A Fiscal Impact Example

Suppose an average housing development is built in an average Indiana school corporation.  The housing development might have 25 homes, each selling for $100,000, each with families of two adults and one school age child.  Suppose that 18 of the families are new to the school corporation, while 7 are simply moving from another location within the corporation.  The average school corporation has 3,235 pupils and 191 teachers, for an average class size of 17.  It's got $184 million in assessed value, $57,000 per pupil, and a property tax rate of $5.11 per $100 assessed value.

Here are the new revenues this development generates for the school corporation:

• New property taxes, for general, transportation and capital projects funds:  $18,213

• New motor vehicle excise taxes, plus added charges and fees:  $5,068

• New state aid:  $55,170

• Total New Revenue:  $78,451.

There is also $4,663 in debt service property tax revenue, collected to pay off bonds issued to for construction of school buildings.  This is not counted as new revenue, however, because the debt repayment schedule is usually fixed, and the tax rate will adjust up or down in order to raise this fixed payment.  The "new" debt service revenue would actually be used to reduce (slightly) the rate paid by existing taxpayers.

State aid is distributed by a formula passed into law by the Indiana General Assembly.  It is complex, but essentially delivers more aid per pupil to school corporations with less assessed value per pupil, and less aid per pupil to school corporations with more assessed value per pupil.  For a new development, the higher the assessed value per pupil, and the smaller the number of new pupils, the smaller will be the added aid received.  In extreme cases a very high valued, low enrollment development could reduce total state aid.  The lower is assessed value per pupil, and the larger the number of new pupils, the larger will be the added aid received.

Here are the new costs this development generates for the school corporation:

• New teachers, to maintain constant class size:  $40,717

• New annual debt service, to meet requirements for new classroom space:  $22,970

• Transportation expenses:  $7,751

• Costs for administration, health, cafeteria, maintenance and other services, based on average per pupil expenditures:  $60,961

• Total New Costs:  $132,398

 Fiscal Impact: 

Total New Revenue less Total New Costs =

$78,451 - $132,398 =  -$53,947.

The fiscal impact is negative, implying that the average housing development produces more in added costs than it generates in added revenue for the average school corporation.  This is consistent with the results of many fiscal impact studies showing housing to have negative fiscal impacts.

There are a number of changes that could make the fiscal impact less negative, or even positive:

• Higher valued homes with fewer new pupils ;

• Added business property within school corporation boundaries, in addition to the new housing for the businesses' customers and employees ;

• Lower salaries for new employees and lower per pupil costs for other services;

• Extra school capacity, meaning new teachers need not be hired nor new classroom space built;

• New housing close to school buildings, so there are no new transportation costs.