"For every dollar a county gets in taxes from new development, it costs us 40 to 50 percent more to provide services."
Florida Hometown Democracy on Thursday, September 9th, 2010 in a web ad supporting Amendment 4.
Development doesn't pay for itself, pro-Amendment 4 group claims
The group pushing a constitutional amendment that would give voters more direct control over development projects is trying to debunk what is says is a well-told myth about development -- that it pays for itself.
Florida Hometown Democracy, the organized group supporting the passage of Amendment 4, says in a new web ad that development ends up costing taxpayers, not benefiting them.
"Politicians keep telling us that new development brings tax money to our community," the group says in a web ad available on the group's website. "What they don't tell is that for every dollar a county gets in taxes from new development, it costs us 40 to 50 percent more to provide services."
Amendment 4, which will appear on ballots in November, essentially would give citizens veto power over major development proposals and land use changes. The measure, which needs 60 percent of the vote to pass, is being opposed by most local governments and the development industry. A group of mainly grass-roots activists -- led by environmental attorney Leslie Blackner of Palm Beach -- is supporting the proposed amendment.
We've rated three statements about Amendment 4 previously, which you can read here. In this item, we're going to examine Hometown Democracy's claim that for every $1 in new tax revenue coming in from development, $1.40 to $1.50 is spent servicing that new development.
Hometown Democracy spokesman Wayne Garcia pointed PolitiFact Florida to four studies to support the group's claim.
A 2006 study by Jeffrey H. Dorfman at the University of Georgia found that in Leon County in Florida, for instance, for every $1 generated by new residential development, the government would spend $1.39. The study focuses on replacing farmland with development, and concludes that commercial, industrial and farm uses will save taxpayers money in the long run.
The Dorfman study also measured the cost in 14 Georgia counties and found that for $1 of tax revenue, governments would spend anywhere from $1.13 to $2.27.
An earlier study from 2002 and 2003, commissioned by the 1000 Friends of Florida, The Conservation Fund, The Georgia Conservancy and Tall Timbers Research Stations, focused on Leon County in Florida and two Georgia counties. It found that for every $1 in revenue generated by the residential development of farm and forest land, taxpayers pay $1.38.
A third study, commissioned for a specific development in Jacksonville in 2000, found that developing the undeveloped land would create $157 million in property taxes over 15 years but cost Duval County taxpayers $250 million.
The fourth study was commissioned for Sarasota County in 2002. It found that the typical Sarasota subdivision costs the county $1.53 for every $1 of revenue it generates.
After seeing the findings referenced in the four studies, we noticed a trend. Each seemed to be focusing on the development of residential subdivisions, or taking undeveloped farm or forest land and turning it into single family homes.
That's certainly a prominent form of development in Florida. Probably the one most people think of when they think about development.
But it's not the only kind.
Some development does more than pay for itself
All the studies Garcia provided found that commercial and industrial development did more than pay for itself. The Dorfman study found that in Leon County, for every tax dollar generated by commercial and industrial development, taxpayers would have to pay $0.46 for services.
The Sarasota study found that expensive 5-acre ranches cost $0.57 for every $1 generated.
The ad makes no claim about one specific type of development or another. It just says development.
And still, those studies don't account for the disproportionate share of taxes the people in new homes are paying, said David Denslow, research economist for the Bureau of Economic and Business Research and Distinguished Service Professor in the Department of Economics at the University of Florida.
"New houses are on average more expensive than existing ones, and therefore pay more than their average share of residential property taxes," Denslow said. "In addition, except for Florida residents with portability, the new houses don't get an initial break from Save Our Homes."
The studies, Denslow said, also ignore the fact that Floridians create property tax revenue where they live, where they shop, and where they work. The development creates spin-off tax benefits. (For the record, Denslow opposes Amendment 4, saying he doesn't believe it will result in good land planning).
Other experts we talked to said that the cost of a development to taxpayers very much depends on the specifics of the development.
Take a 3,000-acre farm in eastern Hillsborough County. In order to add 1,000 homes there, the county government would need to upgrade county roads and extend utility lines. Then, once the homes are built, the government would have to provide fire and police service, and the school district would have to provide school options.
Through impact fees, developers would pay some of those costs. Through property taxes, homeowners would foot another part of the bill. But very likely, not all of it.
Now take an empty square block in downtown St. Petersburg. And say someone wants to build a 10-story hotel. Roads are in place. So are the utilities. No new residents means no real impact to the school district.
In that scenario, property and sales taxes generated by the property very likely would more than cover the cost to the city.
Now say you're a beach community tearing down an old hotel and replacing it with condominiums. In that scenario, you're potentially increasing the cost on the school system, but you're also increasing the tax dollars generated by the property. How does that all shake out?
Maybe a net positive.
Or say you're building low-value residential developments in a bedroom community Polk or St. Lucie County. That's going to most likely cost taxpayers.
The bottom line is "it very much depends on the type of development what kind of ratio you get between the tax revenues received and the cost of public services," said Lance deHaven-Smith, a professor in the Reubin O'D. Askew School of Public Administration and Policy at Florida State University. "For a long time, we just wanted growth in Florida ... the thinking being we were going to bring in this growth and make a bountiful Florida.
"But now we know that not just any growth will do it," deHaven-Smith said. "It requires a mix that includes commercial and industrial and unless you actively plan for that, you don't get it."
And as we searched, we even found at least one study that contradicts the studies provided by Hometown Democracy. The study isn't from Florida, but found a net positive impact for taxpayers by the development of five St. Louis area residential subdivisions. The study, which was paid for by a St. Louis business group, said that "annual revenues from the five subdivisions for local taxing districts exceeded the costs of providing services to the subdivisions by $13.9 million."
What's the net effect of all the development happening in Florida? No one was able to direct us to an authoritative study to provide a clear answer.
There is evidence, however, that growth isn't completely paying for itself. Back in Hillsborough, the county Metropolitan Planning Organization has identified more than $3.2 billion worth of unfunded, but needed road projects. Here's a list of the top 20 unfunded projects from 2008. Pinellas County in 2009 had at least $1.1 billion in unfunded road projects.
But when Hometown Democracy says in an ad that taxpayers are paying a 40 to 50 percent premium for development, they're failing to tell the entire story. The group is able to find specific examples of developments that cost taxpayers 40 to 50 percent more than what they're generating in new tax income, but the math doesn't work as a generalization. The cost, or benefit, of a development to taxpayers matters very much on the specific details about the development.
Generally, studies suggest that new large single family developments do not pay for themselves. But infill development (taking an empty lot in an urban area) or redevelopment is much more likely to pay for itself. So are commercial and industrial development projects. As such, we rate Hometown Democracy's claim Half True.