CNVR Fiscal Impact Report 2000

Central Naugatuck Valley Region FISCAL IMPACT REGIONAL SUMMARY REPORT Council of Governments Central Naugatuck Valley The pictures on the cover were arranged in relation to each communities general location in the Cent ral Naugatuck Valley Region. Bethlehem A Farm Woodbury Antique Shop on Route 6 Watertown Civil War Monument Thomaston The Opera House Southbury Southbury Green Middlebury St. John of the Cross Church Waterbury City Hall Prospect Town Hall Cheshire Town Hall Oxford New Industrial Development Naugatuck Town Hall Wolcott Town Green Beacon Falls Matthies Park August 28, 2000 This report summarizes the fiscal impact of different land uses in each of the thirteen communities that comprise the Central Naugatuck Valley Region of Connecticut. The study was prepared by Planimetrics, LLP of Avon, Connecti- cut. The Region includes Waterbury, the Regional center, and the following twelve surrounding communities: • Beacon Falls • Bethlehem • Cheshire • Middlebury • Naugatuck • Oxford • Prospect • Southbury • Thomaston • Watertown • Wolcott • Woodbury This study, which grew out of a recommendation in the 1998 Regional Plan of Conservation & Development, is intended to: • Increase awareness of the public costs of different programs and ac- tivities, • Provide a better understanding of fiscal issues by comparing local ju- risdictions with each other and Regional averages, and • Help promote a reasonable long-term balance in every community by comparing fiscal issues with other issues. With this knowledge, the communities in the Region can continue to explore ways to work together to promote greater Regional cooperation. Sincerely, Alfio Candido Peter Dorpalen COGCNV Chairman COGCNV Executive Director TABLE OF CONTENTS 1 Introduction 1 2 Executive Summary 3 3 Methodology 7 4 Basic Information 11 5 Summary of Uses 27 6 Balance of Payments 37 7 Case Studies 39 8 Conclusion 49 Communities in the Central Naugatuck Valley Region INTRODUCTION 1 Which land uses receive more in municipal services than they produce in municipal reve- nue? Which land uses produce more in municipal revenue than they receive in services? OVERVIEW Municipal fiscal impact analysis compares the local revenues generated by a particular land use with the local expenditures associated with that use. The comparison helps estimate whether a particular type of use pays more in taxes than it receives in services, or vice versa. WHY STUDY FISCAL IMPACT? The Council of Governments of the Central Naugatuck Valley (COGCNV) adopted a Regional Plan of Conservation & Development in 1998. The Plan looks at Regional patterns of development and makes recommendations to guide future growth in the Region. One of the Plan’s recommendations (page 28) is to evaluate the fiscal impacts of land use activities in the Region. The recommendation reflects a concern in the Region that the current property tax system in Connecticut produces some per- verse land use situations where a community may strive to: • Attract uses that are “fiscal positives” (provide more in tax revenue than they require in services), and • Avoid uses that are fiscal negatives (require more in services than they provide in tax revenue). As indicated in the Regional Plan, this type of situation can result in “fiscal inequality, unequal tax burdens, and lack of Regional cooperation in areas of common concern”. As a result, COGCNV commissioned this study of all 13 communities in the Region. The study was conducted in order to: • Increase awareness of the public costs of different programs and ac- tivities, • Provide a better understanding of fiscal issues by comparing local ju- risdictions with each other and Regional averages, • Help promote a reasonable long-term balance in every community by comparing fiscal issues with other issues, and • Implement a recommendation of the Regional Plan. 1 Since each community in the Region is different, individual reports were pre- pared for each of the 13 communities. Those reports are available from: Council of Governments of the Central Naugatuck Valley 20 East Main Street, Suite 303 Waterbury, CT 06702-2399 203/757-0535 LIMITATIONS Fiscal impact analysis, also called tax impact analysis, attempts to relate the public costs associated with a specific la nd use to the public revenues associated with that use. While there are many reasons why such an analysis might be performed, the best rationale might be that it can help promote a reasonable long term balance in a community by comparing fiscal impacts with other issues. On the other hand, it st be realized that every land use do es not fiscally benefit the town and uses with negative fiscal results may provide other intangible, but equally valuable, benefits. mu Fiscal issues are not the only crite- ria by which mu- nicipal land use policies should be based. Fiscal parameters are only one part of municipal ad- ministration. The overall form and function of the community and its physical, social, and economic health is more important. Fiscal concerns are not the only criteria by which local land use policies should be based. Every land use will not benefit a community fiscally and a less benefi- cial land use should not necessarily be excluded since it may provide other community benefits. While different land uses vary significantly in their poten- tial fiscal impact on a community, the overall form and function of the commu- nity and its physical, social, and econom ic health may be more important. In addition, it is important to recognize, as illustrated in this Regional summary report, that every community is differe nt. A use that may produce a fiscal sur- plus in one community may not in another community if the fiscal parameters are different. Findings for each community are averages based on long-term condi- tions and trends and such findings may not be directly transferable to other jurisdictions. ACKNOWLEDGEMENTS The preparation of this report was greatly facilitated by the cooperation of mu- nicipal officials including the chief elect ed official, the finance staff, the assess- ment staff, the school business office staff, and other municipal officials. Their contributions to this report are gratefully acknowledged. 2 EXECUTIVE SUMMARY 2 Residential uses typically receive more in services than they provide in tax revenue. This is not surpris- ing since munici- pal services are generally config- ured to benefit residents (voters) while revenue comes from a vari- ety of sources. Fiscal impact analysis reveals some simple truisms about the fiscal situations in most communities in Connecticut: • Most community services benefit residents, • Residential uses provide only a portion of local revenue, • As a result, residential uses can be characterized as having a negative fiscal impact on existing taxpayers in a community. Consider these charts summarizing revenues and expenditures in the Region: Sources of Local Revenue 35% 9% 8% 48% Intergovernmental Revenue Other Revenue Tax Revenue From Residential Uses Tax Revenue From Non-Residential Uses Uses Benefitting From Local Expenditures 84% 7% 9% Residential Uses Non-Residential Uses Tax-Exempt Uses Residential uses provide about 48 percen t of all local revenue in the Region (primarily through local taxes) yet benefit from about 84 percent of all local expenditures. 3 In other words, non-tax revenues (such as state aid, user fees, and investments) and tax revenues from non-residential uses all defray the cost to residential taxpayers of the services they receive. It is little wonder that, in communities th at understand this situation, taxpayers and communities are eager for additional state aid and more economic develop- ment. That strategy is designed to bring something positive into the community and is distinctly different from policies that may be designed to exclude certain uses. The fact that resi- dential uses typi- cally receive more in services than they provide in tax is perceived as a positive by new residents since they will also re- ceive more in ser- vices than they pay in taxes. However, it is perceived as a negative by exist- ing residents since it dilutes the bene- fits they currently enjoy. As shown in the following charts, even when non-tax revenue is deducted from local expenditures (to produce what is refe rred to in this report as “net expendi- tures), the same relationship holds true. Sources of Local Tax Revenue 78% 22% Residential Uses Non-Residential Uses Uses Benefitting From Local Net Expenditures 88% 8% 4% Residential Uses Non-Residential Uses Tax-Exempt Uses 4 The key determi- nant of whether a residential use will produce a fiscal surplus is whether it produces any public school pu- pils. Any residential unit that does not result in school enrollment will be a fiscal surplus to the community. The typical re- sponse of many communities is to try to limit devel- opment that does not “pay its way.” Residential Uses Thus, due to the tax revenue from non-residential development and the revenue from non-tax sources, 1-4 family residentia l uses in the Region generally receive more in services than they pay in taxes. For every $1.00 received in services, the amount of revenue generated by resi- dential uses varies from $0.55 in Southbury to $0.95 in Bethlehem. Southbury had the highest fiscal benefit to existing residents (and the largest fiscal im pact due to new residential development) due to the strong non-residential tax base, revenue received for the Southbury Trai ning School, and the net revenue re- ceived from Heritage Village (an age-r estricted condominium development). Bethlehem was at the other end of the spectrum due to the low amount of non- residential development. Condominiums generally pay more in taxes than they receive in services al- though high school enrollments from some projects do produce a fiscal deficit for a community. For example, it is estimated that the age restrictions at Heritage Village in Southbury produce a $3.5 million annual fiscal surplus for the Town of Southbury. Apartments generally receive more in services than they pay in taxes although low school enrollments from some proj ects do produce a fiscal surplus for a community. Mobile homes can be a fiscal surplus if they have result in low school enrollments. Non-Residential Uses Non-residential uses typically pay more in taxes than they receive in services. In fact, commercial, industrial, and public utility facilities in the Region are esti- mated to produce about $58.6 million in annual fiscal surplus to support other uses in the communities in the Region. Vacant Land (including Public Act 490 Land) Vacant land requires very few municipal services and, as a result, produces a fiscal surplus to a community. What is in teresting with regard to vacant land is its potential future use. For example, while undeveloped residential land or lots may produce a modest fiscal surplus for a community today, there is a strong possibility that the land could produce a fiscal shortfall once developed. Tax Exempt Uses Tax-exempt uses typically receive more in services than they pay in taxes. While some State facilities produce a fiscal surplu s (due to payments in lieu-of-taxes), other tax exempt uses are estimated to require about $12.6 million of expendi- tures annually within the Region. 