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Thursday
Jul102014

Fiscal Impacts of Residential Growth

Jeff Larson recently received his Master’s Degree in City & Metropolitan Planning from the University of Utah. This essay is a summary of his research. You can obtain the entire report here and you can reach Jeff at jlskiut83@hotmail.com or on LinkedIn.

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Many suburban cities attract or allow only low density, single family zones and struggle to maintain public utilities like roads and sewers. At the same time citizens refuse to pay higher taxes and oppose more dense developments. I grew up in South Jordan City, which lies in the suburbs of Salt Lake City, Utah.

South Jordan is a typical suburb but has some unique qualities. It is home to Daybreak which was designed using a traditional neighborhood development model. The city also had mixed use zones until the recently elected mayor and new city council changed that.

South Jordan is a fast growing city and with growth comes new costs incurred by the city. To support new subdivisions, developers and the city have to construct new roads, expand sewer and water lines, and provide other infrastructure and public services to new residents. This particular study is focusing on roads. The goal of this analysis is to gain a basic understanding of the fiscal implications of building single family homes, town homes, and apartments at different densities within South Jordan City and to find at what density a neighborhood has to be to pay for its own roads.

During my research and discussions with city officials, I found that funds for roads typically come from federal funds, gas tax, and property and sales tax. Using the city budget for the last 4 years I was able to determine the expenses for the roads, minus labor costs to be approximately 7.82%. I worked with the assumption that 7.82% is the estimated share of taxes (city revenue) from residents that is allocated to annual road expenses.

The standard width of residential streets in the city is 28 feet, Daybreak is 26 feet. The costs per square foot of roads and maintenance were obtained from the city engineer. Additionally, the total amount of road is for each neighborhood was obtained by the city. The city engineer and a city planner gave me estimated road cycles. However, those differed from each other and research from other sources provided more life cycles. Using the information gathered I determined a life cycle based on a 30 year time frame for the roads in the chosen neighborhoods and in what year the maintenance and repair work is done.

Click for larger image.

The table below shows an outline for each neighborhood and gives the estimated cost of the road cycle. Crack seal maintenance is completed during the 5th year while 100% of the road surface receives a slurry seal on the 7th year, and so on. While all of the maintenance is done at some point, each road is different depending on a number of factors including connectivity, traffic, and wear and tear. If the city were to maintain its roads at this level, it would take Ascott Downs about 75 years to pay for the estimated cost of the 30 year life cycle.

Ascot Downs has 1.7 units per acre. If the density were increased to 3.8 units per acre, the neighborhood would be able to pay for its 30 year life cycle by the 15th year. The 15th year is the estimated year for the first overlay and base reconstruction, the two most expensive maintenance projects. If taxes were increased it would require 31% rate increase to pay for its road without changing the density. Daybreak has 4.9 units per acre and would require 17.6 units per acre to pay for its 30 year life cycle in the first 15 years. Or a tax increase 20% to keep the density the same. Only Wyngate can pay for its road in less than 15 years currently.

If the city were to change the standard width of residential roads to a more traditional width of 24 feet, it would end up saving the large sums of money. For example, if Parkway Palisades was 24 feet wide, it would save $237,000 and 4 years off the expected time to pay off the road. Similarly, Daybreak could save $284,000 and 8 years.

The value per acre was also found for each neighborhood to see if there was a correlation with the revenue generated for roads. Wyngate has the highest value per acre, the highest density, and can pay off its road the fastest. Bad news is that it’s a privately owned development and HOA fees pay for its roads. However, Vista View has the lowest value per acre but can pay off its road faster than Daybreak Three and Ascot Downs. Parkway Palisades generates the most property taxes and is the wealthiest of the neighborhoods. Despite having the lowest density, it comes in second in paying off its roads.

The City’s General Plan states the following, “Preserve peace and quiet in residential areas through circulation design that slows traffic flows and encourages safe driving practices.”

The missing metric for South Jordan, revenue return from property taxes, is biased in favor of infrastructure intensive low-density sprawl that does not pay for itself over the long-term. It could be said that developments like Wyngate are essentially subsidizing the city’s low-density neighborhoods. However, there are not enough of them in the city to make up for the low density developments, and currently Wyngate is maintained privately. And thanks to the high land value of the city, there are some valuable low density neighborhoods such as Parkway Palisades but even that doesn’t cover its road costs.

Possible recommendations to help with the costs of roads would be making more traditional streets that are 24 feet wide and restrict cul-de-sacs to only when topography and existing developments require them. Granny flats and infill projects in residential developments would help increase the tax base. The city should also reinstitute mixed-use zones which traditionally have the highest value per acre and require the least amount of infrastructure. South Jordan is finite and has the opportunity to grow its tax base by making smarter decisions when it comes to infrastructure.

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