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single location. Bedroom communities are not economically sustainable at tax rates that are likely to be levied. In fact, when a rural community with a large base of farm and forest land begins to convert that land into residential development, either as a planned growth strategy or due to market forces and a lack of growth control measures, the local government is virtually guaranteed to head down a path of deteriorating financial stability and increasing local property tax rates.

The authors of this article conducted four COCS studies in Georgia counties that were chosen to reflect a variety of the growth conditions present among Georgia's 159 counties. The counties studied were Appling, Cherokee, Dooly, and Jones. Cherokee County is a rural/suburban county on the northern edges of the Atlanta metropolitan region, facing rapid growth and with mostly small private land owners.

Three land use categories were defined for this study: residential, commercial/industrial, and farm/forest/open space. Farmhouses were included in the residential category. Budgets, annual financial reports, and other supporting agency reports were obtained for fiscal year 1999. 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.

The main implication of COCS studies is that a local government that approves the conversion of farm or forestland 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 imbalances discussed here are only exaggerated if schools are included; schools are very expensive and only very high-priced houses can come close to generating enough school-collected revenue to support even one child per household. Further, COCS studies confirm that programs which reduce property tax burdens on farm and forest land as a mechanism to encourage farm and forest land preservation are equitable and serve only to bring the tax burden more in line with the cost of servicing that property.

The findings of COCS studies should be carefully evaluated in light of the changing character of these rural counties. COCS studies should not be used to promote one land use type over another without a careful and full understanding of their limitations. They use 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. Farm and forestland may not generate an impressive looking tax base, but neither do they create a demand for lots of government services. In particular, rural communities must ensure that their development is balanced with enough commercial and industrial development to "support" residential development that does not generate enough local government revenues to cover the expenditures it requires.

January 2002; Contact author: Dr. Jeffrey Dorfman, Dept. of Agriculture & Applied Economics, The University of Georgia. email: jdorfman@agecon.uga.edu.

The Economic Costs of Development for Local Governments

Editorial Commentary
by Emily Lemcke

Emily Lemcke is the Cherokee County Commission Chair.

This month's column is a partial transcript of the study results released on January 10 of the Community Services Study conducted by UGA's Department of Agricultural and Applied Economics. For a complete version, please email me at emily@co.cherokee.ga.us.

Drive through the outer suburbs of almost any city and one can see farmland and forest land being turned into houses, offices, industrial parks, and parking lots. Around the country, about one million acres of farmland per year are being developed for other uses. Local governments, especially in rural areas, often have difficulty financing their services and are constantly looking for ways to increase their financial health. Local government officials usually believe that the solution to their government's financial difficulties lies through development, by increasing the property tax base.

However, a growing body of empirical evidence shows that while commercial and industrial development can indeed improve the financial well being of a local government, residential development worsens it. While residential development brings with it new tax (and fee) revenue, it also brings demand for local government services. The cost of providing these services exceeds the revenue generated by the new houses in every case that has been studied.

Cost of Community Service (COCS) studies involve a reorganization of a local government's (usually a county's) records in order to assign the revenues and costs of public services to different classes of land use or development such as residential, commercial, industrial, farm, forest and open lands. For example, the costs of a parks and recreation program would be classified as all benefiting residential development; the costs of roads would be allocated across all types of development; local expenditures on the farm services agency would be assumed to be benefiting farm and forest land. COCS studies look at average revenues and expenditures, not changes at the margin, and are thus not capable of precisely predicting the impact of future decisions. Still, they provide the benefit of hindsight, a budgetary baseline from which to make decisions about the future. They can also allow for informed decision-making on such policy topics as tax abatements for farm or forestland (or even for commercial/industrial development). Further, from these averages educated guesses can often be made as to the likely marginal cost of development and the impact on a local government's financial situation of changes in land use within its jurisdiction.

Over 70 COCS studies have been completed by a variety of researchers around the country for cities and rural communities. The numbers clearly show the fallacy of depending on residential development as the road to a sound growth policy.

In not a single instance did residential development generate sufficient revenue to cover its associated expenditures, not in a