5 Understanding the Results W p To maximize fiscal benefits to existing residents, most communities want to: r r New residential uses seeking the same fiscal bene- fits enjoyed by current residents dilute the existing benefits and this may result in per- verse land use decisions. • Attract new non-residential development, • Receive more state aid, and • Generate more revenue from non-tax sources. Some communities also seek to attract housing types that do not generate school enrollment. hat is characterized as a negative fiscal impact (receiving more in services than roviding in revenue) is not always a negative. Consider the following: • Churches and other tax-exempt facilities may not “pay their way” but enhance community character and quality of life • Land trusts pay no taxes but preserve open space in communities which enhances community character and quality of life Even for tax-paying uses, a negative fiscal impact may not always be a negative. Consider the following for 1-4 family dwellings that receive more in services than they pay in taxes: • For existing taxpayers, such new development would raise their taxes (to pay for the services required by the new development) • For residents of existing 1-4 family dwellings, such new develop- ment would dilute the fiscal benef its that they currently enjoy (be- cause they may also receive more in services than they pay in taxes) • However, for new 1-4 family dwellings, the fact that they receive more in services than they pay in taxes would be considered a “good deal” by them Overall, new non-residential developm ent, low school enrollment-producing residential uses, and additional non-tax re venue produce fiscal benefits for exist- ing residents. While such events also produce fiscal benefits for new residents, the new esidential development may dilute th e fiscal benefits enjoyed by existing esidents and be seen as a fiscal negative. Focusing solely on fiscal benefits to existing residents can skew local behavior. If all new residential development is halted in order to retain fiscal benefits for existing residents, community development may be adversely affected. In addi- tion, it does not halt the sale of existing residences to families with school-age children. Future Directions It is important to note that every community is fiscally balanced at a given point in time. In other words, each commun ity generates $1.00 in revenue for each $1.00 in services provided. Some communities are balanced differently than other communities and each community is uniquely affected by changing land use patterns. In the long run, managing the community responsibly to promote the best overall quality of life may be more important than investigating every land use without regard to how it fits into a bigger picture. 6 METHODOLOGY 3 OVERVIEW A fiscal impact analysis requires knowledge of a number of factors: • Budget information (revenues and e xpenditures) is required to de- termine where money comes from and goes to, • Tax base information is required to determine how tax revenue (the major source of revenue for most municipal general funds) is gener- ated from different land uses, and • Demographic information is re quired to understand the population and school enrollment that results from different land uses. Fiscal Impact Components As part of the study, budget, tax base, and demographic information was col- lected for all 13 communities in the Central Naugatuck Valley Region. While tax base and demographic information was available in a consistent format, the budgets for all communities had to be rearranged to provide for consistent report- ing and calculations in the study. 7 This fiscal impact study is based on the concept of “net expenditures.” Net expenditures reflect how much tax revenue needs to be raised to support local pro- grams. Net expenditures are determined by subtracting non- tax revenue (such as state aid) from total expenditures. PROCESS The study is based on the general fund of each of the 13 municipalities in the Region. The general fund supports almost all municipal expenditures and re- ceives almost all municipal revenue (especially tax revenue). The study looked at 1997 land uses and 1998-99 revenues and expenditures in each municipality. These dates were selected since 1998-99 was the most re- cently completed fiscal year at the time the analysis was done and that budget was based on the 1997 Grand List (a compilation of all real estate, motor vehicles and taxable personal property). The analysis of fiscal impact is based on the concept of net expenditures. Net expenditures reflect how much money needs to be generated by local tax revenue to fund each program area. When non-tax revenues (such as state aid, local user fees, interest on investments, and other sources) are deducted from the program expenditures they are associated with (s uch as state education aid being deducted from total education expenditures), the ne t expenditure in that program area can be estimated. Net expenditures can also be restated in terms of services to different components of the community: • services to pupils (educational programs), • services to residents (park/recreation, library, elderly, and other pro- grams or services that benefit residents), and • services to property (such as fire, police, public works, debt service, and similar expenses that benefit all property). Fiscal Impact Process 8 LAND USE CATEGORIES To facilitate the analysis, land use categories consistent with property assessment reporting requirements of Connecticut municipalities were used: Residential Uses • vacant residentially zoned land • vacant residential lots • 1-4 family residential uses • residential condominiums • apartments • mobile homes Commercial Uses • vacant commercially zoned land • commercial buildings • commercial condominiums Industrial Uses • vacant industrially zoned land • industrial building • industrial condominiums Public Act 490 Uses • private land assessed for farm, forest, or open space use Public Utility Uses • land and facilities used by public utility companies Tax Exempt Uses • federal, state, or local lands or public facilities (such as schools, hos- pitals, and garages) that are tax exempt • private lands or facilities (such as religious, educational, and hospi- tal) that are tax exempt 9 AVERAGE COSTS AND MARGINAL COSTS It is important to note that the analysis looks at the “average” cost of different land uses rather than the “marginal” cost of different land uses. In an average cost analysis, overall fiscal impact can be estimated after compar- ing the average costs and average revenues that result from a typical land use. A marginal cost analysis is much more difficult since it requires the determina- tion of how much more it will cost to maintain one more mile of street, provide police or fire service for one more house or business, or educate one additional student. Marginal costs are typically lower than average costs until the capacity or capa- bility of the current system is consumed. At that time, additional capacity needs to be created through the hiring of new staff, purchase of new equipment, or construction of new facilities — each of which can have expensive local implica- tions. Such an analysis involves dete rmination of “excess capacity” in various municipal delivery systems and identifying the “straw that breaks the camel’s back.” Since, over time, average costs and marginal costs will converge, average costs are most often used in town-wide fiscal studies. 10 BASIC INFORMATION 4 Basic information collected as part of the study is summarized on the following pages: Demographics • Regional Housing Composition • Regional Population Distribution By Housing Type • Regional Public School Enrollment By Housing Type Tax Base • Regional Tax Base Comparison Budget • Regional Expenditure Comparison • Regional Revenue Comparison • Net Expenditure Comparison 11 Housing Units Based on information from the assessor in each community and from the Con- necticut Department of Economic a nd Community Development (DECD), the number of housing units in each community was estimated as follows: Residential Housing composi- tion is important since fiscal impact can vary for dif- ferent types of residential land uses. 1-4 Family Building The number of dwelling units in single-family, two-family, three- family, and four-family buildi ngs was estimated from Census, DECD, and assessor data. Apartment The number of apartment units was estimated from assessor data. While assessed as a commercial property, an apartment building is considered to be a residential land use. Condominium The number of residential condom iniums was obtained from local assessor data. Mobile Home The number of mobile home units was obtained from assessor data. Commercial Nursing Homes, etc. The number of nursing home beds or other residential units in commercial facilities was not considered relevant to the analysis. Tax Exempt Public, Private The number of dwelling units in tax- exempt facilities (state facilities, church houses, private schools) wa s estimated based on the assess- ment type and assessed value of tax exempt facilities. As can be seen from the table on the faci ng fold-out page, there are some major differences in the housing mix in each of the thirteen COGCNV communities. 