What’s Infrastructure Got to Do With It? Helping Cities Generate Revenue Through Strategic Development
Local governments across the nation are experiencing chronically under-funded budgets, making it more important to use the resources they do have to make strategic investments. As local governments find ways to reduce costs and provide services more efficiently, several communities have realized that how and where they develop can have an enormous impact on the need for infrastructure and fiscal health of their community. Specifically, these communities have come to understand that focusing on mixed-use development consistently generates more revenue than traditional separated land uses.
Infrastructure and Fiscal Analysis in the City of Galt The City of Galt, a small, agricultural community located in Sacramento County, California partnered with the Sacramento Area Council of Governments (SACOG) and the Local Government Commission (LGC) to learn more about the effects that land use decisions have on a community’s fiscal health, by using SACOG’s Integrated Model for Planning and Cost Scenarios (IMPACS) tool. SACOG developed the IMPACS tool to help communities analyze and estimate the infrastructure and city service needs, capital and operational costs, and expected revenues for specific development scenarios. This work was made possible through funding from the Sacramento Air Quality Management District. The City of Galt worked with SACOG and LGC to develop four different fictitious development scenarios, which used the Galt General Plan as the base. The four scenarios were based on a variety of typical growth patterns seen in communities across California. Using IMPACS, Galt, SACOG and LGC estimated the fiscal impacts of each development type. The results can help Galt determine the proper mix of development to ensure an economically sustainable and balanced growth strategy now and into the future.
What Generates Revenue at the Local Level? After comparing the different ratios of revenue to cost on a per-acre basis for each of the Galt development scenarios, it becomes clear that mixed-use development consistently generates a higher ratio of revenue to cost when compared to separated land uses. For example, on a per-acre basis, mixed-use development generated almost a two-thirds higher ratio of revenue to cost when compared to regional retail and local office development in the mixed-use development scenario. Mixed-use development generates an even higher ratio of revenue to cost when compared to stand-alone housing or local retail. In fact, total infrastructure costs for some separated land uses such as residential development and local retail fell below the desired ratio of one, leading to a net loss in revenue. This finding highlights the importance of having a comprehensive strategy to assure a community’s growth leads to net overall revenue. City of Galt Development Scenarios Low Density: Big box retail, lowdensity housing and no mixed-use development. Focused Development: Industrial development, downtown development and Southeast Galt Development. Downtown Focus: Pulls growth from the outlying areas to downtown Galt. Mixed-Use: Mixed-use development that balances housing and jobs.
It becomes clear that mixed-use development consistently generates a higher ratio of revenue to cost, per-acre, when compared to separated land uses.
The ratio of revenue to cost, per acre, for mixed-use development in the mixed-use scenario was very similar to the ratio of revenue to cost, per acre, for mixed-use development in the focused development scenario and the downtown focus scenario. This indicates that mixed-use development consistently generates a higher ratio of revenue to cost, when compared to separated land uses.
The desired pay-back period for municipal projects is generally 30 years or less. However, the pay back periods for each of the fictitious Galt scenarios further showcases the financial strain that separated development can have on a local government, especially in comparison to mixed-use development. The only scenario that meets the desired pay-back period of 30 years is the Mixed-Use Scenario, characterized by development that balances jobs and housing. These results are supported by research on this topic from across the nation. For example, one study indicates that compact infrastructure is up to 47% less expensive than conventional development patterns (Moris Beacon, 2010). Fiscal Analysis in 9 different communities in Colorado, Idaho, Montana and Wyoming found that 2-3 story mixed-use buildings generate between 3-5 times more revenue on a per-acre basis compared to single-use commercial buildings such as low-density housing or big box retail development. Lastly, SACOG’s Blueprint process found that the “region could save $13.8 billion if it built the Preferred Alternative (which promotes compact, mixeduse development and more transit choices) rather than the Base Case (which is a projection of how the six-county Sacramento region would grow if recent development trends continued) over the next 50 years.” The analysis in Galt, as well as research undertaken across the country, reinforces the idea that where and how a community builds has a tremendous impact on the cost of development. The results showcase that traditionally separated land uses generate much more revenue for a community when they are built in conjunction with one another, as mixed-use development. One acre of mixed-use development is more economically advantageous in that it can contain several types of revenue-generating uses and a better jobs-housing balance in comparison to one acre of separated, low-density housing or local retail. Separated land uses such as local retail and residential serve a role but should be built in conjunction with development that generates a higher ratio of revenue to cost, such as mixed-use development. The City of Galt and other communities across the nation, should consider the fiscal benefits of Using IMPACS In Your investing in mixed-use development that is balanced and strategically located. Community Are you interested in using How Fiscal Analysis Can Help Your Community IMPACS to help make more Fiscal Analysis allows local governments to make informed land use decisions and create an informed development and land economically viable and balanced growth strategy for their community. use decisions? Contact Raef u Make informed development decisions based upon accurate fiscal information and analysis for a Porter,
[email protected], at general plan or specific development proposal. SACOG to learn more, attend a u Understand the current capacity and future demands on infrastructure for potential training and access the tool. development sites. u Determine if extra fees are necessary to ensure that projects are economically feasible. Similar Efforts u Joe Minicozzi, Public Interest Projects, analyzes and compares the revenue of different development types on a per-acre basis. http://www.theatlanticcities.com/jobs-and-economy/2012/03/simple-math-can-save-cities-bankruptcy/1629/# u The State of New Hampshire created an online “Cost of Sprawl” modeling tool that allows municipalities to understand the fiscal impacts of different land use scenarios and decisions. http://www.costofsprawl.org/ Learn More Kate Meis, Local Government Commission,
[email protected], 916-448-1198 ext 305 David Shabazian, Sacramento Area Council of Governments,
[email protected], 916-321-9000
