The myth of added tax base with new residential development

"This ‘Ponzi scheme’ surrounding development leaves most cities and towns functionally insolvent", featured on MarketWatch HERE.

It is no mystery that each new housing unit built in DE costs approximately $1.25 in required govt services for every $1 in new taxes generated. Yet legislators and developers have most folks believing the opposite is true.

Around the country, about one million acres of farmland per year are being developed for other uses. Local governments, especially in rural areas, often have difficulty financing the services that come with this development and are constantly looking for ways to improve their financial health. Local government officials often believe that one solution to their government’s financial difficulties lies through development, by increasing the property tax base; however, a growing body of empirical evidence shows that while commercial and industrial development can indeed improve the financial well being of a local government, residential development worsens it. While residential development brings with it new tax (and fee) revenue, it also brings demand for local government services. The cost of providing these services exceeds the revenue generated by the new houses in every case studied (American Farmland Trust).

Growth and development policies are in the spotlight in many areas of the country. Newspapers eagerly print lists of the fastest growing counties in the U.S. State governments compete against each other for new business investments from large employers. Redevelopment and revitalization efforts in downtown urban areas continue to be pushed, and often succeed. Everybody wants growth in their city, town, county or state, but only specific types of growth. To make things more confusing, different people want different types of growth. Some want new residential development, thinking more people and houses represent new taxable property and new vitality for a community. . .

This report examines some of that evidence, documenting likely fiscal impacts of residential developments, commercial/industrial developments, and farm/forest (undeveloped) lands. I will discuss the results of many specific fiscal studies of counties around the country and some other evidence on fiscal impacts of land use types and patterns. [Full article . . .]