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"What price growth...?"

What Price Growth?

The Cost to Thurston County Residents: 1997-2002

by The Carnegie Group

September, 1997

Growth doesn't pay for growth. Taxpayers pay for growth. In Thurston County, each taxpayer will pay almost $600 per year in additional taxes and fees for the capital facilities required over the next six years for growth. This estimate does NOT include the cost of expanding the LOTT regional wastewater facility, nor the costs of operating the new facilities required by growth. When these costs are included, the in-crease in taxes and fees may double to over $1,200 per year.

This yearly payment does nothing to improve our community's standard of living. Despite these major projected public subsidies for growth, many aspects of our "quality of life" will decline. Roads, schools and parks will become more crowded, air more polluted, water more expensive, and open space more remote. The Carnegie Group, a group of responsible citizens concerned about the costs and negative impacts of growth, invites you to consider the following information and to begin asking public officials why taxpayers should subsidize growth.

How Much Does Each Of Us Pay For Growth?

The Carnegie Group interprets data provided by the Thurston Regional Planning Council (TRPC) to indicate the annual capital costs of growth per taxpayer in Thurston County is almost $600. In September of 1997, TRPC published figures on the cost to all governments in Thurston County of building and maintaining the facilities needed to serve the public over the period 1997-2002 (Region-Wide Infrastructure Report). These infrastructure facilities include roads, schools, sewers, vehicles, office space, computers, and other physical objects. TRPC divided the total budget into 9 sub-budgets. TRPC also divided each sub-budget into three categories - "Catch Up," "Keep Up" and "New Capacity" (defined below). This diagram, for example, shows TRPC's sub-budget for sewers.

Total sewer sub-budget for the interval 1997-2002 is $6.24 million.
Note: This does NOT include the projected costs of expanding
the LOTT treatment plant's capacity.

From these TRPC estimates, we have calculated how much of each capital sub-budget goes to "Catch Up," "Keep Up" and "New Capacity." The following table summarizes projected capital costs between 1997 and 2002 by category (for example, "Schools") and by the objective of the expenditure (for example, "Catch Up").

TABLE 1. Capital Costs By Category And Objective ($ millions)
1 2 3 4 5
Cost (Alt.2)
as per 9/97
%New Capacity % Keep Up % Catch Up TRPC Source
Page nos.
General Government 57.8 22.6 41.2 36.2 32,34
Parks 33.9 31.9 6.6 61.5 42,44
Schools 147.2 53.9 37.3 8.8 50,52
Sewers 62.4 69.2 20.8 10.0 56,58
Solid Waste 8.9 39.2 55.2 5.6 60,61
Special Use Districts 34.4 89.1 3.5 7.4 64,66
Storm Water 13.8 13.3 4.5 52.2 72,74
Transportation 249.8 29.3 38.4 32.3 80,82
Water 48.1 58.1 22.5 19.4 89,91
TOTAL COST* $656.3 23

*Note: This table based on the more conservative (lower) of two budget estimates in the TRPC report. See pp.20, 23.

To determine the cost of growth to current taxpayers, we first defined the cost of growth as the cost of "New Capacity" and "Catch Up." We defined the cost to current taxpayers as the costs of growth minus the amount paid by growth and other non-taxpayer sources. "Catch Up" costs are clearly a cost of growth. Recently adopted impact fees may pay a small portion of these catch up costs. However, the major portion of the costs of recent growth will not be paid by growth and must be paid by all current residents. New capacity costs, on the other hand, can and should be paid by future growth. The following table assumes that both catch up costs and the major portion of new capital costs will continued to be paid by current residents.

TABLE 2. The Cost Of Growth To Taxpayers ($ millions)
6 7 8 9 10
$ New Capacity
(col 1 x col2)
$ Keep Up
(col 1 x col 3)
$ Catch Up
(col 1 x col 4)
Sources Other
than Taxpayers*
Cost to Taxpayers
(col 6 + col 8 - col 9)
General Government 13.1 23.8 20.9 3.4 30.6
Parks 10.8 2.3 20.8 4.6 27.0
Schools 79.3 54.9 13.0 2.1 90.2
Sewers 43.2 13.0 6.2 16.0 33.4
Solid Waste 3.5 4.9 0.5 0.0 4.0
Special Use Districts 30.7 1.2 2.5 13.5 19.7
Storm Water 1.8 0.6 11.3 1.5 11.6
Transportation 73.2 95.9 80.7 39.6 114.3
Water 28.0 10.8 9.3 10.1 27.2
TOTAL COST* $283.6 $207.4 $165.2 $90.8 $358.0
% of $656.2 million 43.2% 31.6% 25.2% 13.8% 54.6%

Note: Calculation of the amount paid by sources other than taxpayers (Col. 9) is explained in Note 1 (end of this brochure).

