Fiscal Sustainability

Introduction

My May 17, 2020 blog post ( Paying for Stuff We Use) talked about how communities pay for the services provided to their citizens, primarily through property taxes – the assessed value of different land uses. There was further discussion and references to different processe that may generate more revenue, not by land uses, but by calculating the value per acre.

Value per Acre Analysis

This analysis is detailed in Value Per Acre Analysis: A How-To For Beginners, using property information – size, ownership, zoning, assessed value, and taxes paid. This information is usually available from the local (town or county) tax assessment office.

This information can then be mapped, using Geographic Information System (GIS) or Googele Earth.

Source: Strong Towns https://www.strongtowns.org/journal/2018/10/19/value-per-acre-analysis-a-how-to-for-beginners

To illustrate the the impact of this method, the following example compared two existing commercial properties – a large “big box” store versus a smaller “mixed use “use site ( commercial uses on the first floor, with residential above).

In addition to calculating value per acre, there are two other key findings – taxes paid by each property owner and employees for each use.

Refer to the following chart to really see the major implications of this new analysis and the impact on a commuity’s budget and fiscal sustainabilty :

Source: Urban3 and Strong Towns

Source: https://www.strongtowns.org/journal/2017/5/10/highest-return-on-investment-city-not-where-you-think

So What!

This clearly puunches holes in the long held belief that large commercial uses generate more tax revenues than smaller parcels. Communites have then continually engaged in attracting larger commercial uses, not fully understanding the real fiscal implications.

Large commercial boxes, malls and shopping centers (bricks and mortor) have been in decline for many years, now accelerating due to the pandemic and the resulting shift to online shopping.

The Transformation of the American Shopping Mall | Innovation | Smithsonian  Magazine
Source: Smithsonian Magazine

This also wastes valuable land, with their huge and unneeded paved parking lots. As a result, malls are undergoing a rapid transformation to other productive uses – affordable housing, recreation centers, medical facilities and other mixed uses.

When stores close (i.e. JC Penny, Sears!) then malls decline and become eyesores.

A vlaue per acres analysis provides an opportunity to

“…to make sure that its land use is productive: that is, that the activity taking place on that city’s land is creating enough wealth to support the infrastructure and services needed for that place to continue to exist and thrive.”

Source: Strong Towns

This really a Return on Investment (ROI) anaylsis for communities to understand the long term fiscall impacts from proposed development projects, annexations and re-zoning. Do they actually provide revenues, now and in the future? Will the community be fiscal sustainable?

Examples:

Here are examples how some communities have analyzed their current and future land uses, comp plan polcies to determine the impact on curernt and future revenues and budgets and how they align with their development policies:

  1. Bastrop, Texas – Establish fiscal sustainability as a critical metric for growth management, development character and budgeting
  2. Brownsville,Texas – Develop fiscal baseline for the city, understand how and where to invest resources to close their funding gap, and prioritize economic development incentive (TIRZ) opportunities that support the City’s goal to revitalize the core downtown
  3. Pflugerville, Texas – Build alignment within Council, expand the conversation around density and mixed-use development, plan for future infrastructure obligations, and maximize value capture of key development sites in a fast growth suburb.

The key takeaway from this analyis:

“…a city can help close its funding gap through adjusting its development pattern, potentially without raising taxes. Our objective is to provide information and new perspective so that city leaders can align their development and service model with what citizens are willing and able to pay for – now and in the future.”

Source: Kevin Shepherd, Verdunity CEO & Project Principal

So What’s Next

While I believe more communities need to do this kind of analysis, my concern is twofold. – why isn’t this being done by other places and how to start and move past the entrenched status quo and try this?

The key issue – if this is needed and provides a path to fiscal sustainability, how can a community actually implement this?

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