Cost Benefit Analysis
Municipalities are massively invested in urban real estate; well over 80% of municipal revenue is generated by real estate; property tax, deed transfer tax, development charges, permit fees and the like. Real estate tax revenue is critical to municipal budgets yet municipalities rarely consider real estate economics, or undertake a Cost Benefit Analysis, when making urban planning decisions; a behavior akin to investing one’s retirement savings without consideration of the expected risks and returns. Consideration of real estate economics to inform the urban planning process can maximise property values and hence municipal property tax revenue.
“Growth is good” is the prevailing wisdom. But is it always? Real estate development imposes extra costs on the municipal budget as well as enhancing the municipality’s property tax revenue. Unless the municipality utilises Cost Benefit Analysis to inform their urban planning process, property development may impair the municipal budget. The plain assumption that property development always pays for itself is being rightly questioned. Increasingly, communities are considering the fiscal impact of real estate development; undertaking a Cost Benefit Analysis determines how the expected revenue, capital and operating costs, of the property development affects municipal budgets, and by extension, property tax revenue. This issue is especially pertinent to the communities of Atlantic Canada where demographic and migration trends continue to erode the existing property tax base.
While real estate development is critical to community vitality, the way communities grow is a perennial civic conversation. A robust discussion is important; it is especially fruitful when supplemented with objective Cost Benefit Analysis. We are uniquely equipped to deliver that Cost Benefit Analysis. Our understanding of real estate valuation, demographic and market analysis in Atlantic Canada is unparalleled. Combined with the anticipated capital and operating costs of a property development proposal, we can provide a realistic model of a real estate development proposal’s fiscal performance and its net present value (NPV) impact on the municipality’s budget from a property tax revenue perspective. This Cost Benefit Analysis can be utilised to inform the urban planning process.