Growth Doesn't Pay For Growth!

The results show that the misleading slogan "Growth Pays For Growth" is false. The amount that Growth Pays For Growth ($90.8 million) is shown in column 9 (see Note 1). The total budget to accommodate growth over the next 6 years is $448.8 million (sum of column 6 and column 8). Growth pays, at most, only 20% of the true cost of growth. The taxpayers pay the other 80%) (column 10).

How much will this growth subsidy of $358 million over the next six years cost individual taxpayers? There are about 200,000 residents in Thurston County. We assume half of them are adult residents who will be affected by rising property taxes, school levies, increasing water and sewage rates, and the other assessments forced upon us by growth. We divided $358 million by 100,000 adult residents to get the cost per adult for the six-year period. We then divided that answer by six to get the cost per taxpayer per year. If all grow caused taxes and fees were paid in one check each year, it would look like this.

CAUTION. Taxpayers don't usually pay for growth with one large check. We pay by way of many little checks, in which the cost of growth is disguised (usually by lumping it in with the cost of routine operations or maintenance, or "Keep Up"). The amount individual

taxpayers pay for growth maybe more or less than the amount shown here, depending upon where the taxpayer lives in the County and the taxpayer's personal circumstances. The $596.50 figure is a conservative estimate of the average increase in capital facilities costs resulting from growth for all taxpayers. The calculation was made so that any errors in it are likely to be on the low side, rather than the high side. We think the average taxpayer will actually pay more!

What About LOTT? County residents who live in the service area of the LOTT treatment plant may pay even more to subsidize growth. The cost of the proposed LOTT treatment plant expansion is entirely driven by growth. If promoters of growth get their way, LOTT ratepayers may also be writing another check each year, for the next 20 years, that looks like this (see Note 2).

Other Costs Of Growth

Another big cost of growth is not in TRPC's report - the annual cost of operating the new capital facilities constructed to accommodate growth. In some cases (schools, for example), annual staffing and operating costs can be higher than the annual cost of paying off the capital investment. Tlie annitcil growth bill for operations might well equal the annual capital costs for growth identified in the TRPC report.

Your Cash Subsidy Will Lower Your Standard Of Living

The major public subsidies for growth will inevitably stimulate growth. We will get what we pay for. And even the plans to accommodate growth acknowledge that projected facilities will not be able to fully eliminate the increased crowding, congestion and loss of open space resulting from the increased population. In summary, ijwe continue tofollow the calls ofgmwth promoters for ever laiger public subsidies for growth, we will be paying more and enjoying it less.

"But Growth Can't Be Stopped!"

Of course growth can be stopped. More importantly, it can be controlled so that it maintains or improves our quality of life. By leaving our yearly subsidies for growth in the bank, we would limit grototh to that level that can pay its cnon way. Eighty percent of Thurston County's growth results from people moving here from elsewhere, a major portion of whom are encouraged to come here by our subsidies for growth. By refusing to continue this subsidy, we would have more resources to create better employment and living opportunities for our current population and our kids' future. Some of the strongest economies in the world are in countries with stable populations. Why not have that here?

Is The Carnegie Group Mistaken?

You will probably hear promoters of growth claiming that the calculations shown above are wrong. We think not. The Carnegie Group is concerned that the dialog on the cost of growth be accurate and in-formed. For this reason, we present not just our conclusions regarding current subsidies for growth but also our assumptions and procedures. Notes 1, 2 and 3 below explain how we arrived at the figures cited above and provide for alternative interpretations of the TRPC report.

