Beware the Hoax

People don’t like to pay taxes. Yet some think that more residential development is the answer to staunching the growth of taxes. Nothing could be more wrong.

Indeed some of the ring leaders of the recent real estate assessment kafuffle are the same people that decry any restrictions on residential development. As we shall see, development focused on building out residential real estate, especially at the expense of productive farm and forest land, is the most costly and tax-intensive way for this County to grow. The myth that residential development will check tax growth is a cruel hoax perpetrated by the forces of darkness.

Its All About Costs

That residential development drives up taxes is based on the simple fact that residential development costs county governments more than it generates in tax revenues. This fact has been proven over and over in counties all over the United States. Over a hundred of these Cost of Community Services (COCS) studies show that, while residential development may generate the major share of tax revenues in rural communities, residences require more than these taxes to provide schools, government administrations, courts, police, health, planning, fire, EMS, social services, economic outreach, recreation, etc. The ratio of costs to revenue for three types of land use are clearly shown in the graph below, taken from, “Cost of Community Service Studies”, compiled by the American Farmland Trust in August, 2007.

Source: “Cost of Community Service Studies”, compiled by the American Farmland Trust in August, 2007.

This graph shows the median (half below and half above) results of over 130 studies from all over the United States. From this graph it is clear that residential development costs 19% more, on average, that the taxes it generates. On the other hand, for every dollar collected, agriculture and forestry (noted as “working and open land” on the graph) uses only 37 cents of services and commercial and industrial land uses only 29 cents worth of services.

What Does This Mean?

Two conclusions are clear:

1.   Each acre of agricultural/forest land that is converted to residential development means that costs to the County increase 322% on that acre. Non-residential property subsidizes residential property.

2.   Residential development sets off a tax increase spiral even without the loss of farm and forest lands. Whatever the growth rate of residences in the County is, taxes will have to grow 20% faster just to maintain current service levels.

What Can We Do About It?

So if you don’t like paying taxes now, it will only get worse to the extent that residential development happens without a more than proportional growth in commercial/industrial, agricultural/forestry enterprises. Why more than proportional? Because non-residential enterprises contribute a minority share of the absolute tax receipts – actually around 30%. That means that they have to grow faster than residences if they are to make up for an absolute shortfall. Here is the SONs prescription for keeping County taxes to the absolute minimum. We offer this in two flavors. For those of the rabid anti-tax persuasion, use the “stop” flavor. For those who only want to minimize tax growth, use the “minimize” flavor.

1. Stop the conversion of agricultural and forest lands to residential development. If not possible to stop, then minimize.

2. Stop residential development. If not possible to stop, then minimize.

3. Encourage growth of commercial/industrial enterprises that do not negatively impact agriculture. If you stop #1 and #2 above, then you get lower taxes.

4. Encourage agriculture enterprises that do not negatively impact commercial/industrial growth. Again, if you stop #1 and #2 above, then you get lower taxes.

While this may seem simple, the growth of both industry and agriculture so that they do not hamper each other requires serious thought, but it is not rocket science. The answer is before our eyes. One of the most promising growth industries on the shore is aquaculture. Another is eco-tourism. Chickens and tomatoes are already here and growing. The former requires pristine coastlines and wildlife habitats. The later requires ground water and waste processing. The common denominator is the requirement for clean water, underground and on the shore. While not the sole requirement for success, growth in these industries, and the subsidy they provide in taxes, requires clean water.

So It All Comes Down to Clean Water?

Not quite, but SONs thinks this is the most promising place to start. “Lower taxes through clean water”, would be an appropriate motto at this point. How do you nurture water-intensive industries in the land of a sole source aquifer and fragile coastlines? This is where the story comes full circle to SONs’ original charter. The recent breath-taking cost of wastewater treatment in mid-County and the real kafuffle over storm water runoff from the Bojangles site are cases that point to the need for zoning ordinances oriented toward preserving surface and ground water quality. The first two ordinances that the County needs to enact immediately are obvious:

1. Enact the provisions of the Chesapeake Bay Act on the Sea Side of the County.

2. Enact the Storm water runoff ordinance already written for counties in Virginia.

3. Enact a developer fee ordinance that will collect the marginal cost of residential development up front.

The third item will be a challenge to calculate. SONs has previously calculated, based on national averages, that Accomack tax payers will subsidize residential developers to the tune of over $8 million for just the subdivisions that have already been approved. We believe a more detailed analysis will yield a significantly higher amount. Watch this space in future months as we develop the residential developer fees needed to prevent a tax spiral in the County.

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