improvements that increase the assessed value of that property during the levy year. As a result, the imposition of tax caps has the effect of negating increases in the real estate valuation of land for many taxing bodies that do not annex land.

As a "home rule" unit of local government, the City of Sycamore is not subject to tax caps; and because the Library is not a separate district, it also is not subject to tax caps. However, it is likely that real estate tax revenues for the school and park districts will be affected due to the assessed valuation trends of each of these taxing bodies. Both districts have experienced recent increases in assessed valuation that exceed the tax cap limitation factors. Because the districts do not annex land and the tax cap law does not consider increases in land valuation to be new property, it is likely that the benefit of new development to the districts will be limited to the increased value of improvements on the land. Consequently, this report reflects revenue increases from property taxes for the districts adjusted for that limitation.

Present Value

Because both revenues and expenditures would be realized over an extended period of time, it is necessary to adjust a fiscal impact analysis for the time value of money. Specifically, it is necessary to evaluate the 10 year revenue/expenditure balance of the Development with a net present value analysis. Net present value analysis provides a balanced comparison between a future stream of revenues and expenditures over time.

In order to produce a net present value calculation, it is necessary to assign a "discount rate" to money. A discount rate is simply an interest rate which represents the value of money to the taxing district. The value is sometimes referred to as an "opportunity cost" because it represents the rate of return the taxing district could reasonably expect from an alternative investment. This report has assigned a discount rate based on the probable, average, long-term return on investments. For municipal corporations and service districts, discount rates are generally in the 5.00% to 5.25% range. A 5.00% discount rate has been chosen for this report.

Fiscal Impact on the Municipality

The City of Sycamore will receive revenues from the Development as well as incur operating and capital improvement costs for providing public services to the Development. In this fiscal impact analysis, the following categories of municipal revenues and expenditures have been projected:

Revenues                                     Expenditures

Real Estate Tax                              General Fund
State Income Tax Rebates              Special Funds
Use Tax Rebates                            Debt Service
Motor Fuel Tax Rebates                 Capital Fund
Telecommunications Tax                 Pension Funds
Development Exactions 
Annexation Fees
Plan Review & Building Permit Fees 
Household-based Retail Sales Tax
Commercial (retail) Sales Tax
Reimbursements and Refunds
Refuse Collection Fees
Fire and Ambulance Service Fees
Miscellaneous Fines
Franchise Fees

Municipal Revenues

As referenced above, other forms of revenue will be generated for the City by the Development in addition to real estate taxes. Sales tax represents one of those sources of revenue. Essentially, sales tax revenue can be projected based upon commercial development or household expenditures, or some combination of the two factors. In general, sales tax revenue projections from commercial development tend to be more predictable and reliable than projections based on household expenditures. In large part, that is due to the nature of the sales tax distribution system in Illinois which is based on "point of sale". The distribution system generally results in a robust relationship between new retail commercial land uses and additional sales tax revenue.

Conversely, the introduction of new households may, or may not, generate additional sales tax revenue. Household expenditure patterns can be influenced by many factors including, but not limited to; nature of shopping opportunities in the subject community, nature of shopping opportunities in nearby communities, real and perceived distance to shopping opportunities, and variations in household income. As a result, the assignment of household retail sales tax revenue to new households should be undertaken in a conservative manner.

Active development does not include a commercial component, and a review of the City's retail sales tax data from 1990 to 2004 indicates increases in retail sales tax generally following population increases. The apparent general relationship between the two factors, combined with the restricted nature of proximate competition from other communities (primarily limited to the City of DeKalb) creates a situation in which it is appropriate to assign some level of retail sales tax revenue to the introduction of new households in the absence of commercial development.

A number of studies and surveys provide figures regarding the allocation of household expenditures by "convenience" and "shopping" goods categories, and to local and non-local merchants.*2 Essentially, convenience goods include items purchased on a frequent basis such as groceries while shopping goods include items purchased less frequently or only on occasion such as apparel and appliances. The factors used to generate figures for net household-based retail sales tax revenues are summarized in the Technical Appendix.

