The Truth About The Fiscal Impacts Of Residential Development In Loudoun County, Virginia
Prepared for Citizens for Property Rights
Prepared by
Dean D. Bellas President Urban Analytics, Inc. Alexandria, Virginia
September 2003
The Truth about the Fiscal Impacts of Residential Development in Loudoun County, Virginia
Executive Summary
The fiscal analyses presented herein provide important insights regarding the impact of new residential development on the county’s current and future fiscal conditions. The fiscal impacts of growth in Loudoun County reflect the mix of residential and nonresidential uses, their revenue generating potential, and their demand for public expenditures to support the services that these land uses require. Although the County’s non-residential land uses continue to generate substantial tax revenues, the share of nonresidential real estate assessments to total assessments continues to decline while the share of residential real estate tax assessments to total assessments continues to increase. A little more than one-quarter (26.7 percent) of the county’s housing stock was developed since 1999. These new housing units account for the fastest growing values among all housing units in the county (see Table 1). Table 1 Residential Assessed Values in Loudoun County 2002, 1999 – 2002 and Pre-1999 (in 2002 dollars)
Year 2002 * Number Average Value 1999 – 2002 ** Number Average Value Pre – 1999 *** Number Average Value
Single-Family 2,675 $489,634
Town House 1,664 $293,923
Condominium 198 $277,002
8,706 $407,055
7,135 $229,266
863 $202,184
29,868 $301,317
13,370 $177,969
5,334 $110,983
Source: Loudoun County Department of Financial Services; Meyers Real Estate Information, Inc.; Urban Analytics, Inc. Note: *Average base asking price of new units sold in 2002. **Average sales price of new units sold between 1999 and 2002. ***Average assessed value of all units built before 1999.
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The value of new single-family houses built since 1999 grew at a rate 1.3 times faster than for single-family houses built pre-1999 (see Table 4). The value of new town house units built since 1999 has more than doubled in value against town house units built pre1999. The change in value of all new condominium units developed since 1999 increased in value at a rate 2.5 times faster than for condominium units built pre-1999. In Table 2, the findings of the fiscal impact analysis clearly show that single-family houses built since 1999 place the least amount of fiscal burden on the budget of Loudoun County while single-family houses built prior to 1999 place the greatest fiscal burden on the county. Existing single-family houses in the county built prior to 1999 generate a net fiscal deficit per unit 1.7 times greater than for all single-family units built since 1999 and 4.0 times greater than new single-family houses built in 2002. Existing town house units in the county built prior to 1999 generate a net fiscal deficit per unit almost double that of new town houses in the county built since 1999. All new condominium units in the county built since 1999 generate a net fiscal surplus per unit. All condominiums built in the county prior to 1999 generate a net fiscal deficit to the county of ($362) per unit. Table 2 Residential Net Fiscal Surplus (Deficit) Per Unit in Loudoun County 2002, 1999 – 2002 and Pre-1999 (in 2002 dollars)
Year
Single-Family
Town House
Condominium
New Units (2002) New Units (1999 – 2002) All Units (Pre – 1999) Source: Urban Analytics, Inc.
$ ( 666) $ (1,534) $ (2,644)
$
79
$ 1,380 $ 594
$ ( 600) $ (1,138)
$ ( 362)
There are four explanations for the findings reported in Table 2. Firstly, although all new residential units built in the county since 1999 are valued substantially higher than all existing units in the county built prior to 1999 (Table 1) and generate substantially higher real estate property tax revenues, these new units represent only one-quarter (26.7 percent) of the total housing stock in the county. The existing (built pre-1999) housing stock, representing three-quarters of the total housing stock in the county, are valued on average roughly 25 percent less than new housing built since 1999.
