Mixed-Use Downtown Development Puts Standard Malls’ Tax Yield to Shame

[M II A II R II K]

Mixed-Use Downtown Development Puts Standard Malls’ Tax Yield to Shame


Jul 09 2010

Mary Newsom

Read More: http://citiwire.net/post/2133/

- Conventional wisdom, of course, says that to prop up the property tax base, a high-end shopping mall is just the ticket. But when Sarasota County, Florida, looked at where the county government gets the biggest bang for its property tax buck, it found some numbers that may surprise a lot of people.

- Sarasota County Director of Smart Growth Peter Katz, speaking to a meeting of Citistates Associates here late last month, described a recent analysis of the county’s property tax revenue per acre. He pointed first to residential areas. Not surprisingly, when you work the numbers on a per-acre basis, residential property inside the county’s municipalities offered the biggest revenue per acre — a little more than $8,200 per acre for single family houses within the city of Sarasota. This makes sense, as in-town land values tend to be higher.

- Next, Katz showed the results from retail properties. Here comes surprise No. 1.: Big box stores such as WalMart and Sam’s Club, when analyzed for county property tax revenue per acre, produce barely more than a single family house; maybe $150 to $200 more a year, Katz said. (Think of all those acres of parking lots.) “That hardly seems worth all the heat that elected officials take when they approve such development,” he noted in a related, written presentation.

- But here’s the shocker: On a horizontal bar chart Katz showed, you see that zooming to the far right side, outpacing all the retail offerings, even the regional shopping mall, is the revenue from a high-rise mixed-use project in downtown Sarasota. It sits on less than an acre and contributes a hefty $800,000 in tax per acre. (Add in city property taxes and it’s $1.2 million.) “It takes a lot of WalMarts to equal the contribution of that one mixed-use building,” Katz noted.

- Indeed, that three-quarters of an acre of in-town urban-style (14- to 16-story) development is worth more property tax revenue than a combination of the 21-acre WalMart Supercenter and the 32-acre Southgate Mall. Even a mid rise (up to about seven stories) mixed use building brings in $560,000, and the low rise (up to three stories with residential over retail) brings in over $70,000 per acre — more than three times the return of Southgate Mall.

[Swede]

conventional wisdom might be surprised, I on the other am not. Factor in things like cost to the community for infrastructure construction and maintenance and the urban highrise becomes even more outstanding.

Property taxes work nothing like that here, but still the planning ideologies are fairly similar (rowhouses and 3-12s modernist slabs instead of single family houses) but the "urban" planning is basically the same. Sad. The urban way of development (and living) needs cold hard numbers backing it up and people willing to stand up for it.

[M II A II R II K]

Another thing is and we have that over here is where large malls are situated within the city proper where the tax base is already high, and how much those malls would generate.

Then the question is whether it would be taking up valuable space that could generate more taxes if many more smaller individual businesses took up the same space.

[precis]

First off, comparing revenue per unit of area while ignoring expense per is misleading. Yes the Big Box site might produce less property tax revenue than a mixed use building but it will also add very little to the municipal expenses. Municipal spending is mainly towards residents.

Secondly Big Box stores and shopping Malls in Ontario get a massive tax break compared to street retailers as there parking lots are considered 'undeveloped land' and thus the value that they provide to the Big Box/Malls are not captured and taxed.

[M II A II R II K]

But that's the value to the Big Box stores though, not necessarily property tax income for the city. And the taxes they generate in sales ends up going to the state and federal levels of government.

[M II A II R II K]

Mixed Use Reduces Infrastructure Costs and Increases Tax Receipts


August 6th, 2010

By Brice Maryman



Read More: http://www.svrdesign.com/blog/2010/0...-tax-receipts/

- After analyzing the county’s current tax yield for various land uses, they determined that the local mall was the county’s financial engine, grossing some $21,752 per year. But changing the scale of the analysis, the returns of the mall look paltry when compared to various mixed use developments within the City of Sarasota, the most dense of which is netting some $803,000 for County coiffers per year. That’s 3,500% higher than the mall.

- There’s another story to be told too, which is particularly compelling for us: the cost of infrastructure. Factoring in infrastructure, the comparison between high-rise urban residential land uses and suburban multifamily land uses shows a 35% ROIf for the municipality compared to a 2% ROIf for the suburban land use. Infrastructure surrounded by mixed use buildings makes the city money, and it generous financial returns happen in as little as 3 years.

Sarasota County Tax Yield Per Acre. Image by Public Interest Projects, Inc.






County Tax Yield Per Acre with Mixed Use Development. Image by Public Interest Projects, Inc.






Number of Years to Receive a Return of Infrastructure Dollars. Image by Public Interest Projects






The number of Years it will take Sarasota County to pay off its infrastructure investments. Image by Public Interest Projects, Inc.

