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Thread: Taxes and cost of service

  1. #1
    Cyburbian dvdneal's avatar
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    Taxes and cost of service

    Does anyone have a good resource to explain cost of service and taxes brought in by new development? I'm trying to explain to an elected that new home subdivisions do not bring in enough tax dollars to pay for the services they use. Granted I'm in a county so the services should be reduced, but at the same time there are fewer people to share the burden of paying for those services.
    I don't pretend to understand Brannigan's Law. I merely enforce it.

  2. #2
    Cyburbian MD Planner's avatar
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    There are other communities that have done Cost of Service studies. We're doing one right now, reviewing responses to RFPs. I'd ask your Association of Counties (if you have one in Kansas) and see if they can help with some research. Our Municipal League here has been invaluable with research over the years.
    He's a planner, he's a dreamer, he's a sordid little schemer,
    Seems to think that money grows on trees . . .

  3. #3
    I don't have time to look for it now, but there was a Purdue study that showed that homes consume ~$1.40 worth of services for every $1.00 in property taxes paid and industry/commerce consumed ~$0.63/$1.00. (I don't remember the exact figures, but you get the idea.) You might be able to find it online, otherwise I'll look for it later if you think it will help.
    Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.
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    Cyburbian Masswich's avatar
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    Whether housing (or any development) is a net financial cost or benefit depends a lot on the specific situation. New single family homes in expensive suburbs generally cost the community money, especially if the schools are fairly full already. New multifamily housing in core cities usually makes the community money (fewer kids plus likely more existing space in schools.) Commercial development net cost depends a lot on the type of development and the tax structure of the community. Big boxes usually cost money unless there is a local sales tax. Office space usually makes money, especially in places with a split tax rate.

  5. #5
    Unfrozen Caveman Planner mendelman's avatar
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    Also, another factor can be local income tax.

    Here in Ohio, many, if not, all cities have a local income tax that can generate positive balance sheet revenue even for single family detached.
    I'm sorry. Is my bias showing?

    Every day is today. Yesterday is a myth and tomorrow an illusion.

  6. #6
    I think it depends on the type of residential as well. Manufactured, low, middle and lower upper tend to consume more services than they pay in taxes.
    When did I go from Luke Skywalker to Obi-Wan Kenobi?

  7. #7
    A little off topic.. I saw a consultant for a developer once get very creative justifying new development by calculating the cost of service as well as revenue that would be generated from property taxes, sales taxes, and economic spin offs. It was of course biased, but it was interesting.

    Non-luxury single-family homes generally cost more to service than they generate in property taxes, especially when factoring in schools. Higher density condo developments bring in more revenue than they consume. Especially since there tends to be fewer school aged kids per unit, and they may use private waste management services and not have to rely on municipal resources. I've seen an argument that condos use less police services than rentals or single-family homes, but the data behind in was suspect.

    Politically, usually single-family homes are seen as good and any higher density development is seen as bad and will overload the school system. But I know one built-out community in recent years that has gone full growth machine. Basically whatever a developer wanted would somehow be justified and approved. Property taxes have decreased in this jurisdiction while surrounding areas have seen big increases. Lots of new businesses and retail are opening up, revitalizing (or gentrifying?) the dead sections of town. Traffic has become unbearable, though,

    Anyway, back on topic.
    The content contrarian

  8. #8
    Cyburbian dvdneal's avatar
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    Thanks for the help. I found a couple Purdue studies and ran some numbers myself. We don't include school districts and the homes generate around $4k in property taxes. That along with our budget maintenance costs on roads and general lack of real services (no water/sewer) says the houses actually do pay for themselves, but I won't let that get out much if I can help it. It's already enough to fight the pro build and do what you want attitude.
    I don't pretend to understand Brannigan's Law. I merely enforce it.

  9. #9
    Cyburbian MD Planner's avatar
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    I'd be very wary using numbers from a study in another state/community/county/city. It's just not apples to apples.
    He's a planner, he's a dreamer, he's a sordid little schemer,
    Seems to think that money grows on trees . . .

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