Combined (active and future) Development will include residential, commercial, office/research, and industrial components. Commercial development is anticipated to take a classic "suburban" form as community shopping centers. The commercial sales tax revenue figures in this report are based on the aggregate projected sales volume for a typical mix of businesses in a commercial development of the size and nature of the various commercial components of the Development.*3 Retail commercial gross leasable area (GLA) is assigned a sales volume which is then adjusted to reflect some estimated redistribution of sales from existing commercial retail areas. That procedure produces a net increase projection. For this report, redistribution has been set at 15%. Combined development includes a significant commercial component, and the addition of that component accounts for the total, projected sales tax volume increase with no assignment to new households.

In general, other sources of revenue may be classified as per capita or per dwelling unit and include, but are not limited to; state income tax, motor fuel tax, annexation fees, and development exactions. The estimated revenue from current per capita and per dwelling unit sources is illustrated in Table 4 in each section of the report.

It should be noted that the extent to which new residents will actually be a factor in some per capita revenue calculations will depend upon the timing of census efforts. The figures for per capita revenue are based on the assumption that a special census will be conducted in year one of the projection period. Increased revenues from the special census are reflected in the following year. In addition, assuming that 2005 represents the first year of active development, the next decennial census will be conducted in year six producing an increase in per capita revenue in year eight of the projection period.


Average and Marginal Cost Techniques

Fiscal impact methodologies can be classified generally as average cost or marginal cost techniques. The basic difference between these techniques can be summarized by noting that average cost techniques will be based on linear relationships meaning that as the value of one variable changes the value of other dependent variables will change a like amount. Conversely, marginal cost techniques are based on non-linear relationships that may be supported by derived factors or data regarding individual situations.*4 The average cost technique is more commonly employed because it is easier to understand and is more relevant in high growth environments that require an on-going, long-term response to development.

For the most part, this report relies on the average cost technique but employs the marginal cost technique for those factors deemed appropriate for that approach. Given the magnitude of the Development, some elements of municipal services and facilities could be extended beyond their current thresholds of capacity resulting in increased marginal costs. Conversely, some elements of municipal services and facilities will have available capacity to meet increased service demands at a stable marginal cost. For example, the Development would not require additional costs for the City Council, the City Manager, or the City Clerk. In summary, if the marginal cost technique is to be applied to any element of the analysis, access to the technique should be open to all elements of the analysis for which it is appropriate.

Municipal Expenditures (Costs)

In addition to generating revenues, the Development will impose service costs on the City of Sycamore. A common approach used to determine residential service costs reflects a blend of two analytical techniques (per acre and per capita). First, current municipal expenditures are summarized. These expenditures are required to serve the residential, commercial, office/research/industrial, and community facility development in the community. To adjust for distribution among these four primary forms of development, expenditures are allocated to each based on the percentage of developed land area represented by the different land use classifications.*5 The community facility element of per acre costs is distributed among and assigned to the other three primary land use types based on the estimated extent to which each type places service demands on the community. For this analysis, 90.0% of community facility acreage has been assigned to residential development with 5.0% assigned to both commercial and industrial development.

Following the assignment of community facility acreage, the adjusted acreage factors form a first level basis for the distribution of expenditures among residential, commercial, and industrial land uses. A second level of refinement is applied to the distribution of expenditures between commercial and industrial development while the residential component is further broken down by population to derive a per capita cost factor.*6 In the final analysis, the cost to serve non-residential development is expressed on a per acre basis, and the cost to serve residential development is expressed on a per capita basis. The projected per acre and per capita expenditures for the City of Sycamore are illustrated in Table 5 in each section of the report.

After adjusting for inter-fund transfers, and excluding proprietary funds and other funds which will be self-sustaining with respect to the Development,*7 the City budget for the general fund and various other funds was nearly $17,000,000 for fiscal year 2004/2005. Of that amount, approximately $13,000,000 is assigned to residential development through the procedures outlined above. The 2000 population of the City was 12,020. A current estimate of 14,354 can be derived by applying demographic factors to building permits issued since 2000. That figure closely approximates a population estimate of 14,502 provided by City staff. Using the staff generated population figure, the average, prevailing per capita expenditure for residential development in Sycamore is estimated at $895. Projected expenditures are summarized in Table 5 in each section of the report.


Fiscal Impact on Sycamore School District #427

District #427 will receive revenues from the Development as well as incur operating and capital improvement costs for providing public education to students residing in the Development. However, the nature of revenues for District #427 is less complex than that of the municipality. The State of Illinois distributes general state aid (GSA) to public school districts based on a somewhat complex formula, but the great majority of school district revenue is derived from the property tax.

