Public Finance News

Tindale-Oliver & Associates, Inc. 1000 N. Ashley Drive Suite 100 Tampa, FL 33602-3059

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September 2012

Public Finance & Infrastructure Planning News Recent Trends in Transportation Impact Fees Many Florida communi es are reviewing their impact fee programs, and while some implement moratoriums or con nue the fees at some level, others are conver ng their programs into a tool that supports the community’s economic and planning goals and needs. The communi es that work on conver ng their programs emphasize one or more of the following approaches: 1.

TOA Recent Studies

methods to fund the City’s Fire Departments capital and opera ng expenditures. The study focused primarily on fire assessments, fire fees and ad valorem funding.

 Pasco County MulƟmodal TransportaƟon Impact Fee Study and Smart Growth ApplicaƟon: TOA converted the County’s  City of Parkland Impact Fee Study: TOA prepared library and roadway‐based transporta on impact fee to a mul modal government buildings impact fee studies for the City of transporta on impact fee. In addi on, the fees were Parkland, which were successfully adopted. differen ated by loca on and land use to give incen ves to those land uses and geographic areas that were targeted by the  City of Orlando MulƟmodal TransportaƟon Impact Fee Study County. The study and the County’s ini a ves received three and Smart Growth ApplicaƟon: TOA completed an impact fee awards from various planning organiza ons. study that converted the City’s current roadway‐based transporta on impact fee to mul modal transporta on impact  Osceola County TransportaƟon Funding Study and fee. In addi on, the study evaluated the City’s growth ImplementaƟon Plan: TOA evaluated several revenue sources management and economic development goals, growth rates, to be used for Osceola County’s future transporta on needs. available revenues to calculate poten al reduc ons that could Some of these revenue sources included mul modal be given to targeted land uses in certain geographic areas. The transporta on impact fee, sales tax, gas tax, ad valorem tax, staff recommenda ons were successfully adopted. special assessments, and others. Based on the study findings, the BOCC direc on included the development of a countywide tax increment financing (TIF) as part of the funding package. In  Orange County MulƟmodal TransportaƟon Impact Fee: TOA calculated a mul modal transporta on impact fee within the addi on, TOA was asked to iden fy por on of TIF from future Alterna ve Mobility Areas (AMA) of the County, which development versus exis ng base development. TOA designed surround the City of Orlando. In addi on, the roadway‐based a database tool that would automate this effort for County transporta on impact fee was updated. As part of the study, staff’s use.

TOA also evaluated the development review procedures used within the AMA and provided recommenda ons. The study is  City of Palm Bay Fire Funding Study: TOA was retained to currently going though the implementa on process. evaluate advantages and disadvantages of several funding

Tampa

Orlando

Bartow

Ft. Lauderdale

Bal more

www. ndaleoliver.com

2.

3.

4.

Flexibility: Several communi es are conver ng their roadway‐based transporta on impact fee to a mul modal transporta on impact fee to expand the type of infrastructure they can fund with revenues. It is important to note that mobility has different meanings for different jurisdic ons. For example, while most urban ci es build very few or no roads and instead are interested in inves ng in transit, bicycle, and pedestrian ameni es, most coun es and rural ci es s ll need to build roads and do not necessarily want other modes to compete for roadway dollars. Many coun es in Florida have some urban pockets, but they s ll need to connect ci es, ac vity centers, and regional public facili es. As such, there is a need to con nue to build roads. At mes, these communi es implement both a roadway and a mul modal impact fee for different geographic areas within the county. A recent example is Orange County (FL), where TOA calculated a mul modal impact fee for the Alterna ve Mobility Areas (AMA) of the county that surround the City of Orlando, which is also in the process of adop ng a mul modal transporta on impact fee. A roadway‐based transporta on impact fee was calculated for the area outside the AMA. Efficiency Recogni on: As discussed “Smart Growth Economics,” it is becoming important for local governments to recognize and encourage certain types of developments that are economically and otherwise beneficial for the community. Of TOA’s recent clients, Pasco County and the City of Orlando differen ated their fees by land use and by geographic area. Hernando County, the City of Sarasota, and the City of Oviedo are also considering this approach.