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Secondly, the rapid escalation from 1999-2002 of post-1999 residential real estate assessed values has allowed the county to increase its annual operating expenditures at a rate substantially greater than the rate of population growth. Annual county operating expenditures increased by almost double the rate of population growth in 2000 and 2001 and by almost five times the rate of population growth in 2002. This increased level-ofservice can not be sustained in future fiscal years solely through the development of higher-valued new residential units only. The net fiscal impacts of new residential growth can not be calculated independently of the county’s budgeting process and its annual operating revenues and expenditures. New single-family houses built after 1999, even with their high average real estate values, can only generate so much in revenues for the county. The county needs to curb its annual operating expenditures to a rate of growth more in line with the rate of population growth in the county. Thirdly, in addition to substantially increasing annual operating expenditures from 1999 to 2002, the county implemented two real estate property tax rate reductions during this time period. Over the fiscal period 1999-2002, the county’s real estate tax rate was reduced from $1.11 per $100 of assessed value to $1.08 per $100 of assessed value to $1.05 per $100 of assessed value. The county lowered the real estate tax rate in response to higher residential and non-residential real estate assessments. However, increased annual county operating expenditures coupled with two reductions in the real estate tax rate can not be offset entirely by an increase in new residential development. Finally, new single-family houses built since 1999 are larger than single-family houses built prior to 1999. Average household sizes and the average number of school-age children enrolled in public schools are slightly higher than for those single-family houses that were built prior to 1999. New town house and condominium units built since 1999 have average household sizes and average student generation factors less than those for town house and condominium units built prior to 1999. It has often been suggested that the county’s high residential growth rates over-burden the county’s ability to finance demands for county services. However, the findings reported in Table 2 do not support this suggestion. New single-family and town house units built since 1999 have substantially lower per-unit deficits than do existing singlefamily and town house units built prior to 1999. All new condominium units in the county built since 1999 generate a net fiscal surplus per unit while all condominiums built in the county prior to 1999 generate a net fiscal deficit to the county. New residential growth helps to offset the annual deficits to the county generated by housing units built prior to 1999.
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Introduction
The objective of this analysis is to isolate the fiscal impacts of new residential development that occurred in Loudoun County in 1999 and thereafter and to compare those fiscal impacts to the fiscal impacts of existing housing stock in the county built prior to 1999. Seperating the county’s total housing stock into two categories - - housing built prior to 1999 and housing built since 1999 - - and isolating the fiscal impacts of residential development into these two categories is relevant as slightly more than onequarter of the county’s total housing stock (26.7 percent) has been built since 1999. The growth in these new housing units is reflected in the county’s tax base that has emerged since 1999 as well as the demand for public expenditures associated with these new households. It has been suggested that the type and mix of these new residential units will over-burden the county’s ability to finance the demands for public facilities and services that accompany these new units. To measure the fiscal impact of these new units, the model that was designed to calculate the fiscal impact of economic growth in the county in 1999 was updated and recalibrated to reflect the changing fiscal conditions in the county since 1999.1 A fiscal impact analysis estimates the type and dollar amount of locally generated tax revenues by various land uses (and their occupants) and the estimated expenditures associated with locally generated services required to provide public services to those land uses (and their occupants). In Loudoun County, these locally generated revenues include, but are not limited to, real estate taxes, personal property taxes, sales taxes, business, professional and occupational license taxes, revenues from licenses, fees, permits, fines, forfeitures and charges for services, and miscellaneous and other local taxes. Expenditures for locally generated services provided by Loudoun County include general government administration, judicial administration, public safety, public works, health and welfare, parks, recreation and cultural activities, community development, and public schools. How much does Loudoun County expend in services (such as public safety and public education services) to the residential sector and how much does the residential sector pay to Loudoun County (in the form of direct or indirect tax and fee revenues) for those services? Do new residential units built since 1999 generate the same fiscal benefits (or burdens) as residential units in the county built prior to 1999? These questions can be answered by analyzing trends or patterns in the county’s real estate tax base, examining growth in population, employment and student enrollment, and studying the county’s annual financial statements and budgets to track the county’s rate of growth in annual operating expenditures including debt service. By examining these factors, the net fiscal impact of pre-1999 and post-1999 residential development can be calculated.
1
Fuller, Stephen S., and Dean D. Bellas. “Fiscal Impacts of Economic Growth in Loudoun County, Virginia..” June 2000. A detailed discussion of the methodology employed in the fiscal impact model is presented in the Appendix.
