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The Fiscal Implications of
Development Patterns
A MODEL FOR MUNICIPAL ANALYSIS
April 2015
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How soul• , ` art grown
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Every town, city, and county makes decisions about how to grow and what kind
of development to build. These decisions shape entire neighborhoods and form the
foundation of communities as we know them. These decisions can also have enormous
implications for a municipality's finances.
Over the past 40 years research has shown that low-density, unconnected, development
is more costly to the public sector than compact, urban development. Every municipality
considering new development should understand the financial implications of these
options. How much will it cost to support that new development in coming years? Would
the development bring more net revenue if designed differently? These are potentially
multi-million dollar questions that no municipality can afford to ignore.
Smart Growth America, a national non-profit, and RCLCO, a national real estate advisory
firm, have created a new model designed to help municipalities understand the financial
performance of development patterns, and what strategies could generate better returns
in the future. We look at a variety of public costs and revenues to help municipal leaders
understand how a smart growth approach to development could help improve their
bottom line.
About this model
Typical fiscal impact models are based on an "average cost" assumption. That is, they
assume each new resident and/or employee associated with new development generates
an increase in municipal operating costs equal to the average cost per resident and/or
employee—regardless of the pattern or location of the new development.
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The main innovation in this new model is that we identify specific governmental functions
as sensitive to geographic dispersion, and we allow the cost per capita for these cost
categories to vary based on the density of the development scenario. As in typical fiscal
models, a cost is assigned to each new resident and employee associated with a given
development scenario. The main cost categories that vary by density, and the conceptual
methodology behind each, are described below. The relationship of density to other
sources of costs and revenues, such as police or sales tax, could also be analyzed for
cities able to provide detailed data for their jurisdiction.
Municipal costs
This model varies six categories of municipal costs based on development density. The
cost per capita of these services tends to decline as density increases, although not
necessarily in a linear fashion. For all cost categories that do not vary by density, the
"average cost" approach is used. The end result is an estimate of the annualized costs at
build-out of the given development scenario.
Roads
Through analysis of existing conditions in the metropolitan area, this model develops a
formula for estimating the length and width of roads needed in the scenario based on the
number of its residents, employees, and land area. Analyses in all cities so far have shown
that the quantity of roads per capita declines as density increases following a similar
pattern. Maintenance costs are assumed to be proportional to square footage of roads.
Water/Wastewater
Using a similar approach to that for roads, the length of water and wastewater pipes for
the development is estimated. The annual cost of maintaining those pipes relative to the
projected rate revenue generated by the development is then compared to the same
metric for the whole jurisdiction. This approach accounts for the fact that, all else being
equal, low-density developments will have more water and sewer pipes to maintain per
capita, and therefore higher maintenance expenses.
Stormwater
The quantity of stormwater that must be addressed by pipes or other means is typically a
function of the quantity of roads and impervious surface in the development. The formulas
developed for estimating the quantity of roads needed are a useful basis for estimating this
need.
Fire Protection
The annualized capital cost of a fire station and engines/ladders, as well as the operations
and maintenance cost, are averaged over the population and employees within the
response shed. The key variables are the density of the response shed (determined by
• the development scenario) and the size of the response shed, determined primarily by
response times. As density increases, the population in the response shed increases, and
the fire costs can be spread over more people, reducing the average cost per capita.
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School Transportation
Most schools have a "walk zone," within which students are expected to walk to school.
All else being equal, if density increases, the number of students in the walk zone will
increase and the need for buses decreases. This model estimates the number of students
who would fall within and outside the walk zone of each school type based on the density
of the development program. School transportation costs are based on the number of
bus-eligible students outside the walk zone.
Solid Waste Collection
As density decreases, the distance between homes tends to increase. Trucks must travel
farther between pickups, which not only burns more fuel, but also takes more time. Both
factors have an implication on the costs of serving residents with solid waste pickup
service.
Municipal revenues
Residential and commercial property values per square foot are often higher in walkable
urban areas than in low-density areas. These value premiums come with associated
increases in municipal tax revenue. With this model, the potential impact of these value
premiums on tax revenue generation can be tested.
Net impact
Annual costs are subtracted from estimates of annual revenue generation potential at
build-out to estimate the total annual net fiscal impact.
Taken as a whole, this model can help municipal leaders understand the fiscal
performance of current and future development patterns, and what strategies could
generate better returns in the future.
Smart Growth America and RCLCO are available to model
this analysis for your city, county, or town.
We work with local staff to understand their goals and challenges, run custom analysis
of development patterns, and suggest strategies that can help your city grow in ways
that support long term fiscal health. We have already successfully worked with several
cities, and samples of our work are available upon request. For more information contact
Chris Zimmerman, Smart Growth America Vice President of Economic Development,
at czimmerman @smartgrowthamerica.org, or Lee Sobel, RCLCO Director of Public
Strategies Group, at Isobel @rcico.com.
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-ii,
il -i1 Smart Growth America
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- L it i"iaking Neighborhoods GreatTogedier
Smart Growth America is the only national organization dedicated to researching,
advocating for, and leading coalitions to bring better development to more
communities nationwide. From providing more sidewalks to ensuring more homes
are built near public transportation or that productive farms remain a part of our
communities, smart growth helps make sure people across the nation can live in
great neighborhoods. Learn more at smartgrowthamerica.orcq.