Operating revenues from real estate taxes are estimated by applying an operational real estate tax rate. The operational tax rate is derived by subtracting the bond debt from the total tax rate. General state aid is based on an extension of recent experience.

Operational costs are derived from data included in the Annual Financial Report for the District and a Development Notebook FY 05 prepared by District staff. Essentially, operational cost estimates are obtained by subtracting interest on bonds from total operating costs and dividing that amount by current enrollment. The actual figures used for estimating operational costs are presented in the Technical Appendix.

The Technical Appendix also includes a basic explanation of the procedures used to estimate capital improvement costs to accommodate students from the Development. The estimate of capital expenditures includes site preparation, architectural and engineering services, and building construction. The figures have been derived from techniques applied to the calculation development impact fees. The methodology is based on an analysis of demand, cost, and revenue factors; and is consistent with the State of Illinois standard for evaluation of development impact fee programs: the specifically and uniquely attributable standard. That form of analysis produces a "net impact" figure which is sensitive to the long term value of real estate for tax purposes as well as to the demands and costs imposed upon the school district. As a result, for a given level of demand, the measured fiscal impact on capital costs is reduced for residential properties with higher valuations.

It should be noted that school district capital cost impacts may vary from estimates provided by an individual district. There can be several reasons for the variations including the following:

o School district capital costs for this report have been generated through classic, conservative development impact fee methodology. That methodology is based on cost factors for major capital improvements and does not consider capital outlay costs for equipment and furnishings.

o Capital improvement impact figures cited in this report are based on an aggregate calculation considering the relative impact of all dwelling units in the Development. While some dwelling units may exert a considerable negative impact on District #427, others may provide a net positive impact considering their estimated values and probable demographic profiles. The planned "active adult" dwelling units fall into the latter category.

o In this particular instance, school capital costs do not include the cost of acquiring sites. Currently, District #427 has two sites available for elementary schools and no specific plans to obtain land for the middle school and high school.

Due to the number of variables considered in the calculations, including time sensitivity, a determination of capital cost based on development impact fee methodology is valid for a limited period of time. As a result, development impact fee programs are commonly updated on a three to five year basis.


Fiscal Impact on the Sycamore Park District

The Park District will receive revenues from the Development as well as incur operating and capital improvement costs for providing active and passive open space, and recreational programs for the population resulting from the Development. The Park District charges user fees for selected facilities and programs offered to the public although a significant portion of Park District revenue is derived from the property tax.

Operating revenues from real estate taxes are estimated by applying an operational real estate tax rate. The operational tax rate is derived by subtracting the bond debt portion of the tax rate from the total tax rate. Operational costs are derived from data included in the Park District Budget. Essentially, operational cost estimates are obtained by subtracting enterprise funds and interest on bonds from total operating costs and dividing that amount by current population. The actual figures used for estimating operational costs are presented in the Technical Appendix.

The techniques utilized for estimating capital cost impacts for the Park District are similar in concept and design to those used for School District #427. However, the estimate of capital expenditures is based on projected costs for site development of active and passive park facilities.


Fiscal Impact on the Sycamore Library

The Library will receive revenues from the Development as well as incur operating and capital improvement costs for providing services, resources, and facilities for the population resulting from the Development. The Library charges user fees for some services and facility rental, but the great majority of Library revenue is derived from the property tax.

Operating revenues from real estate taxes are estimated by applying an operational real estate tax rate. The operational tax rate is derived by subtracting the bond debt portion of the tax rate from the total tax rate. Operational costs are derived from data included in the Library budget. The actual figures used for estimating operational costs are presented in the Technical Appendix.

The techniques utilized for estimating capital cost impacts for the Library are similar in concept and design to those used for School District #427. However, the estimate of capital expenditures is based on projected costs for the provision of library facilities.


Absolute and Relative Impact

Ultimately, all development can be viewed within the context of the larger community - a place to live, shop, work, and recreate. While the examination of pure, absolute fiscal impact is instructive in that it provides valuable data for overall community planning, it may not reflect the relative value of a proposed development as a component of the community.*8 As a result, absolute fiscal impact should not be used as the only, or even the primary, measurement of the relative desirability of land development.

