By Chris Platé, FloridaWest CEO
Balanced growth is crucial for the fiscal health of any community, especially when evaluating the cost of services associated with various land uses. While residential developments expand the property tax base and contribute to the community’s vibrancy, they also demand more in public services than they generate in revenue. Conversely, retail, commercial, and industrial properties typically create a fiscal surplus, providing more in taxes than they consume in services. This disparity highlights the need for strategic economic development efforts, ensuring that counties foster sufficient commercial and manufacturing growth to sustain long-term financial stability and offset the service burdens associated with residential expansion.
Empirical evidence from Cost of Community Services (COCS) studies demonstrates that residential land use consistently incurs higher public expenditures compared to its tax contributions. For every dollar generated from residential properties, counties often spend significantly more on infrastructure, public safety, and education. In contrast, retail, commercial and industrial developments contribute disproportionately higher tax revenues while requiring fewer public services. This reality challenges the assumption that expanding residential areas alone can strengthen local government finances, emphasizing the importance of a diversified tax base to ensure fiscal sustainability. In theory, the ideal balance for a community’s tax base makeup is a ratio of 60 percent residential to 40 percent commercial/industrial.
Residential expansion is a good thing and is necessary to provide a growing labor force for existing and future businesses, which provide the wages to support retail and philanthropic expenditures. However, it must be strategically offset with high-value capital investments from manufacturing companies to mitigate a county’s future financial obligations. Without a strong non-residential tax base, a county could face higher property taxes or the need for alternative revenue sources, placing a greater financial burden on existing homeowners. FloridaWest Economic Development Alliance, as the primary organization driving economic development growth in Escambia County, plays a vital role in this effort. By attracting industries, supporting business retention, and promoting commercial expansion, FloridaWest helps counterbalance the fiscal strain caused by residential growth, ensuring that the county can continue to provide essential services without imposing high taxes on residents.
A major challenge for Escambia County is the shortage of ready industrial property, which limits opportunities to attract new businesses and create a diversified tax base. Large tracts of land like OLF-8 and other parcels represent crucial assets that should be prioritized for commercial, light industrial-modern manufacturing, and retail development, ensuring space for high-wage employers and economic diversification. COCS studies indicate that significant commercial development is necessary to offset the service costs associated with residential expansion. Nationally, as compiled by the American Farmland Trust (AFT), for every dollar spent to support residential units, the homes only generate $0.87 in revenue (a loss of $0.13), whereas commercial and industrial units generate $3.45 for every dollar used to support them. Therefore, discouraging residential sprawl while prioritizing business growth and encouraging higher-density residential and mixed-use developments is key for sustained financial stability.
FloridaWest Economic Development Alliance is putting into place the strategies and aggressively applying resources to address the economic development needs of Escambia County. By collaborating with our local government officials, business leaders, the Pensacola Chamber of Commerce, and other community stakeholders, FloridaWest will continue to implement the necessary strategies to build a sustainable economy with strong job opportunities. As the County, PEDC, and private developers work to increase the readily available commercial and industrial property, FloridaWest can further strengthen the county’s ability to generate business-related tax revenue, reducing the reliance on residential property taxes to fund essential services.
In conclusion, unbalanced growth — particularly residential expansion without adequate commercial or industrial development — can lead to financial strain for a county. Strategic land-use planning for industrial property, supported by organizations like FloridaWest Economic Development Alliance, is critical to maintaining a healthy tax base, preventing unnecessary tax increases, and ensuring long-term fiscal stability. Escambia County can foster sustainable economic growth while preserving its culture and enhancing its financial future by promoting a well-balanced mix of residential, commercial, and industrial development.