At Lincoln House

The Weblog of the Lincoln Institute of Land Policy

August 24, 2015

Promoting Municipal Fiscal Health

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   The Lincoln Institute of Land Policy today launched a multi-year campaign to promote Municipal Fiscal Health in the U.S. and worldwide, to help cities confront an epidemic of insolvency and restore the capacity for local governments to provide basic services and plan for the future.
     “We need a fresh start that recognizes the structural elements of the fiscal stress we see in cities in the U.S. and all around the world, from Puerto Rico to China and throughout the burgeoning metropolitan areas in the developing world,” said George W. “Mac” McCarthy, president of the Lincoln Institute. 
     “Our roads, sewers and levees are crumbling under the weight of fiscal stress and underinvestment,” said former Transportation Secretary Ray LaHood, co-chair of Building America’s Future and a Lincoln Institute board member. “Putting cities on strong financial footing is critical for protecting the basic public goods and services many citizens take for granted.”
     As part of the Municipal Fiscal Health campaign, the Lincoln Institute will share public policy ideas, conduct research, provide education and training, foster regional and international dialogue and help equip policymakers with tools to address their communities’ unique fiscal challenges. These are just some of the activities in the mix:
     -- A kickoff congressional briefing September 10 in Washington D.C. featuring a keynote address by Kevyn D. Orr, former Emergency Manager for the City of Detroit, emphasizing the need to align policies at all levels of government—local, state, and national—and the importance of national policies, like unfunded mandates or competitive funding programs, in hampering or supporting local efforts to maintain fiscal health.
     -- Engagement in the UN-HABITAT global summit Habitat III in Quito, Ecuador in October 2016, to ensure that that financing is a critical pillar in creating a more balanced and equitable future for the world’s cities.
     -- Mobilization of new research, culminating in a major conference next year, on the fiscal impacts of historical planning decisions, alternative land-based fiscal instruments that support infrastructure investment, dynamic efforts to measure fiscal health, and the impacts of austerity measures and appropriate regional and national government interventions.
     -- The appointment of Lourdes Germán as a fellow at the Lincoln Institute to help build the intellectual enterprise around the municipal fiscal health initiative, and develop a scorecard that lends transparency to government fiscal discipline. She is director of the Civic Innovation Project, a government innovation and research platform, and has held past roles that included creating the municipal finance division at Fidelity Investments, developing and teaching a municipal finance curriculum at Northeastern University, counseling governments as a public finance attorney, and serving on various government civic boards.
     -- Expansion of the Fiscally Standardized Cities database from 112 to 150 of the largest U.S. cities, including two from each state in the U.S., and additional information on the status of public pensions in each city. The continually updated database makes it possible to compare local government finances across more than 120 categories of revenues, expenditures, debt, and assets.
     Whether measured in infrastructure gaps -- $3.6 trillion in the U.S. by some accounts -- or precarious financial instruments -- $3.3 trillion underfunded municipal debt in China -- the fiscal challenges facing the world’s municipalities are deeply troubling. In addition to the challenges of meeting existing infrastructure needs, growing urban populations and a changing climate require local governments to make additional, preemptive investments for the future of their communities, to plan and prepare for growth and sustainability.
     At the same time that cities face such historic needs, numerous municipal bankruptcies, most notably Detroit in 2013, have highlighted the problems of chronically meager or diminishing revenues, increasing costs of providing public goods and services, mounting historical obligations, and expanding responsibilities imposed both by higher-level governments and local citizens. While the housing crisis and Great Recession of 2008 exacerbated the problem, the roots of cities’ fiscal problems go back many decades.
     The foundation of the Municipal Fiscal Health campaign is to provide cities with the fiscal tools and strategies necessary to support their vital role in society, grounded in these six key areas:
     Intersection of Planning and Public Finance In many cities, planning for growth and major infrastructure projects is conducted separately from budgeting and finance. Coordinating these functions is critical for navigating the ups and downs of revenue cycles and preparing for the costs of maintaining projects over time.
     Land-Based Municipal Revenues Land-based revenue models, including the property tax and land-value increment tax, which captures the increase in property valuesresulting from public actions and investments, can play a significant role in municipal fiscal health. Communities lacking the basic tools or land ownership patterns to use these tools will require innovative ways to leverage land-based revenues.
     Multi-Level Governance Decisions by state, provincial, federal or central governments can have serious impacts on local government finances, and poor higher-level decisions helped catalyse the decline of Detroit and other cities in the United States.  Coordinating efforts to monitor local fiscal health and intervene in instances of local fiscal stress, as well as improving the allocation of state and federal funding, is critical to creating a legislative and political environment conducive to Municipal Fiscal Health.
     Monitoring Fiscal Health and Local Transparency Sound fiscal monitoring and transparency provide the opportunity for intervention before municipal fiscal stress degrades public services, endangers the integrity of infrastructure, or devolves into municipal bankruptcy.  The Lincoln Institute is developing a community scorecard to help communities and lawmakers track the fiscal health of their local governments.
     Capital Accounts and Infrastructure Investment Fiscal stress can have a serious impact on capital accounts, and is a factor in the chronic underinvestment in infrastructure -- $3.6 trillion in the U.S. and up to $40 trillion globally. Failure to maintain infrastructure has been responsible for catastrophes such as the collapse of an interstate highway into the Mississippi River, the explosion of buildings in Harlem due to leaks in century-old gas lines, and the failure of levees during Hurricane Katrina.
     Unfunded Obligations Unfunded obligations such as debt and public pensions, and forgone revenue such as tax abatements and concessions contribute to fiscal stress. For example, Chinese cities have amassed $3.3 trillion in debt in less than a decade without a clear path to repayment, Puerto Rico’s recent bond default threatens to cascade into the largest municipal credit default in history and unfunded retirement benefits hamper the post-recession recovery of many U.S. cities.
     Watch this space for more updates.

