Stretching Property Tax Dollars Through Urbanism

July 1 is approaching.  City halls throughout the North Bay are buzzing with the preparation of 2013-14 budgets.  The story is similar in most cities.  The worst of the recession seems to be in the rear view window and municipal revenues are increasing.  (Although a renewed economic decline, which remains possible, would be disastrous.)   More revenues can be directed to reserves that were at paltry levels and city halls can begin nibbling at the deferred maintenance backlog.

But much of the increased revenue will go not toward municipal services, but toward funding pension obligations and employee benefits.  An article in Petaluma Patch article explains the situation well.

(This isn’t going to be a diatribe on the pension and benefit situation.  Yes, guaranteed benefit plans were based on the belief that severe economic downturns were impossible, which was nonsense.  But it was a nonsense in which almost all elements of the political spectrum participated.  The packages were given to police, fire, and city hall staff with broad support of politicians and voters.  For myself, I was concerned, but didn’t see the full extent of the possible problem.  Nor did I speak out about my concern, so have forfeited my right to cast stones now.)

So, we have persistent and increasing urgent needs for municipal services, paired with budgets that are constrained and unlikely to improve for many years.   There aren’t many rays of hope in that scenario.

But there is one positive sign.  Smart Growth America chose this week to release their report “Building Better Budgets”.   The report is the first attempt to compile studies from across the nation comparing the financial results of urbanist versus conventional development.

(Note: New readers should know that I generally eschew use of the term “smart growth”, preferring “urbanism”.  I believe that urbanism is smart, but also believe that it’s hard to maintain a civil dialogue when defining the other person’s beliefs as “dumb”.  I won’t criticize Smart Growth America for their choice of name, but wouldn’t object if they changed it.)

As the report describes it, the benefits of urbanism to municipal bottom lines have been increasingly understood for years, but this report represents the first attempt to pull together all available studies into a single report.  A total of seventeen studies were considered, including a study of three relatively new projects in Nashville, Tennessee that was done specifically for the report.  The three Nashville projects covered the range of development options from urban infill to urbanist greenfield to conventional drivable suburban.

As the authors acknowledge, many of the studies were performed using different methodologies and terminologies.  They also acknowledge that not every study found budgetary benefits from urbanism.

But when the studies are adjusted to a similar basis and averaged, the results are clear.  Urbanism reduces the strain on city budgets.  Some sample numbers: Infrastructure costs 38 percent less per unit for urbanism projects, property tax revenue per acre is ten times greater, and the cost of emergency services is ten percent less.

Regular readers of this blog will note the similarity between this finding and the StrongTowns argument.  (For newer readers, StrongTowns contends that conventional suburban development doesn’t generate sufficient property tax revenue to maintain its infrastructure.  And that the absence of financial sustainability is an underlying cause of our current economic distress.  StrongTowns concludes that urbanism is an appropriate response to the problem.)

The authors of the Smart Growth America report were seemingly aware of the StrongTowns argument and were careful not to overpromise based on the study results.  They noted that it still wasn’t established that urbanist development would be financially sustainable, only that it was more likely to be.  It was a laudably cautious point that didn’t detract from the report.

If your schedule permits, you may also wish to listen to the on-line presentation of the report.  Of particular interest is the story of Alexandria, Virginia which made an early commitment to urbanism and weathered the bad economic times more easily that other Virginia communities.

Adopting urbanist policies and promoting urbanist growth won’t solve the current budget issues at North Bay city halls.  There are too many existing conventional subdivisions to be maintained.  But turning increasingly toward urbanism for new development will lessen the municipal budget problems of the next generation.  And that’s a worthwhile accomplishment by itself.

As always, your questions or comments will be appreciated.  Please comment below or email me.  And thanks for reading. - Dave Alden (davealden53@comcast.net)