Economics: Another way jurisdic ons can encourage targeted development/ industries is by giving tax or other incen ves and simplifying the development review process for targeted developments. En es such as the City of Tampa, the City of Orlando, Orange County, and Pasco County all provide some level of these types of incen ves.

Alterna ve Revenues: Finally, most communi es recognize that given the decline in growth, impact fee revenues are not likely to be as significant as they were historically. As such, several en es, such as Osceola and Hernando coun es and the City of Sarasota, are reviewing other poten al revenue sources from a perspec ve of efficiency and effec veness.

These four tools help communi es achieve their economic and growth management goals and are being used by an increasing number of local governments.

www.tindaleoliver.com

City of Tampa AlternaƟve Concurrency Program

Pasco County Mobility Fee Vary Land Use Rate by Geographic Area

Inside Smart Growth Economics

2

TOA Recent Studies

4

Public Finance & Infrastructure Planning News is a newsletter of Tindale-Oliver & Associates, Inc.

September 2012

Smart Growth Economics By Steven A. Tindale, P.E., AICP, and A. Nilgün Kamp, AICP As Florida jurisdictions continue to face decreasing revenues and tough decisions on which programs to fund, it is becoming more important than ever to maximize revenues and minimize costs. The lower growth rate over the past few years, along with adverse economic conditions, results in a reduction of tax revenues for local governments. Local governments could respond to this issue from two directions and set the following two goals: 

reduction of costs per unit of development by reducing demand per unit of development enhancement of revenues by identifying more productive revenue sources (such as higher revenues per unit of development).



Smart Growth planning is one of the tools available to local governments to achieve these two goals. An article titled “Travel and Built Environment” by Reid Ewing and Robert Cervero defines successful urban design in terms the following characteristics: 5D’s     

Des na on Accessibility Design Diversity Distance to Transit Density

ECONOMICS

The higher density, along with the other design characteristics, helps maximize the use of available capacity. In addition, the presence of larger tax bases in urbanized areas is more likely to generate necessary revenues to pay for these services.

Recent work conducted by TOA suggested that increasing allowable density from 2 units to 4 units per acre within a 6‐ square mile area generated the necessary density to support 1 fire station, 2 elementary schools, ½ a middle school, and ½ a high school. When the density increases to 8 units per acre, the community is able to support 2 fire stations, 4 elementary schools, 1 middle school, and 1 high school along with parks provided as part of the elementary schools.

It is possible to see the evidence of this efficiency in terms of the service volume. For example, while a fire station in an urbanized area can handle 3,500 or more calls per year, a station in a rural area may receive as few as 100 calls annually. However, to be able to provide the desired response time, a station needs to be Enhanced Revenues physically located in the rural area just like the one in urbanized area. Given that the cost to build a station Reduce Costs and ranges from $3 to $4 million and about another $2.5 Environmental Impacts to $3 million per year to operate, it is important to have the necessary tax base to support this service.

The presence of these characteristics in a community results in attracting types of developments that increase efficiency in the use of available infrastructure, which reduces cost and generates higher tax revenues per acre. The following paragraphs describe the land use decisions that will help reduce the cost of providing government services and discuss long‐term effective revenues sources and the variables that control these revenue sources.

Reduction of Costs Typically, reducing cost is associated with cutting government services. However, it is possible to minimize reduction of services by increasing efficiency through a reduction of cost per unit of development if the necessary densities are available and the services are centralized.

General government services such as public safety, education/ schools, parks and recreation, transportation, etc., are much more efficient and inexpensive in terms of cost per resident in urbanized areas. This efficiency is maximized with the

www.tindaleoliver.com

appropriate design characteristics as described previously in terms of the necessary destination accessibility, design, diversity, distance to transit, and density (the “5 Ds”).