[Policy Wonk]

All true, but neither form is really a reasonable substitute for the other and not very many retailers could keep their doors open at the rents such locations demand.

[precis]

Originally Posted by M II A II R II K

But that's the value to the Big Box stores though, not necessarily property tax income for the city. And the taxes they generate in sales ends up going to the state and federal levels of government.

No, that is not what I am saying.

Property Tax Imbalance
• Impact of converting 1-storey commercial
building to Residential Tower

• Business
Deemed Services Consumed: $71,695
Taxes Paid: $152,350
Excess Taxation: $80,655

• Residential
Municipal Services Consumed: $234,670
Taxes Paid: $129,750
Shortfall: $104,920

Property
Upon Redevelopment:
Assessed value increases 500%
Consumption of services increases by 227%
Actual tax revenue falls 15%
* based on a 33 unit tower
http://www.udi.bc.ca/Publications/UD...arch012007.pdf

[M II A II R II K]

Best bet for tax revenue: mixed-use downtown development


September 13th, 2010

By Philip Langdon

Read More: http://newurbannetwork.com/article/b...elopment-13144

At a time when local governments are struggling financially, two studies — one in Sarasota County, Florida, the other in Asheville, North Carolina — suggest that one of the best fiscal remedies is dense, mixed-use development.

The studies, by Public Interest Projects, a real estate development firm in downtown Asheville, show that on a per-acre basis, sprawling single-use developments such as big-box stores do a poor job of providing governments with needed tax revenue. Dense, mixed-use development, usually downtown or adjacent to transit, is financially much more beneficial.

[precis]

Now if we could have an expense per acre comparison, we can begin to look at the issue critically. Providing only half of the information is useless.

[hammersklavier]

Originally Posted by precis

Now if we could have an expense per acre comparison, we can begin to look at the issue critically. Providing only half of the information is useless.

Good point.

Although, among other considerations, a location in the dense walkable core has a far lower transportation expense than a place located well into the periphery. However, since this expense is "invisible", so to speak, since it is eaten by both customers and employees, it would never show up on any official statistics.

[precis]

Originally Posted by hammersklavier

Good point.

Although, among other considerations, a location in the dense walkable core has a far lower transportation expense than a place located well into the periphery. However, since this expense is "invisible", so to speak, since it is eaten by both customers and employees, it would never show up on any official statistics.

Halifax, Nova Scotia, proposed moving to a system that had taxes reflect actual costs. You would be very surprised to learn that the McMansions would have ended up with large tax decreases and that mid to low income dense suburban areas would have seen very large tax increases.

http://www.thecoast.ca/halifax/why-e...nt?oid=1436219

A lot of urban homeowners think this is a fine idea. "I'm really, really, really tired of subsidizing the people who live in huge homes in the suburbs and drive two cars (more when their kids grow up)," explained one "tax reform" advocate in an email. "Most of these people make more money than I do. They are a drain on our collective resources... It costs as much as three times more to service a house in Kingswood or Fall River as it does a home that is on a 40×100-foot lot in the city."

In fact, my analysis of hundreds of homes and apartments throughout HRM shows that, far from being the "best possible tax system," the proposed tax system will slash millions of dollars off the tax bills of high-value properties and make up the lost revenue by increasing taxes on modestly priced houses. Further, contrary to the claims of "tax reform" supporters---and as the figures from Kingswood attest---the new system will reward suburban sprawl with tax breaks, and raise taxes for those living in compact, transit-friendly communities.

According to Mills' poll results, people in HRM want property taxes "based on the cost of the services actually received by the property owner"---no one should be subsidized by someone else. But if we built such a system, the very first thing we'd have to do is to nearly triple property taxes.

As city budget documents show, if you add up all the residential taxes collected in HRM and compare it to the cost of all the services delivered to residential properties, you'd find that the costs are 2.7 times higher than the amount residents pay in taxes. The difference is made up by commercial property taxes.

So people on the Halifax peninsula who think they are subsidizing suburbanites are wrong---they aren't. It's Burnside and Bayers Lake industrial parks, and businesses in HRM generally, that are subsidizing suburbanites and peninsula residents alike.

[someone123]

I never looked into the "tax reform" plans very closely because they were obviously going to die but I suspect that the way they calculated "services" was oversimplified.

For example, one metric they were talking about at one point is how far a house is from a bus stop and the frequency of service. Homeowners better served by transit were to pay more for the privilege. What they didn't mention is that some very frequent bus routes in Halifax turn a profit from fares alone. Overall fare box recovery is high but many suburban and rural routes run at a huge loss. Providing buses four times a day along a rural route is more expensive than running buses once every ten minutes downtown. Transit is a good example of a service that benefits from economies of scale and other efficiencies of urban areas.

