Fiscal Impact of Sprawl on Municipalities and School Districts:

 
Introduction:

Studies on the fiscal issues of growth or sprawl mostly fall within two categories: (1) estimating the potential savings of managed growth over unmanaged growth; and (2) investigating the extent to which each land use type pays the costs it introduces to the public sector. 

Potential Savings or fiscal impact on municipalities or school districts:

The first study on the costs of sprawl (Real Estate Research Corporation (RERC), 1974) focused on the relationship between on-site infrastructure costs and density or land use patterns.  Recent studies (Frank, 1989; Duncan et al., 1989; and Burchell et al., 1992; Bank of America et al., 1995) used a similar approach to look at the relationship between density or land use pattern and off-site infrastructure costs (i.e. local and county roads, water, sewers, and schools).  Assuming identical population, household, and employment growths, the methodology involves tabulations of all per unit costs of different infrastructure types, multiplied by their quantities required by both unmanaged growth and managed growth scenarios.  The estimated difference between total off-site infrastructure capital costs is interpreted as potential savings of managed growth relative to unmanaged growth on the net deficit of a municipality or school district.  It is estimated as $5.1 million annually in a study for eighteen communities in Southeast Michigan (Burchell and Neuman 1996).  In a New Jersey study (Burchell et al., 1992), managed growth is 2% less costly than unmanaged growth for both municipalities and school districts.  Specifying the scenarios of different densities, Frank (1989) concluded that capital costs of off-site infrastructure for a typical subdivision of three houses per acre can be reduced at least one-third by developing near basic public facilities and employment centers, with an average density of 12 houses per acre.  Such an approach or “bottom-up” methodology - has limited the geographical scope of most studies to several residential developments to all developments in a MCD or county.  However, a study in California’s Central Valley employs GIS to apply the methodology to a larger geographical area and is able to project the cost difference between the managed and unmanaged growth scenarios of California’s Central Valleys in forty years (American Farmland Trust, AFT 1995). 

Fiscal Impact of Land Uses:

The second type of studies uses a methodology (The Costs of Community Services or COCS) developed by American Farmland Trust (AFT). COCS studies (AFT, 1993a, AFT, 1993b, and Arend et Al. 1996) intend to tabulate the cash flow including revenues, capital costs, and operating costs associated with a land use type independent from whether it is a product of sprawl or managed growth.  The main research question is the  extent to which a new land use pays for its public costs introduced.  The costs are in the forms of services to residents, workers, farmers, and school children, while its associated revenue comes from property tax levied on new developments, sales tax, as well as non-tax and intergovernmental resources.  Land uses with a cost and revenue ratio less than one pay for what they cost the public sectors, generating net revenue, thus considered fiscally sound.  Those with a ratio greater than one, however, are subsidized by other fiscally sound land uses.  A fiscal impact hierarchy is compiled by AFT based on the results of similar studies in different localities in the U.S (Appendix A).  The assumption is that the fiscal impact hierarchy of land uses stays the same, although the expenditure and revenue ratio of same type of land use may change in different localities.