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Thursday, September 20, 2007

McCities: Taxing Ourselves Into Homogeneity

By Greg Bell
Utah State Senator, District 22

The Hinckley Journal of Politics (2007, Volume 8) recently published my article entitled:
Sales Tax and Land Use: Are Cities Being “Driven to the Mall?” You can read the entire article here. homogeneity
"In 1999, citizens in part of unincorporated Salt Lake County, Utah were forming the city of Holladay. As they were deciding the boundaries for the new city, they considered the tax revenues that various properties would bring to their city. They could include the Cottonwood Mall, a traditional anchored shopping mall, and/or Cottonwood Corporate Center, a large state-of-the-art, mid-rise office complex, which is a hotbed of high-tech companies located near upscale residential areas where executives for such companies might tend to live. Holladay chose the mall over the office park because of the tremendous sales tax revenue the city would reap from it (Linton, 2004). Holladay would have gained little on a net basis from including the office park in its municipal boundaries because the city does not participate in the significant personal and corporate income taxes generated there." (P.70.)
The article points out that cities have every incentive to develop retail stores which contribute few high-paying jobs, while they have almost no inducement to create job sites for technology and other high-paying jobs. Hello!! Why do we drive our cities to do the very opposite of what our state economic policy is?: to get high-paying jobs.

The other serious problem is that this heavy distortion toward sales taxes drives much of our land use decisions in this state.
"One wonders whether the citizens of the cities who have developed commercial/retail facilities for sales tax revenue are pleased with the result. Do they view retail and commercial development as necessary to finance a modern city? Do they enjoy large retail developments as providing desirable services and amenities? Do they object to their city’s change from a bucolic and identifiable town to a sprawling suburb with fast-food franchises and discount super-stores as their gateway? Has there been a consequent loss of Main Street businesses such as the hardware store, the local grocery, the diner, the deli and the barber shop, and have the residents noted and regretted this loss? Do they care that they now can’t tell when they’re leaving their town and entering the neighboring one? Do residents care that when most Wasatch Front cities are viewed at their freeway entrances, they are becoming indistinguishable from each other and from the suburban areas of Phoenix, Las Vegas and Southern California? Do they care that we are close to having the same McCity at every freeway off-ramp? Do they regret that suburban commercial development is almost exclusively auto-dependent, sprawl-type development? Do they care that the gateways to their cities and towns are no longer a tapestry of fields and pastures and unique older homes, but a predictable pattern of four-lane roads lined with big box retail, car lots and malls? Will they miss the ambience and connectedness of the traditional town with its smaller scales and the unique flavor deriving from hometown shops and stores and old buildings? Will there be any place to walk to anymore? Is it still possible for a ten-year old living in suburban Utah to ride his bike to his baseball practice or to get an ice cream cone?" (P.73.)
The article concludes:
"Like all rational creatures, city leaders respond to financial incentives. Utah’s municipal fiscal structure provides a strong bias in favor of cities facilitating regional retail development. Most of this development has been sprawl-type, auto-oriented retail and commercial facilities. Such development often comes at the cost of losing traditional Main Street-type businesses and the scale and flavor of the historic places from which these [cities] have grown. The economic development incentives applicable to cities are misaligned with the State’s goals of non-retail job creation and business growth. Cities’ fiscal bias towards retail development has worked against siting more industrial and office facilities in suburban locations, which has seriously increased commuting and its attendant public and private costs such as congestion, pollution, and highway capital and maintenance costs. The current municipal point-of-sale sales distribution formula is neither fair nor good policy. A new formula could protect cities that have invested in retail facilities, yet could begin to wean municipalities from over-reliance on sales tax dollars and even give them incentives to align themselves with State economic development goals by providing for more office, industrial and non-retail commercial development in their communities." (P.74.)
Currently, local option sales tax is about the only politically viable tool for Utah cities to increase revenues. Until we develop the political will to limit that dynamic we will continue to get more of what we’ve been getting–and it ain’t pretty.


Blogger Jesse Harris said...

Cities who focus so strongly on retail to the exclusion of office space are short-sighted and will experience long-term problems with cash flows. Sales taxes are notoriously fickle and, as you noted, are generated by low-paying jobs with high turnover. While an office complex don't generate as much sales tax revenue, there's still the property tax revenue.

This also ignores the benefits of having higher-paying professional jobs that result in better home values, less traffic congestion via shorter commutes and gains in long-term owner-occupants that keep neighborhoods desirable. Of course, this probably goes a long way towards explaining why so many recently incorporated cities are so horrendously mismanaged from a fiscal standpoint.

9/21/2007 9:19 AM  

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