CMAP experience in the LTA program, feedback from communities on training needs, and interviews with local developers indicate that many plans do not reflect market and fiscal realities over the short and long-term. Lack of market understanding draws out and even halts development processes, leading to potential conflict when community change does not meet residents’ expectations. Lack of understanding of long-term expenses leads many communities to a mismatch between needs and costs, resulting in increased taxes or fees or declining services and infrastructure. These issues compound at the regional scale, leading to overbuilding and a backlog of local infrastructure needs. Underpinning plans with market and fiscal analyses is necessary when the state and region increasingly face limited fiscal resources, and it can help the region continue to thrive with prioritized investment in infrastructure and development.^[1]

The types of places that residents and businesses want changes over time, such as the current growing preference for walkable places spurring more housing in suburban downtowns, growth of service industries, and the resulting shift in employment types, or the decline in large-format retail due to changing consumer patterns.^[2] Major demographic shifts also change market demand; as the region’s population ages, demand for varied housing types to support aging in community will continue to grow. Planning for current market understanding as well as these major shifts in the context of local and regional goals can help local governments create successful plans.

Markets transcend jurisdictional boundaries, which means that thriving municipalities and counties take a subregional and regional perspective when planning for their ability to support various types of development.  Market support for development types such as commercial, office, and residential is closely aligned with population and employment densities, regional and national economic trends, and the major infrastructure, workforce, and built environment assets of a subregion.

[GRAPHIC TO COME: Bird’s eye view illustration of various market types, infrastructure networks, and local boundaries.]

As with market potential, lack of a full understanding of the mid- and long-term fiscal implications of cumulative development decisions can limit local governments' ability to implement community goals. Planning for development must strongly incorporate planning for both local fiscal impact as well as costs to supporting jurisdictions. This is a particularly important consideration for communities at the developing edge of the region, who must align expansion proposals with the immediate and long-term cost of the new infrastructure required to support that development. Communities often recoup the costs of near-term needs, like new stoplights or water main extensions. Some communities, such as Romeoville, recoup costs of infrastructure investment through exactions from new development. However, these same communities may not have the data and expertise to properly assess cumulative infrastructure costs of development. When a disconnect occurs between near-term development approvals, tax and fee schedules, and long-term maintenance and replacement costs, local decision makers may face challenges in maintaining or upgrading their infrastructure without substantively and disruptively increasing taxes and fees.^[3] Built-out communities face different challenges than growing communities, with the former able to leverage a stock of existing infrastructure to support development, even if that infrastructure must eventually be reconstructed. Increased use of fiscal impact analysis as well as asset management programs can help communities better link goals to costs, improving planning processes and outcomes.

[GRAPHIC TO COME: Informational graphic on asset management.]

Assessing the potential public costs of and market for planned development is critical for each phase of planning, from site-specific initiatives to comprehensive plans. Basing plans purely on potential fiscal outcomes without tying those outcomes to market realities can lead to overbuilding of some development types and construction of underutilized public infrastructure, leaving communities with the costs of supporting development without revenues to match. In particular, the state distribution of retail taxes to municipalities based on sales made within their jurisdictions may lead some municipalities to promote excessive retail construction, which results in high vacancy rates. Among the broad local and regional impacts, metropolitan Chicago is home to 4.1 percent of all U.S. retail square footage, and 5.8 percent of vacant retail.^[4] By balancing fiscal and market considerations development can be resilient.

The following describes strategies and associated actions to implement this recommendation.

Community goals for specific types of retail, office, or industrial development do not always match regional economic trends or subregional market potential. Markets for real estate or particular industries do not align with municipal boundaries. To foster achievable goals, communities should incorporate market analysis into planning processes, using technical analysis to inform objectives. A market analysis should assess current and forecasted demographic trends, recent development and absorption activity, competitive existing development, industry mix, existing assets and infrastructure, and similar factors. This analysis can help local governments set near and long-term goals in the planning process. Local governments may need to plan for new infrastructure or some types of development to generate other desired developments, such as increasing housing units to support downtown restaurants or retail. Similarly, planned industrial may require new truck routes and infrastructure to limit impacts on adjacent uses.

