Economics of Land Use

2007 Lebanon CT Fiscal Study

A local example of a Cost of Community Services Study
Saving Land Lowers Taxes

Today it’s common practice to consider the environmental impacts a proposed building project would have on natural resources but frequently the economic impact of that same project is ignored. New projects are often considered a good economic decision because of anticipated additional tax revenue to the town – clearly a benefit. But this is just looking at one side of the picture – all new development brings additional costs to the town in the form of additional demands for services.

Residential Development

New people moving into a community can bring a renewed vitality and energy, and enhance a community in so many ways.  After all, our communities wouldn’t exist without its residents. 
Fiscal impacts are being felt however in many of our Corridor communities from new residential development. Typically people build homes to raise their families, and many towns are feeling pressure from increasing education costs from an increased school-age population.  On average the amount of local tax dollars to educate one child in a Corridor community exceeds the taxes paid on a typical home.  Municipal expenditures for snow plowing, libraries, public safety and other costs are increased as well as the population grows.

Commercial and Industrial Development

In order to balance the fiscal impact of residential development, towns frequently turn to commercial and industrial development.  The immediate fiscal impact is very positive, as generally there is minimal demand for additional services.  However, the full fiscal impact of commercial and industrial projects is usually not felt for a few years.

Some increased town costs are easy to identify, new infrastructure such as roads or sewer lines may be needed, or there may be increases to the police and fire department budgets.

A tool used to study the impact of a specific development project is a Fiscal Impact Statement that compares the increased revenues generated by the project with the current and future impact to town expenditures.

Farm Land, Vacant and Undeveloped Land

Undeveloped land may not generate much in the way of tax revenue, but the demand for town services is low.  Studies show that the revenue generated far exceeds the cost for the related services. 
One thing that has been shown time and time again is that, although counter intuitive, the more developed the community, the higher the mill rate is needed in order to support the demand from services. 

Balance Growth and Open Space

Corridor communities are facing development pressures, it’s important to plan for this growth while preserving the things we value.   A smart approach is to balance growth with preservation.   Find areas in that have the infrastructure in place and increase the density, both residential and commercial, in that location, while at the same time reducing density in areas that are more sensitive to development. 

What can your town do to plan for growth and conservation the “smart” way?  Smart growth is about sensible land use planning with efficient growth patterns.  Smart growth focuses new development where infrastructure is already in place and protects sensitive natural resources and important open spaces that create the character of our communities.  Smart growth in your town is about shaping the future of your community.  It starts with a good natural resource based comprehensive plan and follows through with land use regulations that will implement your plan.

Cost of Community Services Study

A way to analyze the overall economic impact of land use decisions is through a Cost of Community Services Study (COCS), which shows the cost to provide town services on a land use basis. The American Farmland Trust (www.farmland.org) developed the model 15 years ago, and it’s been used across the country to evaluate the differences between revenue generated and services required by specific land uses.
GVI can help you study your own town’s fiscal land use effects with a  COCS. Contact Paula Stahl, GVI’s Community Design and Community Finance Educator at paula.stahl@uconn.edu.