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Commentary: Taking a cue from Charlottesville

A couple of years ago, I spoke with a Met Council planner and asked if the council had ever taken a critical look at the costs and benefits of suburban growth. I was underwhelmed with the response. The answer was no. Moreover, to the best of my knowledge, neither has the Legislature, a state agency or a community in the metro area studied the question, much less attempted to quantify it.

A lot is at stake. Yet, we blithely go along with long-range plans assuming that suburban development is inevitable and economically sustainable. But what if it’s not?

Charlottesville is in Albermarle County, Va. It adjoins the rapidly growing Washington, D.C. area and is home to the University of Virginia. Thomas Jefferson’s Monticello is a short distance away. Charlottesville felt the pressure of encroaching growth and development, and commissioned a 2012 study, “Counting the Costs and Benefits of Growth.” The findings and the full report are available at citizensforaccountablegovernment.org. It should be required reading for every local policy maker and public official.
The study is 59 pages in length. It is liberally illustrated with statistical information and charts and graphs, and a full discussion of its methodology and sources.

The question from the report:

“Does the encouragement of growth—even in a carefully targeted form—help local governments pay for essential public services, without also undermining the quality of life? It is widely assumed that communities have little choice in the matter, that they must expand their populations and their number of commercial enterprises in order to remain prosperous. The study approaches this question by considering estimates of all readily measurable fiscal benefits and cost.”

It concludes:

“Few land uses pay their way: they do not generate sufficient government revenues to pay for the public services they require. This is because new area residents require services that increase local government costs at a level greater than the additional local revenue they contribute. It also is because the deficits created by this growth cannot be offset by other more fiscally advantageous but far less predominant land uses.”

Attempts to offset the fiscal gaps caused by commercial and population growth by recruiting new residents of significant wealth and income, will not work. This study calculated the “break‐even” price of a new home—the price at which a home will generate enough local revenue to offset the additional public service costs that will be incurred as a result of that new household. The break‐even price of a home in Albemarle County is $668,761. This is the average price at which all future homes must be sold to avoid increasing current deficits. The “compensating” price, on the other hand, determines the number of homes that must be sold at a specific price to generate sufficient local revenues to pay for the services currently demanded by all land uses, citizens, and commercial enterprises. This study calculated that the next 2,000 homes sold in Albemarle County must be priced at an average of $2.7 million to make up for current deficits. This represents the additional property taxes necessary to close the current annual shortfall between local revenues and local costs. These two findings show how difficult it will be for Albemarle County to ever recruit enough wealthy new residents, with the capacity to purchase enough homes at these prices, to allow the county to build its way out of its growth‐induced financial corner.

“Current impact fees, as implemented, are inadequate as a means of filling the gap between the true costs of new development and its local revenue generating potential. Current proffers are a legally defensible set of calculations that help offset the costs of new development. This study shows that the proffers do not count all the costs of new development, understate others and overstate anticipated revenues. Future population increases will generate even less favorable ratios of revenues to public service costs than those reported in this study. This will happen because increased population density eventually necessitates increasingly complex public service structures, which carry rising per capita costs. This study concludes that even without accounting for this complexity, and due only to the rising share of residential public service costs in the overall land use mix, the fiscal deficits connected to local revenues and local costs only will worsen with additional population growth. At a hypothetical population of 200,000, for example, the prevailing 2008‐2009 ratio of public service costs to revenues generated for all land uses in Albemarle County would rise by approximatel y 16 percent, from a cost of $1.24 per revenue dollar to a cost of $1.45.”

The study concludes that population growth pays for its fiscal costs only in the most carefully controlled and unrealistically isolated scenarios.

Charlottesville, Va. isn’t Prior Lake, but the study asks, and answers, the same questions that should be part of a wide public discussion here. I suspect that the findings and the answers will be the same. Now, what to do about it?

Please read more at the Prior Lake American:

John Diers is a Prior Lake resident who spent 40 years working in the transit industry and author of “Twin Cities by Trolley: The Streetcar Era in Minneapolis and St. Paul” and “St. Paul Union Depot.” To submit questions or topics for community columnists, email editor@plamerican.com. (Editor’s note: Diers is a community columnist and not employed by, or paid by, the newspaper.)