July 22, 2015

Managing State Trust Lands, Updated

2508_State_Trust_Lands_Updated_cover_webA comprehensive report on the management of state trust lands in the West has been updated to reflect the latest policy innovations and best practices.  State Trust Lands in the West: Fiduciary Duty in a Changing Landscape (Updated), co-authored by Peter Culp, Andy Laurenzi, Cynthia Tuell, and Alison Berry, is the product of Western Lands and Communities, a joint program of the Lincoln Institute of Land Policy and the Sonoran Institute.
     The report, an updated version of the original 2006 publication, State Trust Lands in the West: Fiduciary Duty in a Changing Landscape, was presented at the Western States Land Commissioners Association’s summer conference held July 19-23 in Moab, Utah. The updated edition including new graphics, charts, and appendices, reflectsthe current status of initiatives profiled in the case studies, to better help trust land managers identify successful land management actions.
     Available in print and by free download, State Trust Lands in the West (Updated) introduces readers to the concept of state trust lands, which Congress granted to each state upon inception for the purpose of supporting public institutions, primarily K-12 public schools. The report explores the history and current status of trust lands in the West, where 85 percent of the remaining 46 million acres of these lands are concentrated; and offers examples of initiatives to help land managers and other interested parties fulfill their multiple trust responsibilities while producing larger, more reliable revenues for trust beneficiaries, accommodating public interests and concerns, and enhancing the overall decision-making environment for trust management.
     State trust lands are an often misunderstood category of land ownership in the U.S. According to Stephanie Sklar, CEO of the Sonoran Institute, ”This popular report was updated and reprinted so it can continue to serve as an introductory primer on the issue; one that clearly illustrates the varying degrees of flexibility the states have in managing their trusts, all while meeting their fiduciary responsibility to the beneficiaries.”  The Sonoran Institute makes a practice of sending this report annually to all new trust land managers, she said. “The history and core content of the report have not changed significantly, but providing updated data makes the report more timely and useful.”
     State Trust Lands in the West and a companion website,, show how the states compare to one another: how much land each state holds in trust; the type of revenue generating activities conducted on trust lands; who the beneficiaries are; and the annual revenue generated and distributed to the beneficiaries. Across the West, communities are changing rapidly as a result of both population growth and an ongoing nationwide shift toward a more diversified, knowledge-based economy. This report presents strategies and approaches state trust land managers have taken in response to the changes:

  • Establish comprehensive asset management frameworks that balance short-term revenue generation with long-term value maintenance and enhancement
  • Incorporate collaborative planning approaches with external stakeholders to achieve better trust land management
  • Encourage real estate development activities that employ sustainable land disposition tools and large-scale planning processes, especially in fast-growing areas
  • Support conservation projects that enhance revenue potential, offer ecosystem services, and allow multiple uses of trust lands
  • Introduce comprehensive reforms to expand the flexibility and accountability of trust land management systems

     Earlier this year the Lincoln Institute published a related report, Conserving State Trust Lands, by Susan Culp and Joe Marlow, examining strategies to conserve state trust lands with ecological and environmental value, while maintaining the trust obligation to earn revenue for K–12 schools and other beneficiaries.

July 18, 2015

What would Henry George say?

