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Research: Sparks loses money on growth (subscriber content)



New development is a money-losing proposition for the City of Sparks, a new study finds, although increased emphasis on job-creating offices and industrial projects would help stabilize the city government’s finances over the next 20 years.

While development generates millions of dollars annually for the Sparks general fund, the costs of maintaining new roads more than eats up any new money coming into the general fund.

The study by Denver-based Economic & Planning Systems Inc. commissioned by the City of Sparks predicts the negative impact of new development on the city’s road fund will run around $4 million a year for the next two decades.

That more than offsets the positive effects that development brings to the city’s general fund. Those benefits range from $3 million to $3.8 million a year, depending on the mix of residential, commercial and industrial projects.

“The city’s current land use plan adequately balances growth, but efforts are needed to ensure employment uses are attracted to planned sites at the same rate as residential uses.”

The study finds that denser development — apartment complexes rather than single-family neighborhoods, for instance — reduce the financial impact of growth.

The big reason: Denser development requires fewer roads that need to be maintained.

Equally important, the study found, is a balance of residential developments with industrial and office projects that bring new jobs.

“The city’s current land use plan adequately balances growth, but efforts are needed to ensure employment uses are attracted to planned sites at the same rate as residential uses,” the researchers wrote.

The exact mix of office jobs with industrial jobs doesn’t appear to make a big difference to the impact on city finances, the study found.

But retail developments carry bigger costs for the city because they generate more traffic and more police calls, the Economic & Planning Systems analysts found.

Among other findings in the study:

  • The population of Sparks is projected to grow by 23,180 residents over the next 20 years. That would require about 12,000 new houses and apartment units on approximately 1,800 acres of land that’s now vacant.
  • The projected population growth rate amounts to 1 percent a year — far short of the 3 percent annual population growth experience by the city from 1990 to 2007.
  • Assuming that Sparks is the home to 25 percent of the new jobs expected in Washoe County in the next two decades, the city will need about 9.1 million square feet of new commercial and office space on 961 acres of now-vacant land. This would include 7.1 million square feet of industrial space, 400,000 square feet for offices and 1.6 million square feet for retail uses.
  • Sparks has enough vacant land available for development, but the mix of available land may not be quite right. For instance, researchers noted that supplies of land for industrial users in Sparks are limited, but the city has more land designated for office and retail uses than demand might warrant.

The revenues and costs of new development are a critical question for Nevada cities, the researchers noted, because state taxation laws mean that cities now rely heavily on new development to sustain their financial health.

John Seelmeyer
John Seelmeyer
John Seelmeyer is a business writer and editor in Reno. In his 40-year career, he has edited publications in Nevada, Colorado and California and written several thousand published articles about business and finance.