This hypothesis has its own paper, by Robert Wassner and David Edwards. Here is the bottom line:
The more land use decisions in a state are driven by fiscal considerations, the more likely may be the degree of sprawl observed in the state’s urban areas. The reason is that outlying local governments in an urban area, with a greater likelihood of possessing undeveloped land, are more likely to use revenue considerations in choices related to land use. As discussed next, the extent that outlying local governments in a state’s urban areas weigh fiscal considerations in land use decisions is expected to depend on the relative reliance by local governments in the state on the different possible forms of local revenue. That is, greater statewide reliance on a form of local revenue that rises and falls with differences in land use choices can result in forms of land use decisions in an urban area that generate greater sprawl. The theoretical connection between sales tax reliance by local governments in a state and greater urban decentralization centers on the ability of local government officials to influence the location of retail activity in an urban area. The amount of overall retail activity in an urban area is determined by factors such as population, income, age distribution, etc. in the region and is unlikely to change due to local government influences. But local land use decisions can shape the distribution of overall retail development in an urban area. Local this land for retail activity if local greater retail generates for them. This surplus comes in the forms of (1) non-residents paying local sales taxes and (2) the lower alternate land uses.
The paper offers a good bit of evidence, though the authors are very careful to claim this is not the only or even the major factor behind sprawl. Lots of little local governments, of course, also enhance educational competition and the quality of the local schools, which further encourages sprawl.
“Local this land for retail activity if local greater retail generates for them.”
Did anyone besides me have trouble parsing this sentence?
And I should mention that the underlying thesis of the paper sounds right to me and should be extended to ALL jurisdictions.
Reliance on local taxes (mostly sales or real estate in Washington State) encourage ALL governments (except super-rich residential areas) to desire development.
Further, in many governments the staff of the permit-granting agencies (building, zoning etc etc) are paid from applicant permit fees — so naturally they see the immediate and direct connection between continued employment and the granting of building permits. That’s true even in big cities like Seattle. No development, no work.
The bias to develop and build is built-in (no pun intended) to the system. Part of the reason in Seattle is that the general citizenry object to general funds going to pay for reviewing entitlement applications— make the bastards pay. And they do; and the system is inevitably biased to encourage development (which I personally think is fine so long as we build good stuff.)
In my town, Fresno, in the central valley of California, I could not notice that housing was the leading industry and government employment the second leader. between 2002 t0 2006. Then the reverse happened, housing crashed and so has government employment crashed, though at a slower pace.
The argument, spelt out in more detail in the following paragraphs, is that central city land, being centrally available, is most valuable as retail. Fiscal considerations will cause central city land to be used for its most valuable use, retail, and less land used for housing. Then, people will live out in the more remote areas, and commute.
I’m a little confused by the argument because it doesn’t entirely jibe with my experience. Many central cities bitterly oppose having new modern retail move in, and lots of modern retail centers get built on the fringes instead. Central cities tend to have land use restrictions and don’t always favor replacing land with its highest value use. (Though they will sometimes make that argument when using eminent domain, see Kelo v. New London.)
Also, if retail really is the highest value use of central land, and that’s driving the development pattern, it wouldn’t be clear what the problem would be.
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