Thinking like a farmer boosts tax revenue

Calculations per acre reveal that dense, mixed-use development generates substantially more property taxes for municipalities.

  • Asheville, NC mid-rise

    Asheville, NC mid-rise

    The mid-rise, mixed-use building in downtown Asheville, NC, is the kind that maximizes tax revenue for cities.  Image courtesy of Joseph Minicozzi, URBAN3.

Better! Cities & Towns
April-May 2012

Editor's note: On Tax Day, today we will examine property taxes, the kind of taxes that cities and towns rely on most. Density and mixed-use — not parking lots — yield the most revenue by far. This is a premium article for Better! Cities & Towns for the April-May 2012 issue, but I couldn't help sharing.

An analysis by Joseph Minicozzi of Urban3 in Asheville, North Carolina, shows that on a per-acre basis, dense, mixed-use development far outstrips the value of lower density, single-use development — even profitable big box stores.

City officials tend to think of tax yield on a parcel-by-parcel basis. That’s like analyzing agricultural yield “per farm.” When analyzed per acre, the differences in types of urban development become very clear, says Minicozzi.

Minicozzi looked at the county property taxes paid on various kinds of development in 12 communities across the US. (County taxes are generally paid even in cities, and are more consistent than, say, school taxes in various states.)

In the dozen communities, a Wal-Mart on a large outlying site generated $7 per acre in property taxes, while a shopping mall or strip center produced slightly more: $7.80 per acre. By contrast, denser, more urban kinds of development provided much greater financial returns for their communities. Two-story, mixed-use development generated $53.70 in property taxes per acre. Three-story mixed-use generated $105.80 in taxes per acre. Six-story mixed-use was best of all: $415 per acre.

Single-family residential development generated the least: $3.70 if situated in a city and $1 per acre if it was outside the city.

Looking at large parcels critically

The lesson, as Minicozzi sees it, is that governments should encourage dense, mixed-use development — common in downtowns — and take a critical view of lower, large-acreage projects farther away from the core. Governments, in his view, should evaluate development on tax revenue per acre rather than on the value of the individual property. The image below makes the difference clear:

The 3-D map of downtown Asheville, NC, shows not the height of buildings but the tax yield per acre, which is highly variable. Two buildings of similar value, adjacent to each other, yield hugely different tax revenues per acre. The building on bottom, a hotel, has a large surface parking lot and much lower revenue per acre, revealing the public loss from parking. Better! Cities & Towns, from URBAN3 images.

The 12 communities that Minicozzi examined are Asheville; Sarasota, Florida; Columbia, South Carolina; Billings and Bozeman, Montana; Cheyenne, Sheridan, and Laramie, Wyoming; Driggs, Idaho; and Grand Junction, Glenwood Springs, and Rifle, Colorado. Some of the studies were of areas only within the city limits, while others extended into the surrounding counties.

Though most of those are in the Rocky Mountain states (where studies were commissioned by the Sonoran Institute, an environmental organization), and though the sample did not include some regions, such as the Northeast, Minicozzi believes the conclusions apply nationally.

Urban3’s parent company is Public Interest Projects (PIP), a for-profit development company in Asheville that concentrates on multi-story buildings downtown. Earlier studies of tax revenue per acre in Asheville and Sarasota County, Florida, were reported in the September 2010 New Urban News. Some readers have pointed out that large-acreage big-box stores sometimes generate substantial amounts of sales tax, a revenue category not covered in the latest report. Minicozzi noted in response that the revenue from a six-story downtown building is so great that on a per-acre basis, it surpasses the sales tax revenue from a typical large-acreage store.

For more in-depth coverage on this topic: 

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