American Institute of Certified Planners (AICP) Practice Exam

Which method is utilized to assess whether a project is maintaining its necessary income relative to public service demands?

1. Cost Benefit Analysis

2. Fiscal Impact Analysis

3. Cost Revenue Analysis

4. Feasibility Study

The correct answer is: Fiscal Impact Analysis

The correct answer, which is Fiscal Impact Analysis, is used to evaluate the effects of a project on the financial health of a local government or public service system. This analysis focuses on understanding how a proposed project will influence income generation, expenditures, and necessary public services—essentially determining if the project will produce sufficient revenue to cover the demand for services it generates. In this context, Fiscal Impact Analysis assesses whether the income produced by a project (such as taxes or fees from new developments) aligns with the costs associated with providing public services (like emergency services, schools, and infrastructure) to the new development. It helps policymakers make informed decisions by predicting the net fiscal implications of a project on public budgets, allowing for reasonable planning regarding resource allocation and service delivery. Other methods in the provided options serve different functions: Cost Benefit Analysis evaluates the overall value of a project by comparing its costs and benefits, Cost Revenue Analysis generally examines the direct relationship between costs incurred and revenues generated for specific projects or services, while a Feasibility Study assesses the viability of a project, including technical, legal, and operational aspects, but not specifically focusing on fiscal impacts relative to public service demands.