Managing Urban Growth Responsibly

By Gilbert, Mark | Government Finance Review, February 2012 | Go to article overview

Managing Urban Growth Responsibly


Gilbert, Mark, Government Finance Review


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Urban sprawl is a concern for administrators of local governments across North America, but the impacts of outward growth do not have to be negative. A variety of issues accompany the development trends responsible for creating urban sprawl, a process of land consumption that affects both human and the natural environment and stresses the surrounding ecosystems. (1) Jurisdictions that choose to pursue a strategy of responsible managed growth might find that the process is revenue-neutral or even generates revenue, without creating unhealthy conditions for citizens. Growth needs to be subject to fiscal impact analysis, and governments should adopt policies to ensure that new growth is revenue-positive.

THE FISCAL EFFECTS

The fiscal costs of poorly managed growth, or urban sprawl, are plain to see. Crumbling infrastructure, operational budgets that continue to grow while revenue slows, and a demand for more services on the periphery of the city are just some examples of the kinds of costs local governments can expect to see if growth is not properly managed. (2) However, there are other considerations. Jurisdictions that constrain growth can lose revenue and new citizens. There are also political and philosophical considerations. The stakes in this debate around urban sprawl are high--the North American lifestyle, or the "American dream," which is built on the availability of cheap and abundant land. (3) As such, local governments need to closely consider the short- and long-term effects of their policy decisions to manage or curb urban sprawl.

Local governments also have to be good stewards of public finances. The City of Winnipeg, Manitoba, provides a case study of a city that has approached growth in a way that provides leaders with the best information for making growth-related policy decisions.

THE CASE OF WINNIPEG

Winnipeg is the eight largest city in Canada. Modern-day Winnipeg represents 13 municipalities, towns, and cities that were amalgamated in 1972, resulting in a single local government for most of the Winnipeg region. The city's population density varies from 1,604 persons per square kilometer in the peripheral communities to 7,036 persons per square kilometer in the downtown core. (4) Winnipeg was chosen as a case study not only because it is experiencing urban sprawl but because of the initiatives it has undertaken to manage outward growth and ensure that new developments are fiscally sustainable. One forward-thinking initiative is the comprehensive financial analysis of new developments such as Waverley West.

Waverley West is a large-scale development that consists mainly of residential, mixed-density housing, and it required an amendment to the Winnipeg regional plan. (5) The comprehensive fiscal analysis initiative the city undertook ensures that Winnipeg will not enter into major development agreements without first considering the short- and long-term fiscal effects new developments will have on the city.

The key assumptions used in the 2004 study assessing the impact this development will have on city finances include the following:

* The city used 2003 dollars for all estimates, with no adjustment for inflation or discounting of cash flows.

* The city calculated property taxation revenue using property assessments fixed at 1999 values.

* The city made an allowance for a decrease in property tax revenue in future years, assuming that as homes age, their property valuation for tax purposes will decline.

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