Public Finance and Transit-Oriented Planning: New Evidence from Southern California

Local governments seem to be continually strapped for funds. While the role of their planners in generating revenue is often discussed, it is also rarely investigated in any detail. We address this research gap by considering the fiscal nature of land use policy vis-a-vis a specific planning opportunity, namely "transit-oriented development." A massive and influential literature has explored the potential for leveraging rail system investments by locating high density residential developments near commuter rail stations. The feasibility and focus of these strategies have been question, however, in the face of evidence that local government support for these projects is mixed at best. To explain this behavior, we examine the role basic fiscal conditions play in the decision to zone land near all existing and proposed commuter rail stations in Southern California. The analysis indicates that station-area zoning depends significantly on community public finances. The importance of sales taxation in financing local services is consistently important in explaining the concentration of commercial activity in each city, associated revenue mix and tax base trends, and many other features differentiating communities. The results underscore how the practice of transit-oriented development must account not only for travel behavior and the broader goals of any given urban design, but also for the parochial and self-interested nature of municipal planning.