Many assume that growth and development bring in more money for
the local government. That may not be true.
A recent University of Georgia study showed the importance of
balanced growth strategies for preserving the financial health of
local governments.
The study was conducted by the UGA College of Agricultural and
Environmental Sciences and the Warnell School of Forest
Resources. Economists did detailed analyses of the tax revenues
from four Georgia counties (Appling, Cherokee, Dooly and Jones)
and the cost of public services delivered to different types of
development in the 1999 fiscal year.
Costs Higher Than Revenues
The study found that commercial and industrial development, farms
and forest lands brought in more in tax revenues than they cost
in public services. But that’s not true of residential
development. In all four counties, revenues from housing
developments fell far short of supporting the cost of services
the new housing demanded.
The study looked at the costs and revenues associated with
different land uses. It found that for every $1 in revenue
generated by residential development in Cherokee County, $2.23
was required in public service expenditures, including schools,
fire and police protection, infrastructure and road
maintenance.
The service cost per $1 in revenue was $2.26 in Appling County,
$2.07 in Dooly County and $1.23 in Jones County.
Local Governments Lost Money
So local governments lost money on housing developments. But
they brought in more revenue than they spent for services from
commercial and industrial development and from farm and forest
lands.
|
Revenue |
|||
| Land Use | |||
| County | Residential | Comm./Industrial | Farm/Forestland |
|
Appling |
$2.26 |
$0.17 |
$0.36 |
|
Cherokee |
1.60 |
0.12 |
0.20 |
|
Dooly |
2.07 |
0.50 |
0.27 |
|
Jones |
1.24 |
0.65 |
0.35 |
An acre of land with a new house does generate more revenue than
an acre of farmland. But the UGA research said this tells little
about a community’s fiscal stability. In areas where agriculture
and forestry are major industries, it’s especially important to
consider the real property tax contribution of privately owned
natural resource lands.
Farms, forests and other open lands bring in less revenue per
acre than housing development. But they require far less
expenditure, due to their modest demand for public infrastructure
and services.
The net fiscal impact, comparing total revenues to total
expenditures, gives a true picture of what different land uses
cost the community.
“The reason for these differences is fairly simple,” says Gerry
Cohn, director of the Southeast Region for the American Farmland
Trust. “Cows don’t go to school. And tractors don’t dial 911.
Farms don’t ask for much from their counties, while new housing
developments spread out across the countryside require a great
deal of public funds for new infrastructure and services.”
Schools are an important part of the cost burden of housing
developments. But even without school costs, these developments
create a net fiscal loss for local governments.
In Cherokee County, with school costs excluded, the service cost
per dollar of revenue is $1.44 for residential development, 31
cents for commercial/industrial and 52 cents for farm and forest
land.
The study is a snapshot of current revenues and expenses on a
land-use basis and averages across all land in the county in a
single year.
“This is important,” said Jeffrey Dorfman, a UGA professor of
agricultural and applied economics who helped direct the study,
“because it means that results are based on old and new
development.”
“In fact,” he said, “new residential development almost surely
underpays by more than these figures, due to the higher cost of
infrastructure and the lower density of development today,
compared to 20 or 30 years ago.”
Dorfman said counties should approve new development carefully
and with full information.
“Approved development should be steered to those geographic areas
that minimize the cost of servicing the development,” he said.
“Conservation subdivisions and higher-density development (for
the same number of units) also help lessen the negative economic
impact of converting farmland into houses.”
Cherokee County is one of the fastest-developing counties in the
nation. The study there highlights the fiscal issues surrounding
conversion of farm and forest lands to developed uses. Most
people see the downside of growth as the traffic and
environmental quality issues. They don’t realize that unbalanced
growth is almost always economically unsustainable, too.
For Cherokee County to maintain its fiscal viability, housing
development must be balanced with commercial/industrial
development. New houses do increase the tax base, but not nearly
as fast as they increase the expenditures of the local government
and school system.
When farmland is turned into a commercial site, green space and a
historical part of the county is lost. But at least there is an
economic gain to the community. When a farm or forest is
converted to a subdivision, the community loses both green space
and money.
Pioneered by the American Farmland Trust in 1986,
cost-of-community-service studies have been performed in more
than 80 communities nationwide. Every community is different. But
COCS studies have consistently shown that farm and forest
landowners pay more in taxes than they get in services.
Residential land uses, though, are a net drain on local
government finances.
The goal of this COCS study is to provide information to help
citizens and local officials recognize clearly the fiscal impacts
their land use and planning decisions.
“COCS studies don’t predict future costs or the impacts of future
growth. But they’re valuable in dispelling three myths that are
commonly heard about land use,” Cohn said.
“First, sprawling residential development will likely end up
costing taxpayers more to provide public services,” he said.
“Second, this shows that farmland, even when being taxed at its
conservation-use value, is paying more than its fair share.
“Finally,” he said, “farm and forest land, besides providing
green space, wildlife habitat and local economic activity,
provides substantial fiscal benefits. It’s not just open land
waiting to be developed.”