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Residential and Non-Residential Growth
From 1990 to 2003, residential real estate assessed values have steadily increased in Loudoun County while non-residential real estate assessed values fluctuated. From 1990 to 1999, residential real estate values increased 63.1 percent while non-residential real estate assessed values declined 17.0 percent.2 From 1999 to 2003, residential real estate assessed values continued to increase and non-residential real estate assessed values reversed their downward trend over the 1990 to 1999 period. In Table 3, residential and non-residential real estate assessed values from 1999 to 2003 are presented. Although non-residential real estate values increased 96.4 percent over this five-year period, residential real estate assessed values increased 131 percent over the same period. Table 3 Residential and Non-Residential Assessed Values Fiscal Years 1999 - 2003 (in current year dollars)
Year 1999 2000 2001 2002 2003
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Residential $9,486,706,525 $11,221,641,500 $14,350,425,200 $18,357,581,140 $21,913,956,080
Commercial $2,895,143,100 $3,664,607,200 $4,611,938,480 $5,410,528,600 $5,686,348,200
Total $12,381,849,625 $14,886,248,700 $18,962,363,680 $23,768,109,740 $27,600,304,280
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% Change 1999-2003 Year 1999 2000 2001 2002 2003
131.00% % of Total 76.62% 75.38% 75.68% 77.24% 79.40%
96.41% % of Total 23.38% 24.62% 24.32% 22.76% 20.60%
122.91% Total 100.00% 100.00% 100.00% 100.00% 100.00%
Source: Loudoun County Adopted Fiscal Plan FY 2004 Volume 2. Note: (1) Assessed valuation as of January 1st. (2) Does not include assessed values for agricultural and public utilities. Real estate property taxes represent the largest component of locally generated tax revenues. Residential real estate, especially new residential development, continues to generate substantial local tax revenues to the county. In Loudoun County, the share of
2
Ibid. Table 8, page 15.
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residential real estate assessed values to total assessed values increased from 76.6 percent in 1999 to 79.4 percent in 2002. During this same five-year period, the share of nonresidential real estate assessed values decreased from 23.4 percent in 1999 to 20.6 percent in 2003. The implication of the findings in Table 3 is that the county is relying on a continually growing share of residential real estate assessed values over non-residential real estate values for future real estate property taxes. The current slowdown in the Loudoun County economy will continue the County’s reliance on residential real estate taxes over non-residential real estate taxes.3 Of the county’s residential real estate base, there has been dramatic growth in the value of new residential units built since 1999 both in terms of the number of units and the average value of those units. A little more than one-quarter (26.7 percent) of the county’s housing stock was developed since 1999. These new housing units account for the fastest growing values among all housing units in the county. In Table 4, the rate of growth in real estate values in the county during the 1999-2002 period for new residential development built since 1999 and housing stock built prior to 1999 are compared.
Table 4 Percent Change in Residential Values in Loudoun County between 1999-2002 Units Built Post-1999 and Pre-1999
Year
Single-Family
Town House
Condominium
Post – 1999* Pre – 1999**
57.4% 44.6%
69.7% 31.4%
77.4% 22.1%
Source: Loudoun County Department of Financial Services; Meyers Real Estate Information, Inc.; Urban Analytics, Inc. Note: * Change in value from 1999 to 2002 of all units built between 1999 and 2002. ** Change in value from 1999 to 2002 of all units built prior to 1999.
The value of new single-family houses built since 1999 grew at a rate 1.3 times faster than for single-family houses built pre-1999. The value of new town house units built
3
For a thorough discussion of the state of the economy in Loudoun County, see Fuller, Stephen S. “Loudoun County’s Economy Since 2000: The Impact of Slower Growth.” September 2003.
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since 1999 has more than doubled in value against town house units built pre-1999. The change in value of all new condominium units developed since 1999 increased in value at a rate 2.5 times faster than for condominium units built pre-1999. The implication of the findings in Table 4 is that new residential units built since 1999 will generate a larger proportionate share of real estate property taxes in the future over residential units built pre-1999. As residential units built prior to 1999 continue to age, their physical characteristics (such as size, number of bedrooms, unit design and layout, lot size, and unit amenities) will not remain competitive (in terms of holding their value) compared to the physical characteristics of new residential units built since 1999.
