The Cost of Urban Sprawl: A Jurisdictional Context

Gabriel Dekel, MCIP
Copyright 1997 Dekel
The issue of the financial cost of sprawl has received limited scholarly attention. Conceptually speaking, the subject has been treated from a narrow and fragmented perspective. Current fiscal impact analysis lacks a clear spatial-systemic perspective of the cost of sprawl. A jurisdictional distinction between the site of sprawl and the location of its financial impact reveals the complete spatial-systemic scope of the cost of sprawl. This essay describes three case studies to illustrate a triple perspective of the cost of sprawl in a jurisdictional context.
Early utopian visionaries expressed a positive opinion of urban sprawl: Wright (1931) presented his Broadacre City as an exemplary model. Jellicoe (1961) envisaged a Motopia city, and Gutkind (1962) promoted a scattered urban development in his book The Twilight of Cities. Urban sprawl, however, has been regarded as a negative phenomenon by most scholars. The Viennese architect Gruen (1964) criticized sprawl for promoting "flight and blight" of the city core, the area which, in his words, is the heart of the "urban organism." More recently, sprawl has been studied within the general context of "growth management" (Burrows, 1977; Stein, 1993) and "sustainable development" (Newman, 1992; Roseland, 1992). Authors in these fields draw attention to the negative impact of sprawl: the interruption of farm activities by urban-type development (Bryant and Johnson, 1992)(1); the destruction of ecosystems (Rees, 1991); noise and air pollution, the depletion of energy resources, the absence of a public meeting space and the resulting loneliness and social disintegration, all a product of car dependency (Newman, Kenworthy and Robinson, 1992). In sum, the general assertion of this literature is that sprawl has a cost. However, rather than dealing with the issue of cost more directly, the focus has tended to lie in the search for innovative solutions to control sprawl (Brower, 1984; DeGrove, 1991; Des Rosiers, 1992). Scholars in this field have devoted few investigative efforts to the actual measurement of cost and more particularly, to the understanding of the fiscal dimensions of cost. The search for solutions, however, cannot be from the need to measure cost. Since the issue of development is not a zero-sum game, an optimal solution involves determinating of less costly development alternatives.

One possible explanation for the reluctance of authors to investigate the cost of sprawl is the view expressed by some economists that, in the long run, this cost will be eliminated through the operation of market forces, whereby high-density infill will occupy vacant land. Ohls and Pines (1975), Ottensmann (1977) and Peiser (1989) provide empirical evidence to support both this claim and the idea that sprawl-prevention policies should be reexamined. Aside from the equity issue (high density residents in future infill areas will be subject to a higher tax/service ratio to balance expenses caused by low density areas), one should question the rationale of the "land-value model" suggested by these scholars. The model rests on the notion that the desire for accessibility to the urban center will eventually raise land values in peripheral areas. With the continuing expansion of the city into the countryside and further away from the city center, land values in today's peripheral areas will rise and force high-density development on vacant lands. This model however, is based on an empirical analysis of past years and is not sensitive to the possibility of changing travel patterns. One should challenge the validity of this model given future energy prices, advancement in communications technology, the spread of suburban shopping centers and home-shopping, and the de-industrialization processes followed by de-urbanization processes (Blakeny, 1989), all of which have already reduced much of the need for travel to the city center. Furthermore, this economists' model ignores political influences which often hinder the process of residential intensification. Emerging "zero-growth" and other similar protest movements are making substantial efforts to stop high-density development in suburban areas. Other exclusionary practices also forestall high-density mixed-housing projects in suburban areas (Cox, 1983; Harrigan, 1985; Logan and Molotch, 1987). Finally, it should be noted that even if the prediction of future high-density infill is correct, an analysis of cost would still be necessary in order to assess whether the high density in peripheral areas, once materialized, is sufficient to recover expenditure.

A study conducted by the Real Estate Research Corporation (RERC, 1974) represents a notable exception to the widespread neglect of the fiscal costs of sprawl. Unfortunately, the RERC study over-emphasizes the design aspect of sprawl, thus failing to address the full scope of the issue (Dekel, 1995). This is true at both the macro and micro levels of the analysis. In macro or regional terms, the study considers only the direct costs of sprawl incurred solely by the municipality in which sprawl takes place, thus ignoring indirect inter-municipal impacts. At the micro or the detailed level of analysis, the study does not properly isolate the density variable. For example, the RERC study measures the costs of different development "prototypes," and compares a planned subdivision with a sprawl development. Such a reference overlooks the need to evaluate land-efficiency on a clear density scale for both spontaneous and planned subdivisions.

Another direction of inquiry focuses on the cost of population growth. Ladd (1994),  for example, had concluded that population growth results in additional service costs and pressures to increase of taxation. This study, however, ignores the revenue raising capacity of a locality and emphasises rather the costs associated with increasing densities. These last two points are somewhat incongruent as one cannot claim that density produces higher land values which increase the cost of purchasing land for infrastructure development and, at the same time, ignore the fact that these costs can be offset by the additional taxes levied from the rise of property values. The argument also that high density creates a "harsh environment" may be true but only for substantially high density developments, a matter which is not necessary the only alternative for a sprawl development.

Notwithstanding the generally inadequate inquiry, the issue of the cost of sprawl has become a pressing matter. Recent cuts in senior governments' transfer payments in many advanced industrial nations have motivated localities to pursue new financial sources (Keating, 1989). In the hopes of achieving a speedy increase of their tax base, localities have frequently pursued a pro-development policy (Kantor, 1988; Barnekov, Boyle and Rich, 1989). Besides resulting in mistaken development decisions (Savitch, 1988), such a permissive policy has given rise to the sprawl of development within and outside urban areas.