For example, 2000 census data indicate that the average (median) home value in Sycamore was $143,483. Applying the consumer price index (CPI) inflation factor to that figure produces an estimated current average home value of $160,692 That figure is less than half of the estimated average (mean) value of $331,429 for new homes in active development in the City. It is generally acknowledged that most residential development does not pay-its-way with respect to public service costs.*9 However, given the referenced home values, it's conceivable that new housing is contributing more than existing housing to fund public services on a relative basis.




Section 2
Active Development
Table Series 1


Municipal Impact Summary

Table 6 (Fiscal Impact) summarizes both the revenues and expenditures the City of Sycamore might expect as a result of active development over the coming 10 year period of time. Real estate tax revenues are realized in year two and thereafter. Increases in state-distributed per capita revenue are projected for year two and again in year eight.

Based on the assumptions and factors applied in support of this report, total expenditures would exceed total revenues for the City. The revenue/cost balance is negative at ($12,016,638). The net present value is negative at ($8,745,813). Those figures illustrate the absolute fiscal impact on the City of Sycamore over the 10 year projection period. Figure 1.1 portrays the projected fiscal balance of the Development in graphic form.


School District Fiscal Impact Summary

Table 6 (Fiscal Impact) summarizes both the revenues and expenditures District #427 might expect from active development over the coming 10 year period of time. Figure 1.1 portrays the projected fiscal balance of the Development in graphic form.

Based on the assumptions and factors applied in support of this report, total expenditures would exceed total revenues for the District. The net present value of the revenue/cost balance is negative at ($18,906,712) over the 10 year projection period.


Park District Fiscal Impact Summary

Table 6 (Fiscal Impact) summarizes both the revenues and expenditures the Park District might expect from active development over the coming 10 year period of time. Figure 1.2 portrays the projected fiscal balance of the Development in graphic form.

Based on the assumptions and factors applied in support of this report, total revenues would exceed total expenditures for the District. The net present value of the revenue/cost balance is positive at $195,071 over the 10 year projection period.


Library Fiscal Impact Summary

Table 6 (Fiscal Impact) summarizes both the revenues and expenditures the Library might expect from active development over the coming 10 year period of time. Figure 1.3 portrays the projected fiscal balance of the Development in graphic form.

Based on the assumptions and factors applied in support of this report, total revenues would exceed total expenditures for the Library. The net present value of the revenue/cost balance is positive at $575,349 over the 10 year projection period.


Service Units Summary

Given that the active development scenario is comprised entirely of residential development, it is not surprising that the City and District #427 experience a negative fiscal impact over the projection period. To a varying extent, both of these service providers experience significant per capita costs and rely on property tax revenues to support their expenditures. As a result, these Service Units are dependent, to some extent, on a balanced land use plan incorporating an appropriate level of non-residential uses.

The positive fiscal impact balance for the Park District is primarily a function of a revenue structure that emphasizes user fees and major functions operated principally on an enterprise basis. Alternatively, the positive fiscal impact balance for the Library is influenced by a relatively low level of per capita operating cost.


Table Series 1

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Table Series 1

Figure 1.1

Figure 1.2

Figure 1.3



Section 3
Combined Development
Table Series 2


As referenced above, combined development includes active development and future development. Because it is unrealistic to view active development in isolation, future development has been added to active development to create an overall 10 year development scenario. It is assumed that current market demand and City policies regarding residential absorption will continue through the projection period. As a result, the mix of dwelling unit types and values for future residential development closely approximates that of active development while absorption is "capped" at 250 dwelling units per year in years five through 10. The combined projection results in 794 more dwelling units over the entire 10 year period bringing the total from 2,661 to 3,455.

The commercial component of future development is anticipated in years three, six, and nine; and represents about 5% of combined gross development acreage. Office/research and industrial development is expected to build-out at a uniform rate over the projection period representing 6% and 9.5% of combined gross development acreage, respectively.

This section of the Study utilizes the Fiscal Impact Land Use Model (FILUM) to create a linkage between land use planning and fiscal impact analysis.*10 A brief summary of the FILUM program is included in the Technical Appendix. The FILUM program represents a form of purely land use driven fiscal impact analysis. The land use input for the FILUM program is provided through a land capacity model based on land use designations in the local comprehensive plan and on local land development regulations. Although this form of analysis requires information regarding the community's development regulations and predominant development patterns in addition to the usual types of information required for a standard fiscal impact analysis, land use inputs are not limited to individual sites or specific development proposals; and output is representative of prevailing local conditions.

