Smart land use helps cities deliver services more efficiently, cost-effectively

In addition to local government aid, property tax relief, economic development and environmental regulation-all issues addressed in the Advocate-CGMC is also very active on land use issues. The reason is pretty clear: good land use and annexation laws have a significant impact on the fiscal health of cities, government service delivery, tax fairness and the quality of our environment.

A number of case studies and real life examples lay plain the connection between land use and the cost to state and local governments of providing services. In 1999, the Minnesota Department of Agriculture published the “Cost of Public Services Study,” which analyzed the fiscal impact of new residential development on a selected group of rural Minnesota counties. The study additionally sought out the experience of 240 other Minnesota cities, counties and townships, 88 municipal water and wastewater systems and 200 independent school districts. The full study can be found online here.

Some results of the study include the following:

  • New residential development can have a negative fiscal impact on townships that lose a major part of their agricultural tax base and must also provide higher levels of service.
  • As a result of the structure of Minnesota’s local governments, the fiscal impact of new residential development on counties is usually enhanced when it occurs within cities.
  • Per capita road maintenance costs, the largest expense for rural Minnesota governments, tend to decline as density, residential market value and percent of city residents increase.
  • New development within cities or adjacent areas often favorably affects the cost of water and wastewater services. When the number of connections per mile of pipe are maximized, costs are lowered for all system customers. Also, when new development takes advantage of existing excess capacity, the system is more efficient and per customer costs decline.
  • Student transportation costs decline as residential densities increase and as land use patterns allow more children to walk to school. Cost savings that are attributable to higher densities and clustering can be significant. When new development occurs where it can rely on existing school capacity, per student costs can also be lower.

One of the starkest findings of the “Cost of Public Services Study” in fact had to do with student transportation costs. The analysis showed that of 200 school districts, the ten districts with the fewest pupils per square mile spent an average of $394 per pupil for transportation, whereas the ten with the highest numbers of pupils per square mile spent an average of only $310 per pupil for transportation costs.

Outside of this study, the effects of poor planning or a lack of planning were readily evident in Rochester during the 1990s. Rampant septic system failure in the township areas immediately outside of the city posed an enormous threat to the local drinking water supply and the quality of area surface waters. Neither the state, county nor the townships had an answer. Finally, the City of Rochester stepped forward and spent $22.5 million to subsidize the hook-up of over 1500 township households to the city’s sewer and water system. Had these residents originally been within the city limits or had they been connected to city sewer services, this potential environmental and health disaster and the costs of correcting it could have been avoided.

In following issues of the Advocate, CGMC will continue to highlight specific issues in the relationship between strong land use and annexation laws and the fiscal health of cities. If you have any questions in the meantime, please contact Bradley Peterson at

Municipal laboratories bill moves forward in House

Last Wednesday, the House Health and Human Services Reform Committee advanced H.F. 367, the bill regarding Municipal Environmental Laboratories, to the House Health & Human Services Finance Committee. On behalf of CGMC, attorney/lobbyist Elizabeth Wefel testified in favor of the bill. CGMC members Scott Gilbertson, Melrose’s Water and Wastewater Supervisor, and Shauna Johnson, Waite Park city administrator, testified in favor of the bill.

The bill seeks to remove the burdensome 2009 NELAP accreditation requirements that were placed on waste water treatment facilities that operate their own laboratories. These requirements have resulted in increased fees to wastewater treatment facilities as well as significant increases in time, labor and money spent on paper work and record keeping tasks.

MN businesses feel sharper sting from property taxes

According to a 2010 study by the Council on State Taxation, Minnesota businesses paid four times more in property taxes ($3.6 billion) than they did in corporate income tax ($800 million) in 2009 (see Chart A). Even when adding the $800 million paid in individual income taxes on business income, the amount that businesses pay in income tax in Minnesota is less than half what they paid in property taxes. Source: Council on State Taxation Total State and Local Taxes: State-by-State Estimates for Fiscal Year 2009.

Chart A: Minnesota’s State & Local Business Taxes, FY2009

Click to enlarge

Click to enlarge