IMG_2382Edward T. O’Donnell has a Google Alert in place for “Gilded Age,” and lately it’s been popping up with great regularity, as the term is invoked to describe the 21st century: whirlwind innovations in technology; a huge and growing gap between rich and poor; and deep unrest among the “99 percent” who toil far out of reach of top-tier wealth.
 The economist sounding the alarm about extreme inequality today is Thomas Piketty, whose 700-page Capital in the Twenty-First Century became a bestseller. The towering figure of the late 19th century in the original Gilded Age was Henry George, whose Progress and Poverty was equally if not more popular. In the penultimate Lincoln Lecture of the spring series last month, O’Donnell, Associate Professor of History at Holy Cross College in Worcester, Mass., and author of Henry George and the Crisis of Inequality: Progress and Poverty in the Gilded Age posed he question, what would Henry George say today?
   George occupies a special place in the history of the Lincoln Institute. John C. Lincoln was an inventor and industrialist based in Cleveland, and co-founded Lincoln Electric at the turn of the century with his brother, instituting progressive employee policies that are studied at Harvard Business School to this day. (The story is chronicled in the book Spark). He also became interested in land policy and the ideas of Henry George, establishing the Lincoln Foundation in 1946; in turn the Lincoln Institute of Land Policy was founded in 1974.
     George grew up in Philadelphia, and seemed to be a distracted young man, training as a printer, heading to California to pan for gold, and ultimately returning to journalism.  Struck by the contrast of lavish mansions on 5th Avenue and the poor Five Points neighborhood of New York City, and how landowners outside San Francisco were holding onto land in hopes of cashing in as the city expanded, George came up with the idea of a single tax on land.
     A select few landowners were benefitting handsomely from owning land, entirely because they owned parcels in good locations; they weren’t actually making anything – the comparison being perhaps the hedge fund managers of today. Attempting to translate his ideas into political power, George ran for mayor of New York City in 1886, and finished second behind Hewitt, though in front of a young Teddy Roosevelt. Ultimately he ended up fading from the spotlight and died in 1897.
     In addition to the broad point that extreme inequality threatens democracy, the most relevant part of the legacy of Henry George today may be the land value tax, O’Donnell said. Land-based financing tools that promote municipal fiscal health, such as the property tax and value capture – based in the notion that government action creates value for the private sector – are also prominent, especially in Latin America.  Leading figures such as Warren Buffett and Joseph Stiglitz have underscored the importance of George’s identification of wealth in land.
     “In the seventies, Henry George would have gotten half a sentence -- now he’s getting a paragraph!” O’Donnell said.
      In addition to Henry George and the Crisis of Inequality, O’Donnell is author of Ship Ablaze: The Tragedy of the Steamboat General Slocum (Random House, 2003), and co-author of the U.S. history college-level textbook, Visions of America: A History of the United States 2nd edition (Pearson/Prentice Hall, 2012). His scholarly articles have appeared in the Public Historian, Journal of Urban History, and the Journal of the Gilded Age and Progressive Era. O'Donnell has created video courses for the Great Courses Company titled, "Turning Points in American History" and "America in the Gilded Age and Progressive Era." He also writes a blog on American history,
     The lecture, “Are We Living in a Second Gilded Age?” can be viewed in its entirely in our video library here.

