American Institute of Certified Planners (AICP) Practice Exam

What does fiscal impact analysis primarily assess?

1. Costs of economic development

2. Difference between policy costs and government benefits

3. Investment returns of a project

4. Employment statistics of local businesses

The correct answer is: Difference between policy costs and government benefits

Fiscal impact analysis primarily assesses the difference between the costs incurred by a municipality or government as a result of a particular development or policy and the revenue it generates. This type of analysis helps planners and decision-makers understand how new developments, such as housing projects or commercial enterprises, will affect the financial position of local government. By identifying net fiscal effects, fiscal impact analysis aids in evaluating whether a proposed development will require more public resources than it generates in terms of taxes or revenue. This understanding is crucial for maintaining a sustainable financial environment in communities, guiding policymakers in their planning decisions, and forecasting the long-term fiscal health of a jurisdiction. While costs of economic development, investment returns, and employment statistics are all important considerations in planning, they do not focus specifically on the fiscal implications of developments in the same way that a clear comparison of costs and revenues does.