The importance of the analysis of the cost of sprawl lies in the fact that such cost is often permanent, as the layout of infrastructure may inhibit infill development in the future. In contrast to most other categories of public expenditures, the policymaker has less control over the cost of land-related services. This is because the spatial dimensions of land-related services constitute an independent variable. The density of a development and its location, often lying outside the jurisdictional borders of a local policymaker, produce a financial impact. Once a subdivision is developed, the need for annual operating costs is irreversible. Moreover, these annual costs accumulate in tandem with the continuing development. To this, one should add the aspect of cost-opportunity. As land is a nonrenewable resource, a bad land-use decision carries a double loss: the direct negative fiscal impact of a particular development, as well as the decreasing space for more beneficial developments which could balance off such losses.

The cost of sprawl is a crucial issue for another reason. Additional cost to the local government has an impact on the local economy, given the interdependency between the fiscal health of a community and its economic health (Ladd and Yinger, 1989). Based on the "logic of capital investment" (Judd, 1988), the degree to which businesses are attracted to a locality depends on the ability of the local authorities to offer an optimal tax/service level - that is, lower taxes or, alternatively, better services for higher taxes (Peterson, 1984). The presence of businesses in a locality generates a growth cycle resulting in their contribution to the local tax-base. Increasing fiscal capacity helps localities reduce overall taxes, increase services or subsidize new businesses. If this is true, then the reverse is also true: sprawl can spur a cycle of economic decline and the "crowding out" of businesses. This occurs if sprawl produces a net-loss for the local government which, consequently, is forced to increase taxes in order to maintain the existing level of services.

A New Approach to Fiscal Impact Analysis

Part of the reason that the financial cost of sprawl has not been extensively studied may be a product of the state of fiscal impact analysis (FIA). FIA has been plagued with misleading results to such a degree that it may have lost credibility. Muller (1975), for example, highlights inconsistencies in FIA findings from one study to another. When sponsored by private developers, FIA results differ from those of non-profit organisations or of the public sector, as each party reflects different development objectives. This state of affairs can be explained by the source of FIA, originally set up as a method to help justify American housing replacement and slum clearance projects of the 1930s and the late 1940s. Since these new types of public involvement were dominated by local growth interests (Checkoway 1983; Friedland and Palmer 1984; Mollenkopf 1983; Logan and Molotch 1987; Heidenheimer et al 1990), the related FIA methodologies may have reflected their influence. Another reason is that FIA remains a domain of practitioners who maintain a narrow spatial perspective, since the client is normally a single municipality. Little has been done to establish a comprehensive theoretical approach. A leading FIA source book, for example, is "The New Practitioner's Guide to Fiscal Impact Analysis" by Burchell and Listokin (1985). Much of the academic concern of FIA has been focused on a rather narrow aspect, notably, development impact fees. This last may inhibit the need for a broader FIA, since the idea of development impact fees may create a false impression that the total cost of development can be recovered.

Overall, FIA reflects a fragmented treatment of developmental issues in a fragmented metropolitan area. FIA has rarely been more than a single dimensional accounting exercise, in which an aggregative list of development "prototypes" is assessed. As it stands today, conventional FIA cannot help analyse the full spatial-scope of development alternatives, such as the development of new housing in a suburb as against the redevelopment in a central city. In this regard, one should recall Ruth Mace's long standing criticism:

the legitimate and most promising role of cost-revenue analysis in connection with land use planning will be in defining the net cost effects to the governmental unit concerned with different patterns of development, including variations in such major factors as density of development and spatial distribution of component uses (Mace, 1961 p. 191.)

Therefore, in order to provide a reliable assessment of the cost of sprawl, one must apply a different framework of fiscal impact analysis.

Generally speaking, FIA of development estimates the positive or negative effect of development on the budgetary balance of costs and revenues. Figure 1 illustrates a general scheme of FIA:

The cost analysis (I) addresses the specific range of services for a given development category. The cost component refers to an abstract unit of measurement - one hectare development. Here, the FIA emphasises a long-term perspective for both operating and capital costs. (2)

The revenue component (II) refers to taxes, user-fees and senior-government's transfer payments; it is based on the impact of the additional assessed property value. The property assessment values are measured on the basis of the assessment records of a sample of properties in the municipality.

The new cost/revenue balance results in a change in the overall balance of tax levy (III). The new property assessment (IV) increases the overall tax-base and affects senior government's transfer payments which, for its part, takes into account both the new property assessment and the revised "recognised levels" of new expenditures (V).

Both the change in the balance of tax levy and the change in transfer payments result in a net budgetary impact (VI) which makes it necessary to recalculate the property tax Mill Rate or to re-evaluate other local government policies on services and fees.

Figure1: Calculation Schema of Fiscal Impact

This perspective on FIA involves a thorough review of the dependent variable and the independent variable as follows: First, the purpose of FIA is to guard the economic health of a community and therefore, the subject of impact, or the dependent variable, is ultimately the ratepayer. The ratepayer bears the cost and is free to relocate, a matter which can cause a ripple effect on the local tax base and the local economy. It follows from that that an FIA within a locality must take into account the effects on all overlaying jurisdictions: the municipality, the county, the school board, etc, which all charge the same ratepayer property taxes.