July 09, 2015

The past and future of zoning

Zoning_Rules_cover thumbnailZoning has an honorable history but is being over-used by local communities to block new housing development in ways that exacerbate sprawl and social inequity, according to Zoning Rules! The Economics of Land Use Regulation, a new book published by the Lincoln Institute of Land Policy.
     In a definitive economic, political, and legal account of local land use regulation, author William A. Fischel, a professor at Dartmouth College, reveals how homeowners seeking to protect their investment have made development difficult and costly.
     “State, federal, and judicial interventions to control local zoning have done more harm than good. To help grow the economy, decrease inequality, and improve the environment, America needs to take the wind out of the sails of local land use regulation,” Fischel says.
     For a century, zoning has been a useful and popular institution, enabling cities to chart their own course and homeowners to protect their main investment and provide safe neighborhoods. But as residential real estate prices have soared in recent years, Fischel says, concern about home values has created barriers to growth -- contributing to suburban sprawl, entrenching income and racial segregation, and slowing the growth of the American economy.
     Once dismissed by economists as a paper tiger, municipal zoning is now regarded as a major influence on the development of American cities. Zoning Rules! explores the behavioral basis as well as the economic effects of local government land use regulation. This requires not just an economic model of how zoning works but a deeper understanding of the social, political, and technological factors that guided its history over the last century. Zoning’s popularity is due to its success in protecting the value of single family homes, and anti-sprawl reforms must take this into account.
      Among the key takeaways from Zoning Rules:
      -- Curtail federal tax subsidies to owner-occupied housing, beginning with the home mortgage interest deduction. For tax purposes, housing should be treated like any other investment in terms of both its annual stream of services and its capital gains. “Economists should understand that reforms in that direction are not just about getting more revenue and leveling the playing field among types of capital taxation,” he writes. “The housing subsidy is most likely the major political basis for excessive land use regulation. Bringing the inflated owner-occupied housing sector down to earth would moderate the NIMBY syndrome and make public demands for land use regulation more reasonable.”
     --Take it slow on urban growth boundaries. Portland, Oregon, seems to have found a means of achieving infill development despite NIMBY sentiment, but constraining growth boundaries undermine local governments outside the pale and may cartelize the housing market, making the region less attractive and productive than it might be if exurban growth were simply charged its marginal cost.
      -- Re-assess concern about exactions. Courts and legislatures should be aware that new development can have public impacts that are greater than previous developments; the sequential nature of most development inevitably means that latecomers will be more burdensome than those that came earlier.
     -- Abolish rent control, which can reduce the supply of rental housing, driving more people into the owner-occupied sector and fueling more NIMBYism. Acknowledging political initiatives to cut back on rent control, Fischel suggests that “this is an instance in which the regulatory takings doctrine might be profitably deployed at the state level.”
     -- Re-examine the use of conservation easements for their impact on urban structure as well as their environmental benefits. Where urban development is possible, “perpetual easements are the worst form of suburban exclusion, in that they push development to remote areas and increase inefficient sprawl,” he writes.
     -- Play down the threat of monetary damages as a remedy for exclusionary zoning. Pennsylvania’s substantive due-process approach, which relies on injunctive remedies rather than financial penalties, makes developers allies with affordable-housing advocates without threatening the solvency of local governments.
     Fischel also writes that “the federal government should stop abetting parochial growth control schemes with false alarms about running out of farmland and other sky-is-falling issues. It should also limit litigation about environmental issues to parties that have an ongoing stake in the issues. Mostly, though, the federal role should be to leave the states alone.”
     And he concludes with an inversion of Daniel Burnham’s famous dictum, by suggesting that communities should “make only little plans.” Large plans are often high-profile targets for people who oppose development, he says. Modesty in scale often gets things done, not least because many reviews have thresholds that intentionally allow small players more leeway. More particularly, the megaprojects of urban renewal, like that of New London, Connecticut, create holdout situations and adverse publicity that more modest and contingent development can more easily avoid.
     William Fischel has taught economics at Dartmouth College since 1973. He has written four books, including The Economics of Zoning Laws (1985) and The Homevoter Hypothesis (2001), and more than fifty articles with local government themes. He served on the Hanover, New Hampshire, zoning board for ten years and was a member of the board of the Lincoln Institute of Land Policy for four years.
     Zoning Rules! is also available as an ebook at Amazon.

June 22, 2015

C. Lowell Harriss and David C. Lincoln Fellowships Named

     The Lincoln Institute of Land Policy announced recipients of the C. Lowell Harriss and David C. Lincoln Fellowships, named as part of a continuing effort to support research on the cutting edge of tax and land policy.
     The C. Lowell Harriss Fellowships, named in honor of the Columbia University economist (1912-2009) who served for decades on the Lincoln Institute’s board of directors, support work on dissertations. Administered through the departments of Valuation and Taxation and Planning and Urban Form, the program provides a link between the Lincoln Institute's educational mission and its research objectives by supporting scholars early in their careers. The recipients and their topics are:

  • Kyoochul Kim, Pennsylvania State University: Analysis of the Effect of Land Value Taxation on Land Value and Land Intensity
  • Ross Milton, Cornell University: The Political Economy of Property Tax Structure
  • Alexander Bartik, Massachusetts Institute of Technology: The Efficiency and Incidence of Improvements in Local Amenities: evidence from Census Data and Local Property Values
  • Lyndsey Anne Rolheiser, Massachusetts Institute of Technology: The Local Tax Implications of Inefficient Land Use
  • Paul Edward Bidanset, City of Norfolk, Virginia: Using Locally Weighted Regression with Simultaneous Spatial, Temporal and Attribute Weighting Functions to Improve Accuracy of Mass Appraisal Models
  • Charles J. Gabbe, University of California: Why are regulations adopted and what do they do? The case of Los Angeles
  • Andrew McMillan, University of Illinois at Urbana-Champaign: After the Foreclosure Crisis: Measuring Neighborhood Recovery and Contributing Factors
  • Linda Shi, Massachusetts Institute of Technology: Resilient regions: U.S. Experiments in Metropolitan Climate Adaptation?

