American Institute of Certified Planners (AICP) Practice Exam

How does a fiscal impact analysis benefit city officials?

1. It helps to evaluate aesthetic considerations

2. It assists in determining project profitability

3. It aids in city infrastructure planning

4. It evaluates project revenue versus service costs

The correct answer is: It evaluates project revenue versus service costs

A fiscal impact analysis provides vital information to city officials by evaluating the relationship between the anticipated revenue generated by a specific project and the costs associated with providing public services for that project. This analysis goes beyond simple financial metrics; it helps officials understand how new developments or changes in land use will affect the city's budget, tax revenues, and service provision over time. Through this analysis, city officials can make informed decisions on whether to support, modify, or reject proposed projects based on their financial implications. For instance, if a development is expected to generate significant tax revenue but also requires substantial public services—increased policing, fire services, road maintenance, or school funding—the analysis can show whether the revenues will cover these costs. By illustrating the potential fiscal benefits or shortfalls, city officials can prioritize projects that align with the city’s financial sustainability and long-term goals, ensuring that development not only meets growth targets but also maintains the fiscal health of the municipality. This decision-making tool is instrumental in balancing growth with quality public services.