1 -4 Fa m ily Com pos ition 0% 20% 40% 60% 80% 100% Be a con F al ls Be t h leh em Chesh ire Middlebur y Na u gatuck OxfordPros pec t Southb ury Thomast on Waterbury Wa te rt o wn Wo l c o tt Wo odb ur y Regio n 12 Bethlehem and Oxford have the highest proportion of 1-4 family units. Waterbury has the highest proportion of apartments. Southbury has the highest proportion of condominiums. Prospect and Bea- con Falls have the highest proportion of mobile homes. Apartment Composition 0% 5% 10% 15% 20% B eaco n Fa lls B ethle h em C h eshire Mi dd le bu r y Na ug at u c k Oxford Prospec t S o ut h b ur y T homaston Wate rb ury Wa t e r tow n Wolcott Wo odbu ry Region Condom inium Com pos ition 0% 10% 20% 30% 40% Be a con F al ls Be t h leh em Chesh ire Middlebur y Na u gatuck OxfordPros pec t So u th bu r y Th o mas t o n W at e r b ury Watertown WolcottWoo d bu r y Reg ion Regional Housing Composition (flip page over) 13 P O Population was estimated for each residential use since fiscal impact analysis is not particularly sensi- tive to the number of residents . opulation verall 1998 population estimates for each community were obtained from the U.S. Census Bureau. The 1998 population estimates were allocated to different uses as indicated below. Since fiscal impact analysis is not particularly sensitive to the number of residents of a community (it is more sensitive to the number of public school pupils), occupancy was estimated for all uses. Residential 1-4 Family Occupancy was estimated after occupancy of all other land uses. Apartment Estimated based on the number of apartment units (typi- cally assumed at about 2.0 persons per unit and adjusted based on school enrollment). Condominium Estimated based on the num ber of condominium units (typically assumed at about 2.0 persons per unit and adjusted based on school enrollment). Mobile Home Estimated based on the number of mobile home units (typically assumed at about 2.0 persons per unit and adjusted based on school enrollment). Commercial Nursing Homes, etc. The number of residents living in nursing homes or other commercial facilities was estimated from Census data. Tax Exempt Public, Private The number of residents living in tax-exempt facilities (state facilities, church houses, private schools) was estimated based on local contacts and information from the Census. 14 Per unit occu- pancy is highest in Watertown, Pros- pect, and Oxford. Per unit occu- pancy is lowest in Waterbury, South- bury, and Wood- bury. Occupancy per unit is typically lower for apart- ments and condo- miniums. Persons Per Unit – 0.50 1.00 1.50 2.00 2.50 3.00 3.50 Bea con Fa ll s Bethlehem Cheshire Mid d le bu r y Na ugatu c k Ox ford P rospect Southbury Thoma s ton W ate rb ury Waterto wn Wolcott Woodbu r y R e gion Regional Population Distribution By Housing Type (flip page over) 15 Sc Fiscal impact analysis is very sensitive to the number of school children and care was taken to allo- cate school chil- dren to residential land uses. hool Enrollment Fiscal impact analysis is very sensitive to school enrollment due to the cost of education. As a result, care was taken to allocate the number of school children to different land uses. The following methodology was used: Residential 1-4 Family Public school enrollment was estimated after estimating enrollments from all other land uses. Apartment The addresses of local apartment complexes were obtained from the assessor. These addresses were submitted to the school department with a reque st for the number of school children that resided at each address. Condominium The addresses of local c ondominium complexes were obtained from the assessor. These addresses were submit- ted to the school department with a request for the number of school children that resided at each address. Mobile Home The addresses of local mobile homes complexes were obtained from the assessor. These addresses were submit- ted to the school department with a request for the number of school children that resided at each address. Commercial Nursing Homes, etc. No school enrollments are assumed to result from commer- cial facilities. Tax Exempt Public, Private The number of public school pup ils living in tax-exempt facilities (state facilities, church houses, private schools) was estimated. As can be seen from the fold-out table, public school enrollment per housing unit varies in the Region from about 0.34 pupils per unit in Waterbury to about 0.56 pupils per unit in Wolcott. Another way to look at school enrollment information is in terms of the school enrollment ratio. This ratio expresses the number of school pupils as a percent- age of the population. Clearly, a higher enrollment ratio would signify a larger school burden. 16 Most school en- rollments come from 1-4 family dwellings. Enrollments from apartments and condominiums are highest as a per- centage of total enrollment in Waterbury and Woodbury. School enrollment per 1-4 family dwelling is highest in Southbury and lowest in Waterbury. Enrollm ent Per 1-4 Fam ily Dwelling – 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 Beacon Falls BethlehemCheshireMiddleb ury N au gatu ck Oxfo r d Pros pect Southbury Tho ma sto n W a terbury Wa ter to w n Wo lco tt W o od bu ry R egion School Enrollment Ratio 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% B e acon Fall s Beth lehe m C he shire M iddlebury Na uga tu ck O xford Prospect So uthb u ry Th om aston Waterb ury W a tertown Wolc ott W o odb u ry R egio n Regional Public School Enrollment By Housing Type (flip page over) 17 Tax Base & Composition The tax base of each community in the Region was summarized. The results are ented on the following foldout page. pres m The Grand List supplement re- flects the assess- ment amount above and beyond the real estate assessment that results from motor vehicles, personal property, and any exemptions. The total assessment of each land use includes the real estate and what this study calls the Grand List supplement. The Grand List supplement reflects the assess- ent amount above and beyond the real estate assessment that results from motor vehicles and personal property minus any exemptions (such as for the elderly, veterans, or manufacturing equipment). Each community’s Grand List (the compilation of all listed property in a com- munity) contains two major components: • The taxable Grand List (a compila tion of all taxable property), and • The tax-exempt Grand List (a compilation of all tax-exempt prop- erty). In this analysis, the combination of bot h Grand Lists is called the consolidated Grand List. Grand List Supplement Within the Region, the median Grand Li st supplement for residential uses was about 14 percent. In other words, the assessed value of motor vehicles and personal property minus any assessment exem ptions added about 14 percent to the residential real estate value. Within the Region, the median Grand List supplement for commercial uses was about 30 percent and the median Grand List supplement for industrial uses was about 56 percent. In other words, th e assessed value of any motor vehicles and any taxable personal property (such as computers or machines) minus any ex- emptions added about 30 percent to the commercial real estate value and about 56 percent to the industrial real estate value. Tax Exempt Uses Within the Region, tax-exempt uses add about another 10 percent to the taxable Grand List. However, there are some significant differences between communi- ties in the Region in terms of the amount and type of tax-exempt property. For example, while tax-exempt properties in suburban communities might in- clude state parks or other open space, the list of tax-exempt properties in Waterbury includes low-income housing and other facilities that are likely to require services. 18 Residential uses comprise the smallest portion of the tax base in Waterbury, South- bury, and Nauga- tuck. Residential uses comprise the larg- est portion of the tax base in Bethle- hem, Prospect, Woodbury, Ox- ford, and Wolcott. The per capita Grand List is low- est in Waterbury and Naugatuck since they have not revalued in some time. The per capita Grand List is highest in Southbury, Wood- bury, Middlebury, and Bethlehem. Residential Component of Tax Base 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% B ea co n F al l s Bethlehe m C he sh ire Middlebury Naugatuck Oxford Prospect Southbu ry Tho ma st o n Wa terbu ry Wa tert ow n Wolcot t Woo db ury Reg i on Per Capita Grand List $- $10, 000 $20, 000 $30, 000 $40, 000 $50, 000 $60, 000 $70, 000 $80, 000 $90, 000 Beacon Falls Bet h l eh em Ch e shir e Mid dle bury Naug at u ck Oxf or d Prospect Southb ur y T ho maston Waterbu r y Watertow n Wo lc ott Wo od bur y Re g ion Regional Tax Base Composition (flip page over) 19 Expenditures One of the major parts of the study was comparing expenditures between com- munities. Each community uses a different budget format, and a detailed review was required to compare budgets in a meaningful way. As can be seen from the following chart: • Education expenditures are the largest component of all municipal budgets • Education expenses as a component of the overall budget are greatest in Prospect, Southbury, Bethlehem, Beacon Falls, and Woodbury • Education expenses as a component of the overall budget are smallest in Waterbury, Naugatuck, Middlebury, and Thomaston Regional Comparison of Per Capita Expenditures High $2,456 Average $2,182 Median $2,151 Low $1,716 Regional Comparison of Expenditure Composition Category % Education 59% Public Safety 12% Public