Abstract
The objective of this study is to investigate the relationship between the type of urban spatial structure, population density and the selected types of capital and current municipal expenditures. Seven types of urban spatial structures at the level of city blocks are defined. Different types of municipal expenditure (urban green, pavement, roadway and public lighting) are estimated by the data from 22 Czech cities and six city districts. The capital and current municipal expenditures are calculated for each urban structure per hectare and per capita. The most expensive urban structure per hectare is the urban structure of estates and high rises, which is caused by the large proportion of public space. On the other hand, single detached houses are the least costly. If the population density is taken into account and municipal expenditures are calculated per capita, the least costly urban structure is the urban block structure followed by the organic urban structure (historical centre), which is given by high population density and lower size of public space. The urban structure of single detached houses is the most costly urban structure per capita.
Introduction
The modern city is not a homogeneous spatial structure, although some exceptions can be surely found. The modern city is rather a mix of various urban spatial structures that can be characterized, for example, as a historical city centre, housing estates or a residential suburban area. Each such urban structure can be described by the building density and population density, the area of roadways and pavements, the size of technical infrastructure and the proportion of urban green. The layout and the proportion of municipal infrastructure in individual urban structures are not identical, which leads to differences in both the capital (construction) expenditure and the current (maintenance) expenditure. The municipal expenditure can be calculated as expenditure per hectare or as expenditure per capita. Hence, the population density in the studied urban structure can significantly influence the results of analysis from the viewpoint of municipal budget. Certainly, for the municipal budget the expenditure per capita is an important indicator of financial stability because the number of inhabitants affects both the income and expenditure of the municipality and the per capita state subsidy is the main municipal income in the Czech Republic.
A responsible municipal government should require for any proposed residential or commercial development to be accompanied by a financial analysis of the future municipal expenditures. The idea of this study is to provide an estimate of capital and current expenditures for the development of new boroughs, which can serve as a guideline when considering investment plans in the development area. This general guide, set in the individual situation of each city, can help negotiate with investors, determine the conditions for the realization of development projects, predict budget revenues and municipal expenditures and determine the property tax burden.
The objective of the project (and of this article) is to investigate the relationship between the type of urban spatial structure, population density and the selected types of capital and current municipal expenditures. In the majority of the literature, a geographical unit of analysis is usually the whole municipality. Our main contribution to the existing literature is that our approach is very detailed, based on the unique database of the Prague Institute of Planning and Development. We will focus on the level of city blocks by defining homogeneous urban and architectural localities ranging from 20 to 35 hectares. We assume that urban spatial structures differ in the size of municipal infrastructure, which is determined, for example, by the length of roadways and pavements, by the total area of parks and greenery and by the length of sewerage and water pipes. Because the majority of the infrastructure is financed from municipal budgets, the type of urban structure determines the municipal expenditure per hectare. The type of urban structure determines also the population density, which consequently determines the municipal expenditure per capita.
The second objective of the project, which was more practically orientated, is to use our findings to provide local authorities with a handbook explaining in a more popular way how the type of new development and its population density will affect the future municipality’s spending on urban infrastructure. In this way, we methodically want to support their efforts to create a fiscal impact analysis of the new development project (e.g. Dekel, 1995), or at least to warn them that such an analysis is possible and useful to carry out. This task was accomplished by our publication Density and Municipal Economy (Hudeček et al., 2018), which is freely available to Czech municipalities.
Aside from this introductory section, the article is composed of four other sections. The second section is a brief literature review of international studies and selected local Czech literature. The third section describes the methodological approach of our study. Results are presented and discussed in the fourth section. Finally, the fifth section summarizes and discusses the benefits and limits of the study.
Literature review
The knowledge that the spatial structure of the city and the population density affect the municipal expenditure is not new, and this problem has already been studied in the academic literature and discussed by both policy makers and urban planners for a long period. For example, Margolis (1956) studied the impact of land use policy on municipal budget in California in the 1950s. In the Czech literature, the population density in the city and its economic impact were probably first studied by Janák (1929) in the 1920s.
