Reengineering the Viability of Community Revitalization

By Marilyn Rodgers
Land Value Taxation has received various reviews across the US and throughout the world.  Many efforts have been quite successful and there are various reports that consider it a “must do” for revitalization.  Further, cities have taken it seriously enough to create unbiased reviews for consideration and others in states such as California and Pennsylvania have each instituted LVT with success.
The “Why’s and Wherefore’s” of Land Value Tax are briefly listed on urbantools.org :
 
·         A shift to LVT, even when structured in a revenue-neutral manner, usually results in net tax reductions for the vast majority of residents.
 
·         By reducing or eliminating the tax on improvements, there is a greater incentive to build, to build with higher quality materials, to maintain, to avoid blight, and to redevelop economically depressed areas.
 
·         Cities are almost always on the “short end of the stick” when economic development dollars are handed out.  This program helps achieve the same goals with no public investment.
 
·         When cities obtain permission to give out tax abatements, they lead to a revenue loss to the community with no assured payoff later.  LVT is purely revenue neutral to the city.  There is no tax shifting to citizens and property owners who have already done their bit.
 
·         A tax on land also has the advantage of being a “value capture tax”.  A new public works project may make adjacent land go up considerably in value, and thus, with a tax on land values, the tax on adjacent land goes up.  Thus, the new public improvements would be paid for by those most benefited by the new public improvements — i.e., those whose land value went up most.
 
·         A tax on land has been shown to result in better land use patterns and more in-fill development.  This has the benefit of reducing sprawl.
 
·         Support for LVT cuts across political lines. 
 
·         Free-market economists like how it reduces distortions in economic decision-making. 
 
Environmentalists like how it reduces sprawl and helps fund public transportation. 
For those of you that wish to check out some sites for your own research, here are a few you can start with:
 
·         Henry George Foundation 
 
·         And, some words from Kunstler – Author of “Home to Nowhere” on Earthrights.net 
There are others, but this is a good start for the uninitiated.  For the rest, many of you are familiar enough with the concept while others have a solid grasp.  We need open dialogue to assure the voice of the citizen is heard so, we’d like to hear from you – pros and cons – your opinion of LVT for a future article and presentation to our city leadership.  After all, in order to affect change we need input from people, not just pols.  So, please, comment away!  Thanks.
Image: Nathan Mroz, Buffalonian4life

About the author  ⁄ buffalorising

31 comments
whatever
whatever

No need to apologize about timing. My reply to TMarch wasn't meant to say you should reply faster. I was just disagreeing with his/her complaint about my question.

What I was curious about is if there's any current examples of cities using LVT successfully, rather than discontinued or agricultural examples or info from many years ago. So I'm still not clear what those would be. It would just seem advocates might be able to say something straightforward like "Cities A and B are two good current success stories and here's how it's succedded there".

If it was a great success in Pittsburgh's renaissance why wouldn't they be sure to continue it or expand it instead of mostly eliminating it? I see what you wrote, and wikipedia says something similar, but why would they stop doing something if it's been good? (I'm not demanding an answer to that.)

dcoffee
dcoffee

Bottom line is that we have to find some way to eliminate the tax punishments that go along with improving your property. If I'm already paying the cash to make my building look better, and I'm improving the neighborhood by keeping up my property, why does the city punish individuals for being constructive. I think tax increases should be gradual, and based on the block as a whole. We also need to eliminate the incentive to let your property sit and deteriorate. The only recourse we have now is code violation fees.

Market value is not really how they determine the value of a house, we bought our place for $46,000 and immediately the assessed value was $59,000. How do they get the assessment values for homes? I bet it's needlessly complicated, and and taxing he whole block at the same rate would be easier and save time and money.

Another interesting point is that they rarely devalue properties. They'll re-assess homes on Richmond, and in the Elmwood village, but on the East Side? Do you really think they will reduce assessments as the neighborhood declines?

So can we acknowledge that the current system is a problem, and try to find a constructive solution? Perhaps we need different rules for residential streets and commercial districts. Maybe lot size, or building square footage should be taken into account.

MRodgers
MRodgers

Dear "whatever:"

Let me clarify a point in the post where I wrote:

"We need open dialogue to assure the voice of the citizen is heard so, we'd like to hear from you - pros and cons - your opinion of LVT for a future article and presentation to our city leadership."

This post was to open dialogue, as stated, and also create an air of research to open people's minds about the methods other cities utilize to create better communities. I apologize for not posting before this to "answer the question," but I was at work all day.

California's LVT areas are primarily located in agricultural districts. This effort started decades ago and the result today is that over 100 districts, serving four million acres of the best farmland in the state and raising about 75% of its crops, have realized the elimination of speculation. It was also during the launch of the program in the early 1900's that California became a leader in US agriculture.

There are reports from the 1980's through today that cite anywhere from 15 to 27 cities utilizing a form of Land Value Tax. Scranton, Pittsburgh, Harrisburg, Allentown and others are good examples of the types of plans and their pros and cons.

Pittsburgh experienced a second renaissance during the '80s, but a reassessment in 2003 inaccurately penalized many small homeowners and the city dumped the two-rate tax. and, the use of this tax was an important factor in Pittsburgh's second renaissance during the '80s. But, a reassessment in 2003 inaccurately penalized many small homeowners and Pittsburgh abandoned the two-rate tax.

