Fiscal Impact Model
Nichols long-term financial planning model is a fiscal
planning tool that simulates future financial conditions
of a community over a defined projection period. Financial
status is estimated through projections of expected
future population and community development, which in
turn drives changes in capital and operating expenditures,
assessments, and tax rates. The intended application
of the model is as a management tool by the community's
financial planners to explore potential "what if"
scenarios of possible future conditions and changes
model was developed using Microsoft Excel for Windows.
The model is comprised of a number of worksheets that
are linked together in the order in which they will
most commonly be used. The model may be applied in a
number of different ways. One way is to make predictions
from a single simulation. For example, a set of assumptions
can be inputted into the model and the resulting impact
on expenditures, taxes, and mill rates generated. While
this is a legitimate use of the model, the user should
be cautioned against undue reliance on the output given
the level of aggregation and approximation inherent
in the model.
more effective way of using the model is to compare
the results of different "runs" of the model
employing varied assumptions. This method is the preferred
and recommended usage, because it is not affected to
the same extent by errors resulting from inaccurate
assumptions. Examples of using the model to compare
different "runs" employing varied assumptions
could reflect a comparison of alternative service levels,
the impact of a major development, slower population
growth, higher than expected capital costs, or changes
in financing approaches.
Applied Management has applied the model on behalf of
a number of municipalities. Some customization of the
model may be required to meet the specific circumstances
and needs of the jurisdiction and the model must be
calibrated using historical and current financial and
operating data. The firm provides training in the use
and updating of the model.