Project Spotlight: Measuring Costs of Services for Rural Land Uses in Scott County

Odowd Lake

Scott County, located southwest of the Twin Cities, has been among the fastest-growing counties in Minnesota for the last several decades. The population increased 55% between 1990 and 2000, growing to an estimated 143,680 residents in 2016. One of the key challenges the County faces as it continues to grow is understanding the fiscal impacts associated with different types of land use, particularly in rural and suburban areas of the county that are experiencing rapid growth for the first time. The fiscal consequences of different land uses vary significantly, in terms of both the amount of tax revenues generated and the cost of providing local government services such as road repair, sewer maintenance, public safety, and public schools.

During its recent partnership with RCP and the University of Minnesota, Scott County collaborated with students and faculty to conduct a cost of community services study of the County's three broad rural land-use categories: Agricultural Preservation (with a residential density of 1 housing unit per 40 acres), Rural Residential (residential density of 1 housing unit per 2.5 acres), and Rural Commercial/Industrial. Scott County project lead Brad Davis, who serves as the Planning and Resource Management Director, partnered with professor Jerry (Zhirong) Zhao and Ph.D. student Terin Mayer from the Hubert H. Humphrey School of Public Affairs to conduct the study.

Recently, we asked Davis and Mayer about the significance of this project, their findings, and surprises along the way. This interview has been edited for length and clarity. 

What significance does this project have in Scott County and why was it selected for the RCP partnership? 

Brad Davis, Scott County: During the County’s 2040 comprehensive planning process, there was a lot of debate among residents, landowners, developers and elected officials on sustainable land use and density policies in the rural areas. There was pressure to allow more housing development in one of the county’s long-standing agricultural preservation areas, while at the same time there was pressure in another pocket of the county to move away from rural small-lot cluster residential development to larger 10-acre lots.

In both situations, there was good discussion on how changes in rural density policy could impact the cost to deliver public services to these areas, such as roads, public safety, social services and school busing. Unfortunately, these discussions were not rooted in any real data analysis or systematic method to evaluate fiscal impacts associated with different land uses and densities. 

When the County decided to partner with the U of MN's Resilient Communities Project, we thought this was a great opportunity to tap into the University’s insight, knowledge, and energy to conduct this analysis. The results of this study will inform decisions made today and into the future on setting sustainable land-use and housing-density policies in Scott County’s rural areas.   

Terin, can you describe your background and involvement in the project? 

Terin Mayer, U of MN student: I’m a Ph.D. Student in Public Affairs at the Humphrey School and first got connected to Brad and Scott County through a course I was taking on state and local public finance.

Local government has a big impact on society but is fairly understudied, so the chance to do some fiscal analysis research with a metro-area county seemed like a great opportunity to learn more about the challenges of public budgeting and management at this level of government. I scoped out a research study for Scott County as a class project and then worked through the summer and fall to execute that study. 

What was most rewarding and challenging about the project? 

Davis: The most rewarding aspect was to work directly with a U of MN doctoral student who helped me uncover and evaluate different methods and approaches to fiscal impact analysis.

There are a lot of assumptions and decisions that need to go into this type of study, but Terin could bring best practices and academic findings to the table at critical times during the process. 

Mayer: It’s a rewarding experience to be able to reorganize information that the County was already producing to help shed some light on how land-use decisions impact revenue raising and public service activities. I was really impressed at the professionalism and care of the many department staff I was able to meet during this project. 

An inherent challenge of the work involved trying to think geographically about budget line items that don’t always have a geographic footprint. We were trying to figure out how much of a department’s spending went to each of five different land-use types, and it was often not obvious how to go about that task. 

What was most surprising about the project?

Davis: The most surprising aspect was to learn how our cost of community services methodology differed from some of the national studies that have been done over the years.

Our methodology included farmsteads in the income-generating revenue coming to local and county governments and schools, while national studies excluded these improvements in the revenues. This difference in methodology changes the overall results when comparing our study to national studies, but is a methodology that in my mind is more logical and defensible when discussing the “true” impacts of different density policies.   

What are the project findings and recommendations?

Mayer: By reorganizing publicly available data on how Scott County raises and spends money, this study has tried to answer the question of which land-use types tend to “pay their own way.”

We found that, on average between 2012 and 2016, parcels zoned as Rural Residential and Commercial/Industrial could be seen as subsidizing Agricultural and Urban Reserve/Transition areas. The “cost of community services” (COCS) ratios, in terms of dollars spent per dollar raised, are: Agricultural $1.25, Rural Residential $0.89, Commercial/Industrial $0.37 and Urban Reserve $1.16. 

One might be tempted to assume this means the county should court more land-uses with low COCS ratios and shun those with high, but one should be very careful in drawing that conclusion. Because this study is only a snapshot in time, it says very little about the budget effects of that kind of zoning change. 

My chief recommendation is for staff and leadership within Scott County and among its cities, townships, and school districts to use this information as a springboard for further conversations about the fiscal implications of zoning. Much more can be done with existing data, but will require connecting the dots between the County’s various data systems to make deeper insights possible. 

This collaboration extended beyond the original spring semester 2019 match. What were the goals and findings of the extended work during summer 2019? 

Davis: During spring semester, Terin did an excellent job evaluating the academic research and findings on a variety of fiscal impact analysis approaches.

With this information, we were able to choose a workable approach--a cost of community cervices study--and Terin put together a “blueprint” of the data sets and assumptions that would need to be gathered and determined to execute a COCS study.

This blueprint was the final deliverable for the spring semester. Knowing Terin had amassed a lot of knowledge about the county, our needs, and this COCS approach during the spring semester, it was an easy decision to extend a contract to Terin to undertake and execute the study during the summer of 2019.

What are the next steps for the project? 

Davis: With the results of our study nearing completion, the next step is to present our findings to our key land use decision makers, which include elected township officials, County planning advisory commission, and County commissioners. We plan to present the results of our study to some of these stakeholders in early 2020, and hope to publicize the results of our study in our county media.

Finalizing a cost of services study was a key recommendation from our adopted 2040 Comprehensive Plan, and the study results will inform some of the debates we had during the last planning cycle and shape some of the discussions in the next planning cycle.