The Fiscal Impacts Of Rural Residential Development:
by Roger H. Coupal
Rural residential development has become an increasingly important issue in many counties around the United States. Empirical tests are provided to determine if rural residential development is a net fiscal loss for county governments, following work by the American Farmland Trust. This study focuses on measuring the net fiscal impacts of rural residential development on Wyoming county governments. An econometric model is developed and used to estimate county revenues, county expenditures, school district revenues, and school district expenditures. The estimated model does not verify that rural residential development is always a net loss to county governments on the margin. However, using a representative scenario, it is shown that such development can be a net fiscal loss on average, the extent to which is a function of assumptions tied to the analysis.
Rural residential development is a widespread phenomenon in many counties around the United States. Counties located in isolated, but amenity-rich areas are confronted with issues similar to those experienced by counties near growing urban areas (Heimlich and Anderson, 2001). Rural lands are impacted as farm and ranch land is sold and developed into rural residences. A recent study by the American Farmland Trust (2002) estimates that 11 percent of all prime ranchlands (those with rural development densities, located near to public lands, year-round water availability, mixed grass and tree cover, and high variety of vegetation classes) are threatened by conversion to residential development. The development maybe clustered or dispersed, with the latter tending to have a more pronounced effect on the flow of public goods associated with open space.
The debate over farmland has centered on food security, the loss of high quality soils, the cultural character of small communities, wildlife habitat, and county fiscal stability (American Farmland Trust, 1995). However, critiques of the basic premise of farmland preservation question the notion of loss of value (Gordon and Richardson, 1998). The authors argue that proponents of farmland preservation over state their case when it comes to perceived benefits of preservation. Preserving farmland has the potential for restricting the supply of developable land thereby increasing prices and potentially depressing economic development. Daniels (1999 p. 3) in a reply article argues that while fears surrounding threats to U.S. food supply are unwarranted, there are areas where dispersed development can cause fiscal and environmental problems. He argues that planners and policy makers need to be “strategic” and “aim for balanced growth”.
An important player in assisting county planning efforts across the country has been the American Farmland Trust cost of community services methods (COCS), (AFT, 1999). The general results from studies across the country indicate that conversion of agricultural to residential use is a net fiscal loss to county taxpayers. When one accounts for both county revenues and county expenditures, it costs counties more than they receive in revenues, regardless of the higher assessed value for residential property relative to agricultural land. Most states differentiate the assessed valuation of agricultural land and residential land. This study provides an evaluation of the AFT methodology using a set of county fiscal impact models. The AFT housing versus farm use hypothesis is tested both at the margin and on average for Wyoming counties.