March 2020 - Parks & Recreation - 22

FINANCE FOR THE FIELD
Designing Parks to Enhance
a Community's Tax Base
By John L. Crompton, Ph.D.

I

t has long been recognized that many people will pay a premium to live
close to a park. Indeed, the pioneering urban parks in the mid-1800s
were funded by cities that acquired land for a park and retained onethird to one-quarter of the land to sell or lease after the park was completed to pay its capital costs. These early parks were viewed as economically
beneficial features that enhanced profits from real estate developments.

20

Parks & Recreation

| M A R C H 2 02 0 | PA R K S A N D R E C R E AT I O N .O R G

Unfortunately, in contemporary
times, elected officials rarely recognize the financial merit of parks.
Their social merits may be accepted, but conventional belief states
that parks are a costly investment
from which a community receives
no measurable financial return.
However, this perspective overlooks the enhanced property taxes
stemming from increased increments of value at properties located close to parks. The principle is
illustrated by the hypothetical 50acre park situated in a suburban
community shown in Figure 1.
It is a natural, resource-oriented
park with some appealing topography and vegetation. The cost of
acquiring and developing it (fencing, trails, supplementary planting,
landscaping, picnic shelters, etc.) is
$50,000 an acre, so the total capital
cost is $2.5 million. The annual debt
payments for a 25-year general obligation bond on $2.5 million at 5 percent are approximately $185,000.
In Figure 2, annual income
streams that can be attributed to
the park and could service the
bond debt are developed based on
two different scenarios. Scenario
A in Figure 2 shows the annual
incremental property taxes in the
three zones from the premiums
attributable to the park amount to
$189,500. This is sufficient to pay
the $185,000 annual bond debt
repayment.
Scenario B results in annual
property tax increments in the



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