According to the European Environment Agency (2006), the sparsely populated urban sprawl is a costly form of urban development due to increased household spending on commuting from home to work over longer and longer distances, the cost to business of the congestion in sprawled urban areas with inefficient transportation systems and the additional costs of the extension of urban infrastructures including utilities and related services, across the urban region.
Carruthers and Ulfarsson (2003) examined the influence that alternative development patterns have on 12 measures of public expenditure: total direct, capital facilities, roadways, other transportation, sewerage, rubbish collection, housing and community development, police protection, fire protection, parks, education and libraries. They studied how the character of urban development affects per capita public outlays in a cross-section of 283 US metropolitan counties during the 1982–1992 time period. A separate equation is estimated for each measure of expenditure, providing substantive evidence of how density, the spatial extent of urbanized land area, property value and political fragmentation affect the cost of services. The important finding of the analysis is that the per capita cost of most services declines with density and rises with the spatial extent of urbanized land area. This reinforces the claim that urban sprawl undermines cost-effective service provision, and lends support to growth management and smart growth programmes aimed at increasing the density and contiguity of metropolitan areas, at least from the standpoint of public finance. The models show that there are savings to be gained in numerous areas, especially where both the density and the spread of the metropolitan area matter for the cost of service delivery.
Holcombe and Williams (2008) investigate data from 487 US municipal governments with populations greater than 50,000 to see the relationship between population density and per capita government expenditures. There is no statistically significant relationship between per capita total government expenditures and operational expenditures for cities smaller than 500,000, and for larger cities higher population density is associated with higher per capita government expenditures. Infrastructure expenditures tend to decline with increases in population density for cities smaller than 500,000, whereas expenditures on services tend to increase with population density for cities larger than 500,000.
Hortas-Rico and Solé-Ollé (2010) studied the impact of urban sprawl on municipal budgets in Spain. They undertook an empirical analysis using a cross-sectional dataset of 2500 Spanish municipalities for the year 2003 and a piece-wise linear function to account for the potentially non-linear relationship between sprawl and local costs. The estimations derived from the expenditure equations for both aggregate and six disaggregated spending categories indicate that low-density development patterns lead to greater provision costs of local public services.
Another Spanish study (Fernández-Aracil and Ortuňo-Padillo, 2016) investigates the impact of land use patterns associated with compact population on the costs of provision and maintenance of urban public services for local entities, controlling for other factors. The aim is to develop an econometric analysis using a panel data set of municipalities of the Spanish Mediterranean area and Madrid in the period 2006–2014. The estimations derived from the study indicate that compact population impacts positively on the decrease of municipal costs of urban public services. A 1% increase in compact population is associated with a 0.217% per capita decrease in costs.
Garrido-Jimenez et al. (2017) studied the housing density and the relative length of roads as determinants of operating cost of urban services on a sample of six Spanish cities. Their study investigated the differences between the economic impact of these two variables on municipal budgets, showing that housing density explains better the operating cost per unit area of services such as roads and parks maintenance, while the relative length of roads does so in water cycle, waste collection, disposal and treatment as well as street cleaning.
An Italian study (La Greca et al., 2011) discusses sustainable urban planning in the case of Catania Metropolitan Area, which contains a large number of detached single family homes. Sustainable development is characterized by densification, mixed used planning and reduced private car dependence by concentrating new services in pedestrian orientated areas.
Libertun de Duren and Guerrero Compeán (2016) studied a panel of 8600 municipalities of Brazil, Chile, Ecuador and Mexico, for the years 2000 and 2010, and found that the relationship between urban population density and per capita municipal spending on public services was strong and U-shaped. Optimal expenditure levels for municipal services are achieved with densities close to 9000 residents per square kilometre. Since 85% of all municipalities are below this ideal density level, the result of the study provides policy support for densification, particularly in medium-sized cities of developing countries, which are currently absorbing most of the world’s urban population growth.
In the literature, the impact of population density on public expenditure is inconclusive. Some studies show that density leads to savings in per capita public expenditure (Carruthers and Ulfarsson, 2003). But other research indicates the existence of diseconomies of scale (Holcombe and Williams, 2008). Finally, some authors propose a U-shaped relation between population density and public expenditures (Ladd, 1992; Libertun de Duren and Guerrero Compeán, 2016). In such a case, an optimal population density exists. Garrido-Jimenez et al. (2017) comment on this, saying that the methodological problem is that neither the variable characterization nor the expression of results is consistent across studies. We also observe that in the majority of the literature, urban variables are usually studied by econometric methods on the municipal data. So the density is measured across the municipal area as a whole, and thus urban spatial structure cannot be taken into account.
