Weds, June 2, 2004  The Louisville Courier-Journal

  Spending on residential areas tops what they pay 

Study: Oldham needs more commercial base

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By LESLIE ELLIS

lellis@courier-journal.com

The Courier-Journal

The question came up repeatedly in debates over growth management in Oldham County : How do residential development and other land uses affect public finances?

Everybody seemed to know one thing for certain — residential areas do not pay their way. The cost of providing services, from roads to schools, outweighs the property taxes generated by that kind of land use.

That's what studies on the cost of services for dozens of other communities showed. Results varied wildly, however.

Some local leaders and residents decided that Oldham needed its own figures. It has those numbers in a new report being circulated by Oldham Ahead, which commissioned the American Farmland Trust to do the study.

Oldham Ahead is a residents' group concerned about growth management and land preservation. The American Farmland Trust is a private, nonprofit conservation organization founded to protect important agricultural resources.

The study, based on last year's property tax revenues and spending on county services, found that for each $1 of revenue received from residential properties, $1.05 was spent providing services to those lands. That was 10cents less than the national average of $1.15.

For every $1 in taxes from commercial land uses, 29 cents was spent providing services. And for every $1 received from farmland, 44 cents was spent.

Residential development generated 92 percent of the revenue last year. Commercial land uses generated 7 percent and farmland 1percent. The report said that while farm, forests and open lands generate less revenue, they require little expenditure on public services.

"While residential development contributes the largest amount of revenue, its net fiscal impact is negative because the total expenditures for that land use exceed the revenues," the study concluded. Commercial development revenue offsets the shortfall, the report said, while farmland revenue contributed to the balance.

The study included spending by county government, schools, libraries, emergency services and the health department, but did not include any spending by the seven cities in Oldham County .

The report also stressed that the conclusions are just a one-year fiscal "snapshot." It also said it did not try to evaluate the economic impact of the various kinds of land uses, such as home construction.

The overriding message, said Oldham Ahead President Prewitt Lane , is not new — look at the big picture of the county and the problem of delivering services because of the imbalance in the tax base.

The study showed Oldham doesn't have enough revenue from industrial and commercial development to "provide a high level of services in the county."

Lane said Oldham's below-average $1.05 figure for services in residential areas took him by surprise, especially compared with $1.64 spent in Lexington-Fayette County , where a similar study was done several years ago. But staff members from the farmland trust said the higher figure for Lexington simply reflected more services provided in a more urban county.

Asked whether some might be skeptical of a study by an organization that works to preserve farmland, Lane said the results show the findings were impartial and not skewed against development since the study found a below-average cost of service for residential areas.

The report itself said the results should not be used to "judge the value of one land use over another or to compare one type of new development to another."

Lane said Oldham Ahead will use the results, such as the financial benefits of farmland, in discussions with property owners interested in preserving land or in community discussions on growth issues.

The report's finding did not surprise James Roark, director of the Oldham County Economic Development Authority. "It re-emphasizes the need to attract business investment," he said, to achieve a better balance in the county tax base between residential and commercial and industrial land uses.

Roark said the study's findings indicate the imbalance is getting worse.

The Oldham development authority's figures from 2002 showed that 86percent of property tax revenue came from residential uses. The new study says that percentage in 2003 was 92percent.

"The fact that it is already up to 92percent shows the gap is widening quicker than we projected," Roark said.

The development authority has estimated it would be up to 88 percent by 2009. The authority's goal is a 70-30 split between residential and business use.

Judge-Executive Mary Ellen Kinser said Lane has briefed her on the report, but she has not read it all. She said it was interesting to see that the cost of services to residential areas wasn't as high as expected.

But she also has questions about the methods used to determine the cost of services. For example, she said, there are hundreds of home-based businesses, raising questions about whether costs should be attributed to a residential or commercial classification.

The study also does not consider issues like the difference in maintaining older roads in more rural areas as opposed to newer roads in recently developed subdivisions, she said.