At a recent gathering in a MMRG member town, a resident was heard asking, “When are we gong to bring more business into town so we can get more taxes to cover escalating school costs?” This question reveals a misconception that many of us hold about municipal finances, taxes and development. The truth is that towns with more open space on average have lower taxes.
Something must be happening in the towns that are pursuing economic development to pay for schools – their taxes still end up higher than those which have resisted conversion of land from open space to something else. If business brings revenue, then why doesn’t it work?
It is clear to most of us that residential development is the most costly for taxpayers to support – services, schools, and police and fire protection are just a few of the costs that are increased with every new resident. Once we add them to the books, new costs must be paid every year – new roads must be forever maintained, and new schools will be filled each year with children whose education must be funded.
But while some studies can show that industrial and commercial development pays more in taxes than it costs in services, these analyses do not take into account several other key cost factors. One clear result of commercial/industrial development is that it attracts people. Business is nothing without markets and without workers. New jobs are not always filled by residents, but often attract people from away who relocate to be closer to work. Often there are costs engendered in courting new businesses to move to town – new sewer lines, new roads, carrying debt on empty municipal industrial park projects, etc. Some towns even incur the cost of new town employees hired to court new growth!
We should also recognize that the highest revenues for communities generally come from the largest structures – in other words, the bigger the business, the better for revenues. But aside from the considerable cost of attracting and then supporting those larger businesses, there are also the inevitable and dramatic unemployment increases caused when they close their doors and move to Mexico. Sure, big business employs the most individuals, but it also attracts the most new residents to fill jobs. When the industry leaves, all those new residents are left jobless. In this recurring and predictable scenario, attracting bigger businesses to town has actually increased the number of unemployed over the long run.
Other hidden costs may be associated with new development as well. Impacts to air and water quality and the loss of downtown economies have been economic disasters for some towns. Once the costs of past growth are on the books, towns seek to balance them with taxes on new development. The cycle begins again, and towns end up chasing their own tails up an ever escalating cycle of tax and spend: new businesses bring new subdivisions, new subdivisions bring new schools, roads, transfer stations safety buildings and ultimately – more of everything.
One reason why towns with more open space have lower taxes is because open space has no hidden costs. It does not attract new residents, require infrastructure subsidies, or destroy environmental quality. Studies clearly show that open space pays more than it costs. Farms and forests are productive contributors to the economy and cost little or nothing for communities to support. 25% of New Hampshire’s economy comes from open space – that’s about 8 billion dollars a year.
Perhaps residents should be asking “When are we going to get more open space in town to offset escalating school costs and tax increases?” Currently, the six MMRG member towns have tax structures that facilitate investment in open space. In these towns, a percentage of the Land Use Change Tax penalty is placed in the towns’ conservation funds (see page 1). Some towns also place money in capital reserve funds for the purchase of open space.
Another strategy to invest in lower taxes is the use of municipal bonds to purchase open space. This investment avoids the future costs of growth, and actually saves taxpayers money in the long-run. North Hampton, NH passed a $4 million bond issue to acquire undeveloped land. They will purchase only 850 acres with these funds. The state of New Jersey passed a billion dollar bond for the same purpose. Smart communities will consider bond funding for land acquisition before property values escalate higher.
Towns are also appropriating money to new capital reserve funds for land or easement purchases. This summer, HB 596 was signed by Governor Shaheen providing a process for selectmen to acquire the authority to expend capital reserve funds on land purchases without town vote. These techniques are our next line of defense against runaway taxes and loss of quality of life, but should not replace a commitment to the Conservation Funds that our towns maintain. Conservation Funds are outside the political process and are designed to be managed for natural resource protection considerations, and not municipal finance or planning relief.
Municipal growth is a fact of life. We cannot avoid it, nor should we try to. What we can do is manage the quality of the growth we get. This is our choice and our responsibility. One of the best strategies is to balance new business and residential subdivisions with open space acquisitions and set-asides. Using these methods, communities include the purchase of land to be set aside for a town forest, a trail system, or a park as they plan for growth. Our communities will grow.
The bottom line is that there will be many costs associated with that growth. Our challenge is to direct growth in a way that supports our quality of life, and does not escalate costs beyond our ability to pay. MMRG can provide more information about managing and offsetting municipal costs with open space.