In the local Czech literature, the municipal expenditure and its relation to the type of urban spatial structure have been studied by a few smaller studies and student theses in the last decade. For example, Kupčíková (2011) investigated, in the case of the city of Hradec Králové (Czech Republic), the spatial and economic characteristics of different types of urban structures. Kupčíková distinguished six types of urban spatial structures: 1) historical city centre, 2) urban block structure from the 19th and early 20th centuries, 3) garden city structure (urban villas), 4) housing estates, 5) residential suburban area and 6) original village area. The average municipal expenditure was observed in the period 2006–2010. In the next step, the unit expenditure was multiplied by the size of the infrastructure for each urban structure in order to compare municipal expenditures per hectare and per capita.
Rybová and Šilhánková (2013) carried out an analysis of the need for new transport and technical infrastructure construction in selected municipalities in the suburban area of the city of Pardubice, Czech Republic. The expected infrastructure expenditures related to new residential developments are then compared with the budgetary limits of the studied municipalities. Saidlová (2016) carried out a comparative analysis of the municipal expenditures of the six spatial urban structures that were defined in Kupčíková (2011) on the set of eight selected cities in the Czech Republic in 2012. The municipal expenditures included in the study were as follows: transport infrastructure, public green, public lighting, water supply and sewerage maintenance. The least costly urban structures for maintenance per capita were the urban block structure and housing estates. On the other hand, the most costly urban structures were the residential suburban area and the original village area. Hudeček, et al. (2016) presented a pertinent example of one city block from Prague, illustrating how expenditure depends on the building type (atrium houses, row houses or single houses). The construction and running expenditure per capita can be 15 times higher for single houses than for atrium houses.
Unlike other international and Czech studies, we do not use budgetary data that often include various other items and, therefore, are not directly comparable between municipalities. In this study we use the information on prices per unit.
Methods
As the first step, the authors define different types of urban spatial structures that can be found at the level of city blocks. These urban structures can be found in most European cities. The types of urban structures differ in the area of public space and also by population density. This means that from the view of the municipality the types of urban structures may differ highly in both capital and current expenditures per hectare or per capita. Based on the literature, expert knowledge of the Prague Institute of Planning and Development and the architectural studio Pavel Hnilicka Architekti, the research team has defined seven types of urban spatial structure:
Organic urban structure. This is the historic centre of the city, the typical features of which are irregular streets and squares. The houses form closed irregular blocks. The streets are designed for pedestrian traffic; the facilities are within easy reach.
Urban block structure. Structure of compact closed blocks from the 19th century. The streets form a regular network that has a clear hierarchy; the squares are often in the form of a public park. Blocks are arranged into neighbourhoods and completed with parks.
Garden city urban structure. Villas located separately in gardens, mostly multi-storey. The boundary between public and private spaces is delineated with fences. The network of streets is regular, usually supplemented with squares in the form of a public park.
Urban structure of single detached houses. Detached houses located separately in gardens; the area is low-rise. The boundary between public and private spaces is delineated with fences. The network of streets is regular, sometimes supplemented with a small park or square. Typical features are residential locations without significant amenities, and the proximity of parks and facilities suitable for recreation.
Urban structure of paired villas and row-houses. A location of detached houses with predominant semi-detached houses and terraced houses. The scale of the building is small. The network of streets is regular; the streets are rather narrow with a residential character. Typically, sites without significant amenities, and a proximity of parks for recreation.
Urban structure of mixed building types. A structure that does not have a unified typology and that combines both compact blocks and semi-open blocks. There may be solitary structures typical of the modernist city. The scale is variable. The mixed structure has mostly a natural centre of gravity, which is a square surrounded by a compact building block.
Urban structure of estates and high rises. A structure made up of buildings surrounded by a park in a free area. The scale is large; the public spaces are not clearly bordered and have no hierarchy. The transport is often clearly divided into pedestrian and car zones. The centre of gravity is mostly public transport stations, where there is a concentration of people and activities.
