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REPORT DOCUMENTATION PAGE EEE on 28108 DISSLRLTION “INCIDENCE OF DEVELO2MENT IMPACT PLES: TLORY AND EVIDENCE? SATTACRR, Mal PROSSEDS PRILLIPD UTVERSETY OF COLARADO AT ROULDER Reront Mumacn cineas SORNETATEA "8 ye tetoTRRNOREN RT —} [Ti DESARTWANT OF THR ATI FORCE. ‘SGRUCY Hero mun AFITICTA, RITSU 12S oss p STREET WPAFB OF 45433 FEET AVATARS STREET 2-H OEE intimidation fs Acomdancs Wi AFL 35 DISTRIBUTION STATEMENT A Approved for PublicRet ase Distibution Unlimited 20040213 054 ies Ie PRCE ToD “SEEUIEYY SUSSF TERT TOT" TATRA ‘SECURITY AND POLIGY REVIEW WORKSHEET. Respinnt for Palais Rtense Clearance th ema Sth A a10% Seer TEL emurmcnemermrmsos He usnta [DEES Thilo [Josoescr sae oa [pre crersnen osm yoro ws exerens [F] wectss som — -— aoraveener PY rwnn atten [rece os os ae Tmcrperted oF DEPELEP MENT ImPKET FEESE TBE Dey AND EW OES a PHILENE Dees PRCELEDA, LF coe, USAF Ha USAER HER D, FOAM Guat tase ewan no id oti pn ho mt dW at ar ute oe | [ Irmtaneronuer ENepeeve [XJecmmomranr | reeey avd EV Dew ee N/A pack ee BAT TMESI oe DeNER APMC WT IMOreT FES sewn cocaine [idee [vee snrossenren FOR MORE INFORMATION Phone: (957) 255.9964 DSN: 785.8954 FAX: (937) 258 2195 DSH: 785-2135 E-MAIL: aft.pod@antoda wee” hic: aftlimewestn0 him 1 Jan ROD THIS “PISsive ATOM MOMELS FEES PACED on evurdeeS of HEL REE DEWE OF Commonites Te FAY Fale, IPE VERVZE’ ASSCCLANEO LOT Geo fonae communi MOVER IF coverovetero > MALY TE Tie cece oo vem eRe et ciherd Feenta yess TIES SavTZ Flew tree Teorey Thy Fin wc® rey eee T Se RSE, Emmwie ne “PATA 18 Tier Use? 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Incidence of Development Impsel Foes: Theary and Evidence ‘writen by Plilip Drew Prosseda hes boon approved for the Deparanent of Eeennics be be, Boslld md Charlee A.M, de Bartolomé - Cpt hy Se ail)|L—— Dsl F Walsh BAL, ‘Ter G, Mekinaish TH Zr} Date ‘The final copy of this thesis has been examined by the signatories, and we find that ‘oth the coniont and the fort. meet acceptable presentation standards of acholarly \Wotk in the ubove mentioned dinuipfine, ‘the views expressed in this aniole are chose of the author and do not reflect the official paicy or position of the Uniled Slates Air Mocce, Depariment of Defense, or The TS. Government Incidence of Development Impact Fees: Theory and Evidence by Philip Drow Prosseds B.S, United States Air Foros Academy (1950) MOL. fol F, Kennedy School of Government, Harvard University (1988) MA University of Colorado at Bi der (1996) A thesis submitiad tothe Faculty ofthe Graduate School ofthe University of Color in pail iene ofthe requirement forthe degree of Doctor of Philosophy Department of Feonomios 2003 Prosteda, Phillip Drew (PRD. Reanomics) Aneidence of Development Impact Fees: Theory and Evidence ‘Thesis dircoted by Professor Charles A.M, de Bartolomé ‘This disscrtation investigates the incidence of development impact fecs from both @ theotetiea! and empirical perspective, A model of two communities with coxisting immobile residents and open land for new residents iz developed. New residents may chaowe lp live in ether community and do so ta maximize utility, The Pareto efficient and competilive outcomes are characterized and conditions for at efficient outcome under competition are established, The properties of the madel are then developed under a eonmpotitive system where now infrastructure is financed by a property tex on all residents, Model parameters such as the leve of infiaatrustue, the level of amenity, the total muber of new residents ia the system, and income are varied and the effect on ulilty is analyzed. Onc community then chooses various Tsvels of an impect fee an a subetlute for property tax finance and the welfare effects of this change in finance mechanism are analyzed. Final, both communities match inmpacl fees and the welfare cffeets of thie inoraction are smalyecd, It is found that the dominant welfare maximizing strategy (or existing