Second, because land is a limited resource, any FIA of development should be a cost-alternative study. That is to say that the cost of a proposed development must be compared to the cost of other alternatives. The alternatives are the total variations, or dimensions, that land development reflects. The notion of land development, the independent variable, contains three dimensions: Land - that is variation in location, development - that is variation in type, and the combination land and development refers to a third dimension - variation in density. Conventional FIA focuses on variation in type (e.g. residential, commercial, industrial). Analysis of the cost of sprawl, however, must focus on the spatial dimensions of a development. So that, in addition to the evaluation of development alternatives as defined by variation in type, one must consider development alternatives as defined by two other independent variables: density and location. These two aspects are described at length in Dekel (1994) and (1995). It should be noted that in order to enable a cost-alternative comparison, a common measurement unit is used - the impact of one hectare development. The reference to such a small area should not diminish the importance of the impact as a cumulative phenomenon. Through the on-going operating costs and continuing development, local government budgets are subject to ever growing effects.

Given the presence of political structure within a region, sprawl cannot be analysed only as a pure physical entity. The jurisdictional context of sprawl must be addressed. To this point I shall now return.

Triple Perspective of the Cost of Sprawl

A reference to jurisdictional borders suggests a potential division between the place of sprawl (origin) and the location of its fiscal impact (destination). Three possibilities follow: (a) impact on the same locality consequent to land development within its own borders; (b) impact on a locality consequent to sprawl originating in neighboring communities; (c) impact on the same locality consequent to its own extra-jurisdictional expansion. Figure 2 illustrates this triple perspective of fiscal impact analysis.

Figure 2: Triple Perspective On The Cost of Sprwal The spatial-systemic dimension of development impacts exists at any origin-destination combination: (a) the magnitude of impact which is both originated and contained inside a locality depends on the spatial variation of service-cost and tax-revenues within neighborhoods. The variation in taxation levels reflects the difference in property values among neighborhoods which is itself a product of the socio-spatial structure of a community (Harvey, 1973); (b) an impact which is a result of extra-jurisdictional overspill is a product of spatial-systemic interdependency among neighboring communities and involves direct and indirect financial effects: the direct effect on a neighboring locality which hosts the sprawl and the indirect effect on a locality which originates the sprawl but does not accommodate it. This matter illustrates the reality of regional interdependency among different land-use types: eg. interdependency between residential and non-residential developments following the linkage between residence and workplace.

Holding a triple perspective, the analysis of three case studies here illustrates a new approach to the study of the cost of sprawl. The first case study refers to the fiscal impact of sprawl occurring within the city limits. This case shows how decreasing levels of housing density in the peripheral area of a city in Saskatchewan, Canada, affects the overall level of taxation. The second case study refers to overspill of development and its financial consequences on neighboring municipalities. This case provides an account of the cost of development in four townships which are subject to urban encroachment in southwestern Ontario. The third case study refers to the costs of development incurred by a locality which generates an urban sprawl beyond its limits. This case describes costs incurred by the provision of services to employees who live in the city (referred to in the first case study) and commute to an industrial area located in a neighboring rural jurisdiction.

All in all, urban sprawl is investigated here as a threefold phenomenon. It includes both residential and non-residential types of development; it occurs within and beyond the city limits; and, lastly, it is a phenomenon which produces impacts on neighboring jurisdictions and, through a feedback cycle, on the jurisdiction which originated the sprawl. Our efforts to achieve a more precise analysis of sprawl are not limited to the macro-level, or the regional scope of sprawl, but also to the micro or detailed level. In this respect, we refer to sprawl as a density variable. The proper reference to employment of density as an independent variable involves the selection of a large sample of subdivisions in order to study their budgetary attributes according to a density scale, an analysis which must stand statistical testing. By following such a procedure, one can overcome the problem involved in the above-mentioned RERC study, which studies cost differentials of a limited number of development prototypes and thus fails to isolate density parameters from design idiosyncrasies. Our analysis, then, breaks away from the traditional and fragmented approaches of FIA (outlined in Burchell and Listokin, 1978), as we emphasize the spatial and systemic dimensions of development. (3)

Impact of Sprawl within a Municipality

The first case study concerns a residential development in the peripheral area of Regina, the capital city of the province of Saskatchewan. Rapid sprawl spurred by exceptionally low land values, the presence of physical limits on expansion, and the substantial population decline in the inner city, have all motivated the city's planners to set up density goals for various peripheral neighborhoods. These density goals, however, have been challenged by local developers. The developers have gained leverage because of the consistently moderate levels of housing construction during the repeated recessions in the provincial economy. The pressure to lower housing densities has not always originated with developers, but has also been initiated by the local administration. In an effort to attract businesses to the city, official promotional campaigns depict affordable housing as a major benefit. Such a benefit may indeed be needed in order to attract potential residents who are deterred by the harsh climate of this northern city. The promotional strategy, therefore, aims to present Regina as a community of exceptionally low cost, together with a high standard of living. Naturally, a provision for inexpensive housing on large lots is part of this strategy.

The analysis of the fiscal impact of urban sprawl within Regina's jurisdictional limits focuses on the density dimension of residential developments (Dekel, 1995). Given variation in density, the empirical question is - which housing densities are fiscally sustainable? The purpose of inquiry is to identify the budgetary break-even point between land-related service costs and tax revenues of any hectare development, according to a density scale. Such a budgetary break-even point (or "optimal density") can be identified by transposing a curve which reflects the changing levels of "required tax revenues" (or "required property assessment")(4) onto a regression curve which reflects the variation in actual taxation returns (or "observed property assessments"), according to a density scale. The curves of these two variables intersect because, according to this study, they are in an inverse relationship. That is, given a rising density scale, the expected assessment has a positive relationship (the higher the density, the lower the expected assessment) which rises at a decelerating rate, and the required assessment has a negative relationship (the higher the density, the lower the required assessment) which falls at a decelerating rate.

