Study: Residences a drain on Waterville finances

10/5/2011

When it comes to dollars in and dollars out, residential houses and retail businesses in the city result in a negative net fiscal impact on the city of Waterville, according to findings from a just-released analysis.

All types of housing had a negative impact on the city's operating budget in 2009, the year studied by Randall Gross/Development Economics of Washington.

Mr. Gross presented his fiscal-impact analysis findings during a joint meeting last week of the city council and the comprehensive plan steering committee.

About a year ago, council approved spending $11,225 to hire Mr. Gross to conduct a study of the cost of community services. Council was seeking information as part of an update of the comprehensive plan.

In the analysis, Mr. Gross measured and compared the costs and benefits of residential, retail, office, and industrial uses.

Assessment of costs and benefits helps to illustrate how land use, development, and economic policies can affect the city's fiscal health, according to Mr. Gross' report.

His findings showed that residential and retail land uses, when comparing the city's costs of services with the amount of revenue, produced a negative net impact in 2009 on Waterville's operating budget. The highest gains were generated by office and industrial uses.

The analysis showed that Waterville, which generates most of its revenue from income tax collections, spends nearly 50 percent of its operating budget on public safety.

According to Mr. Gross, the city experiences a high negative cost for apartments, largely driven by the impact of senior housing on local services such as fire and emergency medical services.

Compounding the situation is that seniors who are retired typically generate little income tax revenue to offset the cost for services, according to the findings. Mr. Gross noted that the issue has implications for Waterville's future if the city's senior population continues to increase.

"If senior housing is excluded from public safety costs, then the impact of rental housing is significantly reduced," the report stated.

To offset the senior population's cost, Waterville might be able to attract more health-care professionals to balance the tax base, he said.

Those professionals would provide an added benefit of delivering services to local residents, he noted.

Offices and industrial tenants, who require fewer public safety services and who generate income taxes from high-wage jobs, result in a relatively high fiscal gain to the city, Mr. Gross said.

The city has only limited commercial real estate.

Waterville's retail businesses fail to cover their costs in terms of the city's operating budget in part because of lower-wage jobs but also because they generate higher traffic and produce more calls for fire and EMS services.

Mr. Gross recommended that the city attract high-wage office and industrial uses which are "clearly necessary for balancing the city's fiscal base."

He suggested an economic and entrepreneurial development effort, perhaps focused on recruiting a developer partner who could help attract office uses.

Because senior housing "already generates a strain" on city services, new senior housing developments should be paired with office uses, such as medical facilities, to help balance the impact of senior housing, he recommended.

Waterville has a fair tax rate, he said, and he recommended that the city make sure residents are aware of that, such as how that relates to the expectation of services.

Waterville's role as a bedroom community affects the city's revenue stream, he said, because a large number of residents work outside the city and receive a partial credit for income taxes. Lowering the income tax credits would help reduce some of the revenue outflow, he said.

When Jim Seiwert, a member of the comprehensive plan steering committee, asked whether the city should try to draw retail development around the new Kroger store, Mr. Gross said the city could consider locating residential development near the new store, which would help encourage people to walk to the shopping area.

Pedestrian traffic helps to reduce wear and tear from vehicular traffic on streets, he noted.

Beth Sikorski, a comprehensive plan steering committee member, asked how the city could repurpose areas such as the site of the former Kroger store.

Mr. Gross said the city could implement zoning policy that encourages mixed-use development, such as a place that features ground-floor businesses and residences on uppper floors.