Land use and municipal budgets: the fiscal connection.

• Author: Lynch, Patrick

Sprawling suburban development isn't just bad for the environment, human health, and quality of life; it's also bad for budgeting. Municipalities across the United States are struggling with the fiscal burden of expenditures for infrastructure and services that are higher than necessary because of inefficient planning. Governments can achieve significant savings over time by shifting to more compact development. When the revenue implications of more walkable environments are factored in, the potential gains to the tax base point to sizable net fiscal benefits.

From zoning and building approvals to funding for transportation infrastructure, to taxes on real estate and the location of public facilities, local governments control many of the key tools that shape the pattern of development in their communities--but governments don't typically factor in the fiscal implications of geographic patterns of development when making these decisions. A significant portion of municipal budgets is affected by the geographic pattern of development, including street construction and maintenance, water and sewer infrastructure, fire protection and police services, solid waste removal, and school transportation. Local governments spend more, both for upfront capital costs and ongoing operations, to provide services to their citizens when residences, civic functions, and places of commerce are widely dispersed because of car-only development patterns.

Analysis by Smart Growth America (SGA) helps quantify the potential magnitude of fiscal benefit that more compact (i.e., less sprawling) development can create. (1) In collaboration with RCLCo, a real estate advisory firm, SGA constructed a fiscal impact model that focuses on the relative effects of sprawl versus compact development. The model can be used in scenario planning to quantify the municipal costs of sprawl and to determine the fiscal dividend that can be earned with smarter growth. It can help planners and local officials better understand the connection between land use policy and local budgets and taxes. (2)

CREATING THE MODEL

The aim of SGA's study was to develop a fiscal impact methodology that accounts for the increase in cost efficiencies associated with relatively dense development patterns, and that local practitioners can adapt and use in scenario planning. The model focuses on the aspects of municipal budgets most affected by the geographic pattern of development. It also models the revenue side, providing perspective on the net fiscal impact of development pattern choices.

The governmental functions SGA used for modeling were chosen based on the degree to which the cost of providing them (either initially or ongoing) depends on the geographic pattern of development. For example, fire protection is very sensitive to geography because of the need to distribute stations geographically, on the basis of response time. Similarly, the cost of providing school transportation rises sharply when populations are scattered-- more of the student population lives beyond a walk zone, and buses must travel greater distances. Other functions, like libraries and human services, tend to be more closely correlated with population levels, regardless of development patterns. (3)

Ultimately, SGA identified five components for potential modeling: street construction and maintenance; water, sewer, and storm water infrastructure; solid waste collection; fire protection; and school transportation. (4)

The inverse relationship between total road pavement area for a community and development densities provides an example of the effect relative geographic dispersion has on these five components. Exhibit 1, an example from Arlington, Virginia (a community that exhibits a wide range of built densities, from large-lot single-family suburban to highly intense transit-oriented development centers with high-rise apartments and office towers), illustrates this relationship. The vertical axis shows road area per capita, and the horizontal shows density, displayed as resident population and employees per acre. Each "dot" on the graph corresponds to a set of specific 40- to 100-acre grid cells with a given density.

Moving up and to the left along the curve, we can see that as density falls, the amount of road area required per capita rises quite sharply at densities below 50 people per acre. Since cost is largely a linear function of the amount of road, this implies a corresponding rise in costs for road construction and maintenance.

But it is not only the cost of roads themselves that are driven by the quantity of roads per capita. Water-related infrastructure --the pipes that bring fresh water to homes and take away waste water--runs beneath the streets. In effect, their cost has a linear relationship to the road network. The more dispersed the development, the more street per capita and the more pipe per capita under the street--and the higher the bill for all of it.

Then there is the cost of what goes on top of the street, which includes local government functions that relate directly to the use of the street network, like garbage trucks, school buses, and fire and EMS vehicles. Again, the more dispersed the...