The economic benefits of preserving community character.

• Author: Leithe, Joni L.

While most communities recognize the social and cultural benefits in preserving open spaces, historic buildings and scenic viewsheds, not as many realize that there also may be economic and fiscal benefits. The GFOA's Government Finance Research Center was asked by the National Trust for Historic Preservation to assist in developing a methodology for analyzing and documenting the economic and fiscal benefits of historic and other preservation activities. Governmental activities undertaken to preserve a community's historic and natural heritage can be characterized as aesthetic regulations or fiscal incentives. Examples of aesthetic regulations are historic districts, tree ordinances and open space preservation laws. Fiscal incentives, intended to stimulate certain types of private investment activity, include property tax abatements, freezes and credits, as well as direct grant or loan programs.

Aesthetic regulations often are controversial because they are perceived as detrimental to the economic interests of property owners. While they may in some cases prevent an individual owner from maximizing profits on a particular building, aesthetic regulations can enhance the physical attractiveness of an entire area, making the properties in the area more valuable than similar properties located elsewhere in the community. In districts able to attract shoppers and tourists, local businesses may profit even more from patrons' expenditures for lodging, food, gasoline and souvenirs. Fiscal incentives are less controversial because home and business owners can choose whether they want to take advantage of a particular incentive; however, debate often centers around the desirability of allocating public funds to promote special interests or to subsidize uneconomic land uses.

The costs of preservation activities, especially aesthetic regulations viewed from the perspective of a private property owner, have generally been more fully documented than the benefits. This is largely because citizen groups and others interested in community preservation techniques have lacked the technical orientation and/or resources to examine and assess the economic benefits of community preservation. The methodology developed for the National Trust provides an approach for examining and quantifying the increase in economic activity and the accompanying fiscal benefits to the local government that can result from preservation activities. The workbook in which the methodology is published describes three major areas of inquiry for documenting economic benefit, the data needed for the analysis and where to obtain the data; it also includes a series of worksheets designed to facilitate assembly and analysis of the data.

Overview of Methodology

The methodology is designed to analyze three areas of private economic activity that may arise from preservation programs: construction and...