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Thread: zoning and financial analysis

  1. #1

    zoning and financial analysis

    How much financial analysis do you'all perform in zoning and site plan reviews, etc.? Given the importance of "investment backed expectations" in zoning law, and applicants' constant claims that holding their projects to city standards will bankrupt them, how do people respond to these claims?

    We tend to gloss over them.

    What methods do people use - looking at comparable projects, cap rate analysis, etc? Should financial analysis be a factor in zoning and site plan decisions? If putting the sidewalk on both sides of the street really would make a project unfeasible, should that matter?

    I'm looking at this as a potential thesis topic (a long story) and wanted to get a quick survey of how people treat applicants financial claims, and whether people do their own "quick and dirty" analysis to get a handle on the truth of these situations.

  2. #2
    Forums Administrator & Gallery Moderator NHPlanner's avatar
    Apr 1996
    New Hampshire
    We don't do much fiscal impact analysis, and when we do it's generally for larger projects, and look at the impacts to community services and tax revenues, not the developer's costs.
    "Growth is inevitable and desirable, but destruction of community character is not. The question is not whether your part of the world is going to change. The question is how." -- Edward T. McMahon, The Conservation Fund

  3. #3
    Cyburbian nerudite's avatar
    Aug 2001
    We don't do them too often here for individual projects, but often when we look at zoning changes we will consider the fiscal impacts. As an example, there has been a request to narrow our lot width minimum from 11.5m (38') to 9m (30'). Since taxes are based on assessment, we ran a fiscal impact analysis for the proposed change to our Land Use Bylaw. Any large changes to the Municipal Development Plan (General Plan) or a large redistricting would trigger the requirement.

    Davis, CA used to require fiscal impact analyses for just about every large project/PUD. That was almost 10 years ago though...

    I don't think that in most cases any City I have worked for would allow a serious change in policy (like no sidewalks!!!) because a developer can't afford it. The long-term costs to the City and its residents isn't worth it. In some specific cases, such as redevelopment where the City wants specific employers or industries, we may give a little more. But with a standard development, never.

  4. #4
    Cyburbian Cardinal's avatar
    Aug 2001
    The Cheese State
    We don't do much analysis, but given that we have done several developments of our own, it is not to hard to look at the plan and see whether or not the developer is telling the truth. Face it, the differnetial cost between siding materials is not significant when amortized over a twenty-year note or given the 39-year depreciation of commercial buildings.

    Fortunately, most of the local developers want to do a quality project. They live in the community and want people to think of them as contributing to make it a better place. The problem ones are often from outside of the area. They want to skimp on all of the better materials, landscaping, curbs and sidewalks, etc., so that they can undercut the local market rent.
    Anyone want to adopt a dog?

  5. #5
    Member Wulf9's avatar
    May 2003
    Near the Geysers
    In California, there is no investment backed expectation in law. State law enables (requires) a General Plan and that zoning conform to the General Plan. So the basic expectation is a comprehensive, internally consistent General Plan and zoning to implement the plan. Investment return is not a part of law here.

  6. #6
    Cyburbian Doitnow!!'s avatar
    Dec 2003
    If putting the sidewalk on both sides of the street really would make a project unfeasible, should that matter?
    I'll tell you friend. That's exactly what I am doing right now and I am reaching a state where I may have to rethink having elaborate sidewalks on both sides.Just the bare minimum in many places.
    But doing this kind of financial analysis is new to us and I am catching on it real fast as I believe in having the full picture of what we are planning and visualising.
    Unfortunately most issues are that of basic infratstructure they should not be compromised. They involve high initial capital investment and returns over a period of time.
    Some private developers are convinced as they are getting better returns by providing such and marketing it as value addition.

    Nice topic for thesis if you are taking it up.

  7. #7
    We do not do any financial analysis. If it is a big project we require a performance bond to ensure the project completion.

  8. #8
    Cyburbian Masswich's avatar
    Nov 2002
    Ocean to the east, land to the west

    Big Issue (and for some good reasons)

    This has become a big issue in the Boston area, and for some good reasons (limited developable land brings up the issue of opportunity cost, Prop 2.5 limits ability to collect taxes, etc.) The focus is on the fiscal impacts to the community, not the developer.

    The problem is that fiscal impact analysis is somewhat of an art, not a science, and its easy to find justifications for your pre-existing opinions somewhere out there. That having been said, I think fiscal impact is important. Towns generally don't want residential development because they say it costs them money. The state responded with a report saying that it often makes communities money. The truth is somewhere in-between, and though planners seem to hate having this discussion since its so difficult to pin down answers, its becoming hard to avoid.

  9. #9
    Cyburbian Emeritus Chet's avatar
    Aug 2001
    South Milwaukee
    As far as investment backed expectation goes, Its incumbent on the developer to do the financial analysis, and where zoning laws result in uneconomic situations, the analysis should be constructively shared with the community. A developer saying "...but I can make more money with an 80% floor area ratio" carries no weight, but a developer demonstrating that the existing bulk requirement results in investment disincentive doies IMHO.

    I used to work for a community that did a limited municipal fiscal impact analysis (cost of service provision v. revenue potential) for any major development. I always suspected their methods were flawed and assumed too many static relationships.

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