Urban Design for Economic Growth and Tax Base Expansion Part 1

Aug 17, 2017 | view 1,915

Urban Design for Economic Growth and Tax Base Expansion Part 1

By Thapana Boonyaprawit

Smart Growth Research Institute Thailand

Email: [email protected] http://www.smartgrowththailand.com

Introduction

Urban planning and design in the United States have progressed to the physical design phase aimed at improving the economic base of cities and expanding the tax base. The government, through relevant ministries, has been implementing urban planning and design alongside grassroots economic revitalization, using the tax base as one measure of planning success. This approach has been adopted because, in recent years, the government has invested heavily in infrastructure and utilities. Upon evaluating budget expenditures, it was found that some of the infrastructure and utilities investments have created budgetary burdens for both the federal and local governments in terms of maintenance and operations. Additionally, the infrastructure investments have negatively impacted economic development and urban growth. A clear example is the investment in infrastructure and utilities in low-density areas, where the state has lost significant agricultural land and open spaces that maintain environmental quality due to single-family housing or buildings with single-use activities. At the same time, there has been a need to invest in infrastructure across vast areas with few residents. The outcome of investing in low-density areas is low land-use efficiency, requiring a high proportion of infrastructure investment, resulting in the loss of agricultural land, food production areas, and open spaces that preserve environmental conditions. Furthermore, low-density areas create physical constraints that compel residents to rely on personal vehicles for transportation, lacking alternatives for travel (due to the unfeasibility of investing in public transportation systems).

Image showing the commercial area in downtown Boston designated as a walkable city (WalkUps)

Can significantly contribute to expanding the tax base for the state

Source: Image from Link Curbed Boston: https://boston.curbed.com/2017/8/14/16143736/boston-apartment-rents-non-luxury

Meanwhile, it has been found that investing in infrastructure in high-density areas and walkable neighborhoods yields higher economic and tax returns. The economies in high-density areas and walkable neighborhoods are diverse and interdependent, capable of generating related activities. The land use and infrastructure utilization are efficient, with costs and expenses per land parcel being low due to a high number of users. The compactness of the area, combined with diverse economic activities, enhances land-use efficiency and provides value compared to the economic returns received by businesses and residents. The state benefits directly from the expansion and increase of the tax base, which arises from the concentrated economic activities in areas where the state has invested in infrastructure and utilities.

Image showing low-density and dispersed areas in the suburbs where the state needs to invest in large-scale infrastructure to support a small number of residents but yields little tax revenue for the state

Source: http://www.conservationmagazine.org/2014/08/just-how-far-will-urban-sprawl-spread/

Study Results on the Relationship between Land Use and Tax Base

This first article presents a study example from Smart Growth America, which used modeling to compare infrastructure investment data and the proportion of budget expenditures alongside tax revenues from actual areas in West Des Moines, USA. It presents land use activity patterns categorized by building types and uses a model to analyze the impacts on income, costs, and taxes derived from four alternative land use types: low-density land, medium-density land, high-density land, and walkable neighborhood land, which is very dense and often consists of downtown commercial areas. The costs used in the model are based on estimates derived from infrastructure investment data, operational costs, and expenses for infrastructure and utilities, as well as tax impact estimates from each land use type, as shown in Table 1.

Table 1 Details of land use activities categorized by alternative land use patterns

Source: The Fiscal Implications of Development Pattern: 2015, West Des Moines, Smart Growth America.

The estimates from Table 1 indicate that high-density land and walkable neighborhood land have a higher residential density compared to medium-density and low-density land, which aligns with the land use efficiency where walkable neighborhoods utilize the least land while providing comparable residential and commercial utility.

Subsequently, a comparison of income, costs, and tax impacts was conducted by dividing the urban area into two groups: the regular urban core and the urban areas around school districts, categorized by costs, expenditures, and annual tax impacts on national income and per acre. The study results are shown in Table 2.

Table 2 Study of income, costs, and tax impacts categorized by national income and per acre

Source: The Fiscal Implications of Development Pattern: 2015, West Des Moines, Smart Growth America.

The tax revenue base comes from property tax, hotel tax, and taxes from other income sources such as licensing fees and permits. The cost estimates are based on construction costs, road expansion, road maintenance, stormwater management and drainage systems, wastewater treatment, fire protection systems, and transportation expenses for students (school buses).

Data obtained from the model and comparisons with actual operational figures reveal significant findings: in walkable neighborhoods, the state can recognize tax revenues that differ considerably from other land use types, particularly regarding taxes per acre or per parcel in both the regular urban core and in school districts, where the state has opportunities to receive more tax revenue from area development. This is similar to land use efficiency, even though the costs of infrastructure investment and operations in walkable neighborhoods may be higher than in high-density and medium-density areas.

Conclusion

The next article will highlight the economic impacts and urban development occurring in walkable neighborhoods compared to other areas, along with measures for urban design that align with the scale of infrastructure and utility investments.

References

Smart Growth America: 2015, The Fiscal Implications of Development Pattern.

Note

Those interested in urban design and tax bases can listen further at the Nakhon Sawan seminar organized by the Municipal League.

The 3rd Urban Planning Knowledge Dissemination Conference will be held on August 17-18, 2017. Details can be found at the link below.

http://tatp.or.th/local-infrastructure-economic-center-for-benefit-taxation/

Thank you for the information from www.smartgrowththailand.org

Urban Design for Economic Growth and Tax Base Expansion Part 1