     The David C. Lincoln Fellowships in Land Value Taxation (LVT) were established in 1999 to develop academic and professional interest in this topic through support for major research projects. The fellowship program honors David C. Lincoln, former chairman of the Lincoln Foundation and founding chairman of the Lincoln Institute, and his long-standing interest in land value taxation (LVT). The program encourages scholars and practitioners to undertake new work in the basic theory of LVT and its applications. These research projects add to the knowledge and understanding of LVT as a component of contemporary fiscal systems in countries throughout the world. The 2014-2015 DCL fellowships announced here constitute the fifteenth group to be awarded:

  • Alex Anas, Professor of Economics, State University of New York at Buffalo: The Effects of Land Value Taxation in Los Angeles and Paris in a Computable General Equilibrium Model
  • Kevin C. Gillen, Economist and Senior Research Consultant, Fels Institute of Government, University of Pennsylvania; and Guy Thigpen, Director of Research, Philadelphia Redevelopment Authority: The Empirical Development and Application of Land Price Indices
  • Tina Beale, Program Director, Land Economy and Valuation Surveying Division, University of Technology at Jamaica; Rochelle Channer-Miller, Assistant Lecturer, Land Economy and Valuation Surveying Division, University of Technology at Jamaica; Cadien Murray-Stuart, Senior Lecturer, Land Economy and Valuation Surveying Division, University of Technology at Jamaica; and Amani Ishemo, Associate Professor, Urban and Regional Planning Division, University of Technology at Jamaica: Towards Property Tax Compliance: A Case Study of Attitudes Toward Paying Property Taxes in Jamaica
  • Robert W. Wassmer, Professor, Department of Public Policy and Administration, California State University at Sacramento: Property Taxation, Its Land Value Component, and the Generation of "Urban Sprawl": The Needed Empirical Evidence
  • Zhou Yang, Assistant Professor of Economics, Robert Morris University: Differential Effects of Two-Rate Property Taxation: New Evidence from Pennsylvania

June 11, 2015

The nexus of water and land

FullSizeRenderWater is everywhere in the news these days – too much of it as a result of volatile weather leading to flooding and mudslides, or too little of it, very much in evidence in California’s struggles with drought. And because policies related to water have a critical relationship with land use and land policy, the Lincoln Institute is looking more closely at that nexus.
     In the latest in the Lincoln Institute’s spring lecture series last month, Scott Campbell, a joint fellow with the Lincoln Institute and the Loeb Fellowship at the Graduate School of Design at Harvard University, reported on his research about how land trusts play a role in the protection and management of  water resources. As he explained in Surface Tensions: Large Landscape Conservation and the Future of America’s Rivers, Campbell, most recently the director of a major land trust in Colorado, noted that local, state, and national land trusts have protected more land in the United States than is encompassed by America’s national parks. Working with private landowners—and using voluntary as opposed to regulatory frameworks—land trusts protect an additional 2,000,000-plus acres every year. But as the land trust movement matures, so does the thinking about the water resources, which flow from, through, and across the nation’s lands.
     In contrast to land, preserving the integrity of a resource that moves is inherently complex, Campbell said, especially when that resource is subject to vast sets of laws, regulations, and bureaucratic systems that have evolved over centuries. Including new components such as water rights makes the land trust transaction even more complicated. He recommended building on market mechanisms, incentives, and appropriate pricing to encourage maximum efficiency and conservation. Inter-basin compacts, water networks, and water trusts require water owners to be a “different kind of neighbor,” he said, with a big-picture view of how the management of the resource can benefit wilderness, agricultural land, and urban development.
     Campbell has worked in conservation, preservation, economics, and community development in southern Colorado—where large cities and agricultural towns face radically juxtaposed trends of growth and decline due to consumptive land use patterns and competition for scarce water resources. Under his leadership, the Palmer Land Trust earned the Jane Silverstein Ries Award from the American Society of Landscape Architects and the Award for Excellence from the El Pomar Foundation. Before his time at Palmer, he  served in the Colorado Office of Economic Development and International Trade, under Colorado Governor Bill Owens. There, he led the team that launched Colorado’s Heritage Tourism Program—helping communities capitalize upon the more than $1.2 billion in natural and cultural resource preservation investments Colorado has made through the Great Outdoors Colorado Trust Fund and the Colorado State Historical Fund. Colorado College recently awarded Scott the 2015 Livesay Award for Social Change.
     The lecture can be viewed in full here.

