Several years ago, Fort Collins, Colorado (population 110,000), was confronted with a difficult and seemingly divisive choice. The Hyundai Corporation of South Korea was in the United States seeking a location for a $1.3 billion silicon water fabrication facility. The anticipated employment associated with the plant was expected to be approximately 1,000 jobs.
Hyundai was considering locations in Texas, Oregon, California, and Colorado. While there was excitement over the possibility of such a facility being located in Fort Collins, there also was a great deal of concern about the community's ability to address the impacts associated with the growth. What has resulted from this challenge should help other communities to better evaluate and make rational, informed decisions regarding large-scale development projects and incentive requests.
At the time, the city council and staff received a lot of pressure to appear at once fully supportive of the project and its related benefits while cautious of its potential negative impacts. Concerns seemed to focus on such issues as increased traffic congestion and declining air quality.
Unfortunately, the city and its local Economic Development Corporation (EDC) did not have enough information available to accurately evaluate the project. At the same time, Hyundai requested that Fort Collins provide an incentive amounting to approximately $30 million. Eventually the city and EDC sorted through the available information and put together a modest package that included consideration of a development impact fee rebate and a deferred payment schedule for sales and use taxes.
Hyundai proceeded with its review process and ultimately decided to build the new facility in Eugene, Oregon. While residents' views varied as to whether the city and community had done all that was possible to convince Hyundai that Fort Collins would be a great location for its facility, they shared one conclusion: the city had only limited information from Hyundai and only a basic method for quantifying the benefits and costs - both direct and indirect - associated with the project. The local decision-making process was therefore more difficult and not readily supported by the public.
Following the Hyundai decision, the city quickly considered its options for developing a model or process that would more accurately evaluate projects of this nature and scope. It contacted the economics department at Colorado State University (CSU) and contracted with Professors Harvey Cutler and Stephen Davies to create what now is referred to as the Fiscal & Environmental Impact Model.
The model is an enhanced version of an analytical tool more commonly referred to in academic circles as a Computable General Equilibrium (CGE) Model. The major difference between more standard fiscal impact models and the one that Fort Collins and CSU developed is the latter has the ability to make inferences regarding the external impacts of certain projects. This can include increases in travel time, traffic congestion, and the decline in air quality associated with certain types of growth.
The impact model aides staff and councilmembers in evaluating the benefits of the wages paid to employees, purchases made, taxes paid, and the costs or impacts associated with the facility's location. The model also takes into account the benefits and impacts associated with employees that move into the community to take advantage of new jobs.
In each case, the local unemployment rate is a critical factor to be considered. The lower the rate, the more difficult it is to obtain qualified workers with in the local economy. With new people moving into the community, existing systems may be stressed. External impacts, like an increase in travel time and traffic congestion related to new residents, as well as air quality impacts, are included in the evaluation.