Local government budgets and Smart Growth

For years, research has shown that smart growth development can reduce costs for localities and in some cases can even increase public revenue.  Over the last 10 to 15 years, research about smart growth development strategies has continued to develop.  However, one question in particular still remained: What impact does smart growth development strategies have on municipalities’ bottom lines?  An organization called Smart Growth America sought to answer that very question.

Smart Growth America published a report entitled Building Better Budgets: A National Examination of the Fiscal Benefits of Smart Growth Development.[1]  This report examined 17 case studies of municipalities across the country.  Localities in this study included Afton, MN; Champaign, IL; Charlotte, NC; Fresno, CA and Phoenix, AZ just to name a few.  Specifically, the report compared municipal revenues in two types of development scenarios: smart growth and conventional suburban.  Smart growth development is characterized by buildings located closer to each other, neighborhoods that allow ample walking for residents, streets with better connections among destinations, a greater mix of home types and increased transportation options.  On the other hand, buildings farther away from each other, neighborhoods designed primarily for driving, street systems with longer distances between destinations and fewer public transportation options are characteristics of conventional suburban development.  The report by Smart Growth America focused on three financial aspects of these two strategies: the cost of upfront infrastructure, the cost of providing ongoing services, and the tax base created by additional development.

So, what did this comparison study show?  First, smart growth development costs about one-third less for upfront infrastructure than conventional suburban development.  Some type of infrastructure is of course required to support and supply any development.  Often, the most expensive forms of infrastructure in new developments include roadways, water lines and sewer lines.  The less expensive costs for upfront infrastructure in smart growth development scenarios can be attributed to the fact that smart growth development typically requires fewer infrastructures.  This means that upfront capital costs, maintenance costs, and presumably costs for eventual replacements are lowered.  Additionally, smart growth development scenarios often reuse existing infrastructure, which serves to further lower upfront capital costs.

Secondly, the comparison study showed that smart growth development saves municipalities an average of roughly 10 percent on ongoing delivery of services.  Examples of ongoing delivery of services include the cost of services provided by first responders in emergencies such as police, fire and ambulance.  The way a community is configured has a profound impact on delivery of public services.  Because smart growth development utilizes street systems with better connections among destinations, service vehicles may drive fewer miles, thus allowing a reduction in operating costs.  Further, research showed that the savings on services in rural areas were even higher.

Finally, the survey concluded that smart growth development produces 10 times more tax revenue per acre than conventional suburban development.  Tax revenue typically refers to property and sales taxes, as well as licensing fees and other small sources of revenue in some instances.  This finding is particularly significant because for most communities property taxes are an extremely important source of revenue.  In fact, a 2010 U.S. Census survey of local government budgets nationwide showed that 48 percent of revenue from municipalities’ own sources came from property taxes.[2]

The findings of Smart Growth America are significant for multiple reasons.  The primary reason is because it shows that smart growth strategies create significant revenue for local governments and significant savings for residents! These findings are particularly relevant to local governments given our anemic recovery. Areas that experienced or are experiencing a lot of sprawled “McMansions” development are burdened with high land use and development costs.  Localities across the country have seen that low-density developments fail to pay for their own infrastructure. Transportation costs for families have ballooned, in some cases to more than a quarter of their income. There is a significant correlation between lack of transportation and access to higher paying jobs.[3]  By making the decision to utilize smart growth development strategies, local governments may find that that their public balance sheets AND quality of life for residents can be improved for decades to come.

This is a guest post by Jasmine McKinney. Jasmine is currently a second year student at the University of Richmond School of Law.  She received her Bachelor of Arts degree from Virginia Tech in 2012.  She is currently a legislative/public policy intern at HOME of Va through the Carrico Center for Pro Bono Service.


[1] Smart Growth America, Building Better Budgets: A National Examination of the Fiscal Benefits of Smart Growth Development, available at http://www.smartgrowthamerica.org/documents/building-better-budgets.pdf

[2]  U.S. Census Bureau (2012, September), State and Local Government Finances Summary: 2010, available at http://www2.census.gov/govs/estimate/summary_report.pdf.

[3] Shaila Dewan, Is Suburban Sprawl on Its Way Back?, Sept. 14, 2013, available at http://www.nytimes.com/2013/09/15/sunday-review/is-suburban-sprawl-on-its-way-back.html?_r=0.

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