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A ne.. ... -, .nom Utl finds that growth enables local govern- ne F.,cws�t,' Eff&Z of 6rowth marts to spend more on resident *ces without increasing tax And Commercial Development !dens. v J . THOMAS BLACK AND RITA CURTIS perennial concern—the community impacts of tures per some parameter—residents,students,em- growth and development—became a major issue in ployees, rooms, trips generated,square footage— the 1970s and 1980s in the United States as metro- that can be related to the design and use characteristics politan areas experienced unprecedented growth. of the new development. One of the key questions has been whether or not Revenues typically are estimated by projecting growth pays for itself in local government fiscal the contribution of the development to the various terms: Do the taxes,fees,and other revenues it gen- bases used for calculating taxes and fees and then ap- erates exceed or fall short of the costs of servicing plying projected tax rates. growth% Evidence of concern about growth's net fis- Fiscal impact analyses nypically have been hypo- cal impact can be found in the spreading movement thetical,usually undertaken during rezoning or de- to adopt development impact fees,particularly in velopment permit approval processes.Rarely has re- high-growth areas.' search sought to measure the effects of various types While economic recession has put concerns about of development by examining actual service demands, the fiscal effects of irowth on the back bumer in the marginal costs of meeting those demands,and many communities, questions about the effects of actual revenue generation.The validity of the con- growth on local revenue capacity,service costs,and clusions of most fiscal impact studies,therefore,de- tax burdens will return to prominence as demographic pends on the validity of their assumptions. forces and an economic recovery spur new growth. The problem with standard focal impact analysis A review of fiscal impact studies by Robert is that it does not capture the complex interactions Burchell and David Listokin'indicates generally sig- among various types of land uses as growth occurs. nificant variation in the cost-revenue effects of dif- For instance.,a residential development may pro- ferent types of land uses.Uses that place below- duce a net direct cost.But it also provides custom- average demands on the school system and housing ers for businesses in the area,and thus can increase assistance,health care systems,and other social serv- business sales(and sales and gross receipts taxes) ices tend to generate a net fiscal surplus.Uses that and underlying commercial property values(and de- place above-average demands on education and so- rived property taxes).This expansion of tax revenues cial services tend to produce a fiscal deficit.Thus, does not necessarily add offsetting costs to the com- office,industrial,warehouse,retail,and small unit munity. Conversely,an industrial park may in itself one-and two-bedroom high-rent multifamily hous- generate a net fiscal surplus.But it may also increase ing uses typically show up on the net positive side of the demand for low-to moderate-income housing the ledger.On the other hand,lower-rent apartments in the community and thus,interactively,result in a and larger(three-and four-bedroom)housing units net fiscal burden.Various land uses are interdepend- tend to result in a net fiscal"deficit.This is under- ent.The overall fiscal impact of one kind of Bevel- ' standable:education and social service expenditures opment depends on the interaction of industrial, together constitute on average approximately 50 commercial,and residential land uses over time. percent of U.S.local government expenditures. A More Interactive Approach The Problem with Traditional impact Studies A few researchers have explored the use of statistical As typically applied,fiscal impact analysis involves techniques to examine the relationships between growth an estimation of the service requirements associated (measured by population size or growth, commer- with various types of land uses or developments— cial activity,or construction activity)and local gov- commercial,industrial,single-family residential, ernment revenues and expenditures across a set of multifamily residential—and a costing out of those urban jurisdictions with variable growth attributes. requirements.Costs are calculated,for the most If one can sort out the effects of growth factors part, on the basis of recent experience with expendi- from other factors that may influence local govern- 18 Urban Land - January 1993