As such, it makes sense for local governments to encourage higher density and more urban development in order to reduce infrastructure capital and operating cost per person.

This could mean encouraging both new growth and redevelopment within the urbanized area. According to information provided by the Urban Land Institute, older adults and households without children are projected to become more dominant nationwide over the next 15 years. People in these age groups tend to prefer an urban lifestyle, while families with young children tend to be attracted to a suburban lifestyle. These new markets provide an opportunity for local governments to further encourage urban development that incorporates the “5 Ds” described previously.

Effective Revenue Sources In a depressed economy, it is very difficult to obtain public support for new taxes. However, local governments still have a few tools to maximize their revenues, including encouraging types of developments that generate larger amounts of taxes

Page 2

per unit of development and choosing revenue sources that are more efficient.

A comparison of tax revenues generated by single‐use and mixed‐use properties clearly indicates that mixed‐use properties generate a higher level of taxes per acre. As shown on the accompanying map, the City of Orlando’s activity centers (A1 through A3) and mixed‐use corridors (C1 through C3) include approximately 3 percent of the total acreage in the city but generate 45 percent of the tax revenues. This suggests that financial and other incentives provided to mixed‐use developments tend to be recouped in terms of additional tax revenues, which, in turn, can fund additional government services. As such, supporting these types of developments financially benefits the entire community.

Although it is difficult to gain support for new/additional taxes, local governments have a certain level of flexibility in choosing a revenue source. Given this, it is important to evaluate the efficiency of at least three primary taxes used to fund infrastructure and operating costs to provide government services: fuel taxes, property taxes, and sales taxes.

An evaluation of these revenue sources over time and across communities indicates the following: 





Fuel taxes are not a productive revenue source. They have been decreasing on a per capita basis over time due to higher fuel efficiency of newer vehicles. In addition, they tend to decrease as a community becomes more urbanized.

Property taxes tend to be the primary revenue source for the general fund and are based on the taxable value of the property and millage rate each jurisdiction imposes. A correlation analysis between taxable values and several demographic variables suggests that there is a positive relationship between income and wealth and taxable values. In other words, property tax revenues per capita are expected to increase as a community’s income and wealth levels increase.

Sales taxes are a commonly‐accepted funding source for a variety of infrastructure projects and operations and historically have provided the greatest revenue yield and stability compared to other sources. A correlation analysis between taxable sales and several demographic variables suggests that, similar to property taxes, there is a positive correlation between income/wealth and taxable sales. In other words, sales tax revenues per capita are expected to increase as a community’s income and wealth levels increase.

Page 3

Figure 1 City of Orlando Property Tax Revenue DistribuƟon

Given these relationships, it is more productive to fund government services using either sales or property taxes, which tend to increase as a community’s income/wealth increases.

Mixed‐use developments that incorporate the necessary design characteristics and achieve high densities are also able to support high‐quality jobs, which help increase a community’s income levels. In addition, sales tax revenues tend to be higher in communities that attract a large number of tourists and other non‐residents. As such, the burden of the tax is shared with those who visit the community and place a certain burden on services.

Recent changes in economic and demographic conditions present certain challenges as well as opportunities for local governments. Although reduction in growth rates tend to result in a reduction of tax revenue increases, the reduced growth rates also make it more manageable for local governments to plan the future of their community. During high growth periods, communities struggle to keep up with additional infrastructure and service needs, and it is difficult to take the time to create a well‐planned community, which tends to take several years, and even decades.

The current change in absolute growth along with a larger tax base provides an opportunity as well as a need to develop well‐ planned and efficient communities, where the available infrastructure and services are used efficiently, effective revenue sources are enhanced, and types of development that help achieve these two goals are encouraged.

www.tindaleoliver.com

Public Finance & Infrastructure Planning News is a newsletter of Tindale-Oliver & Associates, Inc.

