For Release Friday, May 31, 2013
Last month, the Government Accountability Office found a widening gap between projected revenues and expenses in the years ahead. While it’s tempting to point fingers at pensions or other easy targets of so-called “wasteful spending” as the only reason for this fiscal problem, city leaders should carefully consider the role that different development strategies play in their budgets and how they can help cure – or ruin – them.
Too often we see cities and towns chasing short-term revenue, mistakenly arguing that sprawling new development on the edge of town represents true economic growth. Yes, new buildings and wide new roads provide a quick hit of cash to a city budget and offer a compelling illusion of prosperity and growth. But over time, the cost of serving such developments often costs more than the tax revenue those developments generate.
Last week, a report I co-authored with Smart Growth America illustrates how walkable, smart growth infill development results in significantly better returns for municipalities compared to car-centric, traditional suburban development. Building Better Budgets: A National Examination of the Fiscal Benefits of Smart Growth Development surveys 17 studies from around the country that compare different development scenarios, including a new study of Nashville-Davidson County, Tenn., commissioned specifically for this report.
The difference in the effect various development types can have on a city’s budget is almost unbelievable. Smart growth strategies can not only save public money on infrastructure and ongoing services, but can significantly increase public revenue. Those factors combined could benefit municipal budgets everywhere. When taken as a national average, the report finds:
- Smart growth development costs at least one third less for upfront
- Infrastructure construction.
- Smart growth development saves taxpayers at least 10 percent on ongoing delivery of services.
- Smart growth development generates 10 times more tax revenue per acre than conventional suburban development.
The findings from the Nashville study are worth singling out. On a per-unit basis, The Gulch, an infill smart growth development in downtown Nashville, not only costs $200 less per unit per year for ongoing services than one in Bradford Hills, a conventional suburban development, but it generated $2,030 more per unit in tax revenue. (Revenue included property tax but also the sales tax likely to be generated by the project’s residents as well as other miscellaneous taxes.)
The difference in net revenue between the two types of development is even more glaring. On a per-acre basis, The Gulch generated $115,720 in net revenue – almost 1,150 times the net revenue generated by Bradford Hills ($100). Those trends are similar on a per-unit basis as well.
A common misconception is that smart growth development is a strategy best suited for big, urban cities. But a closer look shows that a community of any size – suburban, rural, close in or far out – can benefit fiscally from smart growth. Even in small and mid-sized cities, smart growth patterns can have a significant influence on the budget. One case study in Building Better Budgets, from Champaign, Ill., found that a smart growth approach to future expansion in that mid-sized Illinois city could turn a $19 million deficit into a $33 million surplus.
Local governments throughout the United States already face unprecedented challenges in providing high-quality infrastructure and adequate public services to their residents on a tight budget. When it comes to local budgets, how towns decide to develop represents either their greatest burden or their greatest opportunity.
William Fulton is vice president of Smart Growth America and a former mayor of Ventura, Calif.
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