Growth and development is a fact of life in much of Georgia and a topic of debate across the state. Many areas of the state are concerned that they are being inundated with an overabundance of development; other regions are trying to encourage development and growth as a means to boost their local economy. Unfortunately, many local governments do not fully understand the financial impacts that new growth can have on their budgets. While development brings new tax revenue to a local government, it also results in increased government expenditures. The aim of this study is to provide local governments in Georgia with a set of numbers that can help guide them in making development and planning decisions so that such decisions are made with a full understanding of the fiscal impact of those decisions. To do this, we have performed the first cost of community service studies in the state of Georgia.

      Cost of Community Service (COCS) studies are simply a reorganization of county municipal records to assign the cost of public services to different classes of land use or development such as residential, commercial, industrial, farm, forest and open lands. The result is a ratio of expenditures-to-revenues for different land use types. COCS studies look at average revenues and expenditures, not changes at the margin, and are thus not capable of predicting the impact of future decisions. Still, they provide the benefit of hindsight, a budgetary baseline from which to make decisions about the future.

      COCS studies are especially useful in areas undergoing development pressure. For this reason, the counties of Oconee and Habersham were chosen for this study. Our results emphasize the importance of farm and forest lands to a county's tax base. The truth behind increasing residential development is also revealed--more residential development is likely to make a local government's financial situation worse, not better.

Calculating Expenditure-to-Revenue Ratios

     The American Farmland Trust developed COCS studies to support use-assessment programs in the Northeast. Use-assessment programs were initiated to slow the loss of farmland and forestland and more equitably distribute property tax burdens. We followed the methods outlined in Is Farmland Protection A Community Investment? How to do a Cost of Community Service Study (American Farmland Trust, 1993) to complete this study. COCS studies have been completed in over 50 cities or counties around the U.S. To date no studies have been done in the Southeastern U.S. (Virginia is the closest state to Georgia in which a COCS study has been completed.)

    Three land use categories were defined for this study: residential, commercial/ industrial, and farm/forest/open space. In this study farm houses were included in residential category. Most importantly, this study does not include financial data for schools. The reason for ignoring school revenue and expenditures is that local government and school budgets are maintained separately, so school-related fiscal impacts are not of direct relevance to the local government decision makers. Since planning and development decisions are made by the local government, not the school boards, we decided to focus solely on their fiscal impacts.

    Budgets were obtained for fiscal year 1998 and 1999 for Habersham and Oconee Counties, respectively. Revenues and expenditures for each county were allocated to land use categories based on the review of available records and interviews of local officials and service providers (see Appendix Table A). The percentage of property tax revenue raised by each land use type was used in allocating a majority of revenues for which local officials could not offer more precise breakdowns (see Appendix Tables B and C). The Oconee County budget listed explicit sources of revenue; thus, an effort was made to get more accurate figures (see Appendix Table C). Expenditure percentages were primarily obtained through interviews. If a percentage breakdown for an expense could not be obtained from an individual or a record search then the percentages calculated for the property tax revenues were used. In assigning the expenditures to different land use categories it is important to note that COCS studies measure the demand for public services, not the public good that is to be gained.

    The revenues and expenditures were totaled for each land use category and expenditure-to-revenue ratios were calculated . The ratios are presented in Table 1.
 
 

County             Residential             Commercial /Industrial             Farm /Forest/Open Space

Habersham        1 : 0.81                          1 : 1.04                                         1 : 1.42
Oconee              1 : 0.92                          1 : 1.25                                         1 : 1.06

Conclusions

      The expenditure-to-revenue ratios for both Habersham and Oconee Counties suggest that residential land use costs more in services than it generates in revenue. The results also highlight the positive contributions of farm and forest land to these two counties' tax base. Further, these results would become even more skewed away from equity if school revenue and expenditures were included, since all services accrue to the residential development. Residential development would have a larger shortfall in revenue and the other two land-use classes would be overpaying by even more. The implication of these results is that a local government that approves the conversion of farm or forest land to residential development, is likely to face a worsening in its financial condition. While the lure of an increased property tax base is often attractive to a local government when it is considering a request to approve a new subdivision, they must realize that their expenditures will likely rise more than their revenues, resulting in a budget shortfall unless millage rates are increased.

      The findings of this study should be carefully evaluated in light of the changing character of these rural counties. Other sources of information as well as community input should also be considered in planning for the future. COCS studies are not about promoting one land use type over another. In particular, they are built using average revenues and expenditures and may not reflect the costs and revenue of a particular development project. They do, however, challenge the idea that rural counties must choose development to ensure economic stability.

References

American Farmland Trust, 1992. Does Farmland Protection Pay? The Cost of Community Services in Three Massachusetts Towns. The Massachusetts Department of Food and Agriculture.

American Farmland Trust, 1993. Is Farmland Protection A Community Investment? How to do a cost of community services study.
 

Habersham County

Annual Financial Report for the Year Ended June 30, 1998. Prepared by Amos, Kitchens and
         Co., Certified Public Accountants, Cornelia, GA.

Sheriff's Office Monthly Incident Summary Report, August and September, 1999.

Consolidation Sheets for County Digest

Oconee County

Annual Budget 1998 - 1999

Consolidation and Evaluation of Digest 1999

http://www.oconeesheriff.org

http://www.oconeecounty.com

Habersham County

Kim Canup               Health Department

Joan Church              Tax Assessor

Joan Jones                 Clerk of Court

Nell Goss                  Sheriff's Department

Mark Shirley             Extension Service Agent

Ron Vandiver            County Manager

Cliff Whitworth         Highway Department
 

Oconee County

David Anglin             Probate Court

Len Bernat                 Operations Director

Harriett Browning     Tax Commissioner

Henry Hibbs              Agricultural Extension Agent

Mike Hughes             Sheriff's Department

Debbie Layman         Emergency Management

John McNally            Clean and Beautiful Commission

Trisha Smith              Economic Development

Bruce Thaxton            Fire Chief

Shawn Wheeler          Civic Center Director

Joan Whitehead          Tax Commissioner's Assistant
 

1. Nanette Nelson is a graduate research assistant and Jeffrey Dorfman a professor in the Department of Agriculture and Applied Economics, The University of Georgia, Athens, Georgia 30602-7509; phone (706) 542-0754; fax (706) 542-0739; e-mail jdorfman@agecon.uga.edu.