Thursday, September 29, 2011

Development Matters

ECONorthwest recently released a report on the long term financial challenges facing municipalities commissioned by the League of Oregon Cities.  The headlines are about benefit costs, and how their growth is far out of line with growth in government wages and property tax revenue.  But the report touches on something I don’t often see mentioned, the connection between development and property tax revenue.

From the intro discussing property taxes (emphasis mine):

Even though property taxes are not directly tied to personal income, it makes sense that the two go hand in hand. As a city experiences growth in population, and as its residents see their incomes grow, they drive demand for new housing and new businesses. This new construction fuels growth in assessed value, and in property taxes.

If measures 5 and 50 are a problem because they limit growth in property taxes, development is a salve that eases the problem.  And note that location matters:

Cities will also experience unequal property tax growth. Cities able to capture new residents and employment growth will experience more property tax growth, whereas cities unable to attract residents and jobs will experience personnel costs that far exceed any growth in property tax revenue.

If it’s easier to develop in Washington County then that’s where development will go, and so will the property tax revenue. 

This is why I get ticked when I see people blithely trying to kill development projects or redlining whole neighborhoods, as if there weren’t a cost to their actions.  Forestalling such development leaves the city and its residents poorer.  Some buildings are worth paying that cost in order to save and some are not.  But an honest discussion of costs and benefits is impossible when you miss one entire side of the equation.

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