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The Fiscal Case For Smart Growth

William Fulton on
May 22, 2013

 

After eight years in elected office in California, I can tell you that I often fell into the same trap as everybody else: chasing revenue. When you're up against the wall on budget problems, any new revenue especially a boost in property or sales tax revenue looks like the solution to all your problems.

And it is at first. How many times have I heard a city councilmember or a city manager say they're just trying to hang on for one more year until the revenue from some new subdivision "comes online." But as I've written before in this space ("The Multari Curve"), the revenue boost is short-term and over time it's eaten up by increased service costs, meaning you always have to approve another subdivision to make up for the deficits on the one you approved in the past.

Yesterday, Smart Growth America the organization I spend most of my time working for released a national report called "Building Better Budgets," which makes the argument on a national scale that smart growth-style development can actually improve the fiscal situation of local governments by increasing revenue and decreasing cost. (Full disclosure: I was the project manager for this report.)

Building Better Budgets has already gotten a lot of publicity in the blogosphere (see, for example, the APA's blog. And it's mostly a review of research nationally not a California-specific piece of work. But there are a couple of things worth calling out for California planning practitioners.

The first is the simple fact that infill development properly done, can have a huge positive impact on the bottom line in a city's operating budget. This is the main thing we were shooting for in Building Better Budgets. The argument that smart growth and infill development lower the cost of up-front infrastructure was well established. But the report highlighted the argument about operating costs as well. 

For example, Smart Growth America scooped up some research from Charlotte, North Carolina, which found that conventional suburbs cost four times as much for the fire department to serve than smart growth neighborhoods and SGA concluded that a smart growth approach could avoid the need for Charlotte to build two fire stations when the city is built out, saving about $13 million in capital costs and $8 million per year in operating costs.

As a former elected official, the bottom line for me is that a smart growth development approach is a way out of the fiscal box. Conventional suburban development always loses money in the end. Traditionally, the only ways around the problem were to keep approving subdivisions (simply pushing the day of reckoning out into the future), charge enormous impact fees (which simply shift the cost rather than reduce it), or raise taxes. Smart growth can lower the cost of development, which is good for everybody developers, homebuyers, taxpayers and increase more revenue. It's a game-changer.