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Examining the Fiscal and Economic Impacts of Local Development Decisions

Land use decisions by local governments have profound effects not just for their communities, but also for the region as a whole.  By understanding both the local and regional implications of municipal fiscal policies, officials can be more effective in seeking to achieve and sustain livability for their residents in the long term.

To provide better information on the impacts of development, CMAP has released Fiscal and Economic Impact Analysis of Local Development Decisions. The report contains case-study analysis of the fiscal impacts of 31 developments in ten of the region's communities, including an additional assessment of regional economic and market impacts. The report focuses on municipal fiscal impacts, though some analysis of other districts is also provided. While each case study exists within a unique set of localized market and fiscal conditions, CMAP identifies several trends regarding fiscal impact practices, revenue sources, and infrastructure and service costs.

Although retail developments generally provide the highest fiscal benefits to local governments due to sales tax revenues, some higher density residential and office developments also have very positive fiscal results. Furthermore, retail developments are very dependent on the customer base provided by adjacent households and workers. Municipal expenses are generally driven by calls for emergency services and the cost to maintain new lane miles or other infrastructure.

Additionally, mature case study communities with underutilized infrastructure and a prevalence of infill development generally experience higher net benefits from new development. Finally, municipal land use decisions affect the fiscal condition of other jurisdictions. This is particularly true for multijurisdictional infrastructure like the transportation network, as well as for jurisdictions that are highly dependent on property taxes.

This report builds on prior CMAP analysis of local fiscal and regional economic impacts. In April 2011 the CMAP Board created the Regional Tax Policy Task Force, an advisory group of representatives from local and state government, businesses, civic organizations, and academia, to make recommendations on state and local tax policy matters in GO TO 2040.  Among other issues, the task force discussed fiscal and economic impacts generated by non-residential land uses, focusing on prototypical non-residential land. In its discussion of the task force's advisory report, the CMAP Board directed staff to continue to study the local and regional impacts of local land use decisions, emphasizing analyses that include specific information and cooperation from local municipalities.