Laserfiche WebLink
The Planner Blog - Home Page 1 of 3 <br /> The Cost of Development, One Example <br /> Monday,March 30,2009 <br /> Charles Marohn in Finance <br /> Most development that takes place in small towns ultimately weakens the town. <br /> This is because most development costs the community more money to maintain <br /> than is ever brought in through additional tax revenue generated by the <br /> development. This is true even when the development is successful and builds-out <br /> right away. It is almost always a losing proposition. <br /> Most small towns in Minnesota are funded primarily through property taxes. My <br /> own property tax statement arrived this week indicating that my family's share of <br /> the city's revenues will be $252 this year. That has been a pretty consistent number <br /> for some time now, and it provides an opportunity to provide readers of TPB.com a <br /> concrete example of the Small Town Ponzi Scheme. <br /> We purchased our property in 1996 and built a house that same year. We have your <br /> standard, "new" small-town lot - 5 acres on a cul-de-sac. We bought it because of <br /> the location, the thick woods and, most of all, because it was the lowest price lot we <br /> looked at. <br /> At the time we purchased the lot, the road in front of it was gravel (Class 5 for you <br /> rural folk, aggregate for you engineers). The year after we built, the city improved <br /> the road to an asphalt surface (tar or bituminous, respectively). The city graciously <br /> picked up half the cost of this road and assessed the rest back to us. This was a <br /> good deal and we gladly paid the $3,300 assessment (financing provided by the city <br /> to boot). <br /> So our share of the road was initially subsidized $3,300. Let's assume my taxes <br /> have not increased since 1997 (they have, but it helps makes the point). Let's also <br /> assume that the city has spent the same amount - roughly 35% of the budget - on <br /> road improvements each year (that is also not true - it has been increasing, but it <br /> also makes the point). Based on these assumptions, it will take the city more than <br /> 37 years just to repay the initial subsidy. <br /> $252/year tax contribution x 35% portion dedicated to roads = $88/year <br /> contribution to roads <br /> $3,300 initial road subsidy / $88/year contribution = 37.4 years <br /> http://www.theplannerblog.com/j oumal/2009/3/3 0/the-cost-of-development-one-exarnple.ht... 4/9/2009 <br />