September 2012

Smart Growth Economics By Steven A. Tindale, P.E., AICP, and A. Nilgün Kamp, AICP As Florida jurisdictions continue to face decreasing revenues and tough decisions on which programs to fund, it is becoming more important than ever to maximize revenues and minimize costs. The lower growth rate over the past few years, along with adverse economic conditions, results in a reduction of tax revenues for local governments. Local governments could respond to this issue from two directions and set the following two goals: 

reduction of costs per unit of development by reducing demand per unit of development enhancement of revenues by identifying more productive revenue sources (such as higher revenues per unit of development).



Smart Growth planning is one of the tools available to local governments to achieve these two goals. An article titled “Travel and Built Environment” by Reid Ewing and Robert Cervero defines successful urban design in terms the following characteristics: 5D’s     

Des na on Accessibility Design Diversity Distance to Transit Density

ECONOMICS

The higher density, along with the other design characteristics, helps maximize the use of available capacity. In addition, the presence of larger tax bases in urbanized areas is more likely to generate necessary revenues to pay for these services.

Recent work conducted by TOA suggested that increasing allowable density from 2 units to 4 units per acre within a 6‐ square mile area generated the necessary density to support 1 fire station, 2 elementary schools, ½ a middle school, and ½ a high school. When the density increases to 8 units per acre, the community is able to support 2 fire stations, 4 elementary schools, 1 middle school, and 1 high school along with parks provided as part of the elementary schools.

It is possible to see the evidence of this efficiency in terms of the service volume. For example, while a fire station in an urbanized area can handle 3,500 or more calls per year, a station in a rural area may receive as few as 100 calls annually. However, to be able to provide the desired response time, a station needs to be Enhanced Revenues physically located in the rural area just like the one in urbanized area. Given that the cost to build a station Reduce Costs and ranges from $3 to $4 million and about another $2.5 Environmental Impacts to $3 million per year to operate, it is important to have the necessary tax base to support this service.

The presence of these characteristics in a community results in attracting types of developments that increase efficiency in the use of available infrastructure, which reduces cost and generates higher tax revenues per acre. The following paragraphs describe the land use decisions that will help reduce the cost of providing government services and discuss long‐term effective revenues sources and the variables that control these revenue sources.

Reduction of Costs Typically, reducing cost is associated with cutting government services. However, it is possible to minimize reduction of services by increasing efficiency through a reduction of cost per unit of development if the necessary densities are available and the services are centralized.

General government services such as public safety, education/ schools, parks and recreation, transportation, etc., are much more efficient and inexpensive in terms of cost per resident in urbanized areas. This efficiency is maximized with the

www.tindaleoliver.com

appropriate design characteristics as described previously in terms of the necessary destination accessibility, design, diversity, distance to transit, and density (the “5 Ds”).

As such, it makes sense for local governments to encourage higher density and more urban development in order to reduce infrastructure capital and operating cost per person.

This could mean encouraging both new growth and redevelopment within the urbanized area. According to information provided by the Urban Land Institute, older adults and households without children are projected to become more dominant nationwide over the next 15 years. People in these age groups tend to prefer an urban lifestyle, while families with young children tend to be attracted to a suburban lifestyle. These new markets provide an opportunity for local governments to further encourage urban development that incorporates the “5 Ds” described previously.

Effective Revenue Sources In a depressed economy, it is very difficult to obtain public support for new taxes. However, local governments still have a few tools to maximize their revenues, including encouraging types of developments that generate larger amounts of taxes

Page 2

per unit of development and choosing revenue sources that are more efficient.