Works 7% Capital /Debt 6% Other Services 16% TOTAL 100% Other services include recreation, land use, and other general government services. Expenditure Distribution 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Be a con Falls Bethle hem Che s hire Mid dle bury Naugatuck Oxford Pr o sp ect S outhbu ry T ho mast o n Wa ter bury Wa t e rt ow n Wol cott Woo db ury Region Education Public Safety Public Works Capital Expenses/Debt Service Other Services/Functions 20 Per capita spend- ing is highest in Middlebury and Cheshire. Per capita spend- ing is lowest in Prospect, Beacon Falls, Watertown, and Woodbury. Per pupil spending is highest in Ox- ford. Per pupil spending is lowest in Naugatuck, Wol- cott, Watertown, and Beacon Fa Per Capita Expenditures $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 B e aco n F al ls Bethleh e m Che shire Mi dd le bu ry Naugatuck Oxford Pro s p e ct Sou t hbur y Thomaston Waterbur y Water t o wn Wolcott Woo dbu ry Regio n Per Pupil Expenditures $- $2, 000 $4, 000 $6, 000 $8, 000 $10, 000 $12, 000 Be a con Fall s Bethleh e m C hes hi re Mi ddle bury N aug at u c k Oxf ord P rospect Southbury Thoma st o n Wa terb ur y Wa terto wn Wolcott Woodbury Regi on lls. Regional Expenditure Comparison (flip page over) 21 Revenues Municipal revenue comes from a variety of sources. While the largest category is current taxes on local property, revenue is also derived from: • Intergovernmental revenue (such as state or federal aid) • Fines or fees • Investments • Miscellaneous (such as taxes from prior years, use of the municipal surplus) As can be seen from the following chart, current taxes provide most municipal revenue. The percentage of all re venue derived from current taxes is: • Highest in Middlebury, Southbury, Woodbury, and Bethlehem • Lowest in Naugatuck and Waterbury Regional Comparison of Revenue Composition Category % Current Taxes 58% Intergov. Rev. 33% Fines, Fees, 4% Investments 1% Miscellaneous 4% TOTAL 100% Regional Comparison of Current Taxes Per Capita High $2,218 Average $1,276 Median $1,262 Low $1,035 Percent Revenue From Current Taxes 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Beac on Falls Bet hlehem Ches hire Middlebur y N augat uck Oxford Prospect South bury T homaston Waterbury Wat ert ow n Wolcot t Wo odbury Re gion As can be seen from the following chart, non-tax revenue (intergovernmental revenue, fines, fees, investments, and miscellaneous) as a percentage of local revenue sources is: • Highest in Naugatuck and Waterbury • Lowest in Middlebury, Southbury, and Woodbury Revenue From Non-Tax Sources 0% 10% 20% 30% 40% 50% 60% Beacon Falls Bethlehem C hes hi re M iddle bur y Naugatuck Oxford Pros pect Southbury Thomaston Waterbury Wat ertown Wolcot t W oodbury Region 22 As can be seen from the following chart, current taxes per capita are: • Highest in Middlebury, Bethlehem, Cheshire, Southbury, and Woodbury • Lowest in Beacon Falls, Naugatuck, Prospect, Waterbury, and Wolcott Per Capita Current Taxes $0 $500 $1,000 $1,500 $2,000 $2,500 Be a con F a lls B ethle hem Cheshire Mi ddleb u ry N a ug a tu ck Oxfo r d Pro spect Southbu r y T ho m a sto n Wa ter b ury W aterto wn Wolcott Wo od b ur y R egio n Regional Revenue Comparison (flip page over) 23 Net Expenditures The term “net expenditures” is used to refer to the money that needs to be raised rough local tax revenues for a particular program area. Net expenditures are termined by subtracting non-tax program revenues (such as user fees and state aid) from program expenditures. th de Net expenditures refer to the money that needs to be raised through local tax revenue for a particular program area. Net expenditures are determined by subtracting non- tax program reve- nue (such as user fees and state aid) from program expenditures. Net expenditures can also be restated in terms of services provided to different components of the community: • services to pupils (educational programs) • services to residents (park/recreation, library, elderly, and other pro- grams or services that benefit residents) • services to property (such as fire, police, public works, debt service, and similar expenses that benefit all property) Net expenditures vary from municipality to municipality depending on the levels of local expenditures and the revenue sources used by each of the programs. In the fiscal impact analysis, net expend itures are reallocated to land uses based on the characteristics of each use. Net expenditures for services to pupils (educa- tion) are allocated on a per pupil basis. Net expenditures for services to residents are allocated on a per capita basis. Net expenditures for services to property are allocated on the basis of assessed value (ad valorem basis). As can be seen from the following chart, net expenditures per pupil for education are: • Highest in Middlebury, Southbury, and Woodbury • Lowest in Naugatuck, Wolcott, and Waterbury Net Expenditures – Services to Pupils $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 B eaco n F al ls Bet h le he m Che s hire Middleb ury N a ug atu ck Ox fo rd Prosp e ct S out hbury Th om asto n Wat e rbury Watertown Wolcott Woo db u ry Region 24 As can be seen from the following chart, net expenditures for services to people are: • Highest in Waterbury, Woodbury, Cheshire, and Middlebury • Lowest in Oxford, Wolcott, and Bethlehem Net Expenditures – Services to People – 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00 Be acon F all s Bethlehem CheshireMiddlebu r y Naugatuck O x for d Prospect Southbury Thoma ston Wate r bury Watertown Wolcott Woodbur y R eg ion As can be seen from the following chart, net expenditures for services to property are: • Highest in Naugatuck and Waterbury • Lowest in Southbury and Woodbury Net Expenditures – Services to Property – 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 B eac on F all s Bethlehem CheshireMiddl ebur y Naugatuc k Oxford Pr ospec t Southbury Thomaston Waterbury Water town Wolcott Woodbur y R egion Net Expenditure Comparison (flip page over) 25 USE OF NET EXPENDITURES Since the number of pupils, number of residents, and assessed value can be estimated for most any land use, the net expenditure estimates provide t he basis for estimating the fiscal impact of different land uses in the Reg ion. The fiscal impact methodology allocates revenues and expenditures based on the consolidated Grand List (taxable and tax exempt properties). The use of the consolidated Grand List assumes that all properties (whether they pay taxes or not) benefit in some material way from the overall provision of municipal ser- vices. The following pages summarize the fiscal imp act of different uses in the Region. 26 SUMMARY OF RESULTS 5 Residential Uses Residential uses generally receive more in services than they provide in revenue. The key determi- nant of whether a residential use will produce a fiscal surplus is whether it produces any public school pu- pils. Any residential unit that does not result in school enrollment will be a fiscal surplus to the community. In the Central Naugatuck Valley Region, or elsewhere in Connecticut, residential uses typically receive more in value of services than they provide in tax revenue. Overall, the analysis found that residential uses in the Region received almost $51 million more in services than they paid in taxes in 1998-99. The main reason is that residential uses produce residents and school children. As a result, residential uses benefited from almost all of the $190 million in net educational expenses, almost all of th e $19 million of net per capita expenses, and about $118 million of other expenses. However, it is important to note that there are differences among the various residential classes (1-4 family dwelling, apartment, condominium, mobile home). In addition, there are differences with in each class depending on the characteris- tics of different uses. These differen ces are discussed on the following pages. 27 1-4 Family Buildings Chart Composition This chart, and the charts on the following pages, compare the tax revenue received as a multiple of the services provided. For example, in the chart on this page, 1-4 family dwell- ings in Bethlehem provide about $0.93 in tax revenue for every dollar in services received. In Southbury, 1-4 family dwellings provide about $0.55 for every $1.00 received in services. As a class, 1-4 family dwellings (including single-family, two-family, three- family, and four-family buildings) typically receive more in services than they provide in revenue because of school-age children. However, there are some differences among communities in the Region. As can be seen from the following chart: • 1-4 family dwellings pay the most for the services they receive in Bethlehem, Woodbury, and Wolcott, and • 1-4 family dwellings pay the least for the services they receive in Southbury. 1-4 Family Dwellings $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 $1.00 B ea c o n Fall s B e th leh e m Che shire M i d dle bury Nau g atuck Oxf o rd Prospect Sout hbu ry T ho m a ston Waterb u ry Wa t ertown Wolco tt Wo odb ur y T pr rec p In communities with a large non- residential tax base, more of the revenue to support services to resi- dents is provided by other uses. As a result, new residential uses tend to be seen as a fiscal drain since they dilute benefits to existing resi- dents. here is an interesting explanation for this pattern. In communities with a large non-residential tax base, more of the revenue to support services to residents is ovided by other uses. In other words, residents pay less for the services they eive. In Southbury, where the non-residential tax base is among the highest in the region at 27 percent, residents pay only about $0.55 for every $1.00 of services they receive. On the other hand, Bethlehem residents pay about $0.93 for every $1.00 of services they receive since the non -residential tax base is the lowest in the region at 4 percent. In Southbury, new residential developments that produce school-age children will tend to be seen as a fiscal drain sin ce they increase costs more than they rovide revenues. Development which d ilutes the fiscal benefits enjoyed by existing residents can make it fiscally attractive for existing homeowners to encourage the purchase of land as open space rather than be developed fo r resi- dential homes. As more costs are “avoided”, the fiscal benefits to existing resi- dents are maintained or increase. Followed to its ultimate extreme, a community could reject some residential developments in order to avoid future ser vice costs. This is a classic example of how fiscal issues may be detrimental to the economic or social development of the community and the Region as a whole. 