Real Estate Taxes and County Operating Expenditures
The rapid escalation in residential real estate assessed values from 1999 to 2002 has allowed the County to increase its annual operating expenditures at a rate substantially greater than the rate of inflation, the rate of population growth, and the rate of employment growth. In Table 5, the growth in non-school operating expenditures in Loudoun County from 1999 to 2002 is presented.4 Annual operating expenditures increased 16.7 percent from 1999 to 2000, almost double the population growth in the County that year. Annual operating expenditures grew by almost double the rate of population growth from 2000 to 2001 as well. The largest spending spree occurred from 2001 to 2002. Annual operating expenditures increased at almost five times the rate of population growth from 2001 to 2002. A closer look at individual operating expenditure categories reveals where the greatest increases in spending occurred. Public safety operating expenditures increased 22.2 percent from 1999 to 2000, 24.5 percent from 2000 to 2001, and 35.7 percent from 2001 to 2002. Public works operating expenditures increased 29.6 percent in 2001 from 2000 and 79.4 percent in 2002 from 2001. Spending in these categories grew at a rate at least double the rate of population growth in the county each year from 1999 to 2002. Employment growth in the county increased 11.7 percent from 2000 to 2001, and 1.9 percent from 2001 to 2002. Yet, community development expenditures (which include expenditures for both the residential and non-residential sectors in the county) increased by 40.4 percent from 2000 to 2001, and by 40.1 percent from 2001 to 2002. Why is this information important to know? New housing units (and the residents of new development) are generally identified as the reason why county operating expenditures increase. Increasing annual operating expenditures by the same rate as the rate of population growth generally ensures that per capita levels-of-service (levels of spending) will remain constant. Residents of the county can expect to receive the same levels-ofservice as in prior years if annual operating expenditures increase at the same rate of population growth. Yet, in Loudoun County, operating expenditures (including debt
4
For a thorough discussion of school operating expenditures and school debt service, see Petersen, John P. “Loudoun County Finances: What is Happening to the Fund Balance and Why?” September 2003.
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service for new capital projects) did not increase at the same rate as population growth. Rather, annual operating expenditures increased by almost double the rate of population growth in 2000 and 2001 to almost five times the rate of population growth in 2002.
Table 5 Non-School Operating Expenditures in Loudoun County Fiscal Years 1999 - 2002 (in current year dollars)
Operating Expenditures General Government Judicial Administration Public Safety Public Works Health and Welfare Parks and Recreation Community Development Total: Change from Previous Year General Government Judicial Administration Public Safety Public Works Health and Welfare Parks and Recreation Community Development Total: Population Growth Rate: Employment Growth Rate: 1999 $22,616,321 $4,733,344 $32,566,948 $8,524,620 $30,162,100 $15,475,862 $11,289,320 $125,368,515 2000 $26,582,025 $4,867,402 $39,782,920 $10,284,035 $34,922,679 $17,917,823 $11,967,381 $146,324,265 2000 17.5% 2.8% 22.2% 20.6% 15.8% 15.8% 6.0% 16.7% 8.46% 13.90% 2001 $30,157,494 $5,768,200 $49,547,630 $13,330,984 $42,239,901 $23,043,666 $16,803,380 $180,891,255 2001 13.5% 18.5% 24.5% 29.6% 21.0% 28.6% 40.4% 23.6% 12.14% 11.67% 2002 $35,128,862 $7,379,470 $67,218,398 $23,916,734 $57,733,790 $28,724,255 $23,537,824 $243,639,333 2002 16.5% 27.9% 35.7% 79.4% 36.7% 24.7% 40.1% 34.7% 7.30% 1.87%
Source: Loudoun County Comprehensive Annual Financial Report (CAFR) for fiscal years 1999 – 2002; Loudoun County Adopted Fiscal Plan FY 2004. Note: Operating expenditures only. Does not include outlays for capital projects. Nonschool debt service apportioned across expenditure categories. The implication derived from the findings presented in Table 5 is that per capita and per job levels-of-service spending are not being held constant from year to year. The county has taken its budgetary use of balance surplus each year from 1999 to 2002 and increased its level of spending (level-of-service) at a rate substantially greater than the rate of population growth. True, residents and workers living and working in the county have benefited from the increased level of services that the county has provided to them over fiscal years 1999 – 2002. However, locally generated revenues collected to fund these
