At the request of the Tennessee Farm Bureau Federation, American Farmland Trust (AFT) conducted a Cost of Community Services (COCS) study to find out the current net fiscal impact of existing land uses in Tipton County. The study analyzes revenues and expenditures on a land use basis for fiscal year 2005 (July 2004 to June 2005). It examines revenues by land use and the financial demands of public services (e.g., public safety, government administration, schools, courts, etc.) and shows the cost of providing these services to residential, commercial and industrial, and farmland uses.
The study focused on the county budget because it represents revenues and expenditures for the largest portion of the government services provided to residents living in Tipton County. The COCS study found that in Tipton County:
· 89 percent of revenue in fiscal year 2005 was generated by residential land uses; 9 percent was generated by commercial and industrial land uses; and 2 percent by farmland;
· 96 percent of county expenditures were used to provide services for residential land use compared with 3 percent for commercial and industrial uses and 1 percent for farmland.
In other words, for each $1 of revenue received from residential properties in fiscal year 2005, Tipton County spent $1.07 providing services to those lands. For each $1 from commercial and industrial land uses, the county spent 32 cents; and for each $1 received from farmland, the county spent 57 cents providing services.
Residential land uses created a deficit of $6.1 million, while the other two land use categories generated surpluses: $6.2 million from commercial and industrial and $622,664 from farmland. While residential development contributes the largest amount of revenue, its net fiscal impact is negative. Commercial and industrial development net revenues offset this shortfall. Commercial and industrial land generated significant revenue from property tax since it is assessed at higher rates than residential and farm properties and from several other business-related tax revenues.
Agricultural lands pay more in local tax revenues than they receive in services. Differential property tax programs are justified as a way to provide an incentive to keep land open and in active agricultural use. Even with a reduced assessed value, agricultural properties contrib ute a surplus of revenue to pay for public services for residents of Tipton County.