Figure 3: Regina East Sector Housing Densities and AssessmentsFigure 3 illustrates observed assessments and their regression curve in the East Sector neighborhood, a curve which intersects with the required assessment curve. The point of intersection establishes an "optimal-density" point. (5) As can be seen in this illustration, the observed assessments of many subdivisions of this neighborhood are located beneath the required assessment curve and below the "optimal density" level, indicating a budgetary loss. This deviation from the "optimal density" is common in all four studied neighborhoods. However, because the neighborhoods maintain a particular socio-economic status with certain property values, they also reflect unique profiles of "observed assessments" and, therefore, different "optimal densities". Consequently, affluent subdivisions require a lower optimal density compared with less affluent neighborhoods. Our analysis shows that the difference between optimal densities of the most affluent and the least affluent neighborhoods in the peripheral area of Regina is 78%.

The nature of the inverse relationship between the required assessment for each density and the observed assessment contradicts the otherwise plausible claim that low-density development can always provide, through high property assessment values, adequate funding to recover the additional costs generated by the under-utilization of land-related services. This relationship shows also that high-density subdivisions within each studied neighborhood subsidize low-density subdivisions. The difference between the required assessment and the expected assessment per hectare in each neighborhood indicates the presence of a hidden deficit. The total hidden deficit in all studied neighborhoods in the peripheral area of the city amounts to 1.1% of Regina's overall tax-base. This hidden deficit has been balanced off by higher property taxes charged to other residential and non-residential ratepayers throughout the city.

Exporting Impact to Neighboring Communities

The second case study concerns the influx of development from one municipality to its neighboring communities, resulting in a fiscal impact on these localities. The localities chosen for this study were four townships adjacent to major urban centers in southwestern Ontario: Brantford, Lobo, Dover and Chatham. This case study illustrates the effect of a strong pro-development policy among rural communities, a policy which invites sprawl from a neighboring urban area. There are many determinants which contributes to such a pro-growth stance. First, determinants which originate from local communities: the need to halt the decline in population and the need to find new sources of revenues and employment consequent to the economic difficulties in the agriculture industry. Second, determinants which originate from the neighboring city consequent to de-urbanization processes and land-speculation activities. Rural municipalities, often lacking effective policy evaluation mechanisms, are responsive to developers' pressures. Local decision-makers assume that free market forces will balance negative financial impacts associated with service costs to new residential neighborhoods, through future development of industrial and commercial enterprises.

The FIA, in this case, was directed to analyze the cost of one hectare development of various types (Dekel, 1994). The standard of one hectare development was used in order to compare development alternatives and assess whether a spatial/fiscal balance between these alternatives could be achieved. (6) The results of this FIA show that most residential developments and low-intensity non-residential developments have a negative impact on the local ratepayer. Figure 4: LOBO TWP: Impact on Property TaxesFigure 4 illustrates the additional cost to the local ratepayer stemming from various types of development in Lobo Township. The link between a negative impact of residential development and the mostly positive impact of non-residential development is consistent in all four townships, regardless of their different assessment structures. High-density residential development produces a negative balance because of the demand for extensive services, while low-density estate development produces a negative balance because of the low tax return in proportion to the area occupied. Therefore, dormitory communities in a rural setting should be viewed as the indirect impact of the neighboring urban municipality. Low-intensity industrial development, such as scrap yards, and common neighborhood commercial operations also carry a negative fiscal impact. Only high-profile, high-intensity industrial parks and commercial plazas generates some fiscal benefits. These benefits, however, are not sufficient to balance off costs associated with residential development. A comparative analysis of cost per hectare, per development type, shows that it is not feasible that a rural municipality could normally attract adequate proportions of non-residential development to balance the costs of residential development.

Moreover, high-profile developments have proved to be a double-edged sword. First, such developments often provoke a neighboring city which justly claims that these developments are sustained by its market and draw on its tax-base. Annexation of such development is frequently sought and, if accomplished, the local municipality is left with the initial infrastructure costs related to such "prestigious" developments. Second, the perceived benefits from high-profile developments are not only exaggerated, but also help legitimize a pre-determined pro-development policy.

The perceived gains from high-profile non-residential developments promote development of all types and, even when some losses are observed, local politicians are placated by the belief that the losses will be balanced by the more profitable developments. Therefore, the most important consequence of perceived benefits is that they help obscure the need for a thorough evaluation of the true benefits of all development alternatives in a community. On balance, the inability to recover losses from residential development comes about either because the volume of high-profile non-residential development is insufficient, or because it has not been jurisdictionally aligned with residential development.

It is a mistake to assume that the losses for the community subject to the influx of development are a gain to the community which generates the sprawl. The deteriorating economies of rural communities have an indirect impact on the city, which supports rural residents who migrate to the city to receive welfare benefits.

A more direct impact of urban sprawl on the originating city is illustrated in our third case study.