May 26, 2015

Lincoln Institute Study Compares Property Tax in 50 States

     The Lincoln Institute of Land Policy released the annual 50-State Property Tax Comparison Study, a comprehensive analysis of effective property tax rates in each state’s largest city, one rural area in each state, and the District of Columbia.
    The study, produced in partnership with the Minnesota Center for Fiscal Excellence, tracks the property tax as the primary revenue source to fund local government to provide basic services. The Northeast and Midwest generally have higher property tax burdens as compared to the West and Southwest.
    In part because the study measures effective property tax rates – that is, the actual tax payment as a percentage of market value – many struggling post-industrial cities, where property values have dropped, show up at the top of the rankings.
    "The property tax remains the foundation of sound municipal fiscal health," said George W. "Mac" McCarthy, president of the Lincoln Institute. Cities such as Detroit are working hard to make adjustments in valuations to bring balance back to this essential covenant, McCarthy said.
    Bridgeport, Connecticut continues to impose the highest taxes on homes worth $150,000 to $300,000, followed by Detroit, Aurora, Ill., Newark, and Milwaukee. Cities with the lowest effective residential property tax rates include Denver, Birmingham, Washington D.C., Honolulu, and Boston.


    Cities with the highest apartment property tax rates – in contrast to "homestead" or owner-occupied housing – include New York, Detroit, Des Moines, Aurora, and Bridgeport.  The lowest in the rankings are Salt Lake City, Washington, D.C., Denver, Cheyenne, and Honolulu.
    In terms of commercial property taxes, cities with the highest effective commercial rates include Detroit, New York, Chicago, Providence, Des Moines, and Bridgeport. The lowest taxes can be found in Wilmington, Del., Virginia Beach, Seattle, Honolulu, and Cheyenne.


    Cities with the highest industrial property taxes are Columbia, South Carolina., Memphis, Jackson, Miss., and Houston. Cities with the lowest industrial property taxes are Cheyenne, Wilmington, Honolulu, and Virginia Beach.
    The study is most useful when analyzed alongside other information about state and local tax structures, said Mark Haveman, executive director of the Minnesota Center for Fiscal Excellence. Some jurisdictions are more dependent on the property tax and have limited alternative options; some have higher income and sales taxes to finance a greater share of the cost of local government.
    There are also many policies to redistribute property tax burdens across the classes of property through exemptions, differential assessment rates, or other classification schemes.

Other highlights:

Median-valued homes (urban)

  • Rates range from high of 4.0 percent (Bridgeport) to low of 0.3 percent (Honolulu)
  • Burdens range from high of $6,601 (Bridgeport) to low of $529 (Birmingham)

Effects of parcel-specific assessment limitations

  • The economic recovery appears to be creating additional amounts of excluded homestead value benefiting long time property owners
  • The effects can be very large –a new owner of the median valued home in New York City, Los Angeles and San Francisco pays 30 to 40 percent more in property taxes than the average tenured resident of the same home.  

Business property vs residential property taxes

  • Most property tax systems (42 of 53 in total) give residential property "preferred" status by imposing higher effective tax rates on business property through differential rates, differences in the proportion of value that is taxable, and/or credits or exemptions for homeowners
  • When comparing effective tax rates on land and buildings for commercial property valued at $1 million versus median-valued homes for 53 property tax systems, the effective tax rates on business property are 71 percent higher.
  • New York City and Boston are at the high end – each with effective tax rates for business property that are at least 4 times higher than those for residences.
  • States that tax homestead properties more heavily only do so because commercial properties are under-assessed relative to residences
  • States with no parcel-specific assessment limitations and low differentials between residential and business effective tax rates have had slower growth in property taxes.

    The Lincoln Institute and the Minnesota Center for Fiscal Excellence have co-produced the 50-state comparison study for the last four years. The report released today, based on 2014 data, is available at the Lincoln Institute subcenter Significant Features of the Property Tax, which offers detailed data on the property tax in 50 states and the District of Columbia. Last year’s report is available here.
    The study can be used for further research on the dynamic impacts of property taxation, such as the extent to which commercial or industrial tax rates have an influence on locational decisions of businesses, or the relationship between tax rates and the proportion of untaxed or untaxable land in cities.

