Subsidies for Subdivisions: Study says Rural Developments cost Natrona County
Last week the Sonoran Institute released a report projecting the negative fiscal impacts of rural development on Natrona County’s budget. The report signals a new focus for land planning discussions in Wyoming following last year’s debates over property rights in nearby Platte and Goshen County.
The Sonoran Institute presented the report on the afternoon of September 4, 2012 to the Natrona County commissioners and in an evening presentation at the Natrona County Library. Small but interested audiences attended both events.
The report titled “Leaping the Budget Gap: Land Use and Fiscal Planning in Natrona County, Wyoming” has a simple take-home message: on Natrona County government balance sheets, residential development in rural areas never pays for itself.
Specifically, rural development raises county expenses for road and bridge infrastructure, fire protection, and sheriff patrols. New rural housing generates some tax revenues, but it’s not enough to offset the increased costs to the county, according to the modeling done in the study.
Crucially, as development moves farther afield from Casper and adjacent municipalities, the gap between revenues and cost of services only widens.
For example, the study calculated the taxes paid by an average landowner living on a ranchette located 6 miles down a county road. It found those taxes amounted to only 8 percent of the county’s operations costs and 25 percent of capital costs for providing service to that property.
The rest of the money has to be made up by taxes from oil and gas production, tourism, industrial land uses and other county sources.
All this subsidizing works out all right in a place like Natrona County, which has a solid commercial tax base to cover the costs of services to rural residential subdivisions.
It also helps that rural Natrona County has seen a comparatively slow pace of housing construction. Over the last 15 years, only 500 rural houses were built across the entire county. People seem particularly slow to build on ranchette parcels, which so far aren’t requiring too much in the way of services.
Just north of Casper, the seven-year-old B.B. Brooks Ranch development has seen only 26 houses built, according to Michael Sawhill, President and Chief Operating Officer of the Brooks Realty and Advisory Group. He says his company and parcel owners are paying Natrona County more taxes than were coming in when the property was still open ranch land, without needing much in return.
“Right now [Natrona County is] getting hundreds of thousands of dollars a year without any expenditures within our area aside from Ormsby Road, which was there before our development,” Sawhill said.
A landowners association maintains private roads within the development. “Other than maintaining Ormsby Road I know of no major expenditures the county has or will have in the near future,” he said.
But as time goes on, more people will move into the hundreds of exurban and ranchette lots that are already platted, putting increasing pressure on county resources. And according to John Heyneman, the Sonoran Institute’s Wyoming Project Manager, that could be a real problem.
“Counties across the Western US are contemplating, or enacting, severe layoffs and budget cuts because they’re struggling to balance their budget,” said Heyneman in a press release. “What this study shows is that improper land planning is a big part of the reason why counties are in this situation in the first place, and it also shows that proper land planning is necessary if they want to get out of it.”
That’s a message Natrona County was primed to hear because of its experience with the B.B. Brooks Ranch. In 2005, the Brooks Realty and Advisory Group caught the county off guard when it opened its 64-square mile ranchette subdivision on the sandy plains just north of Casper.
The development quickly cut 100 miles of access roads, marketed itself nationally, and started selling 40-acre lots. The website www.wyominglandrush.com enticed buyers with videos selling Wyoming’s western image and maps charting the development’s growth.
As of this writing, B.B. Brooks Ranch is in its 4th and final phase, having sold 75-80% of the lots in the 798-parcel development.
“I can tell you there are thousands of people who appreciate the opportunity to have a rural home site and ranch,” Sawhill said. “We’ve been extremely successful wherever we’ve been… Our product is helping people achieve their American Dream of having a rural property.”
While many lots have been purchased, Sawhill said he didn’t know how long it would take for the development to be built out. “People love Wyoming. They have this dream of having a place outside the cities that is safe and secure. I think you’ll see over time how many more people will move out into this area,” Sawhill said.
Amid rising concerns about the loss of open space, Natrona County residents, conservationists and lawmakers searched for a way to get a handle on ranchette development. In 2008 they took their case to the state legislature, which passed a new law giving counties authority to regulate subdivisions with lot sizes of greater than 35 acres.