Impact as a Feedback of Development Overspill

The third case study concerns an influx of development from one municipality into a neighboring community, resulting in an overall positive impact on the recipient community, and in a negative impact on the municipality which generates that influx, or a "boomerang effect" (Dekel, 1997). This case study is, in a way, the antithesis of the first case study. Here a rural municipality, neighboring Regina, has managed to capitalize on a major industrial development which falls into its jurisdictional area, while the city has been left with a negative financial balance. In contrast to the first case study, the balance between benefits from non-residential development and costs of related residential development tilts in favor of the rural area. The contrasting result in the two instances is no accident. The outcome is a consequence of the specific political context in each case: in the prairie province of Saskatchewan the senior government has been subject to its prominent farming constituency, whereas in Ontario the senior government has been dominated by the urban population. The North Regina Industrial Subdivision (NRIS) is the product of unplanned industrial sprawl spawned around IPSCO (Inter-Provincial Steel Corporation), a provincially owned enterprise. The NRIS has grown to half the land-area of Ross Industrial Area, Regina's "official" industrial subdivision. Due to its location, the NRIS enjoys both low taxation levels and access to a large labor pool in the adjacent city. Property taxes are levied by the local municipality, the Rural Municipality of Sherwood, which enjoys the highest tax-base/person ratio in the province. Education taxes are levied by the local school-board, shared by twenty-five rural municipalities.

The FIA of this case study shows that Regina has an annual net loss of 1% in its tax base consequent to the provision of municipal services to NRIS employees. The FIA, in this case, has taken into account the indirect benefits from these employees and their households, that is - the tax levy from commercial operators in the city. (7) At the same time, the city has one of the lowest tax-base/person ratios in the province and, consequently, one of the highest taxation levels.

Both this third case study and the previous one reflect the importance of the structure of jurisdictional borders and the need to understand senior government inter-municipal preferential policies. In the case of Saskatchewan, the senior government has turned down Regina's request to annex the NRIS. Furthermore, the province actually encouraged industrial sprawl by imposing a selective policy of "power surcharge," that is, a tax paid to the local authorities on the basis of use of the provincially owned electric and gas utilities. While urban residents are affected by this surcharge, rural residents are exempted from it. This selective policy created the incentive for heavy power users to locate outside the city. There is no similar incentive in Ontario. The Province of Ontario is more committed to the needs of urban communities, a commitment reflected in its frequent approval of large-scale annexation schemes and municipal amalgamation. Since commercial and industrial development is normally located in the area immediately adjacent to a city, annexation in Ontario usually involves a disproportionate amount of non-residential development, compared with residential developments which are sparsely located in the countryside, farther away from the city. Since in most cases non-residential development provides a positive cost/revenue balance, rural municipalities subject to annexation are frequently left with a negative fiscal balance.

Synthesis

Taking a spatial or systemic perspective on the issue of urban sprawl, our case studies show significant fiscal impacts. The findings are consistent in both provinces - Saskatchewan and Ontario - and for both urban and rural municipalities. The severity of these impacts is accentuated given two factors: first, for comparative reasons the calculation of net-costs was limited to one-hectare impact for the rural municipalities, and to one year total impact for the cases involving Regina's residential and industrial subdivisions. However, these impacts refer to operating and long-term capital costs and are therefore permanent. Furthermore, when one introduces a cumulative effect which takes into account future expansion of sprawl, the costs should continue to increase.

Second, development as a spatial-systemic phenomenon reflects interdependency among various land-use types, where one type attracts another type: residential development follows nonresidential development and vise-versa, ancillary business follows base-industries, etc. This interdependancy is fostered by the agglomeration tendencies of local economic activities (Smith 1981). However, where a region is highly fragmented in jurisdictional terms, and where there is a significant tax differentiation among localities, there is no guarantee for a particular locality that beneficial development types will follow (in an adequate volume) costly development types. In the Township of Lobo, for example, in order to offset costs from the most costly residential hectare, there is a need for 1.5 hectares of the most beneficial type of commercial development, an unrealistic prospect. Beneficial development types which are systemically connected to Lobo's costly development types are rather choose London instead, which is the adjacent urban center.

A systemic perspective in Regina reveals another aspect of interdependency between land uses. This aspect refers to the financial linkage between the low-density suburban development and the industrial growth at the NRIS: the budgetary losses involved with the difference between the service cost of the NRIS' employees and the lack of their employers' tax revenues, together with the budgetary losses associated with servicing low-density suburban development, in effect force the city to raise its taxes well above the level of other cities in the province. (8) This has a ripple effect: a high taxation level in Regina results in the continuing flight of businesses to the NRIS and the continuing financial losses to the city. Businesses that require high-level municipal services not offered in the NRIS, refrain from moving into the region altogether. A shrinking or undiversified employment market stimulates a negative net-migration balance in the city (experienced between 1987 and 1989 ) (9) and, subsequently weakens housing demand. This drives land values in the city suburbs down. That, in return, invites low-density development which produces high service costs and high taxation levels, and so on. In the very terms of the above-noted "logic of capital investment", one can argue that Regina has already been manifesting a "growth cycle-reversal" since, in recent years, the city has lost its position as the largest community in the province. (10). Given that, it is highly unlikely that more cost-beneficial types of development will arrive in the city in adequate numbers to undo this trend.

Beyond the numeric analysis of the impact, one should also be aware of the importance of the political determinant: senior government's preferential policies with regard to the urban-rural relations is a case in point. In the case of Saskatchewan, the senior government's adherence to its rural constituency has resulted in the lure of industries into rural areas, away from the designated industrial zone of Regina. This has been a conscious decision, aimed at expanding the tax-base of rural municipalities. At the same time, the senior government has rebuffed the request by Regina's policy makers to adjust the city's municipal borders to the expanding industrial sprawl. In contrast, in the case of Ontario, the senior government's pro-urban position has resulted in accession to urban politicians' demands for the annexation of industrial and commercial developments in rural areas to urban jurisdictions. Because non-residential development generally produces a positive fiscal balance, senior government's preferential policies have often resulted in a negative fiscal impact on those rural communities which carry less political clout. Overall, senior government policy makers should be aware then of the side effects of imprudant preferential policies.

