We all know that Lawrence is growing. Some of the effects of growth are hard to miss: new housing subdivisions, more retailers on South Iowa Street and West Sixth Street, and more traffic on the roads. But other consequences of growth are harder to see.

Living in a dynamic and expanding community creates many benefits, but it also imposes costs. New jobs, rising home values, and greater diversity of choices are all positive effects of growth. At the same time, however, delivering city services to a growing population costs more money and requires expansion and upgrading of existing infrastructure, or creates increasing congestion.

Who benefits from growth? Who pays the costs? These questions are at the heart of many of the recent political debates about how to manage Lawrence’s growth. Curious about the answers to these questions, I decided to see what I could learn from a variety of publicly available sources.

Any simple answer must be a generalization. But several themes quickly emerged. First, since 1990, the cost of city services has increased substantially, even after adjusting for inflation. Second, despite economic development officials’ focus on the benefits of job creation, the single largest benefit of growth has been the rise in the value of owner-occupied homes. Third, while the benefits of growth have accrued mainly to homeowners, the costs of city services have been spread more widely.

The city’s annual financial reports contain a wealth of information about city spending and revenues, and I can only touch a few high points here. Combining general fund expenditures (those supported by taxes) and the most important enterprise funds (those supported by fees) spending increased by almost 90 percent (after adjusting for inflation) between 1990 and 2003.

The local population increased quite rapidly as well, but it grew only 31 percent during the same time. As a result, spending per resident increased from $708 to $1,070. The biggest spending increases were for public safety, general government, and water, sewer and sanitation services. Of course, some increased spending may have resulted in more or better services – more police on the streets, the T, new recreation facilities – but some of this reflects rising costs of service as the city’s population grew.

The financial report also documents who paid for these services. By far the greatest increases in city revenues were from sales taxes and charges for water, sewer and sanitation services. These are regressive revenue sources, falling especially heavily on lower-income residents.

Sales tax collections rose by an average of $200 per resident (again, adjusted for inflation between 1990 and 2003). Lawrence does of course attract out-of-town shoppers, but their spending can account for at most about 8-10 percent of sales tax revenues, so most of this increase came from the pockets of local residents.

Another important source of revenue was rising charges for water, sewer and sanitation services. Expressed as an average per resident these increased by nearly $100 per person. This does not mean that individual bills rose this much, because some of the increase was paid by businesses located in the city.

Despite complaints about the burden of property taxes, the city’s share of this revenue source increased by only about $50 per person on average.

Who benefited from Lawrence’s growth? Although economic development officials emphasize the benefits of job creation, new jobs did little to improve wages or employment opportunities for existing residents. Based on data from the Bureau of Labor Statistics, I found that although employment grew by nearly 35 percent since 1990, average wages in Lawrence actually fell slightly relative to the rest of the state. Similarly, movements in the local unemployment rate have closely paralleled those at the state level.

Why have new jobs failed to produce a relative improvement in employment conditions? The simple answer is migration. Employment opportunities draw in new residents, thus boosting population, but ensuring that labor market opportunities parallel those in other communities.

The indirect effect of job growth was rising real estate prices. More population has meant more demand for housing, and prices have risen much faster than in communities growing more slowly. Based on indexes of housing prices I estimate that the typical home owner in 1990 would have seen his or her property value rise by $16,000 to $30,000 more than if they lived elsewhere in the state.

On balance it seems likely that the benefits of growth outweigh the costs. But the fact that benefits are concentrated among property owners while the costs are distributed much more widely goes a long way toward explaining the highly charged atmosphere surrounding the politics of growth.

— Joshua L. Rosenbloom is professor of economics and director of the Center for Economic and Business Analysis in the Policy Research Institute at Kansas University. More details about the costs and benefits of growth can be found in his article “The Costs and Benefits of Growth: Lawrence, KS, 1990-2003,” Kansas Policy Review, Spring 2005 , which is available online at www.ku.edu/pri/publicat/publicat.shtml#kpr