Local governments should incorporate market analysis into all planning processes, but particularly in developing comprehensive, strategic, and subarea plans and in considering economic development incentives.

Local governments should plan for markets that cross community boundaries, including partnering with jurisdictions within the same markets when developing economic development and land use plans.

Local governments, business organizations, and other key partners should implement best practices for subregional economic development to better support markets-driven development, reduce costs, and implement local and regional goals.

CMAP and partners such as the Urban Land Institute (ULI) should provide educational materials and training about market-feasible planning and development to local governments.

CMAP should provide subject matter expertise and technical assistance to communities that are collaborating to plan for subregional and regional markets.

Planning for long-term costs can make the best use of the region’s limited infrastructure dollars and leverage our existing road, pedestrian, water, stormwater, and utility systems. Local governments often have strong practices in place to assess the immediate impacts and costs of new development. Many rely on development impact fee schedules and negotiated compensation for parks and trails, water or sewer connections, and other amenities. They often require formal fiscal impact analysis for larger development proposals. However, communities may require assistance to estimate, plan for, and build community support for addressing longer term infrastructure costs, such as with stormwater infrastructure. Many communities are also reluctant to raise taxes and fees to cover the costs of the new infrastructure and services. Increasing regional and local data on infrastructure condition can help communities better plan for the fiscal impacts of individual and cumulative development decisions, reducing costs over the long term. While these strategies apply throughout the region, they are particularly important in areas at the edge of the region, where new infrastructure and communities are being built.

Local governments should plan for infrastructure needs of the whole community through a capital improvement plan, including an assessment of the long-term maintenance costs generated by existing and planned developments.

Local governments should develop transportation, water infrastructure, and other asset management systems to fully implement performance-driven investment practices and make the best use of the region’s limited resources.

Partners and CMAP should develop materials and trainings to help local governments understand how their land use choices affect local revenues.

CMAP and partners should assist with transportation data collection and asset management pilot projects, eventually expanding to a region-wide program.

COGs and CMAP should develop trainings to assist all of the region’s local governments in implementing and improving asset management systems over the long term.

Partners and CMAP should research best practices and leverage its growing resources on age and condition of the region’s infrastructure to develop methods for local governments to assess mid and long-term impacts of major or cumulative development processes.

Development-specific revenues are important: They ensure that everyone who benefits from a municipal service or public infrastructure helps pay for it. Communities should work with developers and businesses to ensure adequate funding for public infrastructure as development is approved. All communities should emulate municipalities and counties across the region that use agreements with developers to fund infrastructure improvements.^[5] 

There are many best practice strategies available. Communities with existing development might work with businesses that would specifically benefit from improved infrastructure to fund those investments via special districts or fees. Recapture agreements with developers help local governments recoup expenditures on prior infrastructure improvements. Communities should work with developers of projects expected to have a significant impact on municipal operations or infrastructure costs to cover these costs.

As part of development approvals, local governments also often approve the construction of new infrastructure. This new infrastructure will eventually incur long-term maintenance and reconstruction costs. Local ordinances govern the extent and type of infrastructure that new developments require. Closely evaluating what infrastructure is truly required to support development can help reduce costs in the long-term.

Partners such as ULI, Government Finance Officers Association, and others should provide assistance to local jurisdictions in assessing the short and long-term fiscal impacts of development.

Municipalities and counties should employ development-specific revenues to reduce public costs of new development.

Local governments should perform fiscal impact analysis to properly employ development-specific revenues and associated agreements.

Local governments should review their development ordinances to ensure that road, water, and other infrastructure requirements are appropriately scaled to support development and optimize long-term costs and needs.

CMAP, and partners such as ULI and the MMC should provide materials on best practices in fiscal impact assessment and assessing costs in development approval processes.