Loveland data prove growth pays own way

Too often, the cry is heard that growth does not pay its way. Recently, a series of studies has been completed that reports a far different conclusion. In fact, the studies suggest that growth subsidizes local government activities.The wide-ranging studies focus on Loveland. In 1994, Loveland’s population was 42,000; at the end of 1996, it was nearly 45,000. With annual growth at 3 percent, the Loveland analysis could suggest similar results throughout Colorado’s Front Range.
1995 is the most recent year of published audited financial statements for Loveland. It shows the City’s combined fund balances (assets over liabilities) increased by $20,300,000.
One popular assumption is that the new outlet mall complex has caused these fund-balance increases. However, the 1995 sales taxes paid by the patrons of the mall amounted to less than $1.8 million. This leaves an unexplained difference of $18.5 million.
A close look at the city’s financial statements and its annual budget shows that fees collected from new construction are the largest source of income for the city.
A look at the types of revenue collected from growth includes sales taxes on building materials, capital expansion fees, utility hook-up charges and plan check fees. A typical new home constructed in Loveland during 1995 had an average sales price of more than $150,000. The city’s fees, taxes, and charges associated with this typical residence amount to $13,700.
In addition to these amounts paid by the homeowner, the developer is required to provide electric, water, and sewer service to the house. Streets, curbs, gutters and sidewalks are also paid for by the developer, then turned over to the city. These city assets, paid for by the developer, are estimated at $6,800 more per house.
Concurrent to residential construction, commercial and business construction takes place. This business construction adds another 40 percent to the total, or $8,200. So, in the end, every new residence costing $150,000 brought the equivalent of $28,700 in additional city assets.
With almost 400 single-family units added in Loveland during 1995, more than $11 million of the $20.3 million in fund-balance increases arose directly from Loveland building activity.
In recent weeks, the city’s Planning Board has ordered fiscal analysis of new development projects planned for the City. A project of almost 395 residential units was one of the first to submit under the new rules. Its numbers forecast that it would generate $2 million in net revenue to the city through its buildout in the year 2003.
Another fiscal analysis model for an affordable housing project was recently completed. Based on the present city fee structure, this project is forecast to bring another $2 million to city coffers.
Oddly, with this project attempting to build affordable housing, one would think the city would be flexible on its charges and fees. No, the $2 million profit still stands.
Besides the capital contributions from new residential construction, another part of the study determined operating revenues currently produced. A new single-family residence costing $150,000 generates $1,950 in general governmental revenue from its residents. On an average residence basis (2.63 people/household), the 1995 governmental operating expenses were $1,400. Thus, new single-family residential construction brought the city an operating surplus of $550.
The myth that growth does not pay its way has been debunked. Whether you look at either the capital or the operating side of the equation, the numbers clearly show growth subsidizing Loveland government.
Development fees are the path of least resistance for local governments to generate revenues. These charges are simply passed through to the consumer, raising the cost of housing. Growth is the industry adding millions to governmental balance sheets and providing operating surpluses. Heaven help the local governments if growth ever stops along the Front Range, because many “acceptable” governmental activities will no longer be affordable.Former Fort Collins mayor John Knezovich is a certified public accountant.ÿ

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