Furthermore, to suggest that sprawl has only negative financial impacts is an over-simplification. In a narrow sense, there are winners and losers. The point is, however, that this division is not a product of random forces of the market in which one would have hoped that temporary losses in a locality can be offset by future gains. The problem is that this division often takes on a life of its own and tends to become structured. Senior government's preferential policies, inadequate staffing which could carry out FIA for small or financially constrained localities, and a growing taxation differentiation among localities, all result in an ever-growing uneven distribution of costs and benefits. Rather than the expression of efficiency, taxation differentiation tend to reflect the ability of a locality to control its sprawl within its borders and to export the costly portions to neighbouring communities - an ability which is often impaired by forces beyond the authority of the local jurisdiction.

Our financial analysis therefore, shows that sprawl is not only a land-use issue but also an egalitarian issue. Within the community, high-density subdivisions subsidize low-density subdivisions. Between communities, politically disadvantaged and financially weak communities are subject to negative financial impact by politically favored and financially healthy communities. Moreover, the cost of sprawl should be of concern also to those who are less preoccupied with egalitarian issues and instead, advocate market-oriented economic development policies. This school contends that communities can offer optimum taxation levels to attract businesses and generate economic growth, only if they manage their resources, including land resources, efficiently. The case studies here show the bias effect of narrow-interest local developers within and outside the community, as well as the effect of the jurisdictional structure and the senior government's preferential policies. The resulting financial impacts undermine the ability of communities to establish taxation levels which simply reflect their efficiency. As a result, in their pursuit of a favorable taxation level, businesses have to give up on other advantages (e.g. other "factors of production")(11) which highly-taxed communities may offer. Contrary to proponents of market-oriented local development policies, businesses' locational decisions are not efficient. Therefore, in a broad sense, there are no winners from sprawl since the national economy as a whole suffers.

Conclusions

Several implications can be drawn. First, in terms of the planning evaluation process, there is a need to clearly address the issue of low-density development at the city periphery. Efficiency of development should not be assessed on the basis of the difference between planned and spontaneous development, but on clear quantitative parameters, that is, on a density scale. This aspect has helped reveal instances where the more compacted inner city subsidises low-density development in the peripheral area. The evaluation of sprawl aspects of a plan should involve a political feasibility analysis which can help determine the degree that sprawl-control policies can withstand political pressures and help indicate other policy alternatives.

Second, in terms of pro-active planning, the role of the local planner is limited and, at the same time, fundamental: within the jurisdiction borders of his or her community, the role of the planner is pronounced. For example, a survey of densities in peripheral subdivisions, sorted by their location and respective costs/revenues, can help set up a summary table. Such a table can be used to illustrate the expected net-cost of a proposed subdivision, given its location and density. This knowledge can help deflect developers' pressures to allow costly developments.

Regarding impacts from outside the locality, the planner can serve - what is described in cybernetic terms - as a "sensor" (Duetsch 1966) who detects and reports potential impacts to a higher authority. Without formal coordination units however, the planner contribution to the monitoring efforts of the cost of sprawl is limited. There is a need for monitoring systems at both the local and the regional levels. At the local level, the common concern over negative impacts from outside can support a cooperative monitoring body between overlaying jurisdictions. This body should have an interdepartmental linkage: Planning, Treasury and Economic Development (Tishler 1988), of all overlaying local jurisdictions (municipality, county, schools, etc.) At the regional level, the competing interests among neighboring localities will likely defeat any local attempt to set up a monitoring body. It is rather the role of the senior government to set up such regional monitoring bodies. The role of a regional unit can be extended to include not only the provision of expert advice to localities on costly types of development, but also to redistribute financial benefits from beneficial developments.

Density control ordinances, the monitoring activities of intra-jurisdictional overspill of fiscal impact, and the creation of government sponsored benefit-redistribution mechanisms among municipalities, should all help reduce the incentive for sprawl. This range of policies may be proven more organic, thus more effective than the implementation of the controversial growth-control ordinances. This is because growth controls may produce unintended side-effects, such as high housing prices (Dowall 1984), and various adverse effects on the local fiscal health . (12)

A last note - the case studies here illustrate a Canadian reality. One may agree that sprawl in America is even more acute and, therefore, the Canadian experience may reflect only a moderate picture. A stronger commitment to public transit and a weaker zeal for highway development helps lessen sprawl in Canada (Goldberg and Mercher, 1986). In addition, American cities are more financially autonomous, whereas Canadian senior governments disallow municipal budget deficits. When budget deficit is allowed, and when there is a common misconception of the financial virtues of development, there is little incentive to restrain sprawl. Furthermore, metropolitan fragmentation, that is the presence of numerous jurisdictions in a region, is more widespread in America, whereas Canadian cities have often introduced second-tier municipal governments (Rothblatt and Sancton, 1993). Metropolitan fragmentation in the US further separates the location of sprawl from the place of its financial impact, and lessens the localities' incentives to control sprawl. American planners and policy makers should take note of the cost of sprawl which Canadian communities endure with a lesser degree of sprawl. Given the difficulties to promote urban agglomeration in the US, the best option to reduce the cost of sprawl would be the setting up of density monitoring units at both the local and the regional levels. These monitoring units can help planners avoid costly development within or outside the jurisdictional boundaries (eg our first and third case studies). Where the cost of sprawl is the result of a development initiative by a neighbouring jurisdiction (eg our second case study) - a regional monitoring body, set up by the senior government, will charge that jurisdiction the value of the fiscal impact on its neighbours.