residents of any community is switch ffom property tax finance for now infiastructnrc to complete impact fee finance, An empirical investigation ofthe incidence of impact fees using a large deta set from nonhern El Paso County is analyzed in a propemty tax capitalization framework, Various econometric motels are employed to lest the hypothesis of postive impact Tee incidence. The empirical modela generally support previous rescarch indicating positive incidence. ACKNOWLEDGEMENTS T am deoply indebted fo my advisor Charles de Bartolomé for his overall ‘guidance and patience (roughanl my dissertation. T could not have accomplished the ‘work in chapter two without his thoughtfil comments, critiques, and suggestions ‘Charles was always available whoa I needed to make the joumey to Boulder for advice, Jim Alm gladly accepted the role of outside reader and was very generous ‘ith his time despite a very demanding schedule, Randy Walsh suggested the prise jindex approuch of chapter Tour and provided the enlhusiuan for me to complete iL T am also grateful forthe assistance of the other membas of my committee, Jeff Zex provided great moral support and is an example of energy and dedication in the classroom, I'll never forget fis Mapatium story in labor economics, Tessa MeKinnish provided expert advioe on using estimated data and stepped in when Robert McNown was not available, Vals shank Robert MeNawn. While unubsle finish the project with me, his adviee and instmetion in econometrics were invaluable, ould not have completed the oronometrics of chapter three and four without the data set provided by the El Paso County Ascessor's Office. Susan Curnntte was instrumental in gotting the data and providing updates as nceded. Horb Rodriguez sct up the video conference with GSU for my defense. M went without a hit, Finally, I owe a special thanks to Georgiana Esquibel aud Julia Perez. Georgiana Jnew the ius and outs of the graduate schoot and helped immensely when 1 needed a timeout ip serves a year’s tour in Sau Araia, Julia jumped dhrough runy hoops £0 get the final committee paper work completed so 1 could defend by Thanksgiving, CHAPTER 1 Introd : u re Table of Contents Review of the Primary Literature on Impact Fee Incidence Ditection ofthe Sudy 2 Theoretical Analysis of Impact Fees from tite Planner and Competitive Perspectives 21 22 23 24 25 Introduetion ‘The Plannce’s Problem: Characterizing the Pareto-efficient Allocation 22.1 Setup andl Assunplons of fie Plan's Problem 222 Constants in the Planner’s Probtemt 223° Lagrangian 2.24 Firs Onder Conditions 2.25 Eitieieney Conditions Charactcrzing a Competitive Allocation Proof thatthe Competitive Problem ie Parelo-efReient Analysis ofthe Modet Uuder a Property Yax Regime 2.5. Initial Symmetry under the Property Tex Resime 25.2 Bifect on Utility and Endogenous Variables When the ‘Level of Infrasructute is Varied in Community 1 25.3. Bilfeeton Uiility and Fndogenous Variables When the Level of Amenity Ts Varia! in Commucity 1 2s a 254 Effecton Usiity and Endogenous Variahtes When The “Total Number af New Residents in the System is Varied 28.8 Effect on Usilty and kindogenous Variables When. Income per Resident Is Varied 25.6 General Conchusions Under a Property Tax Regime 2.6 Analysis of the Model When the Lnpact Fee Is Introduced, 26.1 Biffect on Utility and Endogonous Variables When Community 1 Switches from a Properiy Tax Regime to an Impact Fee 26.2 Effect an Utiity and Endogenous Variables When ‘Both Communities Siraultancously Switch ftom a Property Tax Regime to an impact Fee 2.6.3 General Conclusions When Switeding (hom Property “Tax Finance to an Impact Empirical Analysis af the Ineldence of tmpact Fees 3.1 Introduction 32 Date 3.3. Behavioral Astumptions, Funetional Forms, and Eeonometria ‘Techniques 33.1 Method 1 332 Method 2 33.4 \ontification ofthe Coefficient ofthe Lmpact Fee Vaciable 34 Estimation and Results 3S Estimation and Results in the Reformulated Model 3.6 Chapter Summary R 2