Brownsville, Texas
Prioritizing infill to close infrastructure funding gap & increase return on service investments
Project objective
Develop fiscal baseline for the city, understand how and where to invest resources to close their funding gap, and prioritize economic development incentive (TIRZ) opportunities that support the City’s goal to revitalize the core downtown.
1.
FROM APPRAISED VALUE TO REVENUE PER ACRE
The first step we always start with is to explain the difference between appraised value and revenue per acre. Here is what the difference looks like for Brownsville:
Appraised value
This map shows the appraised value of each lot in Brownsville. Bigger lots tend to have a higher value while smaller lots have a lower value.
Revenue per acre
When you take the property tax levy revenue for a property and divide it by the area of the parcel, you get the actual amount of revenue the city collects per acre of land. This map shows the revenue per acre for each parcel.
2.
FACTORING IN COSTS
Then, we factor in the city’s budgeted costs along with projected service costs and unfunded infrastructure liabilities to get a clearer picture of their long-term fiscal situation.
Revenue minus current budget
When cities budget, they set costs to match the revenue they expect to come in that year. When we allocate the costs down to the parcel level though, we can see which parcels are revenue positive, and which ones cost more to serve than they generate in revenue. We present this information two ways: a net revenue map that shows the net (revenue minus costs) for the parcels, and an ROI (return on investment) map, which shows the amount the city gets back in revenue for each dollar it spends on services. This map shows the net revenue per acre for levy revenue and budgeted costs for Brownsville.
Unfunded liabilities
Brownsville’s unfunded street replacement costs were approximately $1.3B. Because many of these are older streets and in need of replacement already or in the near future, we spread the costs out over 20 years. When we distributed the $65M annual funding gap across the parcels to show the projected cost (or what we sometimes call the “true cost”) to serve development, some parcels and patterns continued to operate at a gain even with the additional costs. These are reflected in green on the map. Note how many of the parcels that were green in the previous map turn red.
This process and these two maps together were used to help city leaders understand why they don’t have enough money for street maintenance and where they should prioritize development to close their funding gap.
Now, here’s what this looks like with each step layered on top of one another:
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3.
ANALYSIS
Once the modeling is done, we can explore how different development patterns perform and use this data to inform land use, zoning, infrastructure and investment decisions.
Revenue/acre by lot size and structural value (residential and commercial)
Like many cities, Brownsville was asking the question “what home value is enough to pay for itself?” Charts like those shown here help us communicate why revenue per acre is a more useful metric for cities to think about, and how this number changes for different lot and structural value combinations. For both residential and commercial properties, we see the same trend: value per acre is highest for the smallest properties (left of chart), and trends down as the property size goes up.
This information was used to communicate the value of more dense, small scale development, especially in the context of maximizing the return on taxpayer investment. The bigger the lot, the lower this return is. To close the city’s funding gap and increase taxpayer ROI, we encouraged the city to invest in improving infrastructure in older areas with small lots that have the potential to generate much more revenue per acre, and to amend development policies to encourage more of the high ROI patterns and less of the patterns that are losing money for the city and its taxpayers.
Performance by land use code and zoning districts
Data from the models was also reviewed to assess how different land use and zoning districts perform with the current budget and with projected/unfunded service costs and infrastructure liabilities. In the bar chart, we were able to show almost every land use category had a positive return on investment (over $1) for the current budget, but went negative when unfunded infrastructure costs were added in.
The city also wanted to know what proportion of revenues and costs came from the different land use types. Among other things, these charts revealed that over 70% of the city’s property tax revenue came from residential and how vacant/agricultural land was consuming over 50% of the costs but generating little to no revenue in return.
4.
APPLICATION
Once we have a baseline of how current development patterns are performing and what the city’s funding gap is, we can explore potential scenarios and solutions to see how they impact the city’s fiscal health.
Investing in Downtown and older neighborhoods
Brownsville was considering several possible TIRZ projects when we were brought in to complete our analysis. Several of these proposed projects were on the periphery of the city limits, while a couple of them focused on revitalization of the historic downtown. During the analysis process, we were able to show how incentivizing new growth up the I-69 corridor to the north was pulling people and investment out of the core, located on the southern part of this map. While this approach adds tax base and new homes and businesses, it adds more infrastructure the city will need to maintain and spreads city services out because the costs to serve the central parts of the city don’t go away.
To close its $1.3B infrastructure funding gap, we suggested the city prioritize efforts that will capture more revenue from areas with existing infrastructure and services, and limit new development on the edge.
5.
KEY OUTCOMES
Exploring the math, maps and money helps communities make more informed decisions and build transparency and trust with residents and developers.
Our analysis was used to support the City Commission’s decision to approve TIRZ projects in the downtown and deny the ones on the edge of the city.
Data was used to show how incentivizing small scale development through smaller lots and buildings in the downtown and existing neighborhoods can help grow the city’s taxbase, close the funding gap and cultivate a self-sustaining local economy and workforce.
Information and discussions from the fiscal analysis process are informing updates to the city’s comprehensive plan, zoning ordinance and infrastructure design standards.
“We hired Verdunity to examine the fiscal performance of Brownsville’s land use, the first step in figuring out how to ‘grow smarter’ in order to maintain a property tax and sales tax base adequate for maintaining the city’s existing infrastructure. Before, you had urban planners going in one direction and transportation going in another direction. What we learned quickly was that they complement each other as well as economic development.”
Client contact information
Noel Bernal, City Manager
noel.bernal@cob.us