May 21, 2015

Renewal, house by house, in Detroit

FullSizeRenderThe shrinking of Detroit and the city’s vast areas of abandoned and vacant land – about 20 square miles, roughly equivalent to the size of Manhattan – have been well-documented. But a lesser-known story is how some neighborhoods are stemming the tide, fending off disintegration block by block and house by house. Representatives of the Detroit Land Bank Authority led a tour this week of homes in the East English Village neighborhood that are being auctioned off and rehabilitated. One woman who had purchased the home for about $8,000 was busy replacing floors and fixing up a big back garden. Another home drew prospective buyers at a recent open house; despite being in very rough shape, the property could sell for $20,000.
     If the trend continues, Detroit could cut in half the 80,000 structures set for demolition by a blight task force, said Craig Fahle, director of public affairs at Building Detroit. The excursion to the east side, near Grosse Pointe, was part of a Journalists Summit (On Twitter: #RVPSummit) organized by the Lincoln Institute and the Center for Community Progress, in association with the 2015 Reclaiming Vacant Properties Conference. About two-dozen writers and editors were in attendance.
     Tamar Shapiro, president of the Center for Community Progress, and Lincoln Institute President George W. “Mac” McCarthy led the group through the history of land banks and reclaiming abandoned properties. There is great interest in rehabilitating blighted properties, but often it just takes too long to get required permits or a certificate of occupancy – details in the bureaucratic process that need to be streamlined, McCarthy said.
     The journalists heard from Jeff Hebert, Executive Director of the New Orleans Redevelopment Authority (“Weak Market, Strong Market, and Everything Between: The Role of Market Responsiveness in the Fight Against Blight”); Alan Mallach, co-author of Regenerating America’s Legacy Cities (“What’s Really Happening on the Ground: Reinvestment and Displacement in Post-Industrial Cities”); Gus Frangos, president of the Cuyahoga County Land Reutilization Corporation, and Kim Graziani, director of National Technical Assistance, Center for Community Progress (“120 Land Banks and Counting: Can They Transform America's Distressed Neighborhoods?”); Frank Alexander, Sam Nunn Professor of Law at Emory University (“Zombies, Delinquents, and Other Trouble Makers: Understanding How Properties Get Stuck”); and Toni Griffin, director of the J. Max Bond Center on Design for the Just City, who showcased a new platform for sharing innovations (“Designing a Just Post-Industrial City”).
     The group also engaged in a spirited conversation about the challenges of writing about struggling cities and gentrification, even as there is a growing readership for stories about cities and numerous online venues such as Next City and CityLab. As organizer of the Journalists Forum on Land and the Built Environment and partner in UN-HABITAT’s  Urban Journalism Academy, the Lincoln Institute seeks to improve the dialogue about land policy by helping turn often highly technical material into compelling journalism.

May 20, 2015

Data-driven decision-making

  The ability to visualize data – where residents have health insurance, how close they are to a park or library, or who is going through foreclosure – has become prerequisite in citybuilding these days. It’s almost hard to imagine making policy decisions or launching initiatives without big data as a guide. And as Maggie McCullough, founder and President of PolicyMap, made clear in a presentation at the Lincoln Institute last month, the technology is getting better all the time.
     PolicyMap, an online data and mapping tool that enables government, commercial, non-profit and academic institutions to access data about communities and markets across the US, is a project of The Reinvestment Fund, a nonprofit community development financial institution that works across the Mid-Atlantic. The idea was simple: create an enormous online library of place-based data and make it available through a familiar map interface, empowering individuals and organizations with “location intelligence.”
     A veteran in housing at local, state, and federal agencies, McCullough said she saw the need to present a wide array of data in an easy-to-understand and actionable format. Whether at the city level or at the Census, CDC, or FBI, information is “available but not accessible,” she said. Users can build maps based on 37,000 data indicators including demographic information, home sale statistics, health data, mortgage trends, school performance scores, unemployment rates, and crime statistics. The maps have been used for research, market studies, business planning and site selection, grant applications, and impact analysis – the latter especially important at a time when scarce resources need to be targeted for maximum impact. The applications are numerous, from siting health care centers, supermarkets, or neighborhood libraries, to tracking tax delinquencies and vacant lots.
     The platform has a unique application as well in fostering interdepartmental coordination and strategic planning by sharing data across city agencies, McCullough said.
     “It’s always better to be making decisions based on information, rather than based on intuition,” said Lincoln Institute President George W. “Mac” McCarthy, who promised future collaboration with PolicyMap on zoning and land use information, for example. “We want to bring data to practice and policy on the ground.”
     The presentation, The Power of Data-Driven Decision-Making, part of the Lincoln Institute’s spring lecture series, can be viewed in its entirety here.
     McCullough has worked for the City of Philadelphia's Office of Housing, Governor Casey of Pennsylvania, the Office of Management and Budget in the Clinton Administration, and within the U.S. Department of Housing and Urban Development. She joined The Reinvestment Fund in 2004, conducting housing-related research and analysis for several of its public sector and foundation clients. She holds a Masters Degree in Governmental Administration from the University of Pennsylvania and has a B.A. in Economics and Political Science from St. Joseph's University.

