The Comprehensive Plan Update has taken place within a policy environment in which land-use decisions are made mostly or entirely based upon fiscal considerations at the expense of achieving a healthy and balanced quality of life. As Hanover’s Comp Plan illustrates, local governments that “fiscalize” land-use planning usually abandon balanced land-use planning policies and instead, use their land-use power to gain fiscal advantage. Over time, the problems associated with fiscalized land-use policies only worsen partly because local governments no longer seek balance in their land-use planning policies, but rather seek to defeat their neighbors in a “win/lose” game of fiscal land-use planning.

Because local government services are labor-intensive, the cost of those service tends to rise steadily over time; property taxes rarely keep pace. Thus, land uses that produce property taxes and require many government services are viewed as unattractive. While rejecting residential development, Hanover and surrounding counties engage in destructive competition for retail developments that will generate sales-tax revenue. In the current fiscal environment, sales-tax revenues are one of the few sources of funds over which local governments perceive they can control. Under the current system of distributing tax revenue, a certain percentage of the state sales tax is returned to local governments. However, these funds are returned to the jurisdiction in which the transaction took place, no matter where the people actually live. For this reason, many local governments pursue aggressive policies of luring and even subsidizing highly profitable retail businesses, especially auto dealerships, department stores, and “big-box” discount retailing establishments.

Because some land uses are fiscal “winners” and others deemed fiscal “losers,” local governments seek to attract the winners inside their boundaries and dump the losers on other jurisdictions. This has led to a competitive approach to land-use planning, rather than a balanced approach. For many communities, the “goal” of land-use planning becomes to attract large retailers or other big sales tax producers inside their boundaries while dumping the affordable housing required by retail employees somewhere else. The goal of a balanced community is not only forgotten, but regarded as detrimental to the community’s fiscal well-being.

Flawed planning assumptions and fuzzy economic development goals are being used to justify irrational land use planning in Hanover County. In most parts of the country, “economic development” is a phrase indicating a set of public policies designed to attract and retain jobs that are appropriate for the local work force. In this regard, economic development is a critical component in building a balanced community. Unfortuantely, this notion of economic development has become warped by fiscal land-use policies. No longer does “economic development” mean jobs that are appropriate or that pay well; instead, the phrase usually means little more than subsidizing retail businesses in order to boost a county treasury, whether or not the low-paying service jobs created by retailers provide a good match with the local work force.

Fiscalized land-use policies create significant imbalances within metropolitan regions. As communities seek to “defeat” their neighbors and “win” the fiscal land-use planning game, land uses that should be integrated into each community become segregated into separate communities, creating regional imbalance. For example, some communities may successfully attract shopping centers or business parks, while forcing housing projects into distant suburbs and rural areas. On a regional basis, this imbalance creates major problems that are often beyond the ability of any government unit to solve, including traffic congestion, deteriorating air-quality, and the loss of a sense of place and community.

Fiscalized land-use policies tend to be connected to revenue sources that are not as stable or predictable as local governments need. For all of its flaws, property taxes provide the County with stability, because property tax revenues do not move dramatically upward or downward in any given year. Revenue from sales taxes and development fees, however, tend to fluctuate a great deal from year to year. Retail sales can rise or fall sharply during an economic boom or a recession, and development fee revenue can fall from millions of dollars to virtually nothing in a real estate bust. Reliance on these taxation sources, which fiscalized land-use policies usually seek to attract, makes stable, long-term budgeting much more difficult for local governments to achieve. Dramatic swings between layoffs and new hires tend to result, often harming the stability of local government and further eroding public confidence in local officials.

The fiscalization of land use planning also undermines public trust in the local planning process and, ultimately, in the role of local government. The way land is used inevitably shapes the revenue potential of counties and the cost requirements with which they must contend. Yet the goal of balanced communities and a high quality of life need not be sacrificed. By changing financial incentives for local governments, we can move away from fiscalized land-use policies, back toward policies that encourage community balance and responsible land-use planning that will be benefit all.

Filed under: 2006 Comp Plan |