A comparison of tax revenues generated by single‐use and mixed‐use properties clearly indicates that mixed‐use properties generate a higher level of taxes per acre. As shown on the accompanying map, the City of Orlando’s activity centers (A1 through A3) and mixed‐use corridors (C1 through C3) include approximately 3 percent of the total acreage in the city but generate 45 percent of the tax revenues. This suggests that financial and other incentives provided to mixed‐use developments tend to be recouped in terms of additional tax revenues, which, in turn, can fund additional government services. As such, supporting these types of developments financially benefits the entire community.

Although it is difficult to gain support for new/additional taxes, local governments have a certain level of flexibility in choosing a revenue source. Given this, it is important to evaluate the efficiency of at least three primary taxes used to fund infrastructure and operating costs to provide government services: fuel taxes, property taxes, and sales taxes.

An evaluation of these revenue sources over time and across communities indicates the following: 





Fuel taxes are not a productive revenue source. They have been decreasing on a per capita basis over time due to higher fuel efficiency of newer vehicles. In addition, they tend to decrease as a community becomes more urbanized.

Property taxes tend to be the primary revenue source for the general fund and are based on the taxable value of the property and millage rate each jurisdiction imposes. A correlation analysis between taxable values and several demographic variables suggests that there is a positive relationship between income and wealth and taxable values. In other words, property tax revenues per capita are expected to increase as a community’s income and wealth levels increase.

Sales taxes are a commonly‐accepted funding source for a variety of infrastructure projects and operations and historically have provided the greatest revenue yield and stability compared to other sources. A correlation analysis between taxable sales and several demographic variables suggests that, similar to property taxes, there is a positive correlation between income/wealth and taxable sales. In other words, sales tax revenues per capita are expected to increase as a community’s income and wealth levels increase.

Page 3

Figure 1 City of Orlando Property Tax Revenue DistribuƟon

Given these relationships, it is more productive to fund government services using either sales or property taxes, which tend to increase as a community’s income/wealth increases.

Mixed‐use developments that incorporate the necessary design characteristics and achieve high densities are also able to support high‐quality jobs, which help increase a community’s income levels. In addition, sales tax revenues tend to be higher in communities that attract a large number of tourists and other non‐residents. As such, the burden of the tax is shared with those who visit the community and place a certain burden on services.

Recent changes in economic and demographic conditions present certain challenges as well as opportunities for local governments. Although reduction in growth rates tend to result in a reduction of tax revenue increases, the reduced growth rates also make it more manageable for local governments to plan the future of their community. During high growth periods, communities struggle to keep up with additional infrastructure and service needs, and it is difficult to take the time to create a well‐planned community, which tends to take several years, and even decades.

The current change in absolute growth along with a larger tax base provides an opportunity as well as a need to develop well‐ planned and efficient communities, where the available infrastructure and services are used efficiently, effective revenue sources are enhanced, and types of development that help achieve these two goals are encouraged.

www.tindaleoliver.com

Tindale-Oliver & Associates, Inc. 1000 N. Ashley Drive Suite 100 Tampa, FL 33602-3059

PRSRT STD U S POSTAGE PAID TAMPA FL PERMIT NO 778

September 2012

Public Finance & Infrastructure Planning News Recent Trends in Transportation Impact Fees Many Florida communi es are reviewing their impact fee programs, and while some implement moratoriums or con nue the fees at some level, others are conver ng their programs into a tool that supports the community’s economic and planning goals and needs. The communi es that work on conver ng their programs emphasize one or more of the following approaches: 1.

TOA Recent Studies

methods to fund the City’s Fire Departments capital and opera ng expenditures. The study focused primarily on fire assessments, fire fees and ad valorem funding.