Note 1. Columns 1-5 in Table 1 are directly from TRPC's report, Region-Wide lnfrastructure Report, 1997-2002 (September, 1997). Columns 6-8 are straight-forward calculations using TRPC's data. Any room for error in the Carnegie calculation lies in columns 9 and 10. Column 9 shows our estimate of the costs that are not paid by taxpayers. These were obtained by examining the detailed sub-budgets for each of the nine categories in the TRPC report and identifying those budget sources that are not paid by taxpayers. Some of these payments are made by those who benefit from growth. These are true Growth Pays For Growth payments. They include General Facility Charges, SEPA or Mitigation Fees, Impact Fees, "Fee in Lieu" (Parks), Hookup Fees (sewers, water), Port Fees and Developer Contributions (of land for schools, parks, etc). Other sources al funds that don't draw upon the taxpayers are the sales of property by local govemments, revenues from various operations, income from revenue bands, and utility payments for right-of-way (Parks). We weren't sure about the Road Fund. Port of it comes from sales of timber, and is not taxpayer expense. Port is paid by taxes. To be on the safe side, we counted the entire Road Fund (about $23.1 million) as a non-taxpayer expense. (We conclude that this conservative assumption makes our estimate of the extent to which Growth Pays For Growth high.) All other sources of revenue shown in the TRPC report draw on the taxpayers. These include Property Taxes, Business & Occupation Taxes (the cost is passed to consumers), Local Option Sales Taxes, Real Estate Excise Tax, Councilmatic Bonds, Voted General Obligation Bonds, Community Development Block Grants, Utility Taxes and Federal Grants. Using these assumptions, we went through each detailed sub-budget, separated the costs paid by sources other than the taxpayers, and listed them in column 9.

We figured that the cost of growth in each sub-budget is the New Capacity cost plus the Catch Up cost. The New Capacity cost is the cost of building new facilities to accommodate the projected population increase in Thurstan County in the next 6 years (30,000). That is a cost of growth. The Keep Up cost is the cost of maintaining, repairing and replacing facilities, both existing and planned. This is not a cost of growth. Catch Up is the gray zone. Catch Up is, in part, building new facilities, or upgrading overloaded facihties, to accommodate people who have moved here in the last few years. That's a cost of growth. Catch Up is also, in part, upgrading facilities in cases where we've decided we want a higher standard - not just to catch up with past growth. Such costs are not a cost of growth. We decided to count the whole Catch Up cost as a cost of growth for two reasons. First, we think the non-growth part of Catch Up is very srnall. Second, we wanted to account for the substantial non-dollar costs of growth that residents of the County have already experienced - increased congestion, air quality degradation, loss of open space, etc. As noted in the text, these catch up costs result from growth which has already occurred. A small portion of these costs will be paid by impact fees paid by this growth. The major portion of these catch up costs, however, will have to be paid by current residents. In contrast to the projected subsidy for future capacity costs, the subsidy for our recent growth has already been incurred, both in the need for new facilities and in declining levels of service. While assigning the major portion of catch up costs to growth appears logical, we recognize some adjustments may be necessary in the actual amount of the catch up costs assigned to growth as addtional data become available.

Note 2. Information from LOTT identifies scenarios costing between $182 million and nearly $600 rnillion. If LOTT selects an option allowing increased discharge to Budd Inlet in winter months, the estimates would be reduced by $40 million, giving a lowest estimate of $142 million and an upper estimate of $600 million. LOTT estimates 65,000 people currently use the LOTT system; 185,000 are estimated to use the system in 2020. Assuming half of all residents are ratepayers, the number of ratepayers will increase from 32,500 to 92,500. Dividing both the low and high estimates of the total cost per ratepayer by 20 years gives an annual cost per current ratepayer of between $218 and $923. In 2020, the annual average cost per ratepayer is reduced, as a result of population growth, to between $76 and $324. Using an average current cost increase of $570 and an average cost increase in 2020 of $200, the average cost increase over the 20 year period per ratepayer is estimated ta be $385. Obviously, this is a very rough figure given the wide range in costs projected for LOTT. This estimate does NOT include interest which will have to be paid on the bonds which governments must use to finance these projected capital costs. When interest is added, annual costs will be several timers greater than those listed here.

Note 3. An exact calculation of the cost of growth to current residents would need to account for two significant factors: the manner in which capital investments by local governments are financed, and the growth in population (and, therefore, in the number of taxpayers). We recognize that the major portion of the estimated capital improvements not paid by impact fees will be paid by long term bonds. These bonds will be retired by annual payments from taxes. While the life of the bonds affects the annual payments, it does not reduce the total burden. Most importantly, continued growth during the life of the initial bonds will result in still more capital investments, bonds and taxes which will fall disproportionately on existing taxpayers. Population growth will, in the short term, reduce the tax burden from the projected capital improvements over the next six years. If we assume a 3% annual growth in population, the population in six years will be approximately 20% greater than at present, meaning the tax burden per capita will be reduced proportionally. On the other hand, additional population growth will demand still further capital investments and impose additional tax burdens. Far this reason, we urge the local governments to undertake detailed financial analyses of their capital investment plans before committing to these investments.

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