Similarly there are many externalities that are barely talked about, let alone captured. If you live in the suburbs and commute in your car for one hour you are imposing a cost on everybody who has to deal with the increased traffic you create. The $20M road widening projects in urban cores are for suburban commuters, not local residents. Road building tends to be oriented toward suburbanites and is a very significant expenditure in most cities, though it is sometimes picked up by other levels of government.

Another good example of is the giant Wal-Mart parking lot. Having huge lots makes a city sprawl outward and forces everybody to travel farther. Having a downtown that is half parking lots effectively forces residents farther out, again inconveniencing them.

On the taxation side I suspect that property taxes are flawed. Most cities want improvements on land and yet property taxes provide a disincentive. As shown by the article above, property taxes are also independent from the cost of providing services. Even if you wanted to subsidize poorer homeowners it is better to know what's going on. Modern governments are bad about inventing random taxes tied to particular spending. The taxes may or may not be tied to anything useful, may or may not provide the right economic incentives, and definitely involve a greater administrative burden.

[precis]

Originally Posted by someone123

Providing buses four times a day along a rural route is more expensive than running buses once every ten minutes downtown. Transit is a good example of a service that benefits from economies of scale and other efficiencies of urban areas.

Yes, That is true but there is one caveat. If utilization is asymmetrical the proportioning of costs is not captured. The suburbanite whom takes PT to a downtown core would, in the AM, look to be utilizing a heavily subsidised (inefficient) system. His/her return trip would initiate on a more heavily utilized system. Which would be viewed as more economically efficient. But as always the truth lies in the middle.

Similarly there are many externalities that are barely talked about, let alone captured. If you live in the suburbs and commute in your car for one hour you are imposing a cost on everybody who has to deal with the increased traffic you create. The $20M road widening projects in urban cores are for suburban commuters, not local residents. Road building tends to be oriented toward suburbanites and is a very significant expenditure in most cities, though it is sometimes picked up by other levels of government.

Again it is not so simple. At least in municipal economics. Any means to increase aggregate flow from outlying areas will benefit the urban core in which it is placed. So long as the demand it supplies produces revenue positive assessment growth. IOW, while cities may incur an expense in constructing and maintain roads, by doing so it allows for non residential development. Which is nearly exclusively revenue positive. Revnue that is not exported. If such expense occur, but there is only increases in residential development (looking at Toronto here), the net benefit turns to a loss.

[mhays]

A lot depends on what expenses a particular government is supposed to cover. For example, in some places the city pays for schools and in others they don't. In some places local goverments pay for all or nearly all roads, and others are criss-crossed by roads paid for at the facility-district, county, or state level, or even with national money. Same with public transit, the social safety net, etc.

Further, there's a lot of subjectivity in analysis of the cost/benefit of a specific use in a location. Areas often under-considered include expenses avoided, for example by locating housing closer to jobs, allowing less transportation infrastructure.

[M II A II R II K]

Study: dense downtowns = higher tax yield


July 12, 2011

By John Stroud

Read More: http://www.postindependent.com/artic...ntProfile=1074

GLENWOOD SPRINGS, Colorado — A new economic study commissioned by a regional land planning institute says local governments have the potential to get more bang for their tax-return buck down on Main Street than at the big-box retail centers. When compared on a basis of tax revenue per acre, the dense, mixed-use urban development pays better dividends than its large-format suburban mall counterpart, concludes the study prepared for the Sonoran Institute's Colorado program, which is based in Glenwood Springs.

- “Public finances are being hammered in so many communities, and economic development has taken on renewed importance,” said Clark Anderson, director of the institute's Western Colorado Legacy Program. “With many of our local communities already working to try to create vibrant, walkable downtowns, we thought it would be good to look at that from a tax revenue perspective,” he said.

- “It really turns on its head the conventions we have in looking at development decisions, and that the big-box development brings the big tax revenue potential,” Anderson said. “When you look at it on a value-per-acre basis, it's really striking.” In the local comparison, Minicozzi uses 2010 Garfield County property taxes as the basis in coming up with a yield-per-acre for property taxes, as well as both actual and potential sales taxes. As an example, the Denver Centre mixed-use building at the corner of Seventh and Blake in downtown Glenwood Springs generates $44,000 in total local taxes on just one-sixth of an acre, according to the study.

- The Glenwood Meadows development, by comparison, obviously generates far more outright annual tax benefit, at $6.23 million, using 43 acres to do so. So on a per-acre comparison, it would take nine acres of mixed-use buildings similar to the Denver Centre to yield as much total local tax income as 43 acres of Glenwood Meadows type of development, Minicozzi's report concludes. Across the board, other downtown commercial and mixed-use buildings outperform their big-box counterparts using the per-acre tax revenue comparison, both in Glenwood Springs and Rifle.