References

Barnekov, T.R. Boyle, R. and Rich D. 1989. Privatisation and Urban Policy in Britain and the United States. Oxford: Oxford University Press.

Blakely, E. 1989. Planning Local Economic Development. Newbury Park, Cal.: SAGE

Brower, D.J et al. 1984. Managing Development in Small Towns.

Chicago: APA Planners Press.

Bryant, C. and Johnson, J. Agriculture in the City's Countryside, Belhaven, London, 1992. pp. 82-95.

Burchell, R.W. and Listokin, D. 1985. The New Practitioner's Guide to Fiscal Impact Analysis. New Brunswick, N.J.: Rutgers University

Burrows, L.B. 1977. Growth Management: Issues, Techniques and Suggestions. New Brunswick, N.J.: Rutgers University.

Checkoway, B. 1983. "Large Builders, Federal Housing Programmes, and Postwar Suburbanization," in Lake, R.W. (ed.) 1983. Reading in Urban Analysis. New Brunswick, N.J.: Rutgers University pp.173-96.

Cox, K.R. 1983. "Local Interest and Political Process in Market Societies," in Lake, R.W. (ed.) Reading in Urban Analysis. New Brunswick, N.J.: Rutgers University. pp.103-117.

DeGrove, J.M. 1991. Balanced Growth: A Planning Guide for Local Government. Washington DC: International City Management Assoc.

Dekel, G.P. 1993 Can a Local Government Ensure that Development within its Conurbation Area is Financially Beneficial to its Ratepayer? Unpublished doctoral dissertation. University of Western Ontario.

--------------- 1994. "The Fiscal Impact of Development: A Regional Perspective in Canada," Land Use Policy. 35(2):128-141.

--------------- 1995 "Housing Density: A Neglected Dimension of Fiscal Impact Analysis".Urban Studies. 32,6 (1995):935-951.

--------------- 1997 "The Cost of Industrial Sprawl: A Boomerang Effect" Environments

(in print).

Des Rosiers. F, 1992. "Urban Sprawl and the Central City," Plan Canada. 35(5):14-18.

Dowall, D. 1984. The Suburban Sqeeze. Berkely: University of California Press.

Duetsch, K.W. 1966. The Nerves of Government: Models of Political Communication and Control. New York: Collier-MacMillan Ltd.

Frieland, R. and Palmer, D. 1984. "Park Place and Main Street: Business and the Urban Power Structure," Annual Review of Sociology. 10:393-416.

Goldberg, M.A. and Mercher, J. 1986. The Myth of the North American City: Continentalism Challenged. Vancouver, University of British Columbia Press.

Gutkind, E.A. 1962: The Twilight of Cities. New York: Free Press of Glencoe.

Gruen, V. 1964: The Heart of Our Cities; The Urban Crisis: Diagnosis and Cure. New York: Simon and Schuster.

Harrigan, J.J. 1985. Political Change in the Metropolis. Boston, Toronto: Little Brown, Ch.10.

Harvey, D. 1973. Social Justice and the City. Baltimore: John Hopkins University Press.

Jellicoe, J.A.: Motopia: A Study in the Evolution of Urban Landscape. N.Y. Praeger, 1961.

Judd, D.R. 1988. The Politics of American Cities, (3rd ed.). Glenview, Ill.: Scott, Foresman.

Kantor, P. 1988 The Dependent City: The Changing Political Economy of Urban America. Glenview, Ill: Scott, Foresman.

Keating, M. 1989 "Local Government and Economic Development in Western Europe," Entrepreneurship and Regional Development, 1:301-312.

Ladd, H.F. 1994 "Fiscal impacts of local population growth: A Conceptual and Empirical Analysis," Regional Science and Urban Economics, 1:661-686.

Ladd, H.F. and Yinger, J. 1989. America's Ailing Cities. Baltimore: John Hopkins University Press.

Landis, J.D. 1992. "Do Growth Controls Work? A New Assessment" Journal of the American Planning Association, 58(489-508):56-66.

Logan, J. and Molotch H. 1987. Urban Fortunes: The Political Economy of Place. Berkely, Cal.: University of California Press.

Mace, R. 1961. Municipal Cost-Revenue Research in the United State: a Critical Survey. Chapel Hill: University of North Carolina Press.

Mollenkopf, J. 1983. The Contested City. Princeton, N.J.: Princeton University Press.

Muller, T. 1975. Fiscal Impacts of Land Development: A Critique of Methods and Review of Issues. Washington, D.C.: The Urban Institute.

Newman, P.W.G., Kenworthy, J.R. and Robinson, L. 1992. Winning Back the Cities Sydney: Pluto Press.

Newman, P.W.G. 1993. "Sustainable Development and Urban Planning: Principles and Applications in an Australian Context," Sustainable Development. 1(1):25-40.

Nicholas J. and Nelson A. 1988. "Determining the Appropriate Development Impact Fee Using the Rational Nexus Text," Journal of the American Planning Association, 54(1):56-66.

Ohls, J.C. and Pines, D. 1975. "Discontinuous Urban Development and Economic Efficiency," Land Economics. 51(4): 224-234.

Ottensmann, J.R. 1977. "Urban Sprawl, Land Values and the Density of Development," Land Economics. 53(Aug):389-400.

Peiser, R.B. 1989. "Density and Urban Sprawl," Land Economics. 65(3):193-204.

