Vanishing Automobile update #12

Growth Pays for Itself --

But Smart Growth Doesn't

In fast-growing regions, smart-growth advocates often use people's fears that existing residents are forced to subsidize newcomers in order to build support for smart-growth policies. A recent report by an Oregon consulting firm finds that, at least in some situations, growth pays for itself. But smart growth -- that is, high-density housing -- does not.

"Fiscal Impact Analysis Related to City Growth and Annexations" was written by ECONorthwest, an Oregon economic consulting firm, for the city of Salem. While the report warns that its findings are based on circumstances specific to Salem as well as specific assumptions about future growth, the report's general conclusions are:

• Growth pays for itself. "The city's fiscal position in General Fund would be slightly stronger under the growth scenario than under the no-growth scenario" (p. vi).
• The report predicts some shortfalls, but the shortfalls will be at least as great without growth as with it. "Billing rates for water, sewer, and storm water services are lower under the growth scenario" (p. vii).
• Some shortfalls are due to poorly priced services. "Under the no-growth scenario, we estimate deficits of similar magnitudes. This suggests that the most critical issue facing the Public Works Department is not the rate of city growth but rather the Department's method of finance" (p. vii).
• All land uses pay for themselves EXCEPT multifamily housing. "Single-family, commercial/office, and industrial uses contribute more in General Fund revenues than they generate in service costs" (p. ix).

This last conclusion, which has grave implications for smart growth, makes a lot of sense. Taxes generated by multifamily housing tend to be much less, per capita, than from single-family housing. Yet multifamily housing can pose high costs on schools and other municipal facilities.

The report warns that it would be inappropriate for the "city to shun multifamily housing to foster its budget." But it makes even less sense to subsidize multifamily housing through property tax breaks, development fee waivers, or other subsidies, as many Oregon cities are doing in a misguided effort to promote smart growth.

Unfortunately, the report is not available in electronic form. Copies can be obtained from the City of Salem Community Development Department, 555 Liberty St. SE #305, Salem, Oregon 97301-3503. Thanks to Rodney R. Stubbs for bringing this report to my attention.