28 Apartments Apartments, as a class of residential uses, can either produce a fiscal surplus or a fiscal deficit depending on their occupancy characteristics of each. For example, age-restricted apartments produce a fiscal surplus because there are no school enrollments. As can be seen from the following chart: • apartments produce the greatest surp lus in Southbury since the Town as- sesses many assisted living and elderly care facilities as apartments and these produce no school enrollments, • apartments produce a fiscal surplus in Bethlehem, Oxford, and Woodbury due to low school enrollments, and • apartments produce a fiscal shortfall in the other municipalities due to the cost of educating school children. Apartments $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 B eac on Fal l s B ethlehem Ches hir e Middlebur y Naug atuc k O x ford Prospec t Southbur y Thomaston Waterbury Watertow n Wolcott Woodbur y The very high fiscal ratio in Southbury is due to a local assessment practice where assisted living facilities are consider ed apartments rather than commercial facilities. It is important to note that fiscal relationships can change over time. This is especially apparent in com- munities with a small number of uses where a small change in occu- pancy can produce a large change in fiscal impact. The very low fiscal ratio in Prospect is due to a unique occurrence. While there are very few apartments in Prospect, the school enrollment is high from one unit. However, these enrollments are all at the high school and, as a result, the fiscal situation will change with graduation of students. This points out another reason for caution with fiscal analyses. The estimates reflect conditions at the time the study is done but these conditions can change over time as people age, pupils graduate, revenues change, expenditures change, and other changes occur. For example, a re view of apartments in Prospect at the present time may find them to produce a fiscal surplus. 29 Condominiums Like apartments, condominiums can either produce a fiscal surplus or a fiscal deficit depending on their occupancy characteristics. For example, age restricted condominiums (like Heritage Village in Southbury) produce a fiscal surplus because there are no school-age children. As can be seen from the following chart: • condominiums produce a fiscal surplus in seven of the ten communities that have such developments, • condominiums produce the greatest surplus in Southbury due to the age restrictions at Heritage Village, • condominiums produce a fiscal deficit in Naugatuck, Thomaston, and Wood- bury due to school-age children that result in costs exceeding what is paid in tax revenue. Residential Condominiums $0. 00 $1. 00 $2. 00 $3. 00 $4. 00 B eacon Falls Bethl ehem Ches hi re Mi ddl ebur y Naugatuc k O xfor d Pr os pec t S outhbur y T homaston Waterbur y Watertow n Wolco tt Woodbury Age restrictions cannot be imposed on a development by a municipality in order to produce a fiscal surplus. However, de velopers can establish age restrictions and zoning regulations could provide for more units per acre for age restricted developments (since the occupancy per unit or bedrooms per unit are typically lower). In fact, regulations based on bedrooms per acre rather than units per acre may be a more appropriate regulatory tool. 30 Mobile Homes Mobile homes can also produce a fiscal surplus or a fiscal deficit depending on the occupancy characteristics. Within the Region, mobile homes provide a fiscal surplus in four of the nine communities where they are located and a fiscal short- fall in the others. As the following chart indicates mobile homes produce: • a fiscal surplus in Beacon Falls, Oxford, Prospect, and Waterbury due to elderly occupancy or low school enrollments, and • a fiscal shortfall in Naugatuck, Southbury, Thomaston, Watertown, and Woodbury due to the cost of educating school children. Mobile Homes $0.00 $1.00 $2.00 $3.00 B eacon Fall s Beth l eh em C he s h i r e Middlebur y Naugatuck Oxfo r d Pr ospe c t Sou thbu ry T homasto n Waterbury Water town Wol cott Wo odbu ry 31 Generally speak- ing, any residen- tial unit that does not result in school enrollment will be a fiscal surplus to the community. Variations Within Residential Classes It is important to note that the preceding discussions are broad generalizations for classes of residential land uses. There are differences within each class, primar- ily due school enrollments. Generally speaking, any residential unit (1-4 family dwelling, apartment, condo- minium, or mobile home) that does not result in school enrollment will be a fiscal surplus to the community. Factors that can cause residential uses to have a lower fiscal impact include: • age limitations (resulting in fewer school age children), • reduced housing turnover (single-family home sales are often made to families with school age children), • extended length of residency (once school children graduate, a resi- dential use will have a positive fiscal impact), and • fewer bedrooms (typically resulti ng in lower occupancy and fewer school children). The fact that residential uses with school children produce a fiscal shortfall while residential uses with no school children produces a fiscal surplus puts municipali- ties in a dilemma. In most suburban communities, the development pattern most desired by existing residents has been single-family homes in residential subdivi- sions. Yet these uses typically produce a fiscal deficit for a community. Multi- family developments are typically seen as “out of character” and have been opposed by existing residents. However, these developments can produce a fiscal surplus for a community. It is not generally possible to influence the age composition of new residential subdivisions . While it may be possible to influence the age composition of new multi-family developments so that they produce a fiscal surplus, it begs the question of whether it is desirable to do so. Again, fiscal decisions are not the only basis on which land use decisions should be made. All residents of a community and the Region are entitled to housing choices. 32 It is also difficult to influence the bedroom composition of new residential subdi- visions. This is a function of the Health Code and could still occur through additions following approval. The bedroom composition of multi-family devel- opments can typically be influenced at the time of approval and may not be permitted later depending on the development form (such as condominium). In other words, a community can have more influence over the composition of apartment and condominium occupancy th rough design and approval than they can have over single-family subdivisions. It can be possible for a community to influence length of residency and housing turnover. Studies have found that hous ing occupancy (and school enrollment) following a house sale (whether a new or existing house) typically peak within about 8 to 12 years after the sale and then children move on with their lives. In other words, after a family has b een in occupancy in a house for about a decade, the likelihood that the unit w ill produce a fiscal surplus increases. Thus, it can be desirable for a community to encourage longer-term residency and discourage housing turnover. The best way to do this is by minimizing the costs of ownership for longer term residents. Options that are available to communities include elderly tax breaks. A case study of the potential impact of the sale of a house occupied by an elderly couple to a family with just one school-age child is presented in Chapter 6. 33 Commercial / Industrial / Public Utility Uses Based on the preceding discussion about residential uses, it should come as no surprise that commercial, industrial, and public utility uses produce a fiscal surplus for a municipality. S Non-Residential In the Region in FY 1998-99, non- residential uses supplied about $58.6 million of net tax revenue to support other uses. ince such uses do not directly result in local public school enrollments or local residents, they have no impact on education or service categories in the local budget that represent about 60 percent of local expenditures. Of course, such uses require workers who must live somewhere. However, employees typically live over a wider area and so a community can benefit fiscally from having local businesses. In addition, such uses are typically assessed at high market values and typically have personal property (machinery, equipment, computers) that can add a signifi- cant amount to the tax base. In 1998-99, commercial, industrial, a nd public utility uses in the Region pro- duced a fiscal surplus of about $58.6 million annually to support other uses in the Region. As can be seen from the following chart: • Commercial uses in the Region all produce a fiscal surplus to the municipal- ity where they are located (the amount of revenue received is in excess of the $1.00 in services provided) • Commercial uses produce the largest surplus in Woodbury and Southbury • Commercial uses produce the smallest surplus in Naugatuck, Waterbury, Thomaston, Watertown, and Wolcott Commercial Development $0. 00 $1. 00 $2. 00 $3. 00 $4. 00 $5. 00 $6. 00 $7. 