Category Archives: value capture

New Idea to Pay for Street Repairs Across Minnesota | kstp

KSTP reports on proposed legislation for a Municipal Street Improvement District.

 Instead of using money from property taxes, cities could use yearly tax assessments for on-going upgrades. Erhardt says it’s a good investment strategy that actually saves money in the long run. “Wasted money, temporary stuff, into the potholes which will blow out of there in short time and it’s not the potholes, it is the road deteriorating that bad.”

As a believer in local autonomy and road maintenance, this seems a good idea. This is a form of value capture, similar to Special Assessments, though different in some important, subtle, legal ways.

The League of Minnesota Cities says:

Existing funding mechanisms for street maintenance and reconstruction are inadequate. Special assessments can be onerous to property owners and are difficult to implement for some cities. Special assessments are not always useful for funding collector streets and other streets that do not abut private property. Property tax dollars are generally not dedicated and are sometimes diverted to more pressing needs such as public safety, water quality and cost participation in state and county highway projects. Municipal state aid (MSA) is limited to cities over 5,000 population of 853 cities in Minnesota–and cannot be applied to more than 20% of a MSA city’s lane miles. Existing MSA is not keeping up with needs on the MSA system.

Altoona Pennsylvania adopts Land Value Tax

The Altoona Mirror reports that Altoona Pennsylvania adopts Land Value Tax, sadly the report headlines on confusion. Altoona property tax bills confuse property owners :

“City Council voted to adopt “land value tax” in 2002, on the urging of The Center for the Study of Economics in Philadelphia, whose president, Joshua Vincent, had made a presentation the year before.

Land value tax shifts the basis for property tax to assessed value of land and away from assessed value of buildings. It’s designed to encourage development and discourage speculative hoarding of ground.

While 16 cities and two school districts in Pennsylvania use land value tax, Altoona this year became the first municipality in the country to go as far as to rely on land value alone.

Council introduced the practice with a 20-percent shift toward taxing on land alone, followed by successive annual shifts of 10 percent, until the transformation was complete.

Because collective assessed value of land in the city is one-seventh as much as assessed value of land and buildings combined, the city had to increase millage by a factor of seven to generate the same revenue.

That land millage is now 369 mills.

Applied to the $24.59 million assessed value of land in the city, it generated $9 million for 2011, theoretically.

Because the new millage is seven times higher than the millage under the old system, individual property owners pay less if their land value is less than one-seventh of their total assessed value – the amount that was the basis for taxation under the old system.

Conversely, owners pay more if their land value is more than one-seventh of their total assessed value.”

H/T Matt Yglesias

Mission exempts churches from ‘driveway tax’

Brad Cooper at the Kansas City Star reports on their Transportation Utility Fee: Mission exempts churches from ‘driveway tax’ :

Mission is giving in a little on an innovative, but heavily criticized way to fund road work.
The city this week agreed to exempt churches and some non-profit groups from a transportation fee that was intended to collect money for roads based on properties that generate the most traffic.
Touted as an alternative way to pay for roads short of raising property taxes, the fee set off a firestorm of complaints last year from critics who labeled it a “driveway tax.”
It prompted two churches — First Baptist Church of Mission and St. Pius X Catholic Church in Mission – to bring a lawsuit to halt the fee. The churches were represented by the Alliance Defense Fund, an Arizona legal organization that advocates for religious freedom.
The churches accused the city of violating state law by imposing a tax dressed up as a fee. Their lawyer equated the fee to taxing churchgoers.
City Administrator Mike Scanlon said today that the council agreed to exempt the churches if the Alliance Defense Fund dropped the lawsuit. The ordinance approved by the City Council takes effect Oct. 11. Scanlon declined to comment on the lawsuit.
Last year, Mission became the first city in Kansas — and possibly in the Midwest — to impose what is called a transportation utility fee on property owners to help pay for roads.
The fee is based on how much traffic each property produces. It shifts the burden for financing roadwork away from single-family homes that may not generate a lot of traffic, to properties such as box stores and government offices, which generate more traffic.
Homeowners will pay $72 a year in fees while the local Target store will pay about $46,000. According to the suit, First Baptist has been assessed $970.77 and St. Pius $1,685.19.
The fee generates about $830,000 a year. The decision to exempt the churches and some non-profits such as charities will cost the city about $70,000, Scanlon said today. Other non-profits, like government buildings, would still have to pay the fee.
The fee is intended to help the city bankroll a 10-year, $30 million plan for improving city roads. The city also plans to ask voters this fall to extend a quarter cent sales tax to contribute to the road plan.
The transportation fee coupled with the sales tax could bring the city about $15 million. Mission will count on other sources, like the state and federal governments, to help pay for the rest of the road plan,”

See our paper: Junge, Jason and David Levinson (2010) Economic and equity effects of transportation utility fees. Presented at 89th Transportation Research Board Conference, January 2010, Washington , DC. Journal of Transport and Land Use (in press).

Disclosure: I did a very very small amount of consulting for Mission KS appearing via Skype at a workshop on this fee about a year ago.

Value Capture for DC Streetcars

From the WaPo Commercial property owners may be asked to pay for part of streetcar costs

Commercial property owners along 37 miles of planned routes for a D.C. streetcar system may be asked to foot the bill for a quarter or more of the $1.5 billion system proposed by Mayor Adrian M. Fenty.

DC is looking at Business Improvement Districts among others.