Smart growth is key to sound municipal finance

Smart growth strategies can help any town or city improve its finances, Smart Growth America concludes in a new nationwide analysis. 

Building Better Budgets: A National Examination of the Fiscal Benefits of Smart Growth Development examines studies and examples across the US and 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 report looks at the costs associated with each development strategy as well as its revenue potential. When compared to one another, we find:

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 facilitiescan 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 an average Walmart store (see graph below). 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. See graph below.

Download the report here.

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