Fiscal Impact of Sprawl on Suburban Households in

Southeast Michigan

Hui-Chun Huang

Urbanization of Land in Southeast Michigan, 1890-2010

What Is Sprawl?

Economists’ Definition:

An efficient distribution of economic activities in a micro sense (Muller 1981). (An aggregate result of individual households and firms’ optimum location decisions.)

A process of path dependency: a process of cumulative causation with self-reinforcing feedback loops instead of self-correcting ones in equilibrium models (Atkinson 1996).

Characteristics of Sprawl

Unlimited outward extension of new development.

Low-density residential and commercial settlements, especially in new growth area.

Leapfrog development jumping out beyond established settlements

Great fiscal disparities among localities

The Fiscal Impact of SprawlContradictory Statements

At the macro-level: The fiscal impact of sprawl has been found negative on municipal budgets. Based on the empirical results of the macro-scaled studies, it is speculated that the cost of sprawl will be born by all the households in an metropolitan areas in terms of increasing tax burdens.

At the micro-level: However, some micro-scaled studies argue that suburban residents benefit from sprawl in the forms of decreasing tax burdens and improved public service and infrastructure in their communities (No empirical evidence has been provided).

The Dynamics of Sprawl

Three Mismatches:

Temporally: Beneficial to suburban residents in the short term while costly in the long term

Socially: Beneficial to suburban residents especially newcomers while costly to some others and society

Spatially: Beneficial to some localities while costly to some others

IndicatorsSprawl indicators:

the change in single family residential land use

Household tax burden indicators: The change in tax per household at three

levels (Minor Civil Division Tax, School Tax, Total - Minor Civil Division Tax + School Tax)

The change in tax rate at the same three levels

Research Question Do individual suburban households perceive the cost

of sprawl imposed on society? Are existing suburban residents fiscally impacted by

suburban newcomers? Is there a time lag in the fiscal impact? Does it differ

between the short term and the long term? What is the spatial pattern of the fiscal impact? Does

it differ depending on the size and location of a locality? Do localities with similar or dissimilar impacts cluster? Is the observed fiscal impact a regional pattern (Do regression model makes sense?)

Statement of Purpose

The study attempts to look at whether suburban newcomers, who later become suburban residents, perceives the costs of sprawl they impose to society and whether the costs are born or will be born by most suburban taxpayers. The question is important in terms of forming a strong case for or against sprawl.

Methodology

Multiple Variable Regression Models: Dependent Variables: Tax Burden Indicators Independent Variables:

• Sprawl indicator: Change in single family land use

• Intervening Factors: Changed in other land use, variables affecting municipal revenues and expenditures, growth indicators.

GIS:

How Can GIS Help Answer These Questions?

Initial insights on whether the fiscal impact of sprawl on households differ between different localities in a metropolitan area, and the short

term and the long term

Thematic mapping using two variables Spatial auto-correlation analysisDiffusion based on two five-year data

and random digital numbers

Thematic Mapping Based on Two Variables

Proportional Single Family Land Use Change: Areas with increase in single family land use are considered areas that have faced sprawl from 1985 to 1995.

Variables Related to Tax Burdens: These are dependent variable for regression models. If these variables present similar behaviors in the areas facing sprawl, then regression analysis is a possible methodology.

DATA SOURCESTATE TAX COMMISSION:

Ad Valorem Property Tax Levy Reports (MCD, School, and Total Tax Data Based on MCDs), Assessment Values Based on School District

DEPARTMENT OF EDUCATION: Bulletin 1014 (School Tax Data Based on School Districts)

Southeast Michigan Council of Governments:

2020 Regional Development Forecast Technical Report (Household Numbers, Job Numbers, Number of Children, Income Indicators etc.)

Thematic Mapping

Initial Exploration of the Spatial Pattern of the Fiscal Impact of Sprawl

MCD TAX PER HOUSEHOLD

Change from 1985 to 1990Change from 1990 to 1995Change from 1985 to 1995

Observations

MCD tax per household has increased in both five and ten-year periods.

Those MCDs in proximity to the city of Detroit of Ann Arbor have faced greater increase than other suburban MCDs in tax per household.

SCHOOL TAX PER HOUSEHOLD

Change from 1985 to 1990Change from 1990 to 1995Change from 1985 to 1995

Speculations

Rural residential developments mainly rely on unimproved roads, water wells, and septic tanks rather than more expensive facilities.

Sewer zones expansion and maintenance of infrastructure close to urban area may be reflected on the greater increase in MCD tax per household in MCDs close to urban areas..

TOTAL TAX PER HOUSEHOLD

Change from 1985 to 1990Change from 1990 to 1995Change from 1985 to 1995

Observations

School tax per household have increased in most suburban MCDs.

MCDs farther away from urban areas seem to have a greater increase in school tax per household than those close to urban areas.

SpeculationsThe impact of sprawl on school tax per household

is greater in areas farther away from urban areas because new schools need to be built to accommodate new growth.

The impact of sprawl on school per household is less greater in areas whose school systems have had enough infrastructure capacity to accommodate new growth. However, operating costs of their school systems have increased.

Observations

The increase in aggregate tax burdens seem to be greater in areas close to urban areas from 1985 to 1990. However, those farther away from urban areas seem to have greater total tax burden increase later from 1990 to 1995.

MCD TAX RATE

Change from 1985 to 1990Change from 1990 to 1995Change from 1985 to 1995

Observations

For the MCDs adjacent to urban areas, MCD tax rate have decreased from 1985 to 1990 while those farther away from urban areas have faced an increase in their MCD tax rate

More MCDs close to urban areas started to have an increase in MCD tax rate from 1990 to 1995.

SCHOOL TAX RATE

Change from 1985 to 1990Change form 1990 to 1995Change from 1985 to 1995

ObservationsSchool tax rate change from 1985 to 1990 is

similar to that of MCD tax rate. MCDs close to urban areas have an increase in their school tax rates while those further away have a decrease in their school tax rates

In 1990 to 1995, most MCDs have an decrease in their school tax rates. Those further away from urban areas have a greater decrease.

TOTAL TAX RATE

Change from 1985 to 1990Change from 1990 to 1995Change from 1985 to 1995

At the macro level, only some growing localities have faced an increased in school tax.

Observation

The change of total tax rate is more dictated by the change of school tax rate. They have similar spatial patterns.

It is possible that there was a structural change in the way school tax was levied during 1990 to 1995 because some localities actually have a decrease in total school tax.

Spatial Autocorrelation Analysis

Using MCD Tax Rate Change from 1985 to 1995

Among growing suburban localities, those with an increase in MCD tax rate are negatively spatially autocorrelated with those with a decrease in MCD tax rate.

Elimination of Growth Effect

Growth Factors:Increase in Household Numbers

Increase in EmploymentIncrease in Population

ObservationsThe spatial pattern of change in household

numbers are similar to that of MCD and School tax per household.

The fiscal impact observed in terms of the change in tax per household may be due to growth instead of sprawl.

Therefore, it is important to use a multiple variable regression model to control growth effect to study the real impact from sprawl.

Spatial Intervening Factors

Sewer ZonesSchool Districts

Highways, County Roads, and Other Pubic Roads

Future DirectionsThe way households were spatially

distributed seems to be consistent in three period.

Therefore, some other intervening spatial factors such as roads and sewer zones need to be further studied.

Diffusion can be used to project the spatial patterns of these fiscal impacts beyond these ten years.