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locally provided services have come from the increase in residentially related local tax revenues and fees, especially residential real estate taxes on new development built since 1999. New residential development built since 1999 generates substantially higher local tax revenues than residential units built pre-1999. These post-1999 residential units help to support the cost of services provided to residents of these new units as well as to residents of pre-1999 housing stock. This increased level-of-service can not be sustained solely through the development of new residential units only. It should be noted that the methodology employed in the fiscal impact model assumes that each person living or working in Loudoun County has access to county services and therefore potentially shares from the benefits of these services. This cost or expenditure allocation is not based on the actual utilization of county services by specific individuals but rather reflects equal access to and availability of these services to all county residents and persons working in the county. Yet, some county programs and services are designed to accommodate residents with limited incomes. Many health and welfare programs and services provided by the county, for example, have income-based restrictions. The mean salary for all jobs in the county in 2000 was $44,700 and $83,600 for all service-sector jobs. The required average salary to purchase new single-family housing in the county ($489,634 was the average value of new single-family housing in the county in 2002) is substantially higher. Residents of new housing in the county and their higher household incomes do not qualify for some of these programs. From a fiscal impact perspective, new housing built since 1999 helps to offset the costs to provide programs and services to county residents living in lower-valued housing. In addition to substantially increasing annual operating expenditures from 1999 to 2002, the county implemented two real estate tax rate reductions during this time period. In 1999, the county’s real estate tax rate was $1.11 per $100 of assessed value. In 2000, the real estate tax rate in the county was lowered to $1.08 per $100 of assessed value. In 2002, the real estate tax rate was lowered to $1.05 per $100 of assessed value. The county lowered the real estate tax rate in response to higher residential and nonresidential real estate assessments. However, as will be seen in the next section, increased annual county operating expenditures coupled with two reductions in the real estate tax rate can not be offset entirely by an increase in new residential development. The suggestion that the county’s high residential growth rates over-burden the county’s ability to finance demands for new public facilities and services can not be attributed solely to new residential growth.
Fiscal Impacts of Residential Land Uses
The net fiscal impacts of residential units built prior to 1999 and since 1999 are presented in Tables 6, 7, and 8. In Table 6, the findings of this analysis clearly show that for each year studied, single-family houses built since 1999 place the least amount of fiscal burden on the budget of Loudoun County and housing units built prior to 1999 place the greatest fiscal burden on the county. In 1999, all housing units in the county built prior to 1999 generated a net fiscal deficit of ($1,805) per unit, a burden 2.7 times greater than new single-family houses built in 1999 at ($666) per unit. By 2002, all single-family houses
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built in the county prior to 1999 generated a net fiscal deficit of ($2,644) per unit, a burden 4.0 times greater than new single-family houses built in 2002 and 1.7 times greater than all new single-family houses built in the county since 1999. Table 6 Fiscal Flows of Single-Family Houses in Loudoun County On a Per-Unit Basis Fiscal Years 1999 - 2002 (in current year dollars) Average Value
Fiscal Year 1999 New Units A 1999 New B Pre-1999 Units C 2000 New Units A 1999-2000 New B Pre-1999 Units C 2001 New Units A 1999-2001 New B Pre-1999 Units C 2002 New Units A 1999-2002 New B Pre-1999 Units C
Revenues
Expenditures Net Surplus (Deficit)
$311,013 $311,013 $208,393
$6,863 $6,863 $5,724
$7,529 $7,529 $7,529
$ (666) $ ( 666) $ (1,805)
$390,485 $344,538 $220,749
$7,946 $7,450 $6,113
$8,080 $8,080 $8,080
$ ( 134) $ ( 630) $ (1,967)
$454,649 $370,427 $254,690
$8,888 $7,979 $6,729
$9,088 $9,088 $9,088
$ (200) $ (1,109) $ (2,359)
$489,634 $407,055 $301,317
$8,055 $7,188 $6,078
$8,722 $8,722 $8,722
$ (667) $ (1,534) $ (2,644)
Sources: Loudoun County Department of Financial Services; Meyers Real Estate Information, Inc.; Urban Analytics, Inc. Note: A Average base asking price of new units sold in current year. B Average value of cumulative new units from 1999 forward in current year. C Average assessed value of pre-1999 single family units in current year. In Table 7, new town house units built each year since 1999 have generated a net fiscal surplus ranging from a low of $53 per unit in 1999 to a high of $631 per unit in 2001. The cumulative impact of all new town house units built between 1999 and 2001 has been a net fiscal surplus ranging from a low of $53 per unit in 1999 to a high of $225 per