May 07, 2015

Cities Increasing Reliance on Fees as Other Revenues Fall

     Cities continuing to struggle with finances have been increasingly relying on user charges and fees, according to an analysis of freshly updated data from the Lincoln Institute of Land Policy’s database on local government finance, Fiscally Standardized Cities.
      User charges and fees - for sewer systems, waste management, parks, city-run hospitals and airports, and for a range of services including education, housing, and community development - are the only major source of revenue that has grown since the start of the Great Recession in 2007. On average, after adjusting for inflation, per capita revenues from user charges grew by over 7 percent between 2007 and 2012. During the same period, property tax revenues fell by 5 percent, and revenues from state aid and from other taxes by nearly 10 percent.

     The growth in user charge revenues continues a long trend. Data from the Fiscally Standardized Cities database show that after adjusting inflation and population change, user charge revenue in the average city in the database increased by 143 percent from 1977 to 2012. Revenues from local taxes other than the property tax, such as a local sales tax, increased 88 percent, while revenue from more traditional sources increased at a lower rate in that period. State aid grew by 53 percent, and property tax revenues by 17 percent, while federal aid actually declined by 18 percent.


     The increased reliance on user charges has helped cities offset drops in other revenue sources, but has not led to increased spending. In fact, real per capita spending reductions from 2009 to 2012 occurred across almost all categories of spending, including public safety and education. Further, cities have scaled back dramatically on basic investments: the largest percentage cuts occurred in capital outlays (18.4 percent). These reductions in capital spending occurred at a time when many central cities are facing large unmet infrastructure needs due in large part to aging water, sewer, and transportation systems, and during a time when the interest rate costs of financing capital investments are at historical lows.
      “Cities are making unwarranted choices to make fiscal ends meet in the short term while compromising long term security and stability,” said George W. “Mac” McCarthy, president and CEO of the Lincoln Institute of Land Policy, who called for a revisiting of the fundamental covenant of property taxes - the focus of opposition and tax limits - to fund services and restore “municipal fiscal health.”
     “The costs of these choices are invisible until they erupt in dramatic ways - when bridges fall into the Mississippi, or buildings explode in Harlem as a result of hundred-year-old gas lines, or are debilitated by social protests. We are facing real structural challenges regarding the way we supply the basic public goods that most people take for granted.”
     Writing in the current issue of the Lincoln Institute’s quarterly magazine Land Lines, McCarthy noted how many municipalities are increasing reliance on revenue from traffic citations and the sale of tax liens to investors, as they struggle with decades-old planning decisions that have decanted jobs and population to the suburbs, and costly federal mandates in the upgrading of infrastructure.
     The Fiscally Standardized Cities database uses data from the Census Bureau to provide a full picture of all revenues raised from central city residents and businesses and spending on their behalf, whether done by the city government or an independent overlying government. The estimates add together revenues and expenditures for city governments and an appropriate share from overlying county governments, school districts, and special districts, allowing a meaningful comparison of local public finance across 112 cities. The database includes data up to 2012, the most recent year for which Census Bureau fiscal data are available. Users can build their own tables to analyze the data in the database, to compare property tax revenues in two cities, rank all cities by their school spending, investigate changes in public sector salaries over time, or see which cities are most reliant on state aid to fund their budgets.
     In 2012 both revenues and spending in most of the nation’s largest central cities remain below their pre-recession levels, said Lincoln Institute fellow Andrew Reschovsky, who teamed with senior research analyst Adam Langley at the Lincoln Institute and Howard Chernick of Hunter College to create the database. “Incomplete evidence from 2013 and 2014 data suggest that in 2015 many central cities remain in weak fiscal health, with inadequate revenues to provide important public services to their residents.”
     The single largest category of user charges are for sewers, and these grew substantially during and after the Great Recession. Sewer charges averaged $221 per capita for the 112 FiSCs in 2012 - up 16 percent from 2007 in real per capita terms. That is nearly $900 for a family of four. In some cities, sewer charges are much higher than average, including Detroit ($728), Seattle ($662), Atlanta ($503), and Tacoma ($501). Higher sewer charges are driven by many factors, including rising costs associated with meeting wastewater treatment requirements under the Clean Water Act.


       Categories of charges include sewer systems, hospitals, airports, solid waste management, parking, seaport facilities, highways, school lunch programs, higher education, parks and recreation, and natural resources. The categories are detailed by the U.S. Census Bureau in this classification manual.