Economic Impact vs. Fiscal Impact Analysis: Which Does Your Project Need?

Economic impact vs fiscal impact analysis: the two answer different questions, and funders such as the U.S. EDA may ask for either.

By Dr. Shirley Ayangbah, Founder and Lead Strategist, Global Economic Research Consulting (GERC)

Councils, boards, funders and developers often ask for “an economic study” without saying which kind. There are three common types, and they answer different questions. Choosing the wrong one wastes money and can leave a grant application or staff report without the evidence it needs.

Economic impact analysis

Question: How much economic activity does this project support in the region?

It estimates jobs, labour income, output and tax revenue from construction and operations, including direct, indirect and induced effects, usually with input-output models such as IMPLAN or RIMS II. It is useful for public support, economic development cases and some grant narratives. See economic impact analysis.

Fiscal impact analysis

Question: Will this project help or hurt the agency’s budget?

It compares the new revenues a development or policy brings to the agency, such as property, sales and other taxes, with the cost of the services it will need. It is used for specific plans, annexations and large developments. See fiscal impact analysis.

Benefit-cost analysis

Question: Are the benefits to society worth the cost?

It values benefits such as safety, travel time, avoided damages and emissions against the full project cost, discounted over time. Federal transportation and FEMA grants often require it. See benefit-cost analysis.

Economic impact vs fiscal impact: quick guide

• Applying for BUILD, INFRA or FEMA BRIC: benefit-cost analysis
• Asking council to approve a specific plan or annexation: fiscal impact analysis
• Showing the community what a new facility means for local jobs: economic impact analysis
• Large projects with public funding: often all three, built from the same data

One caution

Do not present economic impact results as benefits in a benefit-cost analysis. Jobs supported by spending are generally not counted as benefits in a federal BCA, and reviewers will notice.

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About the author

Dr. Shirley Ayangbah is the founder of Global Economic Research Consulting, a woman-owned, California-certified Small Business (Micro) and SB-PW firm in San Bernardino (Certification ID 2045992). She holds a PhD in International Economic and Financial Law and an MA in Economics, and leads GERC’s procurement, grant and economic analysis work for public agencies, prime contractors and small businesses. Call (909) 454-7076 or book a consultation.