Residential development is not the answer

Published 10:32 am Saturday, June 25, 2016

It is my belief that most people who care about the future of Southampton County all want to see the county thrive and prosper. I also believe most of those same people understand that in order for the county to thrive and prosper, some things will have to change. And the biggest change that must take place is an expansion of the tax base.

The problem, however, is that Southampton residents can’t seem to agree on what an expanded tax base should look like. An expanded tax base should include industrial development, but an opportunity for industrial development has yet to present itself where the neighbors of a potential project have not fought it tooth and nail. Enviva, American K9 Interdiction, and now the Camp Parkway project, are all prime examples.

Residential development also leads to an expanded tax base, and there are many who have asserted that more residential development will lead to financial prosperity without giving up the agricultural identity of Southampton County. Yet while it is true that new residential units would generate additional tax dollars, it is also true they would generate expenses for the county in excess of the revenue they would generate.

When property is developed, there are ongoing costs to a locality associated with that development, which are commonly known as Cost of Community Services (COCS). The extension of public utilities, public education and emergency services are just a few examples of the community services that come into play when property is developed. When discussing COCS, economic developers and community planners typically express these costs in a ratio of dollars in versus dollars out. In other words, for every dollar of tax revenue generated by a particular type of development, how many dollars will the locality spend in community services to support it.

Numerous studies in recent years have been conducted in Virginia on the cost of community services for the three primary types of land use: residential; commercial and industrial; and farm, timber and open land. As you might expect, each of these three types of land uses place different demands on a locality for services. According to a COCS study done for Fauquier County by the Weldon Cooper Center for Public Service at the University of Virginia in March of 2015, six studies conducted in Virginia over the last 20 years revealed that the average ratio for farm and open land was .35. This means that, for every dollar in tax revenue farmland generates for the locality, only 35 cents was spent on community services by the locality. The average ratio for industrial development was .44, meaning that both farm and industrial development require far less in community services than they generate in tax revenue.

Residential development is an entirely different story.

The Weldon Cooper study states that the state and nationwide average ratio of cost of community services is 1.18; for every dollar of tax revenue generated by residential development, the locality spends $1.18 in community services. In other words, it actually costs the locality to develop additional residential units without a corresponding increase in industrial development. And if the study’s findings don’t prove it to be true, common sense indeed does.

For example, let’s assume a family of four moves to Southampton County and builds a home valued at $200,000. The real estate taxes levied on that property at the new tax rate of $.82 per $100 of assessed value would be $1,640. Let’s also assume that family has two vehicles worth $40,000. At a rate of $5 per $100 of assessed value, the personal property taxes generated on the vehicles would be $2,000, creating total tax revenue on that household of $3,640. That sounds great, until you realize that two of the people living in that house are children who attend county schools. Currently, the average annual cost for a student to attend public school is $4,500 per student. That is $4,500 in county dollars allocated to the school board’s budget, not including state and federal spending. Of course, adding two new children to the rolls won’t increase county spending by $9,000, as much of that average is attributable to fixed costs that will not increase by adding just two new students. But even if the cost to send those two children to public schools is as little as $2,000 apiece and $4,000 total, and assuming that family doesn’t utilize any other community services, that cost already exceeds the $3,640 their household in generating in real estate and personal property taxes.

What if we built an entire residential community, as some are suggesting, on the Camp Parkway property that is being so hotly contested? Riverdale Elementary School, which sits adjacent to the property in question, is already nearing its student capacity. And Capron Elementary already houses nearly double the number of students it was designed to accommodate. Meherrin and Nottoway elementary schools have some additional room, but not much. Where will we educate these additional students? Will we put more of them in trailers, or will we be faced with the financial burden of building yet another new elementary school?

How will they get to school? How many new buses will the county need to buy, and how many additional drivers will need to be employed to operate them? And since those families cost the county more in community services than the tax revenue they generate, where will the money come from to finance those things?

And if there are no new jobs in the county because the answer to the question of new industrial development is always no, where will these families work? The answer: they will work elsewhere in Hampton Roads or in the Richmond area, where they will do a majority of their shopping and spend the bulk of their disposable income.

No, residential development is not the answer to our financial woes. It will only serve to exacerbate them. The best way to expand our tax base is to get serious about industrial development.

If not, it won’t be long before we find ourselves longing for the days when our real estate tax rates are as low as the ones everybody is complaining about being too high today.

Tony Clark is publisher of The Tidewater News. He can be reached at