A portion of land capacity output is illustrated in the Technical Appendix and represents the projected, combined development of all land use categories in the first year of the projection period. It should be noted that selected elements of input for land capacity modeling are obtained from site capacity models. Examples of site capacity models are included in the Technical Appendix.





Municipal Impact Summary

Table 6 (Fiscal Impact) summarizes both the revenues and expenditures the City of Sycamore might expect as a result of combined development over a 10 year period of time. Real estate tax revenues are realized in year two and thereafter. Increases in state-distributed per capita revenue are projected for year two and again in year eight. It should be noted that the City's fiscal balance varies over the projection period while the balance for the other Service Units "trends" upward over time. The City's pattern is a function of a cumulative demand for service combined with an uneven flow of revenue particularly from one-time revenue sources. The uneven flow of revenue is a common phenomenon given the diverse nature of revenue sources available to municipalities.

Based on the assumptions and factors applied in support of this report, total revenues would exceed total expenditures for the City. The revenue/cost balance is positive at $3,819,380. The net present value is positive at $2,922,445. Those figures illustrate the absolute fiscal impact on the City of Sycamore over the 10 year projection period. Figure 2.1 portrays the projected fiscal balance of the Development in graphic form.


School District Fiscal Impact Summary

Table 6 (Fiscal Impact) summarizes both the revenues and expenditures District #427 might expect as a result of combined development over a 10 year period of time. Figure 2.1 portrays the projected fiscal balance of the Development in graphic form. The Section 3 analysis of impacts on District #427 includes a factor absent from the Section 2 analysis. Specifically, Section 3 includes a $1,000 per dwelling unit capital improvement exaction factor for future residential development.

Based on the assumptions and factors applied in support of this report, total expenditures would exceed total revenues for District #427. The net present value of the revenue/cost balance is negative at ($8,469,503) over the 10 year projection period.


Park District Fiscal Impact Summary

Table 6 (Fiscal Impact) summarizes both the revenues and expenditures the Park District might expect as a result of combined development over a 10 year period of time. Figure 2.2 portrays the projected fiscal balance of the Development in graphic form.

Based on the assumptions and factors applied in support of this report, total revenues would exceed total expenditures for the Park District. The net present value of the revenue/cost balance is positive at $1,293,057 over the 10 year projection period.


Library Fiscal Impact Summary

Table 6 (Fiscal Impact) summarizes both the revenues and expenditures the Library might expect as a result of combined development over a 10 year period of time. Figure 2.3 portrays the projected fiscal balance of the Development in graphic form.

Based on the assumptions and factors applied in support of this report, total revenues would exceed total expenditures for the Library. The net present value of the revenue/cost balance is positive at $1,780,215 over the 10 year projection period.


Service Units Summary

The introduction of non-residential land uses in the combined development scenario alters considerably the fiscal impact balance for all of the public Service Units. The City experiences a shift to a positive balance while the negative balance for District #427 is reduced substantially. As noted above, both of these Service Units are dependent, to some extent, on a balanced land use plan incorporating an appropriate level of non-residential uses. The positive fiscal impact balance for the Park District and the Library continues for much the same reasons as referenced in the active development summary.

Year-to-year variations in the fiscal impact balance for the City are primarily a result of the relative balance between ongoing revenues (such as property taxes) and one-time revenues (such as annexation fees). The overall negative fiscal impact balance for District #427 is due primarily to the intense capital improvement costs associated with student generation from a concentration of four bedroom single family detached dwelling units.

The generally improving trends in fiscal impact balance for District #427, the Park District, and the Library are influenced by land use development assumptions that shift toward a relatively greater amount of non-residential uses during the projection period. The early and heavy concentration of residential development should result in a commercial development response, and the generally healthy real estate environment in the Sycamore area should support a reasonable level of office/research and industrial development over time. The current and planned land use distributions cited in the Sycamore Comprehensive Plan combined with a continuation of a policy of controlling residential absorption rates tend to reinforce those assumptions.


