Center for

Economi c
Devel opment
and Busi ness
Research
Wi chi ta State
Uni ver si ty
CEDBR FISCAL BENEFIT
COST MODEL 2011
Board of Tax Appeals (BOTA) requi res anal ysi s for tax
abatements and IRBs
(Now the Court of Tax Appeals)
State model developed and funded by Kansas Inc. and Kansas
League of Muni ci palities i n 1993, but not kept up- to- date
GWEDC provi ded fundi ng for development of new model
Model needed to comply with Court of Tax Appeals requirement
HISTORY OF MODEL DEVELOPMENT
Ol d model outdated
SIC not NAICS
Other limitations
Al l ow greater fl exi bility
Local techni cal support
Available for use throughout ED process
WHY WAS THE CURRENT MODEL
DEVELOPED?
Desktop Model
Given to regional
partners
Returns output for City
and County
User Friendly
Full Model
Returns output for City,
County, State and
School District
Created to be flexible;
therefore, more
complex than Desktop
model
TWO VERSIONS OF THE MODEL
Goal : quanti fy the changes i n tax enti ty revenues from a
change i n l ocal i ndustry
Model requi res company data, i ncenti ve data
Data is provided by company or economic development
representative
In addi tion, CEDBR mai ntai ns a data base of l ocal tax
structures
Based on the data, the model fol l ows the dol l ars from an
i ndustry expansion/contraction as i t fl ows to other busi nesses
i n the communi ty, empl oyees and l ocal governments
Output i s based on exi sti ng tax structure and pol i cy
INPUT OUTPUT MODELING
NAICS code
Capi tal i nvestment
Land, buildings, machinery and equipment
Number of new j obs
Average wages of new j obs
New/addi tional company sal es
New/addi tional company purchases
New/addi tional company vi si tors
DATA NEEDED: COMPANY DATA
Dol l ar val ue of i ncenti ves by type and taxi ng j uri sdiction
Tax abatement (years/percentage)
Forgivable loan
Training dollars
Infrastructure improvement
Cash value of all other incentives
DATA NEEDED: INCENTIVES
Tax rates
Mill levy rates
Budget information
Number of residents
Number of employed
residents
Avg. market value of
new residential
property
Avg. wage all jobs
LOB (local option
budget) mill levy rate
LOB percentage of
general budget
Capital outlay mill
levy rate
Number of students
General Fund Budget
DATA NEEDED: COMMUNITY DATA
BASE VS. SUPPORT INDUSTRY
We have two types of i ndustry:
Base brings outside dollars in
Support reshuffles existing dollars
Base i ndustri es and support i ndustries may l ook very di f ferent
from one communi ty to the next.
Cal culated by the US Dept. of Commerce, BEA
Quanti fies the ri ppl e from the change i n an i ndustry.
Direct
Indirect/Induced
Total
Base i ndustry has a l arger mul ti plier than a support i ndustry
Di rect, Indi rect and Total j obs/and or payrol l
MULTIPLIERS
A maj or source of revenue for taxi ng j uri sdi ctions i s retai l
sal es taxes
To account for these revenues, we must know what
percentage of a company s sal es and purchases are subj ect to
sal es tax; i t i s al so necessary to esti mate these percentages
for company empl oyees/payrol l
Captured retai l sal es
County County Pull Factors (KSU)
City city pop. is divided by county pop. (calculate Wichitas share of
Sedgwick County sales tax revenue)
WORKER SPENDING PATTERNS
Benefits
Property Taxes
Retail Sales Taxes
Transient Guest Taxes
Other Fees & Taxes
Costs
Incentives
Cost of providing
city/county services
CITY MEASURES
Return on Investment (ROI)
The annual rate of return, over the next 10 years, on each taxing
entitys investment in the company
Benefit Cost Rati o
Compares public benefits over a ten-year period from the new or
expanding company to public costs during the same period
Net Present Val ue
OUTPUT
Quanti tative vs. Qual i tative
Rel i es on i nformati on gi ven to us
The desktop versi on purposely underestimates benefi ts to the
communi ty
Depending on the si tuation, can under - or over- estimate
i mpacts
Example large capital expenditure with tax abatement may
outweigh benefits seen from new jobs
LIMITATIONS