- “Many communities have tended to look at real estate on a miles per tank basis,” Minicozzi said in a recent interview. “But if you look at it on a miles-per-gallon basis, all of a sudden the data on that vehicle changes.” “New urbanist” style downtown redevelopment, with its focus on mixing high-density residential with retail and commercial office space in a pedestrian-friendly setting, also tends to yield higher property values, he said. Add the cost of public services to accommodate the needs of a large mall development compared to a dense downtown area, and the cost-versus-benefit numbers are even more telling, Minicozzi said.

.....

[simms3_redux]

This is silly. Did it ever occur to them that depending on where the mall or Walmart is located, property taxes on a dense, high end single family gated community can generate the same revenue? It's a factor of density. Now a super large, super high end mall in a dense, suburban submarket like Lenox and Phipps in Atlanta and several of the malls in South Florida or the Northpark Mall in Dallas can generate significant tax revenue. They don't get the kind of "breaks" many properties do because the city knows that the malls have been there a while, aren't servicing much debt, and collecting super high rents from tenants who do $1,000+ in sales/SF (even when there is no recent transaction data as there hardly is with super-regional malls).

[M II A II R II K]

Measuring productivity


15 Aug 2011

By Charles Marohn

Read More: http://newurbannetwork.com/news-opin...g-productivity

In an age of austerity, we need to make our public investments go further. No longer is it acceptable to simply analyze public projects in one dimension, such as cash flow or job creation. Our projects need to leverage our limited revenue to do all that and much, much more. Our top priority today needs to be on making our places more productive. In last week's Friday News Digest, I wrote about the work of Joe Minicozzi, whose speech from CNU 19 I had included in an earlier podcast. While we at Strong Towns often start with the public cost for infrastructure and then compare that to the revenue yield from the property it serves, Minicozzi comes at the productivity equation from a different -- and thought provoking -- angle.

- Cities often vigorously pursue that large business -- think Wal-Mart -- instead of the small ma-and-pa shop under the guise that the large business is going to generate more tax base. The same with the big house in the suburban subdivision. That sheetrock palace is paying a lot more tax than the little house on the city block. Isn't it logical that a city will be better off if they have more of these large businesses and homes? Minicozzi's analogy would suggest that revenue per lot is a poor measure of success. The large business may provide a lot of tax base, but it also chews up a lot of land and requires a lot of infrastructure. Same with the house on the large lot. A better way to measure success, and true productivity, would be to look at the tax base on a per acre basis.

- Last month we analyzed two streets that had just been reconstructed as part of a routine city maintenance project. What we found affirms Minicozzi's premise. The street reconstruction cost $180/foot. These costs were actual construction costs from 2010, so there is nothing theoretical about them. The tax base calculations were based on (1) the city's current budget, (2) the city's current tax rates and (3) the actual property values for each property. We assumed a 20-year life span for the street and put the total revenues collected over that period of time into a present value (at 4% for anyone interested).

The results reveal two streets in the heart of the city's downtown that are not even close to being productive

Street #1

• Total cost for street reconstruction: $104,400

• Total revenue collected for maintenance over one life cycle: $23,400

• Revenue gap in current configuration: ($81,000)

• Percent of project covered by adjacent tax base: 22%

Street #2

• Total cost for street reconstruction: $126,000

• Total revenue collected for maintenance over one life cycle: $50,000

• Revenue gap in current configuration: ($76,000)

• Percent of project covered by adjacent tax base: 40%

- These are streets -- especially Street #2 -- that, if you asked a local to name the five most productive streets in town, would assuredly be on the list. It has some of the largest businesses and the town's major employers. Even so, the taxes collected from the adjacent properties are not even remotely close to covering the basic maintenance costs of the streets that serve them.

.....

In the spirit of Minicozzi's work, we analyzed the yield from each property along the streets. The one with the highest total value is also one of the city's largest employer and a business that the community values greatly (with good reason). It consumes five acres in the heart of downtown and, while it pays over $14,000 per year in property tax to the city, the yield is only $2,860/acre.






In contrast, a small little shop that had lost its tenant and was currently sitting vacant -- a place that, quite frankly, nobody in the city government much values -- paid only $1,200 per year in property tax. However, it only consumed a quarter of an acre. Its yield: $4,960/ acre.

To be successful, the City of Pequot Lakes does not need to attract another large employer to build a new business in order to be successful. All it needs to do is get this run down little shop reactivated -- something that is actually much easier to do -- and then create an environment that would allow 20 more of them to be built along this same street.