00 Beacon Falls Bethl ehem Cheshire Middl ebur y Naugatuck Ox ford Prospec t S out hbur y Thoma ston Water bury Water town Wolc ott Woodbur y The pattern is similar for industrial uses although the magnitude of the fiscal surplus is different due to the amount of manufacturing equipment or other personal property associated with industrial uses. 34 Vacant Land (including PA-490 Land) Vacant Land In the Region in FY 1998-99, va- cant land (includ- ing PA-490 land) supplied about $6.0 million of net tax revenue to support other uses. However, the key issue is what hap- pens to that land once it is devel- oped. Vacant land requires very few municipal services and, as a result, produces a fiscal surplus to a community. What is interesting with regard to vacant land is its potential future use. For example, vacant commercial or industrial land produces a fiscal surplus today and will produce an even larger fiscal su rplus (in dollar terms) when developed in the future. In many respects, ther e is no negative fiscal outcome. The earlier that property is developed, the more tax re venue is available to offset residential services. Undeveloped residential land or lots ar e another matter. While they produce a fiscal surplus today, there is a strong possibility that the land could produce a fiscal shortfall once developed. It is this dilemma that can make the Public Act 490 program beneficial for communities. While PA-490 will reduce the taxes that an undeveloped residential property might pay today, it tends to defer the date that the property might be developed in the future. In a sense, it is a program th at can help a community defer or manage the time that a use will occur that requires more in services than it provides in revenue. As can be seen from the following chart, vacant lands and Public Act 490 lands produce a fiscal surplus to the municipality where they are located (the amount of revenue received is in excess of the $1.00 in services provided). Public Act 490 Public Act 490 allows land owned by a private party (or non-tax exempt organization) to be assessed as farm, forest, or open space land under the Public Act 490 program (Section 12-107 of the Connecticut General Stat- utes). The Public Act 490 program reduces the assessment of parcels that meet certain criteria so that an increasing tax burden would be less of a contributor to the sale and development of property. Any property that is sold within 10 years of its desig- nation pays a recapture provision. In this way, the program encourages long term ownership of property and helps moderate develop- ment. Vacant Land (including PA-490 Land) $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 B ea con Fall s B ethle hem C h es h ire Mid dl eb u ry Nau g atuck Oxf ord Pro spe ct So u thb ury T ho mast o n Waterb u ry Wa t er t o w n Wolcott Woo d bur y 35 Tax Exempt Uses Tax-exempt uses include federal property, state property, local property (such as schools, town halls or city halls, public works, recreation, and library), and property owned by non-profit entities (such as land trusts, historical societies, ious institutions, cemeteries, and veteran’s organizations). relig Tax Exempt Uses Tax exempt uses in the Region were supported by about $10.7 mil- lion of net revenue from other uses in FY 1998-99. Since tax exempt uses pay no taxes yet receive some services, they typically produce a modest fiscal shortfall. One exception is due to payments in lie u of taxes (PILOT) from the State of Connecticut. PILOT payments can exceed the expenses attributed to State facili- ties and such uses can produce a fiscal surplu s. As shown in the following chart, there are differences between communiti es and whether State facilities produce a fiscal surplus. Most of this variation is related to higher payments in lieu of taxes for certain types of facilities (such as the Cheshire Correctional Institution, Southbury Training School, and Oxford Air port). Other variations result from local expenditures and tax base composition. State Facilities $0. 00 $1. 00 $2. 00 $3. 00 $4. 00 $5. 00 Beac on Fal ls B e thlehem Cheshi re Mid dl ebur y Naugatuc k Oxford Prospec t Southbu ry Thom aston Waterbury Watertow n Wol cott Woodb ury 36 BALANCE OF PAYMENTS 6 The balance of payments looks at: • which uses support other uses in the Re- gion, and • which uses are supported by other uses in the Region. Once the fiscal impact of different land uses is known in each municipality, the “balance of payments” between uses can be estimated. In essence, the balance of payments identifies: • which uses support other uses, and • which uses are supported by other uses. Overall, about $70 million dollars is tran sferred annually between different land uses in the Region in order to provide adequate tax revenue to meet the net expenditures in different program areas. Regional Fiscal Impact Summary (flip page over) 37 The largest amount of support (almost $51 million annually) is provided to 1-4 family dwellings. About $10 million is used to provide services to municipal facilities. Almost $8 million is provided to support residential apartments. Another $2 million is used to support c hurches and other religious facilities. The greatest support is provided by co mmercial developments (about $30 mil- lion) and industrial developments (a bout $27 million). While vacant land pro- vides almost $6 million worth of support to other uses at the present time, over 80 percent of this land is residentially zoned and subject to future residential development that may prove to be a fiscal negative. Within the Region, residen- tial condominiums produce a fiscal surplus of over $4 million annually to support other uses. Net support in the Region of almost $2 million is provided by State payments-in-lieu-of-taxes. Other fiscal studies have reported that private open space (such as land assessed as farm, forest, or open space as part of the Public Act 490 program in Connecti- cut) is a fiscal positive. However, those studies have also reported the results by comparing the revenue received in relation to the service provided. This analysis confirms those overall findings but also shows that the actual amount of fiscal surplus available to other uses is fairly modest (about $230,000 in the entire Region). Of course, since such programs help reduce the possibility that land will be developed and become a fiscal negative, the positive result overall is important to note. In the computation of the Balance of Payments, it is important to note that the use of the Consolidated Grand List assumes that all properties in the Region (whether they pay taxes or not) benefit in some material way from the overall provision of municipal services. In other words, it includes tax exempt uses as beneficiaries of municipal expenses such as road maintenance, police protection, fire protec- tion, and similar services. If expenses were only allocated on the basis of the Taxable Grand List, expenses would be allocated only among taxable uses and this would: • decrease their support of other uses, or • increase their negative net fiscal impact. 38 CASE STUDIES 7 While individual case studies can help to illustrate different findings, it must be remem- bered that the effect of one de- velopment or one fiscal policy may be dwarfed by overall economic changes or by small changes in other fiscal pa- rameters. The information in this study can be used to estimate the fiscal impact of differ- ent land uses or policies. The following sample case studies are presented: Existing Development • Existing Residential Development Wolcott • Existing Non-Residential Development Thomaston Proposed Development • Proposed Residential Development Woodbury • Proposed Non-Residential Development Prospect Other Case Studies • Tax Impact of Property Purchase With Cash Bethlehem • Tax Impact of House Sale Watertown • Median Sales Price Analysis Beacon Falls • Breakeven Assessment of a Residential Unit Oxford 39 Existing Residential Development Estimating Revenue For an existing residential development, add up all the real estate assessments, motor vehicle assessments, and personal property assessments. Deduct any tax exemptions (elderly, veterans, blind). This is the total net assessment for the development. Multiply by the mill rate to determine the tax revenue generated. Real Estate Assessment Case Study #1 Wolcott This case study is for a fictitious existing residential development in Wolcott. $1,428,000 Motor Vehicle Assessments $174,000 Personal Property Assessments $22,000 Exemptions ($5,000) Total Assessment $1,609,000 Times mill rate 27.98 mills Tax Revenue Generated $45,020 Estimating Net Expenditures Net expenditure amounts are discussed on pages 24-25. Count the number of school children and multiply by the net expenditure for services to pupils. Count the number of residents and multiply by the net expenditure for services to resi- dents. Take the total assessment for the development ($1,609,000) and multiply by the net expenditure for services to property. Add all of these estimates to- gether to get the total estimated annual net expenditures. 10 school children times $3,079 per pupil $30,790 35 residents times $44.47 per capita $1,556 Total assessment times $12.52 mills $20,145 Annual Net Expenditures $52,491 Estimating Annual Net Fiscal Benefit The annual net fiscal benefit is estimated by subtracting the estimated net expen- diture associated with the devel opment from the estimated revenue. Tax Revenue Generated $45,020 Annual Net Expenditures $52,491 Annual Net Fiscal Benefit ($7,471) Since the estimated annual net fiscal benefit is a negative number, it means that the fictitious development is presently resulting in a fiscal shortfall for the com- munity. 40 Existing Non-Residential Development Case Study #2 Thomaston This case study is for a fictitious existing non- residential devel- opment in Thomaston. Estimating Revenue For an existing non-residential development, add up all real estate assessments, motor vehicle assessments, and personal property assessments. Deduct any tax exemptions (manufacturing equipment). This is the total net assessment for the development. Assessed real estate value $560,000 Motor Vehicle Assessments $0 Personal Property Assessments $100,000 Exemptions $0 Total Assessment $660,000 Times mill rate 25.10 mills Tax Revenue Generated $16,566 Estimating Net Expenditures Multiply, take the total assessment for the development ($660,000) by the net expenditure for service to property (page 25) to estimate the total estimated annual net expenditures. 