Reprints of recently published Letters to the Editor and
Extracts from other Relevant Articles
FAIRNESS OF TAX BURDEN
Barnstable Patriot News, Cape Cod, MA, August 19, 2005
By Wyn Achenbaum, Stamford, CT
Value the land, not the buildings You begin your article ("Fairness of Tax Burden Questioned," Aug. 12) with this question: "Is it fair that residential property owners pay 89 percent of Barnstable's property tax levy? Would it be fair to shift some of the burden to commercial property owners?" After all, each property owner in Barnstable either built his own buildings, or bought the property from someone who built them, or can otherwise connect their holding of title to the person who built each building. But none of them created Barnstable's land, and none of them can create even one more square foot, much less another whole lot, be it on the waterfront or in the central business district. Similarly, no matter how many years a property owner has owned his plot of land - commercial or residential - he cannot claim to have created the economic value of the land. The economic value of the land -- think of it as the annual amount the land itself would rent for without the current building on it -- is due to factors completely beyond the property owner's control/blame/credit:
1. population growth
2. natural amenities
3. Barnstable's spending on schools, libraries, emergency services, public works
4. the economic activity and presence of one's neighbors
5. the state and federal government's spending on Barnstable: highways, dredging, beach restoration, bridges, etc.
I can't see any particular reason -- besides "tradition" -- why property taxes should be based on the value of buildings, which are inherently private. Rather, it seems to me that one's tax bill ought to be a function of the value of the site one occupies. A vacant lot downtown is worth exactly as much as its similarly-sized neighbor which has a modern, well-designed building on it. Each lot on the waterfront is far more valuable than a lot of exactly the same size across the road, and both are worth far more than a residential property half a mile or further away from the waterfront without regard to whether they are occupied by a tiny summer cottage or a year-round mansion.
If Barnstable is healthy, downtown land will be valuable, even if some is currently underused. Taxing just the land value will encourage the under-users to improve their properties, which will improve Barnstable for everyone -- and taxing just the land value will not penalize them when they've done so. Win-win situation, no? Collecting from the folks who own waterfront their full share of the tax burden will unburden the less well-off people who can only afford to visit the waterfront, and who would net a great deal less were they to sell their properties. Why should those who can only afford the less choice sites pay as much those who occupy the waterfront sites the market are worth many times as much?
Commercial property should be valued, not on the income approach but on the market value of the land each occupies plus the depreciated value of the current buildings. Otherwise, the property tax becomes an income tax and a disincentive to improvements, not to mention an encouragement to speculators rather than entrepreneurs. A great way to kill the downtown, if that's what is really desired.
Residential/commercial is not the point, unless the residents intend to kill the downtown. You might take a look at the property taxes paid by various properties, and how much of their assessed value is land value and how much is building value. If the assessments on land and improvements don't make logical sense (frequently buildings get over-valued and land undervalued, particularly where there is waterfront involved), make sure the next assessment values the land first, because the land's value will be there long after the current buildings are dust.
If you question the amount various properties pay, divide the annual property tax by 365 and see what they pay Barnstable each day. Then consider what others pay Barnstable per day in user fees and taxes: those who pay for a parking spot for a few hours, those who are guests at local hotels and restaurants, those who buy beach passes or the use of other local amenities. It may put property taxes in a clearer light.
Much depends on your priorities: do you want to favor the wealthy and well-situated, or do you want to promote the long-term health of Barnstable?
KEEPING CITIES STRONG
Philadelphia Inquirer, Jan. 4, 2005
By Edward J. Dodson, Cherry Hill, NJ
Communities throughout the entire region are facing the same challenges. Those businesses that keep their base of operations in the region leave the cities for the suburban and even more distant locations in search of acceptable profit margins. Without jobs, people -- those who have the skills and other resources to do so -- also leave. Left behind are those most dependent upon the contracting ability of the public sector to provide adequate social-welfare services, maintain an aging and crumbling infrastructure, and compete with places where the infrastructure is new, where there are fewer poor people. Over the last 50 years, government has made concerted attempts to reverse the effects of seriously flawed public policies but has done so without focusing on the core problems. A political science professor of mine described the process by which public policy is made in the United States with the term "disjointed incrementalism." We should not be surprised at the contradictory results that occur.
Cities, towns and regions have always competed with one another to attract people with purchasing power. Businesses follow. When the desirability of a region is strong, there is no reason or need to provide special incentives (e.g., tax abatements, low interest loans, grants, etc.) to anyone. When a region has lost its ability to attract people, incentives are necessary but communities have no revenue sources to offer. A city cannot provide public services for free; when one person receives a subsidy, others must absorb the additional cost in the form of higher taxes. Troubled cities long looked to the federal and state governments to provide economic development funds, but these levels of government are facing the same budgetary problems (as businesses moves operations to more business-friendly regions of the U.S. or to foreign countries where the cost of doing business is much lower). Left to their resources, what should cities do to create the best environment to again attract people?
The objective ought to be to encourage residents and businesses to live in and invest in their community. At the same time, the communities should adopt measures to discourage the holding of land parcels unimproved or underimproved over long periods. These objectives can be substantially achieved by converting the existing form of real estate taxation to one where buildings are exempted from taxation (thereby encouraging new construction and renovation of existing structures) and raising necessary revenue by a tax on the assessed value of land parcels only. Doing so will raise the annual cost of holding land for speculation (or just ignoring land assets because the cost of doing so is often minimal today) and stimulate owners either to develop the land they hold or sell it to someone who will.
The above measures will stimulate investment, will attract people, and will start the dominoes falling in the right direction. Cities can then begin to reduce many of the nuisance taxes on businesses and citizens that also reduce their desirability as locations. Good planning, community involvement, investment in quality-of-life amenities, and infrastructure will then combine to achieve smart-growth objectives while making it possible for developers to work profitably with cities.