Smart growth costs less, yields more revenues for cities and towns

The fiscal case for smart growth is gaining steam. New Urban News (now Better! Cities & Towns) reported on a groundbreaking study in Sarasota, Florida, in September of 2010 that showed enormous advantages in per-acre tax yields for mixed-use, downtown properties.

Smart Growth America takes the case to a higher level with a nationwide meta-analysis of 17 studies, including a new study of Nashville, Tennessee, commissioned for the report. The conclusion: Smart growth strategies can help any town or city improve its finances.

Building Better Budgets: A National Examination of the Fiscal Benefits of Smart Growth Development finds that smart growth helps municipalities in three ways: Upfront costs are lower, service costs are lower, and tax revenues are higher compared to conventional suburban development.

The tax revenue advantages are probably most dramatic, because the central business district properties yield 10 times more per acre than conventional suburban development (see “Raleigh analysis” graph). Land is a municipality’s most enduring asset, and maximizing the economic value of that land is the key to generating revenues to provide public services.

Raleigh tax analysis. From Building Better Budgets

Building Better Budgets looks at both costs and revenues. The following is a summary of the findings from the report:

1. Smart growth development costs one-third less for upfront infrastructure. Our survey concluded that smart growth development saves an average of 38 percent on upfront costs for new construction of roads, sewers, water lines and other infrastructure. Many studies have concluded that this number is as high as 50 percent.Smart growth development patterns require less infrastructure, meaning upfront capital costs, long-term operations and maintenance costs, and, presumably, cost for eventual replacement are all lower. Smart growth development also often uses existing infrastructure, lowering upfront capital costs even more.

2. Smart growth development saves an average of 10 percent on ongoing delivery of services.Our survey concluded that smart growth development saves municipalities an average of 10 percent on police, ambulance and fire service costs.The geographical configuration of a community and the way streets are connected significantly affect public service delivery. Smart growth patterns can reduce costs simply by reducing the distances service vehicles must drive. In some cases, the actual number of vehicles and facilities can also be reduced along with the personnel required.

3. Smart growth development generates 10 times more tax revenue per acre than conventional suburban development. Our survey concluded that, on an average per-acre basis, smart growth development produces 10 times more tax revenue than conventional suburban development.

A study for Raleigh, NC, concluded that a six-story building downtown produces 50 times as much property tax revenue per acre as the Walmart store. Even a three-story residential building produces more property tax revenue per-acre than a major shopping mall.

In 2010, local governments in the US raised and spent a whopping $1.6 trillion. Of that, approximately one-third—$525 billion—was expended on projects and activities that are heavily affected by local development patterns, Smart Growth America says.

Nashville findings

Three developments were studied in the Nashville area: New urban infill and greenfield neighborhoods and a 1990s conventional suburban development. The infill development far outdistanced the others in net revenue. The Gulch neighborhood in Downtown Nashville, a redevelopment of a 76-acre brownfield site originally designed by Looney Rick Kiss, generated $115,720 in net revenue per acre — almost 1,150 times the net revenue generated by Bradford Hills (conventional suburban) and 148 times the net revenue of Lenox Village (new urban greenfield).

The Gulch, from Building Better Budgets

The Gulch cost less per unit to provide services than the greenfield projects. The lesson: Investments required for infill revitalization generate a higher return on investment (ROI) than building in far-flung suburbs — in this case at least. When building does take place in distant suburbs, it appears that a new urban design performs better. The Gulch has additional advantages: It appeals to the young and educated workforce, a key market segment this decade, and it supports transit.

The Gulch — and to an extent, Lenox Village — also offer strong placemaking, which creates a distinctive identity for an urban neighborhood and helps to attract new businesses and residents.

The study examines the cost of providing ongoing city services to the residential component of each project, including police, ambulance and fire service costs as well as the overall impact to the County’s general fund, according to Smart Growth America. Upfront infrastructure cost was not included in the analysis.