Campus: CSU, Sacramento -- July 20, 2001
Researcher Calls Sales Tax Battles a Big Culprit in Urban Sprawl
Battles for sales tax revenue are hampering efforts to restrain urban
sprawl and weakening downtown regions throughout the West, according to
a new report titled "An Economist's Perspective on Urban Sprawl"
by Robert Wassmer, a California State University, Sacramento professor
of public policy and economics. Wassmer completed the report as a visiting
consultant with the California Senate Office of Research.
The results, reported in "Part II: Defining Excessive Urbanization
in California and Other Western States," are ever-longer commutes,
worsening air pollution, loss of open space and agricultural land, and
declining vitality in the traditional central places of urban areas.
"All across California and the West, the central places that give
heart, soul and excitement to our metropolitan areas are losing retail
business they ought to be capturing," Wassmer says. "This hurts
these central places and in the long run it hurts nearby areas."
In "Part I: Influences of the 'Fiscalization of Land Use" and
Urban-Growth Boundaries" he identified California metropolitan areas
of Fresno, Los Angeles, Riverside, Merced, Sacramento, Oakland, San Francisco,
San Luis Obispo and Stockton as having the state's highest increase in
sprawl in the 1990s.
Wassmer says the sales tax and sprawl issue is all a matter of the penny
that a local jurisdiction in California keeps for every retail dollar
spent within its boundary. Other Western states have similar policies.
This offers local governments discretionary revenue that in many cases
they cannot get anywhere else. Inadvertently, this siphons retail activity
from central cities and contributes to what most consider urban sprawl.
Wassmer describes a vicious circle in which suburban officials, seeking
to pay for programs and services, allow more retail growth on their relatively
cheap land than their residents need. "Big box" retailers, regional
shopping malls and auto malls proliferate. Central city residents begin
shopping and paying sales tax in the area and may eventually move there.
Downtown areas, meanwhile, lose the retail growth they need to prosper.
In California, the report shows, the Oakland metropolitan area would have
had 46 percent more retail activity - amounting to $1.7 billion - in 1997
alone if not for the local sales tax system. The Los Angeles-Long Beach
downtown areas lost nearly $4.6 billion worth of business to its urban
fringes that year, and Sacramento lost $1 billion. Overall, the 25 central
city areas in California lost $16 billion in taxable retail business in
1997 due to the sales tax system.
That lost business, Wassmer says, could have meant more vibrant cities
with better cultural offerings and busier sidewalks in the evenings.
Wassmer's study offers the first data-driven look at what analysts have
called the "fiscalization of land use" - a situation in which
maximizing sales tax revenue is a significant reason for local zoning
Wassmer says fixing the problem means negotiating an end to the local
sales tax battles. He suggests distributing a large portion of the growth
in sales tax revenue on a regional basis, removing the incentive for suburban
areas to chase more retail development. That's the essence, he notes,
of AB 680, a proposal in the California State Legislature that would redistribute
the growth in local sales tax revenue throughout the Sacramento metropolitan
Importantly, Wassmer's study also notes that growth control measures in
the West have proven partially effective.
After 20 years in place, areas with highly restrictive growth boundaries
- San Diego, Portland and a slew of other cities in Oregon and Washington
- see about a 20 percent increase in central place retail sales that would
have gone to the suburbs absent the growth boundary. Over time, Wassmer
says, this can prove significant in reducing sprawl.
Nevertheless, he says the lure of sales tax dollars present an ongoing
threat to anti-sprawl efforts, even where growth controls are in effect.
Wassmer's reports are available on the California Senate Office of Research
website at www.sen.ca.gov/sor/reports.htm.
Wassmer may be reached at (916) 278-6304 or firstname.lastname@example.org.
Additional media assistance is available by contacting the CSUS public
affairs office at (916) 278-6156.