Calculating the Big Impact of Sprawl on Cities’ Bottom Line

A Smart Growth America fiscal impact analysis found that high-density development produced way better returns for local political jurisdictions.
The fiscal impact of different development scenarios for a 1,400-acre parcel in Madison, Wisconsin, on government’s bottom line. The sprawliest scenarios provide the smallest public returns. Chart: Smart Growth America

When someone builds a new home, does it make the city stronger and more fiscally sound? Or does it drain public resources? The answer depends a lot on where it’s sited and, more specifically, where it lies in relation to other homes and businesses.

Smart Growth America has developed a fiscal impact model that helps predict how developments will help or hurt the municipal bottom line. The tool they developed [PDF] takes into account how density affects the cost of delivering city services, from streets and sewers to fire protection, school busing, and garbage collection.

SGA applied its model to a proposed 1,400-acre development in Madison, Wisconsin, called Pioneer Square. Researchers varied the density and number of units across five development scenarios, ranging from “low density” (about two housing units per acre) to “Compact Plus 50” (about 7 units per acre).

According to SGA’s model, the higher density development scenarios would have a far better effect on the city’s budget [PDF]. Compared to the “low density” scenario, “Compact Plus 50” would generate 233 percent more revenue per acre for the city.

SGA says the results are actually conservative because the tool assumes higher-density properties will have lower taxable value, due to smaller lot sizes.

Unfortunately, most cities don’t use very sophisticated methods to estimate the impacts of new housing developments. Instead, reports SGA, they assume each new home in the city will impose the same costs as the average home. That ignores all the variability in types of housing — and could leave cities with big financial liabilities down the road.

  • Laguna Streets

    This
    comparison needs a third bar showing city revenue due to predatory
    policies like parking fines, moving vehicle fines, police quotas.

  • EDG

    Lol, predatory parking fines…

  • Brian

    This comparison also needs to factor in other “cost’s” such as higher crime rates in more densely populated cities, lower school performance, higher congestion, longer commute times, etc. (There has to be a negative cost consideration to all of that.) The areas in our region that are considered “sprawl” are the best places to raise families, lower commutes, less congestion, higher performing schools, free parking, lower tax rates, etc. (Almost all of them are more fiscally sound than the more dense core community, which is just sucking up county, state, and federal resources.) And because each “sprawl” area has become it’s own City (with its’ own services such as police, fire, streets, schools, parks, etc.), there are no services that the “core” community has to stretch to provide — therefore, no impact at all. Perhaps this is unique to our region, I don’t know. But, sprawl works for us.

  • Chris Wilcott

    Your comments about higher costs in denser areas ignore the economic reality of ‘economies of scale’, in terms of urban development.

    For infrastructure, a typical lot in an urban area may be 33 feet wide while in the suburbs, it may be 99 feet wide. So, one taxpayer for 99 feet of road/sewer/water lines or three? Which is more efficient?

    While policing costs may be a higher dollar value, because there are far more people paying into the cost, on a per taxpayer basis, the costs are far lower. Also, where there are more people to watch, eyes on the street style, crime rates are lower. NYC has one of the lowest per capita crime rates in America.

    http://en.wikipedia.org/wiki/List_of_United_States_cities_by_crime_rate_%282012%29

    Also, your comment about better schools is more based on socio-economic status then anything else. As the suburbs are typically more affluent than their urban counterparts, the suburban school districts are generally better funded. Further, wealthy people typically place a greater emphasis on education at home so their children are expected to do better and they do.

    Your assertion that sprawl works is incorrect. Sprawl is a waste of one of our most precious resources, prime agricultural land, and they are very, very expensive to maintain. In the city where I live, the suburbs and urban area are all within the same municipality. Here, the urban area actually subsidizes suburban development.

  • Brian

    In each of those cases — significant improvement in quality of life is well worth the up front costs.

    In the new developments being built in the urban area, in attempt to compete with the attraction of the suburbs (I think), are much more expensive (small “loft”-type condos/apartments) than the wider homes w/land cost out here (even considering the significant tax breaks they’re giving to developers there).

    Our suburban communities are relatively crime-free. (The largest suburb has 58K people; our has 46K.) In our case, for example, we have 1 officer per 1,000 residents. Violent crime is low (average 1 homicide annually); We have the lowest per capita cost for a police force in this region. (NYCs violent crime rate per 100K in that table appears to be 639,3; ours (I had to look it up) is 26 per 100K. Most of the suburbs here are similarly low crime. Yes, there is a cost for that (sprawl, 99 feet of road/sewer/water lines, etc.). But, again, looking at the big picture, it’s well worth it.

    Though the suburb schools here are certainly more affluent, they are not nearly as well-funded as the urban schools. Suburb schools’ expenditure per pupil (EPP = local + state + federal contributions divided by #pupils) are between $8,500 – $11,500 per pupil; Urban schools EPPs are between $14,000 – $15,000 per pupil — with worse outcomes: 95%+ graduation rates in suburb schools; 60% – 70% graduation rates in urban schools. Again, there certainly is a cost for that increase — but, looking at the big picture, it’s worth it.

    Probably as you indicate, the up-front costs for suburbs may be more per capita. But, over the long term, our suburbs are run and managed so very efficiently that it’s worth that initial cost — all with improved outcomes.

    Every City here is a distinct municipality with it’s own leadership (Mayor & City Council) — most everything is paid for out of local dollars (sometimes with a state/federal match, but certainly with no subsidizing one locality with another’s money.

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