 Pasco County MulƟmodal TransportaƟon Impact Fee Study and Smart Growth ApplicaƟon: TOA converted the County’s  City of Parkland Impact Fee Study: TOA prepared library and roadway‐based transporta on impact fee to a mul modal government buildings impact fee studies for the City of transporta on impact fee. In addi on, the fees were Parkland, which were successfully adopted. differen ated by loca on and land use to give incen ves to those land uses and geographic areas that were targeted by the  City of Orlando MulƟmodal TransportaƟon Impact Fee Study County. The study and the County’s ini a ves received three and Smart Growth ApplicaƟon: TOA completed an impact fee awards from various planning organiza ons. study that converted the City’s current roadway‐based transporta on impact fee to mul modal transporta on impact  Osceola County TransportaƟon Funding Study and fee. In addi on, the study evaluated the City’s growth ImplementaƟon Plan: TOA evaluated several revenue sources management and economic development goals, growth rates, to be used for Osceola County’s future transporta on needs. available revenues to calculate poten al reduc ons that could Some of these revenue sources included mul modal be given to targeted land uses in certain geographic areas. The transporta on impact fee, sales tax, gas tax, ad valorem tax, staff recommenda ons were successfully adopted. special assessments, and others. Based on the study findings, the BOCC direc on included the development of a countywide tax increment financing (TIF) as part of the funding package. In  Orange County MulƟmodal TransportaƟon Impact Fee: TOA calculated a mul modal transporta on impact fee within the addi on, TOA was asked to iden fy por on of TIF from future Alterna ve Mobility Areas (AMA) of the County, which development versus exis ng base development. TOA designed surround the City of Orlando. In addi on, the roadway‐based a database tool that would automate this effort for County transporta on impact fee was updated. As part of the study, staff’s use.

TOA also evaluated the development review procedures used within the AMA and provided recommenda ons. The study is  City of Palm Bay Fire Funding Study: TOA was retained to currently going though the implementa on process. evaluate advantages and disadvantages of several funding

Tampa

Orlando

Bartow

Ft. Lauderdale

Bal more

www. ndaleoliver.com

2.

3.

4.

Flexibility: Several communi es are conver ng their roadway‐based transporta on impact fee to a mul modal transporta on impact fee to expand the type of infrastructure they can fund with revenues. It is important to note that mobility has different meanings for different jurisdic ons. For example, while most urban ci es build very few or no roads and instead are interested in inves ng in transit, bicycle, and pedestrian ameni es, most coun es and rural ci es s ll need to build roads and do not necessarily want other modes to compete for roadway dollars. Many coun es in Florida have some urban pockets, but they s ll need to connect ci es, ac vity centers, and regional public facili es. As such, there is a need to con nue to build roads. At mes, these communi es implement both a roadway and a mul modal impact fee for different geographic areas within the county. A recent example is Orange County (FL), where TOA calculated a mul modal impact fee for the Alterna ve Mobility Areas (AMA) of the county that surround the City of Orlando, which is also in the process of adop ng a mul modal transporta on impact fee. A roadway‐based transporta on impact fee was calculated for the area outside the AMA. Efficiency Recogni on: As discussed “Smart Growth Economics,” it is becoming important for local governments to recognize and encourage certain types of developments that are economically and otherwise beneficial for the community. Of TOA’s recent clients, Pasco County and the City of Orlando differen ated their fees by land use and by geographic area. Hernando County, the City of Sarasota, and the City of Oviedo are also considering this approach.

Economics: Another way jurisdic ons can encourage targeted development/ industries is by giving tax or other incen ves and simplifying the development review process for targeted developments. En es such as the City of Tampa, the City of Orlando, Orange County, and Pasco County all provide some level of these types of incen ves.

Alterna ve Revenues: Finally, most communi es recognize that given the decline in growth, impact fee revenues are not likely to be as significant as they were historically. As such, several en es, such as Osceola and Hernando coun es and the City of Sarasota, are reviewing other poten al revenue sources from a perspec ve of efficiency and effec veness.

These four tools help communi es achieve their economic and growth management goals and are being used by an increasing number of local governments.

www.tindaleoliver.com

City of Tampa AlternaƟve Concurrency Program

Pasco County Mobility Fee Vary Land Use Rate by Geographic Area

Inside Smart Growth Economics

2

TOA Recent Studies

4