Local governments are defined by their geographic boundaries. As a result, a local government’s revenues (and expenditures) are linked to how land is used within its boundaries.* Property tax revenues are a function of the value of property in the jurisdiction. Sales tax revenues are often partially determined by how many and the types of merchants in the jurisdiction. However, when local governments make decisions about land uses, they may not consider the implications for the long-term financial health of the local government, either revenue produced or the cost to serve the development over its life.
If local governments are to find a long-term, dependable solution to their structural revenue and expenditure imbalances, they need to become more intentional about making financially savvy land use decisions.