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unit in 2000. The cumulative net fiscal deficit of all new town houses built since 1999 is ($600) in 2002. This deficit is the result of a combination of escalating annual operating expenditures by the county and two reductions in the real estate property tax rate since 1999. By 2002, all town house units built in the county prior to 1999 generated a net fiscal deficit of ($1,138) per unit, a burden almost double the net fiscal deficit of ($600) per unit generated by all new town houses built since 1999. Table 7 Fiscal Flows of Town Houses in Loudoun County On a Per-Unit Basis Fiscal Years 1999 - 2002 (in current year dollars) Average Value
Fiscal Year 1999 New Units A 1999 New B Pre-1999 Units C 2000 New Units A 1999-2000 New B Pre-1999 Units C 2001 New Units A 1999-2001 New B Pre-1999 Units C 2002 New Units A 1999-2002 New B Pre-1999 Units C
Revenues
Expenditures Net Surplus (Deficit)
$173,207 $173,207 $135,479
$5,003 $5,003 $4,584
$4,950 $4,950 $4,950
$ 53 $ 53 $ ( 366)
$216,098 $193,581 $137,278
$5,627 $5,384 $4,776
$5,159 $5,159 $5,159
$ 468 $ 225 $ ( 383)
$260,537 $209,601 $154,506
$6,248 $5,698 $5,103
$5,617 $5,617 $5,617
$ 631 $ 81 $ ( 514)
$293,923 $229,266 $177,969
$5,544 $4,865 $4,327
$5,465 $5,465 $5,465
$ 79 $ ( 600) $ (1,138)
Sources: Loudoun County Department of Financial Services; Meyers Real Estate Information, Inc.; Urban Analytics, Inc. Note: A Average base asking price of new units sold in current year. B Average value of cumulative new units from 1999 forward in current year. C Average assessed value of pre-1999 town house units in current year.
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In Table 8, new condominium units built each year since 1999 have generated a net fiscal surplus ranging from a low of $1,039 per unit in 1999 to a high of $2,039 per unit in 2001. The cumulative impact of all new condominium units built since 1999 is a net fiscal surplus of $595 per unit. The cumulative net fiscal deficit of all condominiums built prior to 1999 is ($362) in 2002. This deficit is the result of a combination of escalating annual operating expenditures by the county and two reductions in the real estate property tax rate since 1999. Table 8 Fiscal Flows of Condominiums in Loudoun County On a Per-Unit Basis Fiscal Years 1999 - 2002 (in current year dollars) Average Value
Fiscal Year 1999 New Units A 1999 New B Pre-1999 Units C 2000 New Units A 1999-2000 New B Pre-1999 Units C 2001 New Units A 1999-2001 New B Pre-1999 Units C 2002 New Units A 1999-2002 New B Pre-1999 Units C
Revenues
Expenditures Net Surplus (Deficit)
$156,106 $156,106 $ 90,921
$3,933 $3,933 $3,210
$2,894 $2,894 $2,894
$ 1,039 $ 1,039 $ 316
$168,752 $162,049 $ 91,448
$4,179 $4,109 $3,346
$3,018 $3,018 $3,018
$ 1,161 $ 1,091 $ 328
$264,425 $179,907 $ 98,353
$5,318 $4,409 $3,527
$3,279 $3,279 $3,279
$ 2,039 $ 1,130 $ 248
$277,002 $202,184 $110,983
$4,677 $3,892 $2,934
$3,297 $3,297 $3,297
$ 1,380 $ 595 $ ( 362)
Sources: Loudoun County Department of Financial Services; Meyers Real Estate Information, Inc.; Urban Analytics, Inc. Note: A Average base asking price of new units sold in current year. B Average value of cumulative new units from 1999 forward in current year. C Average assessed value of pre-1999 condominium units in current year.
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The implication of the findings in Tables 6, 7, and 8 is that the net fiscal impacts of new residential growth can not be calculated independently of the county’s budgeting process and its annual operating revenues and expenditures. New single-family houses built after 1999, even with their high average real estate values, can only generate so much in revenues for the county. The county needs to curb its annual operating expenditures which have been increasing at an annual rate from two to five times the rate of population growth in the county. Increased annual operating expenditures coupled with two real estate property tax rate reductions since 1999 can not be absorbed alone by new single-family houses built since 1999. Why then, do new town house units and condominium units built since 1999 generate a net fiscal surplus while new single-family houses do not? Single-family houses built prior to 1999 comprise 61.8 percent of the pre-1999 housing stock and new single-family houses built since 1999 comprise 52.1 percent of the post-1999 housing stock. As single-family houses tend to be larger in size and have more bedrooms than town houses and condominiums, and single-family houses built since 1999 tend to be bigger than single-family houses built prior to 1999, single-family houses bear the lion’s share of public school operating costs in fiscal impact modeling. Average student generation factors per unit are higher for single-family houses than for town houses and condominiums.