0 school children times $4,042 per pupil $0 0 residents times $66.36 per capita $0 Total assessment times $10.59 mills $6,989 Annual Net Expenditures $6,989 Estimating Annual Net Fiscal Benefit The annual net fiscal benefit is estimated by subtracting the estimated net expen- diture associated with the devel opment from the estimated revenue. Tax Revenue Generated $16,566 Annual Net Expenditures $6,989 Annual Net Fiscal Benefit $9,577 Since the estimated annual net fiscal benefit is a positive number, it means that the fictitious development is presently resulting in a fiscal surplus for the com- munity. 41 New Residential Development Case Study #3 Woodbury COGCNV Region A proposal has been submitted for a 12-unit subdivision in Woodbury. The houses are estimated to sell for $350,000 each. The development is expected to produce 10 school-age children and a total population of 32 new residents. What is the estimated annual fiscal benefit? Estimating Revenue Multiply the average selling price of a proposed house or unit times the number of units to get the total estimated market value of the development. Multiply that times the current residential assessment-sales ratio (obtained from the local assessor) to determine the total real estate assessment for the development. Add another 8.7% in Woodbury for the net effect of motor vehicle assessments, personal property assessments, and assessment exemptions. Multiply the total assessment by the current mill rate to determine the tax revenue generated. School Enrollment While the average school enrollment per unit in Woodbury was 0.42 students per unit, studies of school enrollment have found that the typical impact from new development is roughly double what the community- wide average is. In Woodbury, this would correlate to a new house multiplier of about 0.84 students per unit and a total enrollment of 10 students from the new development. 12 houses @ $350,000 = market value of $4,200,000 At the residential assessment-sales ra tio (57%) = assessed value of $2,394,000 Adjustment for vehicles, propert y, exemptions (plus 8.7%) $207,880 Total Assessment $2,601,880 Times mill rate 18.90 mills Tax Revenue Generated $49,182 Estimating Net Expenditures Estimate the number of school children and multiply by the per pupil net expen- diture for services to pupils (see pages 24-25). Estimate the number of residents and multiply by the per capita net expenditure for services to residents. Take the total assessment for the development ($2,601,880) and multiply by the net ex- penditure for services to property. Add all of these estimates together to get the total estimated annual net expenditures. 10 school children times $7,413 per pupil $74,126 32 residents times $77.84 per capita $2,2571 Total assessment times $3.22 mills $8,382 Annual Net Expenditures $84,765 Estimating Annual Net Fiscal Benefit The annual net fiscal benefit is estimated by subtracting the estimated net expen- diture associated with the devel opment from the estimated revenue. Tax Revenue Generated $49,182 Annual Net Expenditures $84,765 Annual Net Fiscal Benefit ($35,583) 42 In this scenario, the proposed de- velopment will require more in service costs than it provides in tax revenue. The mill rate will have to be raised to maintain service levels and that existing residents will have to pay higher taxes as a result of the new development. Tax Benefit Of A Proposed Use Or Activity The value of a one mill change in the tax rate is determined by dividing the Taxable Grand List by 1,000. Taxable Grand List $693,208,482 Divide by 1,000 1,000 Value of One Mill Change in the Tax Rate $693,208 When the Annual Net Fiscal Benefit is divided by the value of a one-mill change, it will result in the change in the tax rate (in mills) resulting from the proposed development. Annual Net Fiscal Benefit ($35,583) Divide by Value of One Mill Change in the Tax Rate $693,208 Tax Rate Decrease Due to Development (0.05133 mills) Since the estimated tax rate decrease is a negative number, it means that the proposed development is expected to increase the tax rate in the community. To determine the effect on a typical resi dential property owner, take the total residential assessment and divide by the number of housing units to determine the average assessment. Multiply by the change in the tax rate to determine the benefit to a typical residential property owner. Total residential assessment $621,437,544 divided by number of housing units 3,821 Average assessment per housing unit $162,637 times the change in the tax rate (0.05133) Annual Tax Benefit to a typical residential property owner ($8.35 ) Since the estimated tax benefit is a negative number, it means that the proposed development is expected to increase the tax bill for a typical housing unit. Regional Proposed Residential Development Summary (flip page over) 43 Proposed Non-Residential Development Case Study #4 Prospect Estimating Annual Net Fiscal Benefit Estimate the assessed value of the development. Add an allowance for the motor vehicles, personal property, and exemptions (55.9% for industrial development in Prospect). Multiply the total assessment by the current mill rate to determine the tax revenue generated by the development. Estimated assessed value of $1,000,000 Adjustment for vehicles, propert y, exemptions (plus 55.9%) $559,000 Total Assessment $1,559,000 Times mill rate 24.97 mills Tax Revenue Generated $38,928 Since it is a non-residential development, no expenses are anticipated for educa- tion or residents. Take the total assessment for the development ($1,559,000) and multiply by the net expenditure for services to property to estimate the expenditures generated. Estimating Assessed Value Assessed value of a non- residential development can be estimated in two ways. Ask the Assessor for the likely value on the Grand List. Alternatively, estimate the market value of the proposed development and multiply that by the current non- residential assessment-sales ratio (obtained from the Assessor). Total assessment times $6.87 mills $10,710 Annual Net Expenditures $10,710 The annual net fiscal benefit is estimated by subtracting the estimated net expen- diture associated with the devel opment from the estimated revenue. Tax Revenue Generated $38,928 Annual Net Expenditures $10,710 Annual Net Fiscal Benefit $28,218 Tax Benefit Of A Proposed Use Or Activity Assuming that the value of a one mill change in the tax rate in Prospect is $369,651, the change in the tax rate (in mills) resulting from the proposed devel- opment would be: Annual Net Fiscal Benefit $28,218 Divide by Value of One Mill Change in the Tax Rate $369,651 Tax Rate Decrease Due to Development 0.076337 mills Assuming that the average assessment of a residential property in Prospect is about $114,922, the tax benefit to a typical residential property owner would be: Average assessment per housing unit $114,922 times the change in the tax rate 0.076337 mills Annual Tax Benefit to a typical residential property owner $8.77 Since the estimated tax benefit is a positive number, it means that the proposed development is expected to reduce the tax bill for a typical housing unit. 44 “Payback” Of Property Purchase Case Study #5 Bethlehem Land uses that produce a negative annual fiscal benefit result in increased taxes to existing property owners. In some cases, it may be more cost-eff ective for a community to purchase the property since the cost of acquiring the property can be amortized over a period of time whereas an annual fiscal deficit could continue indefinitely. In other words, if new development is going to cost existing taxpayers more money whether the property is developed or purchased, it may make sense to purchase the property for municipal use or open space. Dividing the cost of purchase by the annual fiscal benefit from development will result in an estimate of how long it would take to “pay back” the purchase price. In general terms, a “payback period” of seven years or less would be considered a more prudent investment than one with a longer payback period. Estimate the market value of the property in its undeveloped state. Multiply by 1,000 and divide this by the Grand List. This is the change in the tax rate (in mills) to purchase the property with cash from current tax revenue. Market value of the property in its undeveloped state $250,000 Divide by Value of One Mill Change in the Tax Rate $242,761 Tax rate Increase to purchase th e property with cash 1.02982 mills Note from the foldout page on proposed residential development, that a new 12- lot subdivision development in Bethlehem could produce an annual fiscal deficit of $38,185 and increase taxes by about 0.15730 mills. Dividing the estimated purchase cost of the property by the annual fiscal benefit from development to estimate the number of years to “pay back” the property purchase. “Payback Period” of property purchase: Market value of the property in its undeveloped state $250,000 Divide by the Annual Net Fiscal Benefit ($38,185) Number of years to “pay back” the property purchase 6.55 years In Bethlehem, after 6.55 years, taxpayers would have paid the same amount whether the property was developed or the property was purchased by the com- munity. 