Economic Benefits of Land Protection

Most people view the protection of land for natural areas and agricultural production as a worthy pursuit. What most people don't realize is that protecting open space also has benefits from a community's economic or fiscal perspective. WLT has conducted three studies to investigate the effect of conversion of open land to residential development on the economic sustainability of local communities. All three studies found that protecting land and changing the typical patterns of residential development can reduce the rate at which property taxes increase.

Using these and other studies, WLT will continue to argue that residential development at the expense of open space is not responsible fiscal policy. Preserving land through private and public means is an effective way to maintain community quality and identity while reducing the rate of property tax increase.

In 1996, WLT published the Cost of Community Services Study of Scio Township (COCS). The study was conducted by a group of Masters degree students at the University of Michigan School of Natural Resources and Environment. The procedure for performing a COCS study was developed by the national group American Farmland Trust. This is the only such study to have been done in Michigan, and specifically addresses local laws and conditions.

The COCS compares the revenues generated by three land uses-residential, agricultural and commercial/industrial-with the public service costs associated with those land uses. Public service costs include police and fire protection, road maintenance, local government and schools. Local officials typically look at just the revenue picture and see that farmland doesn't produce much in taxes relative to residential land. The typical result is community planning that emphasizes residential development.

The COCS for Scio Township found that, for every dollar agricultural land pays in taxes, it requires only 62 cents in service costs. For commercial and industrial lands, only 26 cents of services is needed. For residential lands, however, every tax dollar paid requires services costing $1.40. This means that residential development is a net drain on local budgets. In the short term other land uses can make up this shortfall, but as open lands are converted to housing, property taxes inevitably rise. The largest component of the tax imbalance is the new schools that must be built for the children living in those new houses. Much of Scio Township is in the Dexter School District, which has had several tax increases to build new facilities in recent years.

Quality schools for our children are critically important. But open land is also critically important for food production, scenic views, wildlife habitat, water quality protection and quality of life. This study made it clear that property taxes from other land uses must support residential development. Spending some money now to protect land will save money for public service costs in the future.

In November 1999, WLT produced a study for the Ann Arbor Township Board of Trustees that focused on the Township's remaining undeveloped lands. About 4,000 acres of open land existed at that time, of which about 2,800 was tillable. The study compared the cost of providing public services on those lands at different housing densities with the cost of protecting those lands by purchasing conservation easements. This is the only such study to be conducted in Michigan, and one of the few in the United States.

The study found that for the most likely residential development density of one house per three acres, there would be a shortfall of $4 million to support the public services required by the new residences. A tax increase of 1.35 mills would be necessary to make up that shortfall, resulting in a new tax burden of $167 per year for existing households alone. Those costs would be mostly long-term (30 years for school bonds) or perpetual, while the community would lose much of its natural and agricultural heritage and experience increased traffic and congestion.

The cost to purchase conservation easements on the tillable acres was estimated to be $7.2 million if no matching funds from any source were available and Township residents alone had to cover that cost. That translated to 1.16 mills, which would cost the average existing household $144 a year. Those costs would be terminated in 20 years, however, when the payment obligations to the landowners were completed. Additional incalculable benefits include maintaining the quality of life in the township.

Since this study was published, land prices have continued to rise. As a result, the cost comparison between development and preservation may be closer today than it was in 1999. With supportive funding from State and Federal land protection programs, however, the local cost of preservation could be less than it was in 1999. The important lesson is that communities have a choice in deciding their future, and both options have tangible costs. The argument that preservation is at least as cost effective as residential development is strengthened by this study.

Washtenaw County Cost of Sprawl
How property taxes increase to subsidize development

Tax increases to support residential development happen incrementally and in different jurisdictions. It often is difficult for citizens to obtain a clear picture on how residential development is affecting their tax bills. WLT's Cost of Sprawl study seeks to quantify the total amount of taxes Washtenaw County residents committed to paying in the 1990s to subsidize new housing.

Washtenaw County experienced an 11.7% increase in population and a 21.1% increase in the number of households from 1990 to 2000. Most of those new residents settled outside of the major cities of Ann Arbor and Ypsilanti, buying and building homes in the rural countryside. When budgets for public services in those areas were exceeded, ballot proposals for tax increases were presented and approved by voters.

The greatest amount of increased property tax was for new public schools. New school taxes were defined as those that resulted an increased student capacity at new or existing school facilities. The amount of new school bond proposal funding, which deals exclusively with capital expenditures, was used to estimate new school taxes. New taxes were also instituted for other public services such as police and fire protection, and other local government.

Preliminary results from this study indicate that residents of Washtenaw County will pay over $500 million to underwrite the explosive population increase of the 1990s, when just the tax commitments from 1990-1999 have been paid. This figure increases by $300 million if the school bond proposals passed in 2000 are included. Long-time residents are footing much of that cost while seeing their agricultural and open lands disappear, their travel times increase and other rural qualities vanish. It is clear that this trend in tax increases will continue if current development patterns proceed unchecked.