Explain in detail how to carry out Fiscal Impact Analysis.
Answers
Fiscal impact analysis is a tool that compares, for a given project or policy change, changes in governmental costs against changes in governmental revenues. For example, a major residential development project in Town A will mean new residents that require new services and facilities such as fire and police protection, libraries, schools, parks, and others. At the same time, Town A will receive new revenues from the project in the form of property tax revenues, local sales tax revenue, and other taxes and fees. A fiscal impact analysis compares the total expected costs to the total expected revenues to determine the net fiscal impact of the proposed development on Town A.
There are several standard methodologies that can be employed in a fiscal impact analysis. The two general approaches to fiscal impact analysis are average costing and marginal costing: