Association for Public Policy Analysis & Management

Transportation corridors—high capacity roadways connecting different cities and counties in a metropolitan area—play an important role in the vitality of local and regional economies and are crucial for the long-term health of an urban local government’s tax base. However, an important consideration for transportation planners, economic development professionals, and public finance officers is whether a reduction in transportation costs due to proximity to transportation infrastructure leads to (1) economic growth or (2) a reorganization of economic activity with no net growth. While this question has been explored from the perspective of unemployment, land value, and population growth; little is known about how transportation impacts the growth or reorganization of a local government’s tax base.

To fill this gap, this study will explore how a census block group’s [CBG] proximity to transportation corridors impacts various local government tax bases? In order to provide a robust and thorough analysis, three different dimensions of the local tax base will be analyzed: 1) sales taxes, 2) property taxes, and 3) hotel occupancy taxes. Three different tax bases are used because (1) it allows the analysis to explore how transportation costs impact each tax base differently, and (2) each tax base is a critical revenue source for local governments in Texas.

Using fixed-effects panel data methods, data from 3,697 CBGs located in the four core counties of the Dallas-Fort Worth metropolitan area spanning the years 2000 to 2015 are analyzed. Results indicate that total revenue collected from property, sales, and hotel motel taxes increase in CBGs located closer to a transportation corridor. However, the year-to-year and long-term growth rates simultaneously decrease for these revenue sources as a CBG gets closer to a transportation corridor. These findings suggest that, in a developed metropolitan area like the Dallas-Fort Worth, transportation is primarily reorganizing economic activity associated with these tax bases rather than growing the tax bases.

Results from this study will aid local and regional policy-makers design benefit-based taxes to help finance transportation, in addition to improving policy-maker’s understanding of the role of transportation in economic development. Furthermore, this study provides a new research opportunity for public finance scholars looking to understand the broader relationship among infrastructure and a local government’s tax base.