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FOREWORD

Over the last few years, increasing attention has been given to the link between local and regional land use patterns, environmental quality, and economic and fiscal issues. As new development has spread outward from many of our urban and suburban areas, the need to extend existing infrastructure, or construct new infrastructure, has required substantial public and private resources. Typical average-cost pricing methods can sometimes create an imbalance between those who impose excess costs on the system, and those who pay those costs. These imbalances can cause older developed areas to subsidize newly developing areas when they are served by a common utility service provider. Alternately, when smaller, individual utility systems are built to accommodate new growth and development, utility costs can be greater than if development were directed to areas capable of being served by existing utilities.

Internal subsidies within a system with diverse land use characteristics can add to other local and regional disparities. Typically, suburban communities have higher incomes and are less dense than the older urban core areas. Such is the case in both the Cleveland and Chicago regions. When user rates do not reflect geographic and/or land use-related cost differentials, then lower income communities may subsidize utility services for newer, higher income communities. And, if the cost of water is inefficiently priced within a large regional system, water intensive industries will tend to locate in areas that may not optimize public utility service costs.

Land use characteristics have long been recognized as having an influence on public water and wastewater service costs. Policies that lead to a proliferation of lower density utility service areas can end up costing more, and these higher costs are ordinarily paid by all water and wastewater customers - businesses, developers and builders, home buyers and renters - in the form of higher user rates and charges. Higher rates and charges can constitute a hidden "tax" attributable to regional development patterns. These costs are hidden, because they are less noticeable when they show up in the monthly or quarterly utility bill - a bill whose cost basis is less discernible to the average utility customer, and which is not subject to the same level of scrutiny or attention as the more infrequent, more sizable and more understandable property tax bill.

In response to this situation, this study was commissioned by the Natural Resources Defense Council (NRDC), as one of a series of projects supported by the Joyce Foundation, the George Gund Foundation, the J.M. Kaplan Fund, and the U.S. Environmental Protection Agency. Its purpose is to examine the extent to which land use can affect local water and wastewater utility service costs. It does this by focusing on those components of water and wastewater utility systems that are most sensitive to land use and development patterns, and quantifies the relationship between land use and unit service costs based on empirical data for a number of wastewater collection systems in the Cleveland and Chicago areas. Although there are substantial differences in how these vital public services are provided throughout the U.S., the study's findings are useful for evaluating the impact of local and regional land use and development patterns on utility service costs nationwide.

NRDC provided general oversight and direction for this study in consultation with the Surface Transportation Policy Project, the American Farmland Trust, and the U.S. Environmental Protection Agency. The author would like to acknowledge the input of Dr. Thomas Muller, who aided in review and interpretation of some of the statistical analysis. Although these organizations and individuals provided valuable review, the findings and conclusions are solely those of the author.

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