Table Series 2

Table Series 1

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Table Series 2

Figure 2.1

Figure 2.2

Figure 2.3



Footnotes:

*1 "Tax Caps - A Look at the Arguments", Policy Profiles, Center for Governmental Studies, Northern Illinois University.

*2 Burchell, Robert W. and David Listokin, The Fiscal Impact Handbook, The Center for Urban Policy Research, 1978.

*3 Dollars & Cents of Shopping Centers, 2002, Urban Land Institute.

*4 Burchell, Robert W. and David Listokin, The Fiscal Impact Handbook, The Center for Urban Policy Research, 1978.

*5 Economic Analysis for Local Governments, National League of Cities, 1978. 

*6 Approaches to Fiscal Impact Analyses, Public Investment, American Planning Association (APA), September 2001.

*7 Economic Analysis for Local Governments, National League of Cities, 1978.

*8 A Critical Look at Fiscal Impact Analysis, Public Investment, American Planning Association (APA), December 1997.

*9 Economic Analysis for Local Governments, National League of Cities, 1978.

10. Dahlstrom, Roger K., Linking the Comprehensive Land Use Plan and Fiscal Impact Analysis, Mid-continent Regional Science Association, June 2000.


Technical Appendix

The generation of estimates for household-based retail sales tax is an acceptable methodology to the extent that observations and data demonstrate a probable relationship between the two variables. Generally, this relationship is more likely to be apparent in "stand-alone" communities where alternative, competing shopping options are inconvenient or non-existent. In those circumstances, assignment of retail sales tax revenue to new households is appropriate if the host community has sufficient retail commercial opportunities to meet the probable needs of new residents. The relationship of population to retail sales tax revenues in Sycamore is less predictable due to competition from the neighboring City of DeKalb. However, the relative location of the Active Development creates a situation in which an allocation of retail sales tax revenue to new households is appropriate to some extent.

Estimates of retail sales tax revenue for new households are based on numerous considerations such as the following:

Reasonable estimates of new resident household incomes can be generated from projected housing values in the proposed development. A common underwriting rule establishes a basic housing cost (mortgage, taxes, insurance) to net household income factor of 30%. With this factor in place, an estimate of household income can be derived by applying current mortgage terms, property tax rates, and insurance costs to projected housing prices.

Data regarding the distribution of retail sales for convenience and shopping goods are available for shopping facilities of various sizes. *1 Consumer surveys report that, on average, residents direct 75% of their expenditures for convenience goods to local vendors but only 25% of their expenditures for shopping goods to local vendors.*2 The proportion of household income spent on convenience and shopping goods is available by region and income classification from the Bureau of Labor Statistics. Factors for taxable and non-taxable percentage of goods must be applied to the estimated household expenditure data. Actual calculations for the Active Development are illustrated on the following page.

*1 Dollars and Cents of Shopping Centers, Urban Land Institute, 2002.

*2 The Fiscal Impact Handbook, Burchell and Listokin, 1978.

Click the links below to view (pdf):

Household Income Estimate Chart

Sycamore Population and Sales Tax Chart

Public Service Districts-Operating Cost per Student & per Capita

Although subject to constant refinement, the basic Applied Planning Techniques (APT) model was developed approximately 16 years ago in response to the state of Illinois standard for evaluation of development impact fee programs: the specifically and uniquely attributable standard. Essentially, the program is demand, cost, and revenue sensitive; with revenue sensitivity achievable to extremely high levels of detail.*1 The APT model requires a substantial amount of system-specific input data and can generate a substantial volume of unit-specific output data which is often presented in tabular form.

Analysis for school district capital improvement development impact can serve as an example of the demand, cost, revenue approach. Required minimum data include the following:

1. Total district enrollment for the past five years.

2. Square footage of school facilities for the past five years.

3. School district operational budget for the past five years.

4. School district capital budget for the past five years.

5. School district equalized assessed valuation for the past five years.

6. Real estate tax factors for the past five years.

7. Allocation of any real estate tax revenue to capital expenditures for the past five years.

8.  