Subdivisions above this size had previously been exempt from regulation, creating a loophole that developers across the state eagerly jumped through.
In late 2011, the Sonoran Institute began work on a study to take another look at B.B. Brooks Ranch, principally because it was the largest example of ranchette-style development in Wyoming, and for that matter in the entire West.
The B.B. Brooks Ranch is the kind of rapid, large-scale development that the Sonoran Institute wants the Mountain West to move away from. According to its website, the Sonoran Institute helps communities conserve and restore natural and cultural resources, “and manage growth and change through collaboration, civil dialogue, sound information, practical solutions and big-picture thinking.” (Click here to read about the Sonoran Institute’s Mission and Vision.)
For the Natrona County Study, the Sonoran Institute secured funding from several Casper area donors and the Wyoming Community Foundation, who together hosted presentations of the findings in Casper. Natrona County paid nothing for the project, and had no role other than providing GIS information and cost of service data.
The Sonoran Institute also got the support of former United States Senator Alan Simpson, who provided an open letter explaining his role in initiating county land planning while serving in the Wyoming legislature in the 1970s.
Simpson’s letterread in part, “Wyoming’s subdivision regulations are not consistent, and often do not encourage the sort of development that honors both our open spaces and working agriculture. Finding the balance between fostering development and keeping the Wyoming we love is terribly hard, but few things worth doing are ever easy. We must understand the consequences of taking the easy path.”
As the Natrona County study proceeded, the focus broadened beyond the B.B. Brooks Ranch in an effort to define and quantify the impact of all kinds of rural development in the county, whether on a ranchette, a smaller exurban lot located closer to town, or a metro-infill lot abutting the city limits.
The Sonoran Institute tapped RPI Consulting, a land use, fiscal, and economic planning firm from Durango, Colorado to do the analysis. RPI got its start when managing partners Gabe Preston and Andrew Klotz began doing fiscal impact studies in the 1990s while working in the Roaring Fork Valley of Colorado. They learned how to calculate cost of services, and then realized that where development happens within a county directly affects the county’s bottom line.
The main driver of costs associated with rural development is increased traffic on county roads. This generates the disproportionate impact that rural developments have on county road budgets.
For the Natrona County study, Gabe Preston found that road and bridge expenses are 89 percent generated by residential use.
By Preston’s calculations, the average ranchette house on a 35-acre lot is located 6.9 miles down a county road. The average ranchette family drives 32.9 miles a day on county roads.
Preston concluded that the county’s costs to provide services to the average ranchette house would be $7,540 in annual operations and a one-time capital cost of $16,780 for things like bridges, bulldozers, snowplows, fire trucks, gravel, etc. Landowner taxes on the parcel would provide $570 in operations revenue, and $4,200 in capital revenue.
Preston then used those numbers to create a scenario for developing 500 units to project what the costs of 10 years of growth in the unincorporated county would look like.
The annual county operations costs for a ranchette development with 500 residential units would be $3.7 million, far above the $285,000 in county operating revenue that it would generate. The same development would also have an $8.4 million one-time capital cost to the county, while generating only $2.1 million in capital revenues for the county.
Put another way, the county would face an annual operations deficit of $3.4 million and a one-time $6.3 million capital deficit to pay for services to a ranchette development built out to 500 lots.
The Sonoran Study also quantified the costs of exurban lots, which are generally 1-10 acre parcels located 5 miles down a county road on average, and metro-infill lots located on the edges of Casper and a mere 0.2 miles down a county road.
The revenues from exurban lots contributed about 10 percent of operational costs and 31 percent of capital costs. Taxes from metro-infill lots got much closer to paying their own way, covering 68 percent of operations and 90 percent of capital costs.
“Getting people closer in to town is what creates the economic synergy that boosts revenues,” Heyneman said.