Conclusion
The findings of the fiscal impact analysis clearly show that single-family houses and town houses built since 1999 place the least amount of fiscal burden on the budget of Loudoun County and single family and town house units built prior to 1999 place the greatest fiscal burden on the county. In 2002, all single-family houses built in the county prior to 1999 generated a net fiscal deficit 4.0 times greater than new single-family houses built in 2002 and 1.7 times greater than all new single-family houses built in the county since 1999. In 2002, all town house units built in the county prior to 1999 generated a net fiscal deficit almost double the per unit net fiscal deficit generated by all new town houses built since 1999. In 2002, the net fiscal surplus of all new condominium units built since 1999 is $595 per unit while the net fiscal deficit of all condominiums built prior to 1999 is ($362) per unit. The net fiscal impacts of new residential growth can not be calculated independently of the county’s budgeting process and its annual operating revenues and expenditures. The county’s annual operating expenses between 1999 and 2002 escalated at an annual rate two to five times greater than the annual rate of population growth. New residential units built after 1999, even with their high average real estate values, can only generate so much in revenues for the county. The county needs to reduce its rate of future annual operating expenditures to more closely match the future rate of growth in population. Revenues from new housing units built since 1999 help to offset the annual deficits to the county generated by housing units built prior to 1999.
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Appendix
15
Methodology
In the preceding analysis, the fiscal impacts of new residential development in Loudoun County from 1999 through 2002 are presented. The fiscal impacts of post-1999 new residential development were isolated each year and compared against the fiscal impacts of existing (pre-1999 built) residential development. A fiscal model was employed to calculate the fiscal benefits and costs of new post-1999 residential development in Loudoun County and to compare these net fiscal benefits and costs to pre-1999 residential development. The fiscal impact model designed for this analysis takes a “snapshot in time” of the existing fiscal conditions in Loudoun County for each fiscal year being reviewed. As fiscal conditions change from year to year, the model is recalibrated to account for fiscal and socio-economic changes in the county from year to year, such as annual revenues and expenditures, population and job growth, changes in public school student enrollment, and changes in the number and type of housing units. The basis for this fiscal impact model is the Loudoun County Comprehensive Annual Financial Report (CAFR) for fiscal years 1999 through 2002 and the Adopted Financial Plan (Budget) for fiscal years 1999 through 2004. Budgeted and actual financial data used in the model were obtained through county documents. Socio-economic data, such as the assessed value of all housing units in the county, the number of housing units in the county, the average household size, and the average student generation factor per unit were obtained from the county. Employment data were obtained by the Virginia Employment Commission and population data were obtained from the U.S. Census. The average value of post-1999 new housing units were obtained through Meyers Real Estate Information Services. The process of calculating the revenue and expenditure flows generated by residential and non-residential land uses involved formulating a fiscal model that allocates the county’s revenues and expenditures to their direct sources. The audited revenue and expenditure totals by source and agency reported in the CAFR and the Budget for each fiscal year were divided between those generated by (assignable to) residential and nonresidential uses based on a thorough examination of each revenue and expenditure item as reported in the above documents. Percent distributions (allocation factors) were developed and revenues and expenditures were distributed among residential and nonresidential land uses according to these percent distributions. In addition, these percent distributions were compared to detailed examinations of comparable municipal budgets in Maryland, Virginia, West Virginia, and the District of Columbia to check the allocations factors for reasonableness and construct validity. The residential share of each category of county revenues and expenditures (that is, the portions generated by local residents as opposed to local business activities, or which provide services to local residents as distinguished from local businesses) was converted to a per capita equivalent to facilitate the calculation of fiscal flows associated with each residential land use analyzed. The non-residential share of each category of county
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revenues and expenditures was converted to a per job equivalent to facilitate the calculation of non-residential fiscal flows from commercial development. This approach assumes that each person living or working in Loudoun County has access to county services and therefore potentially shares from the benefits of these services. This cost or expenditure allocation is not based on the actual utilization of county services by specific individuals but rather reflects equal access to and availability of these services to all county residents and persons working in the county. The findings derived in this study are based on an analysis of average costs, not marginal costs. By using average costs and revenue multipliers in this analysis and not adjusting revenue sources and expenditure demands to reflect the income structure of the future residents of Loudoun County or the actual utilization rate of specific services, the actual revenue forecast is likely to be conservative and the actual demand for county services and programs may be overstated. However, where specific costs and revenues could be assigned based on actual use or values, these were calculated based on available data. As can be seen in Tables 6, 7, and 8, the average costing approach to fiscal impact modeling was employed in the fiscal model. The net result of this methodological approach is that the average costing approach generally tends to overstate the actual demand for county services and programs in new residential housing units built since 1999. Had the marginal costing approach to fiscal impact modeling been used, then the per-unit expenditure costs shown in Table 6, 7, and 8 would be higher for all residential units built prior to 1999 and lower for all housing units built since 1999.
