To what degree does the choice of development pattern impact costs for a local government? How do these decisions affect a municipality’s budget and tax revenues, and the cost of infrastructure and services it must provide?
The Fiscal Impact of Development Patterns, a new model from Smart Growth America and real estate advisors RCLCO, is designed to help municipalities answer these questions.
The new model was unveiled yesterday morning, and as part of the kickoff Chris Zimmerman, Smart Growth America’s Vice President for Economic Development, and Patrick Lynch, Smart Growth America’s Research Director, presented an overview of the new resource at an event in Madison, WI. The presentation was webcast live yesterday afternoon and a recorded version of their discussion is now available above or on YouTube.
During yesterday’s presentation Zimmerman and Lynch provided an overview of how the model works, and what municipalities can gain from analyzing their development this way. The new model is unique in that it is sensitive to both geography and density, and allows municipal costs per capita to vary based on these factors. More information about our methods is available in the full overview.
Zimmerman and Lynch also explained what this model found in Madison specifically. Madison is currently planning development for the now mostly vacant Pioneer District, and Smart Growth America tested five different scenarios for development in the area, at varying levels of density.
The lowest density scenario would cost the city approximately $14.3 million annually. The compact scenario would cost the city $12.5 million annually. In terms of revenue, the lowest density scenario would generate approximately $6,000 per acre in annual tax revenue and the compact scenario would generate an estimated $16,000 per acre per year. The net fiscal impact of each scenario would break out as:
The low density options would just about break even for the city. The city’s current plan (labeled here as the “base” scenario) would generate a net gain of $1,000 per acre for the city. The compact scenario would generate approximately $2,000 per acre for the city. And two additional scenarios that assumed even more dense development would, accordingly, generate more revenue.
These estimates are conservative, and they do not factor in the value premiums present in many walkable neighborhoods. If the model were to assume a 20 percent value premium for the more walkable scenarios—which recent research shows is easily possible—the returns become much more striking:
Read more about our analysis of Madison in the full Madison memo.
Analysis like this should be part of any town, city, or county’s decisions about how and where to grow. Understanding the ongoing costs of supporting new development as well as its tax revenue potential can help municipalities remain on sound financial footing for years to come. Our new model can help do just that. Read the full overview to learn more.