Determining the Relationship Between Urban Form and the Costs of Public Services

Documentation of the need for the evaluation of the influence of urban form on the provision of local government services dates back to the 1950s. The literature indicates low-density developments distant from centers of service provision are more expensive to serve than more proximate and high-density developments. Areas diverge from optimal patterns of land use because of information asymmetries and the ability to pass the costs of growth on to the general public. Inefficiencies occur due to average cost user charges which undercharge outlying low-density areas while overcharging interior or high-density areas. There are two potential corrective actions: 1) incorporating information on the fiscal consequences of development, including the spatial component of public service costs, in planning and decision making; and 2) charging each location the full marginal costs of providing services to that location. With the latter action, a subsidy is then eliminated, and efficient development follows. Both approaches require actionable information on the spatial component of public services costs. In order to develop this information, this thesis extends emerging methods in fiscal modeling where government service provision may be modeled with a production function. In this framework the level of service outputs are determined by local government expenditures on inputs and neighborhood (socioeconomic and demographic) characteristics. A corresponding allocation function may be developed where local government expenditures on inputs are determined by socioeconomic and demographic traits, often referred to as neighborhood characteristics. The allocation function is built on a hedonic framework where expenditures are determined by production attributes and neighborhood characteristics may be incorporated as amenity attributes. The research presented here extends previous econometric modeling of public service provision to include a spatial index representing urban form as an explanatory variable in the allocation function. The inclusion of urban form in the allocation function offers the opportunity to determine the spatial component of development costs, enabling more informed decision making.Submitted in the fulfilment of the requirements of the degree of Doctor of Philosophy, University of the Sunshine Coast, 2010