Calculating Net Revenue: How Does Site Design Affect the Bottom Line?
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This table steps users through calculations to estimate potential net revenue from each scenario. The total units in each scenarios vary slightly by design, yet the bottom lines are fairly comparable. These numbers are intended as food for thought about the potential benefits of choosing alternative designs. As noted in the economic indicator page, there are additional costs which are often borne by the community but are not accounted for in these numbers.
Inputs to these calculations include estimated gross sales revenues and a standard profit margin to derive a base profit for each scenario. This base is then adjusted for differences in infrastructure and clearing costs specific to each scenario design, and literature-supported market premiums associated with each design type.
These calculations do not attempt to divide costs and revenues between potential parties. Rather, they assume for simplicity that all costs and benefits accrue to a single investor. While the results represent hypothetical estimates, all calculations are based on actual costs as reported by experts in Georgia. Please read the table's "Descriptions" column for details about variable inputs and assumptions made at each step in the calculation.
| Calculation Results for Each Scenario |
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| Description |
Steps to Calculate
New Revenue |
Conventional |
Conservation |
New Urbanist |
| The gross sales revenue takes into account the total cost of all lots as well as the square footage of all the homes planned for each lot type (marshfront, etc.) The gross profits of the scenarios vary because each scenario is made up of different combinations of lot types, lot sizes, and housing square footage (as noted in the housing type table). |
Gross Sales Revenue Follow this link to the Indicator Methods page for more information on how unit prices were calculated. |
$259,912,850 |
$136,815,500 |
$181,132,000 |
| Assumes that home building costs (materials, labor, etc.) are proportional across all scenarios and, all other things being equal, the developer reaps this percentage of the gross revenues. |
Profit Margin = 15%
![[graphic of a calculator icon]](images/calculator.gif) Choose a different profit margin
|
15% |
15% |
15% |
| The selected profit margin is applied to the gross sales revenue to derive the base profit. |
Base Profit
(Operator:=)
View calculation that gives you this number |
$38,986,928 |
$20,522,325 |
$27,169,800 |
| The 15% profit margin assumes all things are equal, yet infrastructure and clearing costs are NOT equal across scenarios. Water, sewer, road, path, and clearing costs vary with the design of each scenario. The reduction in these costs in the conservation and new urbanist designs compared with the conventional design is added to the profit line here.
|
Reduction in Infrastructure/Clearing Costs
(sum of conventional costs for these indicators less sum of alternative design costs for same indicators)
(Operator: +)
|
$0 |
$3,079,609 |
$927,793 |
| Base profit for each scenario is adjusted for the infrastructure and clearing costs calculated for each design. |
Adjusted Revenue 1
(considering infrastructure cost differentials)
(Operator: =)
View calculation that gives you this number |
$38,986,928 |
$23,601,934 |
$28,097,593 |
| These are additional revenues not proportional across the scenarios. Revenues are added to the new urbanist and conservation figures due the market premium associated with these types of developments. Premiums are based on analyses in the literature which show homes in new urbanist and conservation developments command a higher sales price per square foot than equivalent houses in conventional neighborhoods. Follow this link to view information on how we chose our market premiums |
Market Premium
(Operator: +) |
0% |
15% |
10% |
| Scenario revenues are adjusted by research-based market premiums for each design type. A 15% premium applied to conservation gross sales revenues and a 10% premium applied to the new urbanist gross sales revenues is added to the first adjusted revenue to derive the final adjusted revenue for each scenario. No market premium was added to the conventional scenario. |
Final Adjusted Revenue
(considering infrastructure cost differentials)
(Operator: =)
View calculation that gives you this number |
$38,986,928 |
$44,124,259 |
$46,210,793 |
| Additional Economic Value of Important Natural Resources? |
Permanently conserved lands in the conservation scenario are an additional consideration with economic consequences that are not proportional across the scenarios.
In the conservation scenario, ecologically important resources were identified, buffered, and connected as a first step of the design process. The built environment was then designed to avoid these features. The conservation scenario provides approximately 418 acres for permanent conservation. Per Georgia law, a tax reduction could apply for land in a permanent conservation easement, effectively increasing the overall economic value of this scenario.
The other scenarios conserve lands, but those acres were not designated based on their ecological value nor are they necessarily maintained in a natural state. The new urbanist scenario conserves significant open space. However, the choice of open space acres preserved was based on design preferences such as access or symmetry and not on the ecological value of the natural resources present. The conventional scenario conserves little land, none of it chosen for its particular ecological value. For these reasons, the project does not include consideration of a permanent conservation easement on open space in the new urbanist and conventional scenarios.
Based on the average value of marshfront and interior lands in 1999-2002 Camden County tax assessor records, an estimated fair market value for the conservation scenario's marshfront and interior conserved lands is $27,972,000. According to tax stipulations in Georgia, the land would be assessed for its value without the easement minus its value with the easement. The amenity value accrued to the developer through price premiums placed on lots adjacent to open space areas would essentially zero out this assessed value. However, in all of the scenarios, the developer reaps an amenity benefit from price premiums placed on lots adjacent to open space. While it conserves little land, the conventional scenario reaps significant value from amenity premiums on lots adjacent to undeveloped areas, even man-made "natural areas" such as ponds. Because the amenity value of the open space is considered to have already accrued to the developer via premium lot sales, the ecological value of conserved lands in the conservation scenario is likely to go unaccounted for.
Were the total economic value to be considered – private amenity and public ecological value – then there would in fact be residual value in the ecologically significant conserved resources of the conservation scenario. Under these conditions, the following would apply. The maximum deduction under Georgia law is 30% of the donor's adjusted annual gross income, regardless of the value assessed. Considering proceeds from this project as sole income would make the maximum tax deduction for ecological value $44,124,259 x 0.30, or $13,237,227. Discounting the $13,23,227 by 7% over 6 years, per Georgia law, yields an estimated tax reduction of $10,516,002 and a substantial increase to the conservation scenario bottom line ($54,640,261). Theoretically, this amount would represent what the public is willing to compensate the developer for the ecological services, such as water quality protection and wildlife habitat enhancement, provided by the palustrine and mature forests permanently conserved for public benefit at the project site.
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