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Measuring Productivity

One of the reasons so many cities got into financial trouble during the recession was that development fees had been temporarily subsidizing the maintenance of infrastructure associated with low-density, low-yield, unproductive places. When development stopped, cities had a lot of infrastructure on their hands but the tax revenue from the property this infrastructure supported did not pay for the long-term maintenance of that infrastructure. I recently used the term "more productive" when referring to mixed-use, walkable neighborhoods and a reader asked for an explanation of what I meant. The best way to understand this is to take a few example properties from Mountlake Terrace. We'll compare Arbor Village, a new mixed-use building in the Town Center, the 7-11 at 52nd/212th with a large surface parking lot, a typical single family residential lot in the 8400 zone, and Roger's Marketplace in the Town Center.

7-11

02_138151724901434520650065075006000 [su_table]

Property Acres Taxable Value Taxable Value/Acre MLT Taxes/Acre
SF lot 0.19 $166,700 $877,368 $2,047
7-11 0.54 $459,200 $850,370 $1,987
Rogers 2.14 $2,450,000 $1,144,890 $2,675
Arbor Village 1.26 $20,700,000 $16,428,571 $38,383

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Looking at this table I hope you can understand what I mean by "more productive." Look at what happens when the City allows and encourages walkable, mixed-use development. The tax revenue per acre is increased by 15 to 20 times by taking an autocentric box grocery store or single family lots and building a walkable, mixed-use project.

Some might argue that encouraging development because it will increase the revenue for the City is just the City wanting to get more money from its property owners. To that I say "YES, absolutely." The City is responsible for balancing its budget, for providing all the services and infrastructure we all desire with the tax revenue it brings in...which is a function of the value of the properties in the City. Encouraging development that results in a higher tax yield is the responsible thing to do and is going to end up benefiting the City as a whole.

More general tax revenue is not just going to benefit the neighborhoods where this development occurs. We'll have money to finally improve your neighborhood park, or to fix the sidewalk in front of your house, or to hire another police officer to improve response times.

In addition to the property tax issue, walkable, mixed-use neighborhoods will generally (ultimately) provide more jobs, bring in more sales tax, and bring in more utility revenue. That's what I mean by "more productive."

Now there is nothing wrong with single family residential neighborhoods. But a City full of only single family residential neighborhoods will generally only be able to financially support low-quality infrastructure and minimal services and amenities for its residents. For several decades, this was Mountlake Terrace. For example, while sidewalks are very important, there is very little financial return  when a City builds new sidewalks in a residential neighborhood. The property value of the adjacent homes might go up slightly (and therefore the property taxes), but it in no way will pay for those sidewalks. But an investment in sidewalk and road improvements that encourage development of more productive places (like the Main St. project) will significantly increase the tax revenue to the City to pay for that infrastructure (and infrastructure in other neighborhoods).

Of course this financial aspect is not the only benefit of walkable, mixed-use development and you can peruse the other articles on this site for more.

For more reading elsewhere on the topic:

Weekend Reads: May 30

Four Qualities of Walkable Places