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New report quantifies the fiscal costs of population growth
by Brian Wheeler | Sunday, January 06, 2013 at 12:02 a.m.

A new report produced for Advocates for a Sustainable Albemarle Population says that continued population growth in Charlottesville and Albemarle County would only increase the fiscal challenges faced by local government. 

It also argues that “smart growth” strategies and economic development efforts to recruit even targeted industries are “doomed to fail” in a fiscal analysis that examines the full cost-benefits.

“I think we have long used a drug that we thought would cure our ills, and the drug is growth,” said Jack Marshall, ASAP’s president.  “This drug has side effects and its probably not a drug that is appropriate for most communities in America.  It’s time to reconsider that drug’s claims for what it can do.”

Using publicly available government data for the fiscal years between 2006 and 2009, the study examines the fiscal costs and benefits of population growth in the city of Charlottesville and Albemarle County. 

Various land use categories — like residential, commercial, industrial and agriculture — were examined to determine if they pay their own way for the public services required.

The report concludes, “few land uses pay their way … because new area residents require services that increase local government costs at a level greater than the additional local revenue they contribute.” 

“Growth will not pay for itself, but to remain prosperous and have opportunities for your citizens, and to sustain a healthy community you already have, you actually don’t need it,” said ASAP board member David Shreve.  “This does not mean that all growth must end, nor does it mean, as we have been criticized, that we need to build a moat.”

Shreve, who holds a doctorate in economic history, served as the report's editor and adviser.

Neil Williamson, president of the business advocacy group the Free Enterprise Forum, said the report misses the mark.

“While seemingly accurate in its limited financial analysis, [the report] fails to recognize the indirect, but calculable, economic benefits of population expansion,” Williamson said in an email to Charlottesville Tomorrow.  “The Free Enterprise Forum is concerned the report is flawed in design and unfairly prejudiced in its analysis and conclusions.”

“The report fails to calculate the considerable value of population to economic vitality,” Williamson counters.  “It is established that ‘Retail follows Rooftops’ and revenue (and jobs) follows retail.  One need only look to Greene County [where] the retail sales tax local option has increased exponentially since the establishment of the retail centers.”

Craig Evans was the project manager and principal author for the study.  Evans is a former member of ASAP’s board of directors and he serves as a member of Albemarle County’s Fiscal Impact Advisory Committee.

“If you look at a land use in isolation, like commercial and industrial, they pay their way [so you think] let’s attract more,” Evans said.  “What happens is that as you attract more commercial and industrial uses, you inevitably attract more people.”

The report says that for every dollar in revenue generated, residential housing for those additional people has costs of $1.41 in Albemarle and $1.37 in Charlottesville.  The costs of public education are a large factor.

Last April, the Thomas Jefferson Partnership for Economic Development published a Target Industry Study to help local governments focus their economic development strategies.  Albemarle decided to focus on attracting and growing the following industries: bioscience and medical devices, business and financial services, information technology/defense and security, and agribusiness.

“The targets were identified for the region and individual localities based on many factors, including the skill sets and experience of our existing workforce,” said TJPED’s president Helen Cauthen in an email.  “Our strategies around the target industries will be very focused on strengthening and retaining existing businesses in those sectors, which will provide job stability and security as well as career ladder employment opportunities for current citizens.”

ASAP’s leaders say this economic development initiative is one of their greatest concerns.  They prefer a focus on supporting existing small businesses and question whether the current population can or will fill the new jobs being targeted for creation.

“The Target Industry Study suggests we forge ahead and hire outside folks, not the underemployed,” Marshall said.  “We say wait a minute, it won’t work. ... Continued growth exerts fiscal demands on local government and we have to deal with that some way.”

Shreve was asked how a community might close the fiscal gap identified in the report.

“There are two legitimate ways, first improve the tax structure to get more money out of the community’s income to fund services,” said Shreve.  “The second way is to increase state and federal aid.”

The report recommends more “progressive and responsive” tax structures.

“We could move to a local income tax piggybacked on a state income tax,” Shreve gave as one example, a suggestion that would require action by the General Assembly

Evans moved to the community in 2007 from South Florida and he acknowledges he fits the profile of a newcomer who wants to close the gates on others.  Evans said that in an ideal cost-accounting system, the existing population would pay to get community infrastructure caught up, then newcomers would have to pay for the new services they demand.

The study says recruiting more wealthy residents to help pay down the fiscal gap is unrealistic since it would require an average home price of $2.7 million for the next 2,000 homes in Albemarle to raise enough tax revenue to address even existing deficits.

“Development is not the pot of gold at the end of the rainbow, development has a cost,” Evans said.  “The question has to be how much do we want to grow and as we grow how are we going to pay for it?”

Both Marshall and Evans hope the study will spark a deeper conversation among local officials as they update the city and county Comprehensive Plans.

“A smart community doesn’t ignore these issues,” Marshall said.  “We should talk openly about them and make reasonable decisions.  We should talk about a vision that makes sense, then figure out what steps to take.”

 

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