New Research Reveals the Cost of Sprawl to Municipal Coffers

A suburban development

Ever since the Roman Empire, local governments have had great control over land use. Today, this control is exerted through zoning regulations, tax policies, and infrastructure-investment decisions. Municipalities can choose to develop in an unconnected, low-density, suburban-style manner, or they can consider more compact, connected urban land uses.

These decisions have enormous implications for a municipality’s finances, according to a new report from non-profit Smart Growth America and real-estate advisory firm RCLCO.

The report, The Fiscal Implications of Development Patterns, is authored by Smart Growth America’s Chris Zimmerman and RCLCO’s Lee Sobel. They analyze the dollar costs to municipalities of different land-use patterns, concluding that, overall, dispersed, car-dependent land use patterns result in higher costs to municipalities than dense, urban development. Choosing sprawl over density, the authors state, could have multimillion-dollar consequences.

One cost to municipalities stems from the impact land use has on governmental services that the authors classify as “sensitive to geographic dispersion.” These municipal services are roads, water and wastewater, stormwater, fire protection, school transportation, and solid-waste collection. Each of these cost more for municipalities to provide when land use is dispersed.

The Fiscal Implications of Development Patterns

The second cost to municipalities results from the lower tax revenues generated by low-density development, due to differences in property values. Both residential- and commercial-property values are higher in walkable, dense urban settings than low-density ones.

This combination of higher costs and lower revenues resulting from low-density land use is a net fiscal impact the researchers claim has “enormous implications for a municipality’s finances.”

The authors have offered to model different land-use scenarios for municipalities curious to find out how land use affects their bottom lines. The firms use a fiscal-impact tool that answers such questions as, “How much will it cost to support that new development in coming years?” and “Would the development bring more net revenue if designed differently?”

Smart Growth America and RCLCO’s research about the additional costs of sprawl comes at a time when, overall, the world is urbanizing. 2014 was the first year, according to the United Nations, in which the majority of the global population lived in urban areas. At the same time, also in 2014, according to another study by Smart Growth America, the U.S. was slightly more sprawling than in the year prior. (Urbanization and sprawl are not mutually exclusive, however. Most reports regarding global urbanization failed to explain that the UN’s definition is binary, classifying places as either urban or rural. Suburban sprawl, therefore, is one type of urbanization.)

As the world continues to urbanize, we can construct vibrant, transit-oriented, walkable places, or we can build larger houses on larger lots, with the costs this decision entails: more traffic congestion, higher rates of obesity, and poorer air quality.

And now we know another cost of this land-use decision: more costly municipal services, higher taxes, and burdened municipalities, who may want to revisit their policies that support and encourage sprawl.

Photo by Flickr User Tom Beard

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