45 Possible Tax Benefit of A House Sale Case Study #6 Watertown Suppose a house in Watertown, which is occupied by an elderly couple, is sold and occupied by a family with a school child and an infant. The total assessment of the property (including motor vehicles) is estimated to be $140,000. What is the fiscal benefit? Total Assessment $140,000 Times mill rate 20.79 mills Tax Revenue Generated $2,911 Estimating Annual Net Fiscal Benefit Before The Sale The estimated annual net expenditures before the sale are estimated to be: 0 school children at $3,996per pupil $0 2 residents at 52.10per capita $104 Total assessment at 8.49mills $1,189 Annual Net Expenditures $1,293 As a result, the annual net fiscal benefit is estimated to be: Tax Revenue Generated $2,911 Annual Net Expenditures $1,293 Annual Net Fiscal Benefit $1,618 Estimating Annual Net Fiscal Benefit After The Sale The total estimated annual net expenditures after the sale are estimated to be: 1 school children at $3,996per pupil $3,996 4 residents at 52.10per capita $208 Total assessment at 8.49mills $1,189 Annual Net Expenditures $5,393 As a result, the annual net fiscal benefit after the sale is estimated to be: Ta An The sale of a house occupied by two residents to a family with school age children will turn a fiscal sur- plus into a fiscal shortfall. Elderly tax relief may reduce the desire to sell a house can be a prudent fiscal policy by a com- munity if it extends occupancy. x Revenue Generated $2,911 nual Net Expenditures $5,393 Annual Net Fiscal Benefit ($2,482) The change in the net fiscal benefit is ($4,100) and the property went from pro- ducing a fiscal surplus to producing a fiscal shortfall. For this reason, elderly tax relief can be a prudent fiscal policy by a community if it reduces the desire to sell a house. 46 Median Sales Price Case Study #7 Beacon Falls COGCNV Region Case study #3 looked at the fiscal benefit of typical new residential development. This case study looks at the fiscal benefit of 12 typical houses in Beacon Falls. Estimating Annual Net Fiscal Benefit The calculations are similar to those discussed on pages 42-43 for estimating the tax revenue generated, the net expenditures, and the annual net fiscal benefit. Calculations follow: 12 houses at Median Sales Price @ $110,000 $1,320,000 At the residential assessment-sales ratio (55%) = assessed value of $726,000 Adjustment for vehicles, property, exemptions (plus 13.6%) $98,506 Total Assessment $824,506 Times mill rate 24.65 mills Tax Revenue Generated $20,321 7 school children times $3,847 per pupil $26,931 32 residents times $54.90 per capita $1,757 Total assessment times $7.48 mills $6,170 Annual Net Expenditures $34,858 The annual net fiscal benefit is estimated by subtracting the estimated net expen- diture associated with the devel opment from the estimated revenue. Tax Revenue Generated $20,321 Annual Net Expenditures $34,858 Annual Net Fiscal Benefit ($14,537) Regional Median Sales Price Summary (flip page over) 47 Breakeven Assessment of Residential Unit Case Study #8 Oxford What does a residential unit have to be assessed at (or sell at) to “cover its costs? Clearly, the answer to this question depends on the number of school age chil- dren in the unit. Assuming one school age child in a family of three people in Oxford, the calcula- tions would proceed as follows. Estimating Net Expenditures For Residents and Pupils Multiply the number of school children by the per pupil net expenditure. Multi- ply the number of residents by the per capita net expenditure. Add all of these estimates together to get the total estimat ed annual net expenditures. Notice that this has excluded the net expenditures for services to property. 1 school child times $6,581per pupil $6,581 3 residents times $42.94per capita $129 Annual Resident Net Expenditures $6,710 Estimating Revenue Required The real estate assessment and the estimated market value of the residence are estimated as follows: Tax Revenue Required for Annual Resident Net Expenditures $6,710 Divided by 40.48 mills (the sum of th e mill rate ( approx. 30.40 mills) and the mill rate for services to property rate ( approx. 10.08 mills)) 0.04048 Total Assessment $165,761 Divided by 1.127 (the adjustment for vehicles, property, exemptions) 1.127 Real Estate Assessment $147,082 Divide by the residential assessment-sales ratio 55%) Estimated Market Value of Residence $267,421 If there are two school age children and a family of four, the resident expendi- tures increase to $13,334 and the estimated market value would need to be about $531, 404. Overall, the residential market value needed to support one pupil in the Oxford schools is about $262,280. 48 CONCLUSION 8 Different land uses have different impacts (including fiscal impacts) in each community. Overall, it is im- portant to evaluate each use in light of all of its antici- pated benefits and costs on the com- munity and not simply tax costs and revenues alone. While this report has attempted to summarize some fiscal relationships in the Central Naugatuck Valley Region, it should be considered a starting point for further discussion rather than a final conclusion. A municipal fiscal impact analysis provi des insight into the fiscal impact of different land uses on the General Fund at a given point in time . As changes occur in the Grand List, local revenu es and expenditures, housing occupancy, and school enrollments, the overall fiscal impact of different land uses can be expected to change. Caution should be taken before applying these results to other time periods or jurisdictions since the results of this study represent the interaction of demographic and fiscal parameters that: • may be unique to the communities in the Region, and • are changing over time. It is important to stress that this study only looks at fiscal implications. It does not consider physical, social, or economic implications of different uses. For example In terms of policy implications of the info rmation in this report, it is important to stress that fiscal concerns should not be the only criteria for determining munici- pal policy, especially conservation and development decisions. In the final analysis, while different land uses vary in their potential fiscal impact in a community, the overall form and function of the community and its physical, social, and economic health should be the more important issue. As has been stated previously, it is important to note that each use should be studied in light of all of its anticipated impacts on the community and not simply tax costs and revenues alone. In the long run, managing the community responsibly to promote the best overall quality of life may be more important than investigating every land use without regard to how it fits into a bigger picture. 49 References Ad Hoc Associates, The Effects of Development and Land Conservation on Property Taxes in Connecticut Towns , New Haven, Connecticut, Trust For Public Land, 1995. Burchell and Listokin, The Fiscal Impact Handbook , New Brunswick, New Jersey, Center For Urban Policy Research, 1978. Burchell, Listokin, and Dolphin, The New Practitioners Guide to Fiscal Impact Analysis, New Brunswick, New Jersey, Center For Urban Policy Research, 1985. Burchell, Listokin, and Dolphin, Development Impact Assessment Handbook, Washington, DC, Urban Land Institute, 1994. Burchell et al, The Costs of Sprawl Revisited, Transit Cooperative Research Program Report #39, Washington, DC, National Academy Press, 1998. Holzheimer, Terry, AICP, Fiscal Impact Analysis in Local Comprehensive Planning, Planners’ Casebook #26, Washington, DC, Ameri can Planning Association, 1998. Lincoln Institute of Land Policy, Does Land Conservation Pay? The Fiscal Implications of Preserv- ing Open Land — Resource Manual , Cambridge Massachusetts, Lincoln Institute of Land Pol- icy, 1992. So et al, The Practice of Local Government Planning, International City Ma nagement Association, Washington, DC, 1979. Southern New England Forest C onsortium, Cost of Community Se rvices in Southern New Eng- land , Chepachet, Rhode Island, 1995. Urban Land Institute, Economic/Fiscal Impacts of Development – Selected References , ULI Information Service Infopacket #306, Washington, DC. 1990 Census of Population & Housing, Connecticut State Data Center, Office of Policy & Man- agement. 1996 Housing Unit Data, Connecticut Department of Economic and Community Development. 1997 Grand List Data, Local Assessors Offices. 1998 Population Estimates, U.S. Department of Commerce, Bureau of the Census. 1998-99 Budget Data, Local Finance Offices. 1999-2000 School Enrollment Data, Local Boards of Education. 50 Acknowledgments Council of Governments of the Central Naugatuck Valley Municipality Member Alternate Beacon Falls Susan Cable, Fi rst Selectman Karen Wilson Bethlehem Jeffrey Nicholas, First Selectman Victor Allen Cheshire David Borowy, Council Chair Michael Milone Middlebury Edward St. John, Fi rst Selectman John Baumer Naugatuck Joan Taf, Mayor Executive Committee Kevin Knowles Oxford Paul Schreiber, First Sel ectman Vice Chairman Beverly Hanna Prospect Robert Chatfield, Mayor Executive Committee Southbury Alfio Candido, First Select man Secretary Donald Briggs Thomaston Clifford Brammer, First Selectman Executive Committee Sam Barto Waterbury Philip Giordano, Mayor Allyn DeMaida Watertown Sean Butterly, Council Chair Charles O’Connor Wolcott Michael DeNegris, Mayor Treasurer Richard Longo Woodbury Richard Crane, First Sel ectman Chairman Duncan Graham Regional Planning Commission Municipality Members Beacon Falls Jonathan Chew, Arthur Koeller Bethlehem Victor Allen, Jack Nelson Cheshire John Campbell, Sherwood Dawson Middlebury Thomas Gormley, Francis Ruccio Naugatuck Joseph McEvoy (Chairman) Oxford Isabel Kearns Prospect George Kritzman (Secretary), Gene McCarthy Southbury Harmon Andrews, John Fischer Thomaston Sam Barto Waterbury Thomas Diblasi, Allyn DeMaida Watertown Mary Barton Wolcott Joseph Paulo Woodbury Katherine Campbell (Vice- Chairman), Eugene Crawford COGCNV Staff Project Steering Committee Peter Dorpalen, Executive Director Virginia Mason, Senior Planner Susan Forster, Senior Planner Laurel Stegina, Regional Planner Kristi LeDuc, GIS Research Associate Glenda Prentice, GIS Assistant Peggy Stack, Office Manager Patricia Bauer, Financial Manager Sam Barto, Thomaston Mary Barton, Watertown Delores Curtis, Southbury Kay Campbell, Woodbury William Donovan, Prospect Richard Pfurr, Cheshire Glenn Chalder, AICP Arroll Borden Donald Poland