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References
The following documents were collected from the appropriate agencies and departments in Loudoun County and reviewed. Loudoun County 1. County of Loudoun. Comprehensive Annual Financial Report (CAFR). FYE June 30, 2002. 2. County of Loudoun. Comprehensive Annual Financial Report (CAFR). FYE June 30, 2001. 3. County of Loudoun. Comprehensive Annual Financial Report (CAFR). FYE June 30, 2000. 4. County of Loudoun. Comprehensive Annual Financial Report (CAFR). FYE June 30, 1999. 5. County of Loudoun. Adopted Fiscal Plan. FY 2004 Volumes 1 and 2. 6. County of Loudoun. Adopted Fiscal Plan. FY 2003 Volumes 1 and 2. 7. County of Loudoun. Adopted Fiscal Plan. FY 2002 Volumes 1 and 2. 8. County of Loudoun. Adopted Fiscal Plan. FY 2001. 9. County of Loudoun. Adopted Fiscal Plan. FY 2000. 10. County of Loudoun. Adopted Fiscal Plan. FY 1999. 11. Loudoun County Board of Supervisors, Fiscal Impact Committee. 2002 Annual Update. Demographic, Revenue and Expenditure Modules and Growth Scenarios. March 2003. 12. Loudoun County Board of Supervisors, Fiscal Impact Committee. 1999 Annual Update. Demographic, Revenue and Expenditure Modules and Growth Scenarios. January 2000. 13. Loudoun County Department of Economic Development, 2002 Annual Growth Summary. 14. Loudoun County Department of Economic Development, 2001 Annual Growth Summary. 15. Loudoun County Department of Economic Development, 2000 Annual Growth Summary. 16. Loudoun County Department of Financial Services. Year 2000 Real Property Assessments Report. 17. Loudoun County Department of Financial Services. Year 2001 Real Property Assessments Report. 18. Loudoun County Department of Financial Services. Year 2002 Real Property Assessments Report. 19. Loudoun County Department of Financial Services. Year 2003 Real Property Assessments Report. 20. Loudoun County Public Schools. 2002 Virginia-County of Loudoun School Census. 21. Loudoun County Public Schools. 1999 Virginia-County of Loudoun School Census.
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The following documents were collected from non-Loudoun County sources and reviewed. Other Sources 1. U.S. Census Bureau. Table GCT-T1. Population Estimates: 2002. Geographic Area: Virginia - - County. Census 2000. 2. State of Virginia. Covered Employment and Wages in Virginia by 2-Digit SIC Industry. For the Quarter Ending June 30, 1999. 3. State of Virginia. Covered Employment and Wages in Virginia by 2-Digit SIC Industry. For the Quarter Ending June 30, 2000. 4. State of Virginia. Covered Employment and Wages in Virginia by 2-Digit SIC Industry. For the Quarter Ending June 30, 2001. 5. State of Virginia. Covered Employment and Wages in Virginia by 2-Digit SIC Industry. For the Quarter Ending June 30, 2002. 6. Virginia Department of Taxation. Total Taxable Retail Sales by Business Classification. 2002. 7. Virginia Department of Taxation. Total Taxable Retail Sales by Business Classification. 2001. 8. Virginia Department of Taxation. Total Taxable Retail Sales by Business Classification. 2000. 9. Virginia Department of Taxation. Total Taxable Retail Sales by Business Classification. 1999. 10. Meyers Real Estate Information, Inc. Analysis of New Housing Prices by Housing Unit Type – Loudoun County, Virginia. December 1999 – December 2002.
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