Fiscal Impacts

The insight2050 fiscal impact analysis is a regional study designed to provide an understanding of the ’order of magnitude’ variations in scenarios as they relate to local government revenues and costs associated with new development; the analysis does not include all categories of costs or revenues. The analysis focuses primarily on impacts to the general funds of local jurisdictions (cities and townships), but does include certain county-level costs and revenues in order to provide an equivalent set of service categories for comparison purposes. Therefore, the analysis does include sheriff costs related to townships, but does not consider road maintenance costs for cities or counties because those services are typically provided outside of the general fund. Similarly, the analysis does not include impacts to school districts or other special districts that are funded separately. The fiscal analysis is focused on the costs and revenues associated with new (not existing) residential and commercial development.

Community Insight

“As central Ohio grows and prospers, we must take the time and effort to plan for the future. Through the insight2050 website, communities are able to capture the macro-analysis of trends in order to begin considering future zoning and land use plans. Understanding the fiscal impacts of different growth decisions is critical to community decision making.” — Mayor Ike Stage, Grove City, Ohio

Infrastructure and Operations & Maintenance Costs

Increased land consumption can lead to higher costs for local infrastructure and community services, as growth on previously undeveloped land often requires significant capital investments to extend or build new local roads and water and sewer systems, and to provide new public safety services. Growth focused in existing urban areas can take advantage of existing infrastructure and capitalize on the efficiencies of providing service to higher concentrations of jobs and housing. Moreover, accommodating growth within focused urban areas can help to ensure that future infrastructure investments generate a high return on investment.

Cumulative Local Capital Infrastructure Costs and Operations and Maintenance (O&M) Expenditures (2014 dollars)

The cost difference between new compact and more dispersed development can also vary significantly when public sector operations and maintenance (O&M) costs are taken into account. O&M costs include the ongoing expenditures required to operate and maintain the infrastructure serving new residential and commercial growth, as well as the costs to provide other services included in a typical local government (city, village, or township) operating budget.

Average Annual Local Capital Infrastructure and O & M Costs

The insight2050 scenarios are compared for their regional impacts on local government O&M costs, including:

  • General Government: including administrative and legislative functions
  • Fire: including all fire services in incorporated and unincorporated areas
  • Community Services: including community and recreation services
  • Engineering and Public Works: including only general fund public works functions
  • Police and Sheriff: including police and sheriff patrol services in incorporated and unincorporated areas

Engineering and public works costs are strongly linked to the physical form of infrastructure. More dispersed development, which entails greater lengths of roads and sewer pipes, incur higher O&M costs than more compact development, which capitalizes on the economic efficiencies of shared infrastructure capacity. The same is true for many services such as police and fire, which can cost more to provide when development is more dispersed.

Focusing new growth in and around existing urban areas can reduce costs significantly, as demonstrated by reviewing the capital infrastructure and ongoing O&M costs for each of the insight2050 scenarios. As compared to the Past Trends scenario, following the development pattern of the Planned Future scenario would save $605 million to 2050.

The Compact Future scenario saves $3.2 billion, which is a 19% savings compared to Past Trends, and an average annual savings of $79 million. The Maximum Infill scenario saves a total of $3.3 billion compared to Past Trends. The fiscal analysis of the RapidFire scenario model focuses on local and subregional costs borne by cities, townships, and counties for new developments only. It does not include the cost of new regional roadway and transit infrastructure that might be part of the facilities that support a scenario growth pattern.

Note that the cost variations across scenarios do not always vary directly with the proportion of dispersed or Standard development in a scenario. For example, the Planned Future scenario, which is more compact than Past Trends, sees a slight increase in costs for capital infrastructure compared to Past Trends due to the higher proportion of rural and unincorporated residential development in the Past Trends scenario;This is because development in rural areas is served by septic systems and thus does not incur the higher cost of sewer infrastructure (the cost of installing and maintaining private septic systems falls to individuals, and its costs are not included in the scenarios). For more detail on the cost assumptions, refer to the “Fiscal Impacts Methodology and Results Report” in the appendix.

Revenues

The insight2050 scenarios are compared for their regional impacts on tax revenue, including:

  • Annual income tax and property tax (apportioned to general fund and public safety uses) revenue associated in the model with new commercial development. Commercial development includes all non-residential development.
  • Annual property tax revenue apportioned to general fund and public safety uses for new residential development. (Additional property tax revenue levies for schools, libraries, and other services were not included in these scenarios.)
  • Annual county sales tax revenue generated from households in new residential development.

Calculating Commercial Income Tax, Property Tax, and Sales Tax Revenue

Income tax is typically the most significant revenue source for cities in Ohio. Since the bulk of income tax is generated in a worker’s city of employment, income tax revenue was associated with growth in commercial and other nonresidential space for modeling purposes. Income tax revenues received by worker home locations and income tax generated by business profits were also modeled in order to account for their regional distribution in the different scenarios.

Property tax comprises a relatively small share of city revenues, but is the primary source of funding for townships. The portion of property taxes dedicated to city and township general funds and public safety costs were calculated for the scenarios. General fund and public safety revenue streams were calculated because cities typically fund public safety services out of their general funds, whereas townships must levy additional property taxes to fund public safety services. Annual county sales tax revenue, which funds general county services, most notably public safety, is also included in the scenarios revenue comparison. Note that school districts are funded by separate property tax levies and were not included in these scenarios. For more detail on the revenue assumptions, refer to the “Fiscal Impacts Methodology and Results Report” in the appendix.

Cumulative Residential and Commercial Tax Revenues to 2050 (2014 dollars)

Scenarios Revenue from New Commercial and Residential Development

As the majority of income tax is generated in an Ohio worker’s city of employment, higher income tax revenue is seen in scenarios with the highest proportions of commercial development in higher value urban locations, followed by compact locations; these places also levy relatively high average income tax rates. Thus the Compact Future and Maximum Infill scenarios see higher commercial tax revenue than the Past Trends and Planned Future scenarios. Focused Growth sees an additional $533 million in revenues through 2050 compared to Past Trends, while Maximum Infill sees a nearly $700 million increase.

Property tax revenue from residential development in Ohio does not favor compact development as strongly as does income tax revenue. In the case of city, township, and county property tax and sales tax revenue related to new residential development, the Compact Future and Maximum Infill scenarios result in tax revenue of $525 million and $500 million less, respectively, than the additional revenue generated in the Past Trends scenario. This is in large part due to the higher proportion of large, higher-value single-family residential development in the Past Trends scenario, and the Past Trends scenario’s inclusion of more homes in unincorporated areas with higher property tax rates.

Overall, despite their lower residential revenues, the Compact Future and Maximum Infill scenarios enjoy moderately higher overall revenues when one combines the commercial and residential categories. To 2050, the Maximum Infill scenario sees nearly $200 million more in total revenue, or about $5 million per year. Tax revenue on a per-acre basis illustrates more variation across the insight2050 scenarios. Per-acre residential and commercial revenues add up to $32,000 in Past Trends and $87,000 in the Planned Future scenario. The more compact Focused Growth and Maximum infill scenarios have per acre revenues of $213,000, and $474,000 respectively.

Overall, the insight2050 scenarios illustrate the fiscal efficiency of more compact land patterns in the costs to supply and operate and maintain local infrastructure and community services. While not as significant as the cost advantages, there are also revenue advantages to the more compact scenarios, particularly from a commercial tax revenue perspective and when viewed on a per-acre basis.

Cumulative Residential and Commercial Tax Revenues per Acre to 2050 (2014 dollars)