Growth doesn’t pay for itself. That’s the verdict of Wake County Manager Jim Hartmann, and he should know.
During his long public service career, he has had ample opportunity to observe, in fast-growing areas such as central Florida, northern Virginia, and now here in the Triangle, that the costs communities incur to provide services to growing populations – costs for schools, roads, buses, police, fire, parks – exceed the new revenues that growth brings.
To close this funding gap, local governments end up either reducing service, raising taxes, or both.
Hartmann’s observations are backed up by economic research. Duke professor Helen Ladd, in a 1992 paper entitled “Population Growth, Density, and the Costs of Providing Public Services” found that increasing population density provided cost savings only up to a point. When county-level density exceeds about 250 persons per square mile, further increases result in higher per capita expenditures. (The density of Orange County is about 350 persons per square mile.)
More recent studies have confirmed Ladd’s original finding. For example, a 2012 dissertation entitled “Density, Population Growth and Local Government Finance,” found that “new residential development increases the average (financial) burden on existing residents. ... Therefore, development does not pay its own way.”
The fact that population growth – whether compact or sprawling – does not pay for itself is thus old news. Why, then, do some people in Chapel Hill continue to claim that growth will benefit the town financially?
One reason is that growth proponents tend to focus only on the increased revenues associated with growth, and neglect to consider that growth also incurs new costs. When proponents do consider costs, they tend to focus narrowly on the town’s easily identifiable operating expenses, such as the staff salaries and recurring expenditures that make up the annual budget. The studies cited above, however, show that the costs of growth show up most dramatically in increased capital expenditures, the large, irregularly occurring costs of building new schools or other facilities, acquiring new land for parks, expanding roads, and so on.
We must also recognize that growth can be very lucrative for landowners, real estate developers, mortgage lenders, and others who profit from land-use intensification. These folks have a strong financial incentive to believe and to perpetuate the myth that growth benefits us all. As author Upton Sinclair memorably wrote, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.”
If we believe, erroneously, that any kind of new real estate development will benefit the town financially, we will be inclined to lower our standards for fear that investors will take their money and go elsewhere. This erroneous belief may explain some of our Town Council’s recent unwise land-use decisions.
If, however, we understand that the fiscal costs of population growth exceed the benefits, and that the wrong kind of real estate development is worse than none at all, we will maintain the high standards that, until recently, enabled us to grow in ways that protect and enhance what we love and value about our town.
David Schwartz lives in Chapel Hill.
David Shreve of Charlottesville, Va., will present a free lecture entitled “The myths that shape economic development policy” at the Chapel Hill Public Library, at 6 p.m. Wednesday, April 29.