Does this sound like Fairfax County, or what?

In a post on Governing.com, Aaron Renn writes about how Charlotte, NC, a growing and prosperous city by any measure, is being forced to raise taxes as its ability to annex new land declines and operating and infrastructure demands increase.

Instead of annexing land, Fairfax County is using densification of new urban areas, particularly Tysons and the Dulles Corridor (including Reston) to try to bail itself out of an ever-tightening fiscal bind.  And, frankly, with federal budgets tightening, resulting in less hiring and less contracting in the Metro DC area, the future does not look as rosy as the past.  There will almost certainly be less job and residential growth in the urbanizing areas over the next two decades than the County (or any of the other local governments) has planned for.  Now the County faces a future in which less hiring is combined with leasing less space for those who are hired as office sizes shrink.  That, in turn, cuts development and the "cap rate"--critical to property valuation--of commercial real estate and shrinks property tax revenues.  Homeowners will be left holding the bag of increasing property tax rates while facing stagnant or reducing services from education and roadways to parks and snow removal. 

Here is how Charlotte has dealt with the new problem:

Rapidly growing cities benefit from scale economics. As a city grows, it spreads the fixed costs of providing services across more units, thus lowering unit costs and enabling taxes to stay low. This is doubly true as cities spread into undeveloped "greenfields," where there are few legacy costs. This can make cities look well managed when in fact they are simply benefitting from growth.

The real question is what happens when the growth cycle ends and unit costs either flatline or start going up. Can the city find sustainability demographically, economically and fiscally without growth as a fuel?

One city facing this challenge is Charlotte, N.C. The Charlotte Observer recently took a refreshingly candid look at how rapid population growth and annexation had enabled the city to spend more money without raising taxes. But that free ride is coming to an end. "We are in a different universe now," Republican city council member Warren Cooksey told the newspaper. "Cities have identifiable growth cycles, and Charlotte is entering into a new one." . . .

Not only is Charlotte now limited in its ability to annex, but it is facing an overhang of capital upgrades to bring many areas of the city up to par in services. As a result, taxes are going up.

. . . Even the most prosperous and seemingly invincible cities can be undone when trends shift and growth fades. . . .

Click here to read the rest of this prescient article.  

So far, Fairfax County has refused to acknowledge its changed fortunes, and soon we will all have to pay for it.