March 2010 - Parks & Recreation - 48

First, this is a fiscally conservative action. A bedrock principle of
fiscal conservation is the Benefit Principle which states that those
who benefit from government services should pay for them.

the net deficit for their residents
which would occur if new homes
were built on that land.

Navigating the Politics
Parkland dedication provides
local government elected officials with a partial solution to their capital funding
problems. There are three main reasons why they
represent the safest political option for funding new
parks.
First, this is a fiscally conservative action. A bedrock principle of fiscal conservation is the Benefit
Principle which states that those who benefit from
government services should pay for them.
Second, elected officials can respond to infrastructure and amenity needs created by new
growth in one of three ways:
1 Request existing residents to pay the bills by
approving the issuance of general obligation bonds
which will raise their taxes. Many residents are likely to ask, " Why should we agree to raise our property taxes to build parks many miles away from
where we live which we will never use? "
2 Decline to provide the new infrastructure and
amenities or provide them at a lower level of service than prevails elsewhere in the community. In
effect, this means accepting a reduction in the community's quality of life.
3 Requiring new development to pay the cost of
providing the infrastructure and amenities the need
for which has been created by them.
Few elected officials are likely to run for office on
a platform of raising the taxes of existing residents
or lowering a community's quality of life. If a public referendum was held inviting the public to vote
on which option they would prefer, the likely result
would be overwhelming support for third option.
Third, ostensibly, it would appear that the dedication requirement will lead to some potential home
buyers being priced out of the market. The development community is likely to vigorously promote this
position. If an additional $1,000 parkland dedication fee is added to a starter home costing $140,000,
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representing a price increase of approximately seven tenths of 1 percent, they are likely to argue it will
price out some potential home buyers. If an ordinance is revised every three years, it means that
over the three year period the increase will average two and a half tenths of one percent per year. It
is unlikely that any other cost of development will
increase by such a small amount over a three year
period. The probability of such a price increase
pricing potential " low-end " homeowners out of the
market is improbable.
The reality of parkland dedication requirements
is that they are not likely to lead to any increase in
the price of a new home. The new parkland dedication fee could be absorbed in one of three ways.
1 The option of passing it through to the home
buyer as suggested in the previous paragraph may
be considered. However, if the market would bear
a price of $141,000 rather than a price of $140,000,
then developers would charge that amount since
their goal is to maximize their profits. Market forces dictate that a price of $141,000 is unlikely as an
option.
2 The additional $1,000 fee could be absorbed by
the developer. This is not a viable option because a
developer's willingness to accept the level of financial risk associated with a project is predicated on
a given projected profit margin. Without that profit
margin, the project will not proceed so it is sacrosanct and cannot be reduced.
3 The non-feasibility of options 1 and 2 mean that
the only viable option for absorbing the additional
$1,000 dedication fee is to reduce the developer's
costs. This can be done by reducing the house size
by 10 square feet (assuming a cost of $100 a square
foot), engaging in " value engineering " to reduce
the costs of finishes, fittings, furnishings or landscaping in the house by $1000, or by paying less for
the land. The imposition of a $1,000 parkland dedication fee effectively changes market forces and reduces the value of the land to be sold.
This is explained in the following scenario:
Suppose a developer is about to purchase a piece
of land when the city announces a $1,000 increase

March 2010 - Parks & Recreation

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