But too much development on the edge of the town can also create problems should the City of Casper ever want to annex new land. Residential housing in the county is built to different road, water, sewer, and electrical standards than what the City of Casper requires. This makes metro-infill areas hard to annex without major modifications, and effectively creates a fence or barrier around the city.
“I look at the map of the subdivisions around Casper and it’s starting to look close to being landlocked. If I were the city of Casper I’d be really concerned about that,” Preston said.
Big ranchette developments catch much of the attention and can create a push for more regulation. While people have concerns about seeing more 40-acre lot development, it’s much more common in Natrona County to have smaller exurban lots on Casper Mountain or hobby farms, according to Preston.
And in reality, Preston says exurban parcels under 35 acres in size form the majority of high-cost development in Natrona County. Per unit, these lots are costing the county nearly as much as a typical ranchette, and more money in total, if you consider that only a handful of ranchettes have been built on.
“In terms of real life costs today, it’s the [exurban] houses that are built that are creating the costs,” Preston said. “Because the [ranchettes] haven’t built out much, the cost may not be that high. But those lots are out there, and there are 40,000 acres out there [on the B.B. Brooks Ranch].” He expects the legacy of these developments will be unfolding far into the future.
Preston says the eventual outcome from costs exceeding revenues is a decline in the level of service. Roads will get rougher and stay unplowed longer. Sheriff patrols will become more rare.
Counties can try to boost revenues by assessing impact fees to rural developers or creating limited service areas where residents agree to go without services. But Preston says neither option is ideal.
Impact fees rarely cover the full costs of services, and they aren’t easy to apply universally over a county when some parcels cost $16,000 in county services while others require only $4,000. And as one Casper resident told Preston, limited service areas are hard to enforce in practice, for example when roads need to be plowed so kids can get to school.
Sawhill said another way the county could deal with increased costs of services would be to form a special improvement district where rural residents would pay for major services like paving of county roads.
Someday that might be an option to cover costs of paving Ormsby Road, the Natrona County route that runs through B.B.Brooks Ranch. But Sawhill says it will take many years before there will be enough residents in the development to warrant—or pay for—such a project. In the meantime, he says truck traffic to oilfields on Ormsby Roads is causing more damage than the few residents of the B.B. Brooks Ranch.
When it comes to dealing with things like road impacts, Preston said there is really no substitute for getting planning right the first time. “Think about the legacy of rural subdivisions before approving them. Be courageous in enforcing the county’s authority [to regulate subdivisions] because there are real consequences, fiscal consequences that will affect everyone who lives in the county,” he said.
Heyneman said the Natrona County report provides a specific example of the fiscal burdens counties take on with rural development. While the numbers in the report are specific to Natrona County, Heyneman thinks the core message of the report should be relevant to counties all over Wyoming. He’s planning to take that message on the road on a statewide tour in the near future.
Preston and Heyneman met a receptive audience when they presented their report to the Natrona County Commissioners.
Commissioner Ed Opella responded that the county plans to update its master plan in 2013 in collaboration with the city of Casper, which could make it easier for future county subdivisions to be annexed into the city.
Collaborative planning efforts between the city and county would be breaking new ground in this part of Wyoming. “Continuing coordination with Casper is not the operative word. It would really be initiating coordination,” said Commissioner Bill MacDowell.
Despite the last year’s controversy over the perception that land planning efforts like Building the Wyoming We Want threatened property rights, Commissioner Robert Hendry sees how planning can be a positive thing.
“When Building the Wyoming We Want first came out, it was about limiting urban sprawl. But then it got this connotation of ghosts in the closet and [United Nations] Agenda 21,” Commissioner Hendry said. “Personally, I didn’t want the highway going west to look like coming out of Denver.”
Commissioner Bill MacDowell summed up the cautionary message of the Sonoran Institute’s report: “We’re going to get hammered if we don’t try to work out some of these issues today… [They] are going to be bigger issues down the road,” he said.
— Gregory Nickerson is a University of Wyoming-trained historian and writer from Big Horn. He has worked on documentary films in Nicaragua, Yellowstone, and Philadelphia, and held jobs as a museum curator and hunting guide.
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