Peterson, P.E. 1981. City Limits. Chicago: University of Chicago Press.

Peterson, P.E. 1984. "A Unitary Model of Local Taxation and Expenditure Politics," in Hahn, H. and Levine C.H.(eds) Readings in Urban Politics: Past, Present and Future. New York: Longman Inc. pp.299-328.

Rees, W.E. 1990. "The Ecology of Sustainable Development," The Ecologist. 20(1):10-15.

RERC (Real Estate Research Corporation). 1974. The Cost of Sprawl, Environment and Economic Costs of Alternative Residential Development Patterns at the Urban Fringe, U.S. Government Printing Office, Washington D.C.

Roseland, M. 1992. Towards Sustainable Communities: A Resource Book for Municipal and Local Governments. Ottawa: National Round Table on the Environment and the Economy.

Rothblatt, D.N., and Sancton, A., eds. 1993: Metropolitan Governance: American and Canadian Intergovernmental Perspectives. Berkeley, CA: Institute of Government Studies, University of California, Berkely.

Savitch, H.V. 1988. Post-Industrial Cities: Politics and Planning in New York, Paris and London. Princeton N.J., Princeton University Press.

Smith, D.M. 1981. Industrial Location: An Economic Geographical Analysis. (2nd ed.) New York: John Wiley.

Stein, M. (ed.) 1993. Growth Management: The Planning Challenge of the 1990's. Nebury Park, Cal.: SAGE

Tishler, P. 1988. "Analyzing the Fiscal Impact of Development," Management Information Service Report. Washington, D.C.: International City Management Association, vol.20 (July).

Wright, F.L.: Modern Architecture. Princeton, N.J. Princeton University Press, 1931.

 

1 Interruption of farm activities is reflected in the fragmentation of the farm unit -by the convergence of roads in the urban fringe, and in the difficulty farmers encounter moving their machinery through heavy traffic.

2 The calculations include the annual operating costs and the annual average of capital costs per household or per $1 assessed value of nonresidential property, from a 5-year capital works program or, where long range data is not available, from a sample of 112 neighboring rural municipalities. Only indirect capital costs are included. Direct capital costs are recovered through development impact charges. These general capital costs occur irregularly, but they are cyclical and therefore long-term by nature. The overall residential-nonresidential share of impact on both operating and capital costs is based on the Proportional Valuation Method - the respective proportions in the total municipal/county property assessment. The impact of a subdivision is computed as its number of households proportional to the total number of households in a municipality. The impact of a nonresidential development is based on its total assessment value relative to the total nonresidenital assessment.

3 The FIA of all case studies here is based on the long-term average costing method rather than on the short-term marginal costing method (see Burchell and Listokin 1985). Marginal costing, which focuses on the expenses involved with the expansion of an existing service capacity, is more suitable for the assessment of the one-time development impact-fees (see Nicholas and Nelson, 1988). The FIA describes net-costs (expenditure less revenues), and refers to all three local jurisdictions: municipality, county and school board. Further calculation details are given in Dekel (1993) appendices A-J. pp.219-274. The dissertation is also available, in microfish form, at the National Library at Ottawa.

4 The required assessment per hectare is measured on the basis of the city average residential assessment and density per hectare. The average assessment is divided into two portions: a variable portion which represents the average cost of land-related city services to residential users and which increases in a 1:1 ratio with decreasing densities; and a fixed portion which consists of the remainder of this average assessment.

5 The "observed assessment" is based on a survey of 15,400 property records and the land measurement of 145 subdivision plans in the peripheral area of Regina.

6 This analysis was based on the use of different sets of calculations for each component of the analysis: "soft" services cost vs. land-related service cost (the former was based on cost-growth parameters from a survey of 256 local jurisdictions, the latter on areal measurements); capital cost vs. operating costs (the former was based on the survey average, the latter on a regression analysis between community size and each service cost); and residential vs. non-residential use of services (using the proportional valuation method, noted in Burchell and Listokin, 1978).

7 The related calculations use the employment anticipation method (Burchell & Listokin, 1978). This involves the measurement of the expenditures and revenues related to the service of the NRIS residents in Regina and, second, the subtraction of the net-benefit to the City's tax-base produced by the NRIS residents' proportional contribution to Regina's commercial activity.

8 In 1990 Regina had a higher combined municipal and educational "mill-rate" compared to Saskatoon, the emerging commercial center in the province, and seven out of ten other cities of a smaller size. Source: Saskatchewan Assessment Department: 1990 Mill Rate Return Summary, Agenda Item No. 7.6, Sept. 17-18, 1990.

9 See: City of Regina, Financial Report, 1990

10 Between 1981 and 1991 the population of Regina grew by 9%, from 162,986 to 179,178, whereas the initially smaller population of Saskatoon had doubled that growth rate (17%), from 154,214 to 186,067. Source: Statistics Canada 1981 and 1991 general census.

11 In "supply-management" economic theory terms, factors of production are skilled labour, serviced land for housing, energy supplies, venture capital, and the like. Propopents of market-oriented local development policies contend that factors of production are essential for the economic growth of localities.

12 See discussion on the relationships between growth controls and the local fiscal health in Landis (1992).


Gabriel P. Dekel, MCIP
Director of the Survey Research Unit, a CATI-based polling system
Political Science and Public Policy Department
The University of Waikato, Hamilton, New Zealand.
E-mail: dekel@waikato.ac.nz
He specializes in the spatial aspects of fiscal impact analysis, applied to the study of local development policies.