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For over 45 years, RCLCO (Robert Charles Lesser&Co., LLC) has been the "first
call"for real estate developers, financial institutions, public sector entities, private
investors, anchor institutions, and Fortune 500 companies seeking strategic and
tactical advice regarding property investment, planning, and development. As
the largest independent real estate advisory firm in the nation—with experience
in international markets—we provide end-to-end advisory and implementation
solutions at an entity, portfolio, or project level. Learn more at www.rcico.com.
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- -- -- (6- BLUE ZONES PROJECT'
- by HFALTH WAYS
Increase in Tax Base
Increase in New Businesses
Decrease in Diabetes, Heart Disease or Cancer Rates
Increase in Quality of Life
Reduced Healthcare Claims
Other Metrics Identified by the Steering Committee
Community Blueprint: Naples
Our Purpose:To lead a community well-being transformation initiative,where the healthy choice
becomes the easy choice through permanent changes in environment, policy and social networks.
Our Result:
• Improved health and well-being with lower associated healthcare costs
• Improved productivity at home and work
• Improved economic and social vitality
Community Policy
The Community Policy Sector has three designated subcommittees to plan, adopt and implement
policies within each particular area of the pledge; Built Environment,Tobacco Free Collier Partnership
(Tobacco Policy) and the Food Policy Advisory Council (Food Policy). These subcommittees will each
have co-chairs who will inevitably guide the strategy and policy development for that particular area.
Policy workshops, held in the Spring of 2015, helped drive informed policy strategies discussions within
the community(see Appendix/Policy Workshop Reports).
Built Environment
—I( oal:Create a built environment that promotes well-being.
Municipal governments play a key role in Blue Zones Project by shaping policies and building
infrastructure in a way that supports active living and healthier lifestyles. This results in:enhanced
quality of life and well-being for citizens, competitive positioning for financing/grants for community
improvement projects,a vibrant local economy, and an attractive place for businesses and individuals to
locate.
A comprehensive tour of Collier County(which included Naples, Golden Gate,Golden Gate Estates,
Immokalee,Ave Maria, East Naples and Marco Island) was conducted.The county is vast and diverse,
reflected by a Walk Score of 46. (Walk Score is a tool that measures the walkability of any address from
1-100. To learn more,visit walkscore.com.) The City of Naples has excellent connectivity with a Walk
Score of 88 due to short blocks,a compact and walkable downtown, a Bicycle Master Plan and bike
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lanes evident with great way-finding,which residents would like to improve upon. Particularly,the City
of Naples has an engaged neighborhood association who meets with city staff monthly. This is key to
public input and advocacy for the built environment,supporting elected leaders and is to be applauded.
Collier County is challenged by US 41,Collier Boulevard,Airport Road, Immokalee Road,Goodlette-Frank
Road and other major four-to six-lane arterial and collector roadways which are designed primarily for
the automobile. According to a study by Transportation for America, Dangerous by Design, 2014, Florida
ranks number one as the highest pedestrian/bicycle fatality rate based on population in the nation. In
2011, Florida had 2.6 pedestrian traffic deaths per 100,000 residents, compared to a national average of
1.46 deaths. Implementing Complete Streets policies and adopting language to support these principles
in the Land Development Code can help to decrease accident rates in Southwest Florida.
While the county is populated through a pattern of urban sprawl and auto-dependency, numerous bike
lanes and some pedestrian shared-use pathways are evident. Significant travel distances to retail or
commercial places does not yield active transportation usage due to low density. Collier County's
population has grown by 88,000 or 35%since the year 2000 and its diversity is increasing. Significant
growth has been realized in gated communities which are often separated from places where residents
work, live, play or receive daily services. For example, Pelican Bay has 6500 homes on 2300 acres of
land and an internal tram system,yet residents need to leave the property to access some essential
services. This generally creates auto dependency for residents and contributes to traffic gridlock and
single entry-exit points within these areas. Collier County Activity Centers,which are designed to create
mixed-use hubs, provide a solid example for built environments which support active transportation.
The County has addressed growth via planned unit development which typically focuses on single
development projects rather than an integrated approach to include the entire community. Historically,
Collier County has allowed development of communities that are disconnected and homogenous.This
has unfortunately set a precedence for future developers to replicate.
The City of Naples is poised to lead Southwest Florida-Blue Zones Project in taking the next steps to
enhance its policies and practices to continue to evolve its built environment—streets, neighborhoods,
downtown, parks and open space—into places for people, not just cars. Local governments play an
important role in addressing health issues in the design of the public realm by focusing on developing
strategies,to support and encourage street connectivity, open space,walking and bicycling.The future
demands that any public investment,especially in the design of streets, adds value to the adjacent land.
Making the changes needed for a community to become more walkable,age-friendly,supportive of active
living, and overall better built environments requires that government staff, technical practitioners,
elected leaders, business owners, resident advocates, and other key stakeholders have access to
information about best practices,and a shared vision for moving forward.
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