Interestingly, the type of urban structure has a strong link to the construction period. But it is only a side effect. The year of construction was not the subject of our interest, because the selected structures can be repeated successfully again. That is why we are interested in urbanistic attributes of structures, not the age of buildings. Structures of streets and squares remain, while houses are rebuilt and replaced with new ones.
In the second step, for each type of urban spatial structure we identify four localities ranging between 20 to 35 hectares that can be found in the City of Prague. We chose Prague because of availability of detailed high quality urban planning databases. With larger localities, it is difficult to find homogeneous structures. On the other hand, smaller localities would have significantly fewer squares and parks. The compact city is compensated by large squares and parks, therefore the selection of the locality is crucial for the success of the calculation and must include the basic characteristics of the structure.
The localities were chosen by three co-authors (architects, experts in urban planning) to represent as much as possible the ideal of each type of urban structure. For each of 28 selected localities we calculate the proportion of municipal infrastructure that includes pavements, roadways, urban green and the amount of public lighting. All those data are available from the databases of the Prague Institute of Planning and Development. To clarify for the reader, Prague is the capital of the Czech Republic, with a population of about 1.28 million inhabitants (2017). Prague is a historic Central-European city with a compact city centre (e.g. Sýkora and Štěpánek, 1992). After the collapse of the communist regime in 1989, the land-development patterns have to adapt to market forces, with a negative consequence of residential sprawl outside the boundaries of the city (Hammersley and Westlake, 1996; Stanilov and Sýkora, 2012; Sýkora, 1999). A new Metropolitan Plan is currently under development (Landa, 2016).
As an example of the method, we present those selected localities that were used for calculations (Figure 1). There is one example of selected locality for each urban spatial structure. For the sake of simplicity it is assumed that the whole infrastructure maintenance is financed by the municipality.
Examples of urban structures.
In the third step, we define several types of capital and current expenditures that are determined by the type of urban structure and are usually financed from municipal budgets. For the comparison of individual localities, we select the following types of construction and maintenance costs of municipal infrastructure:
pavement construction and maintenance (cleaning and minor repairs);
roadway construction and maintenance (cleaning and minor repairs);
urban green construction and maintenance;
sewerage construction (maintenance is financed by consumers);
water supply construction (maintenance is financed by consumers);
gas supply construction (maintenance is financed by consumers);
electricity supply construction (maintenance is financed by consumers);
public lighting (including energy).
The basis for analysing the current expenditures of individual types of urban structure is the collection of data on maintenance costs. We chose cities of different size categories, ranging from 3000 to 1.3 million inhabitants, to get representative data. The unit current expenditure in Czech Korunas (CZK) was estimated by the questionnaire data that were obtained from 22 Czech cities and six city districts (three city districts of Prague, two city districts of Pardubice and one city district of Brno). We interviewed city officials responsible for the municipal infrastructure, which was complicated by the different organisational structures in each city. Although the questionnaire was anonymous, we had to overcome the mistrust of providing ‘politically sensitive’ economic data and some municipalities refused to provide them. So the final sample cannot be considered as representative regarding geographical location or population size. The data on current expenditures come from the year 2016. The average yearly exchange rate in 2016 was 1 EUR = 27.03 CZK and 1 US$ = 24.43 CZK. However, it is not the monetary unit that is relevant, but the relative ratios.
The capital expenditures are the total construction costs of all public spaces and the municipal infrastructure in a given locality. The estimation of the construction costs was calculated by the architectural studio Pavel Hnilicka Architekti and was based on the data on average prices of municipal transport and technical infrastructure collected by the Institute for Spatial Development (2017) and on the structured interviews with certified architects and engineers. A higher purchase price of material may be offset by a longer service life. In calculations, when choosing materials a longer lifetime was preferred. Construction costs are calculated for existing localities as if all the types of municipal infrastructure were to be built again. For each type of urban structure, the average costs for the construction of public spaces and municipal infrastructure will be converted to one year and one hectare.