9. General state aid revenue for the past five years.

10. Allocation of any general state aid to capital expenditures for the past five years.

11. Details regarding at least two capital facility projects completed by the district.

12. Details regarding all outstanding bond issues for capital facilities.

13. Details regarding any potential bond issues for capital facilities.

14. Details regarding all capital facility projects planned for the next five years.

15. Details regarding all capital facility projects planned for the next ten years.

The generation of school district capital improvement impact data for residential development is based on the specifics of dwelling unit type, number of bedrooms, and dwelling unit value. Demographic data regarding student generation by basic housing type and bedroom count provides a measure of demand on the school system. Commonly, student generation data are obtained through the application of demographic factors from generally accepted, objective sources for single family detached, single family attached, and multi-family dwelling units.*2

The APT model is designed to recognize many of the unique qualities of individual school districts. For example, data input for the model is generally based on the prevailing service standard in the subject school district rather than on a regional, state, or national standard. Usually, the cost of delivering that service standard to a new student population is estimated based on a proprietary data base of school facilities built in northern Illinois over the past 19 years. Construction cost figures from the subject school district are introduced into the data base and are doubled-weighted to reflect any unique circumstances that may affect that district. The intent is to produce locally sensitive yet broadly-based construction cost factors. Historic cost information is updated to current levels through the application of a building construction cost index.*3 The derived construction cost is compared to a national source from time to time as a monitoring measure.*4

Because development generates value and, therefore, revenue in addition to demand, credits are applied in the overall impact analysis. Failure to consider credits may result in double-charging new residents for required capital facilities. The consideration of credits focuses on the extent to which a school district can direct revenue from new development to capital facilities. Generally, this revenue credit is in the form of participation in the retirement of debt. There are a variety of ways to determine credits for school capital facilities. The APT model applies credits on a dollar value basis. Although complex, that form of credit calculation produces a high degree of sensitivity.*5 However, regardless of credit calculation methodology, the intent is to produce a "net impact" measurement.

Footnotes:

1. Dahlstrom, Roger K., "Development Impact Fees: A Review of Contemporary Techniques for Calculation, Data Collection, and Documentation", Northern Illinois University Law Review, Volume 15, Number 3, Summer 1995.

 

2. "Table of Estimated Ultimate Population per Dwelling Unit", Illinois School Consulting Service, Associated Municipal Consultants, 1996.

 

3. Building Construction Cost Index, Engineering News Record.

 

4. Construction Report, School Planning & Management.

 

5. Nicolas, James C., Arthur C. Nelson, and Julian C. Juergensmeyer, "A Practitioner’s Guide to Development Impact Fees, American Planning Association, 1991.

The analysis of the fiscal impacts associated with land development may be considered one of the most critical components of local or regional growth management. Communities that ignore such impacts over a prolonged period of time may be unpleasantly surprised in the future. The simple fact is that growth requires an allocation of resources to support expanded operational and capital improvement programs. The balance between anticipated revenues and costs can vary substantially among the three basic land use categories (residential, commercial, and industrial) and among individual development projects.

Unlike most fiscal impact methodologies, the Fiscal Impact Land Use Model (FILUM) is a land use driven fiscal impact analysis computer program. Land use input for the FILUM program is provided through a Land Capacity Model. As a result, land use inputs are not limited to individual sites or specific development proposals. Entire planning areas may be entered as land use input for analysis.

The FILUM program is custom designed for application in a particular community or service district and can address any portion of the probable service area. This form of analysis requires information regarding the community's development regulations and predominant development patterns in addition to the usual types of information required for a standard fiscal impact analysis.

Output from the FILUM program can provide some indication of the probable fiscal impacts of the planned expansion of a service area based on general land use designations. While it is necessary to define the study area, to determine raw acreage factors for designated land uses, and to assume absorption rates; a specific development proposal is not a required component of the data base.

Although other methodologies can be accommodated, the basic Fiscal Impact Land Use Model (FILUM) program utilizes the per capita multiplier methodology modified to incorporate a cost per developed acre function for non-residential development. Therefore, the program represents a deterministic, average cost technique of analysis. Use of the FILUM program requires detailed information regarding the operational and capital budgets of the subject community and/or service district(s), as well as detailed information regarding zoning requirements, subdivision regulations, and prevailing development patterns.

Click on the links below to view (pdf):

Fiscal Impact Land Use Model

Site Capacity Model-Commercial Use

Site Capacity Model-Office, Research and Light Industrial

Site Capacity Model-Industrial/Warehouse (Light Manufacturing)