Contents of Main Description

COCS assist people in understanding the fiscal impacts associated with different classes of land use. COCS show that different land uses have significantly varying budgetary impacts regarding both tax revenues received and municipal services expenses incurred.  Local governments need reliable information to help them see the fiscal impact of different land uses and to consider these costs when planning for future development.  These studies help explain the fiscal contribution of working land and open spaces, as well as dispelling the notion that land resources must be developed to keep tax rates low. COCS are inexpensive to perform because it can be performed in a short period of time (often in just a few hours) without the need for outside experts or resources.

The results of a COCS are expressed in an easy to understand ratio.  The ratio compares how many dollars worth of local government services are required for every dollar collected. A ratio greater than 1.0 suggests that for every dollar of revenue collected from a given category of land, more than one dollar is spent on municipal services.  A ratio less than one is read as a net profit for the municipality. 

To illustrate, farms will generate revenue for the municipality/community through real estate taxes.  However, the cost to the municipality in terms of providing services to farms (sewage and water services, fire and police services, road repair/snowplowing, etc.) will be relatively low.  Therefore, a net positive tax cash flow is achieved.  Conversely, the school costs of educating the children in housing developments, plus other municipal costs (e.g. senior centers, replacing sewer systems and roads, etc.) may be much greater than the tax and non-tax revenue that residential land provide.

Nearly all of the studies that have been undertaken show that the ratio for residential land is above 1.0, signifying that residential land results in a net drain on local government budgets. On the other hand, the ratios for the other two land use categories (commercial/industrial and farmland/open space) are usually well below 1.0, representing a net tax gain for the municipality.

Supporters of COCS feel the results are accurate because they are based on existing data rather than projected data. So while they are not predictive of future development costs, they are an accurate picture of current costs and revenue.  This can assist planners in developing a basis from which to understand how future development will impact fiscal budgets.

Critics point out that the studies are often improperly interpreted. A COCS does not provide a community with a way to measure the budgetary impact of a specific proposed development.   What it does provide is an average across all the land within a land use category. The net effect of an individual development, farm, or office complex may be different than that of the land class as a whole. As an example, the ratio of adding a new housing development may differ from the ratio of all current residential development, particularly if the new development is substantially different than existing residential properties (e.g. if it is age-restricted housing; low-income housing; high-end homes). Therefore, knowing the ratios for an entire land class does not allow planners to accurately predict the ratio of a single piece of property within that land class. That new figure would have to be calculated separately (See “Costs and Revenues of Residential Development:  A Workbook for Local Officials and Citizens” in the Library).

When conducting a COCS, it is important not to misinterpret the results by extrapolating the data to future development.  A COCS is intended to provide an assessment of a community’s fiscal and land use situation, with regard to different types of land use, at that particular point in time.

COCS are fairly easy to create, understand, inexpensive, and in some instances, can be accomplished in just a few hours. The results can be calculated with just a simple understanding of municipal financing and mathematics.

The Penn State Cooperative Extension has created an easy, step-by-step booklet on conducting a COCS.  Depending on the size of your municipality, this can be achieved in a very short amount of time.  Included are step-by-step instructions, and a section that helps the reader understand and interpret their outcomes.  To obtain a copy, see “Calculating a Cost of Community Services Ratio for your Pennsylvania Community” in the Library.

The American Farmland Trust performs a COCS for a fee.  Their study is very similar in methodology to the concepts offered by Penn State.  The only difference lies in a slight difference in the accounting of expenses and revenues.  You can access their website and information in the Library.

COCS were first introduced as a measuring tool in the mid-1980s by the American Farmland Trust (AFT), primarily because farmlands are the most common land type converted to development. AFT was interested in creating an easy and inexpensive method for rural communities to measure the contribution agricultural lands make to their local tax base.

By compiling an inventory of land use and conducting a COCS, planners and citizens can better understand the fiscal impacts of land use in their municipality.  Better informed municipal officials can develop sounder strategies for addressing land stewardship, fiscal responsibility and other social needs in their planning and policy efforts.

Comments