Finally, in the fourth step, we calculate the capital, current and total municipal expenditures per hectare (10,000 m2) and per capita for each urban spatial structure. Expenditures are calculated by multiplying the number of each type of infrastructure per hectare by unit capital and current expenditures.
Results
In the city of Prague, 28 representing localities, four for each urban structure, were selected. The area of public infrastructure (pavements, roadways, urban green) and the amount of public lighting per hectare (10,000 m2) were calculated for each locality. The arithmetic average from four representing localities for each urban structure is shown in Table 1. It can be, for example, observed that the largest proportion of public infrastructure is typical for estates and high rises.
The size of municipal infrastructure per hectare (10,000 m2).
Note: The estimates of sewerage, water, gas and electricity supply are based on the length of streets per hectare.
Source: Own calculations.
The estimates of capital expenditures on the municipal infrastructure were provided by authors of this article. The calculations are based on the estimation of construction cost at the 2017 price level. The capital expenditure should be divided by the expected life service (Table 2). For example, in the case of 30 years of service life, it is assumed that 3.3% of the pavements are completely repaired each year in the municipality. Quite common practice is that the developer builds roadways, pavements, public greenery and public lighting, and after completing the construction, the company dedicates it to the city as a gift or sells it for a symbolic price. Then the city is responsible for this infrastructure and future expenditures.
Capital expenditure (CZK) and estimated service life (years) of municipal infrastructure.
Source: Own calculations.
The data on current expenditure were obtained by questionnaire. We chose municipalities of different size categories to get the most relevant data. Some municipalities know exactly the unit price; in other municipalities the unit price is calculated from the total budget divided by the size of the urban infrastructure. Each municipality approaches maintenance in a different way, so some data may vary greatly. It depends on the quality and frequency of services, on climate conditions, etc. The average and median values of unit current municipal expenditures obtained from the questionnaire survey are presented in Table 3. For some cities and city districts a part of the data is missing. We are aware of some degree of heterogeneity among the cities, for example in quality and frequency of services provided, in local prices paid per unit of services and of course in different expenditure definitions resulting in possible errors in the questionnaires. To avoid influence of extreme values, the median instead of average is used in the calculations.
Current municipal expenditure per year in CZK (n = 28).
Source: Own calculations.
Finally, we calculate the capital, current and total municipal expenditures per hectare (10,000 m2) and per capita for each urban structure. To obtain expenditures per hectare the average area, the length or the amount of public infrastructure (Table 1) is multiplied by the unit capital and current expenditures from Tables 2 and 3. From this calculation, estimates of capital, current and total municipal expenditures for different types of infrastructure for each urban structure are obtained (Table 4). The most expensive urban structure per hectare is the urban structure of estates and high rises, which is determined by the large proportion of public space. On the other hand, the urban structure of single detached houses is the least costly. However, it has to be taken into account that these expenditures are calculated per area, not per inhabitant. If the population density is taken into account and municipal expenditures are calculated per capita, the results are quite opposite. The least costly is the urban block structure followed by the organic urban structure (historic centre), which is given by high population density and lower size of public space. The urban structure of single detached houses is now the most costly.
Annual expenditures (CZK) per hectare (10,000 m2) and per capita, and per 1m2 of gross floor area.
Source: Own calculations.
It is also worth noting that annual capital expenditures made up 66% to 76% of total expenditures and are greater than current expenditures for all urban structures (Table 4). If such shares of capital expenditures are not observed in the municipal budget, this could be a sign of gradual obsolescence of the municipal infrastructure.
Another interesting view is offered by the comparison of the gross floor area. The gross floor area is much larger in organic urban structures and urban block structures that are typical structures of the central parts of the city than other urban spatial structures. As a result, the total expenditure per 1m2 of gross floor area is low in these urban structures. It has to be taken into account that in the central parts of the city a large proportion of floor area is for offices and shops, rather than for living in.
The interesting thing for urban planners is to know how the population density affects the municipal expenditure both per capita and per hectare. For this purpose, we can use the presented data, not just for seven urban structures, but for all 28 analysed localities for which we have the data. In case of expenditure per capita we obtain a curve (Figure 2) that points to the magical limit of the population density that is about 100 inhabitants per hectare (see Newman and Kenworthy, 1989). Below this threshold there is a sharp increase in total expenditure per capita, while above that limit no great savings can be achieved. The multiplicative regression model describing the relationship between the expenditure per capita and population density per hectare was estimated. A 1% increase in the population density is associated with a 0.75% decrease in municipal expenditure per capita (R2 = 0.919, F-statistic = 295.3). The population density is statistically significant at the 0.01 level. Another view of the same trend is offered by Figure 3, which shows expenditure per hectare. Municipal expenditure per hectare grows much slower than the population density. From the estimation of the multiplicative regression model we obtain that a 1% increase in the population density is associated with a 0.25% increase in municipal expenditure per hectare (R2 = 0.558, F-statistic = 32.9). The population density is statistically significant at the 0.01 level.
Population density and municipal expenditures per capita.
Population density and municipal expenditures per hectare.
Conclusions
In the article, we investigate the relationship between the type of urban spatial structure, population density and municipal expenditures. Our research is based on a unique, detailed database, so we could focus on the level of city blocks by defining homogeneous urban and architectural localities. We assume that urban spatial structures differ in the size of municipal infrastructure, which is determined, for example, by the length of roadways and pavements, by the total area of parks and greenery, by the length of sewerage and water pipes. The analysis shows that low population density increases the per capita expenditures on municipal infrastructure. As a consequence, garden city urban structures, single detached houses and paired villas and row-houses are more expensive than urban structures with higher population density. It seems that urban structures with population density below 100 inhabitants per hectare are not financially efficient for the municipal budgets.
As discussed in the second section, the impact of population density on public expenditure is inconclusive in the literature. This study supports the idea that densification leads to savings in public expenditures. In our regression models we found that a 1% increase in the population density is associated with a 0.75% decrease in municipal expenditure per capita and a 0.25% increase in municipal expenditure per hectare. Such findings may be limited by the fact that only ‘physical’ municipal infrastructure was included, and not expenditures for the municipal police, fire protection, waste collection, etc. These data were not available on the disaggregated level, and there is no clear evidence from the literature as to whether they depend on the urban spatial structure or not.
The results also show that there is inequality in the municipal expenditure paid per one inhabitant living in different urban structures. So it may be the case that people living in high-density urban structures subsidy those living in low-density urban structures (e.g. Dekel, 1995). Many theoretical and practical questions arise from such an observation. For example, is there an optimal urban structure from an economic point of view? Is it possible to reform the property tax system to be based on the type of urban structure (e.g. La Greca et al., 2011)? Moreover, Eberle and Tröger (2015) have pointed out that places with the same population density may have a completely different atmosphere. A dense urban structure is not a guarantee of a good urban structure, just as a sparsely populated urban structure is not automatically a bad one. We always have to take into account the other parameters.
The limits of the study are quite obvious. Firstly, both the absolute and relative expenditure estimations are based on Czech data, so the transferability of the results to other countries with different price structures is not straightforward. Local price estimations would have to be carried out. However, the main findings regarding the different financial costs of the urban spatial structures per capita and per hectare that are determined by the size of municipal infrastructure and by the population density should be similar. Secondly, the study does not include all expenditure categories, for example public transport, fire protection, waste collection, etc. This is usually a limit of international comparison, because countries differ in what types of services are or are not financed from a municipal budget.
In the future, it may turn out that some of our data and calculation procedures were not perfect. However, we are not primarily concerned with exact numbers but with the direction of reasoning. We are trying to show to local governments that public finances are very closely related to urban planning. We assume that the benchmark values for each urban structure will serve as a guideline for local governments in deciding on developments, whether brownfield or greenfield. The research results can help with the practical question of how to plan and build (Hudeček et al., 2018). Urbanism is not just about the economy. However, we see that in general discussion this argumentation is often lacking because there are practically no usable data. Each development plan is complex and depends on its distance from the centre of the city, the type of the landscape, the transport connections, the social environment, and many other factors. The economic view we offer in this research complements the overall mosaic.
Footnotes
Declaration of conflicting interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: The research was supported by the Technology Agency of the Czech Republic, grant no. 2016TD03000280, ‘Modern and Effective Planning: Density & Economy’.