Pennsylvania cities include:

Aliquippa in 1988, Allentown in 1997, Altoona in 2002, Clairton in 1989, DuBois in 1991, Duquesne in 1985,

Ebensburg in 2000, Harrisburg in 1975, Lock Haven in 1991,

McKeesport in 1980, New Castle in 1982, Scranton since 1913, Steelton in 2000, Titusville in 1990, and Washington in 1985. Sources for this information come from List of cities from King and Nesbit (2007).

On top of that, in Amsterdam, NY they use a "graded tax plan" where land is taxed at a higher rate than improvements.

Additionally, there are other forms of Land Value Tax utilized not only in the US but throughout the world.

whatever
whatever

It sounds like you want to criticize the asking of a directly relevant simple question. Did she post this article expecting only praise and no questions about any claims?

My question stands. What are cities in PA and CA currently having success with LVT as her article's second sentence says?

If she's willing to answer it, maybe there's more to discuss about examples in those states. Or if she isn't, that's okay and says something too.

TMarch
TMarch

Duh, backatcha, whatever. You only brought Wikipeia to the table and I think this is an article to stimulate conversation. So while your sitting there all day and commenting on everyone elses work, why don't you do some homework yourself?

scottw
scottw

The city real estate department puts values on properties based on several variables, location and demand for example. Most vacant lots average $1. to $2. per square foot in areas of lower demand, the values go up from there but they are pre set values and don't change depending on the intended use, usually.

whatever
whatever

TMarch, Duh. My comment _asked_ for other references, so obviously I wasn't saying wikipedia is anywhere near the whole answer. But that doesn't mean what it mentions is irrelevant either.

The author MRodgers said cities in CA and PA have "instituted LVT with success". Why is it too much to ask her what are sources about that? If she wrote it, shouldn't she be able to easily say where the LVT successes in PA and CA are discussed?

The article you linked was published in 1997 and in its table says "as of 1995". Obviously its info and references are at least that old. I don't know enough to favor or oppose it, but apparently Pittsbugh mostly eliminated use of LVT in 2001 (except in one district as a surcharge above regular property tax). Maybe they had reasons to move away from using LVT, but then again that's just one city.

Can anyone answer what the cities in PA and CA to which MRodgers referred as currently having success with LVT, and what are its recent signs of success in those? Shouldn't that be an easy question for advocates to answer as a start?

JSmith
JSmith

Land Value Taxation sounds like a good idea at first, but there are a few things I don't understand about it. Who decides how much a lot is "worth", if not the market? If you do use the market to determine the value of a lot (as we currently do with property), aren't you then back to taxing the improvements?

There's a big empty lot at 50 Court Street and I think it should have a 20 story skyscraper on it. Can I really force Carl Paladino to build one just by taxing the parking lot as if it were a 20 story building? This seems to ignore basic supply-and-demand concepts.

I guess I don't fully understand the concept. I do see the value in not "punishing" someone for building on a parking lot. I'm just not clear on how the value of the land is assessed without taking the market into effect. And if the market has said that the land is low-value, then how can you force it to be otherwise?

TMarch
TMarch

You really need to go beyond Wikipedia for background. I fond this one about Pensylvania. http://www.earthrights.net/docs/success.html And, if you read the article and comments you will see other references. I like it when an author allows me to search things out and think. I believe that was the intention of this article and for the feedback.

ReginaldQMerriweatherIV
ReginaldQMerriweatherIV

Agreed, but the demand is not created by subsidies, rather, the subsidies were developed and expanded because .

quick thought experiment:

How would this LVT be implemented? At a city wide level or a county wide level?

If only implemented at the city wide level, more than a few structures would be build on vacant lots in higher demand areas. The vast majority of lots, however, would be abandoned, to be taken over by the city, as their owners leave the city limits and begin investing in areas where they aren't forced to develop land to a set standard. This would leave us with MORE vacant structures and lots, while also helping to drive up the value of living in the suburbs.

If the county took on a LVT, the first place these developments would take place is out in the suburbs (Such as Benderson's proposed Maple rd. complex near UB) because there is significant demand for space.

The Kettle
The Kettle

RQM>"Believe me, it drives me nuts to see the old farms in North Amherst and Clarence torn up for another subdivision, but there is a demand to live out there."

All I would ask is for the government to stop enhancing that demand.

scottw
scottw

It sounds like a constructive means of stepping up our city's suffering tax base without penalizing home owners for making property improvements. There's a huge a tax base waiting to be drilled by taxing vacant, underutilized and abandon property. I say let's do it.

scottw
scottw

The problem being Sean that the City of Buffalo is notorious for making inner city development difficult and expensive. I wish I could remember exactly the date of the article that was in the Buffalo News some several years back, perhaps someone else will remember it too; The article basically stated that most larger chains, companies, firms etc (we don't want most chains downtown, but I digress,) found it cheaper, often by the tens of thousands, and less complicated to get through the zoning and ordinance issues in Amherst for ex. than in the City of Buffalo. I recall one example that they sighted in which a company that wanted to be in the city would have had to foot expenses of some $80k or more where as it cost them a little over $500. to get the same project done in Amherst. Anyhow, that's what I remember.

whatever
whatever

MRodgers in the article>"others in states such as California and Pennsylvania have each instituted LVT with success"

Which cities in CA and PA are having success with LVT?

Wikipedia says Pittsburgh tried LVT for a long time but then in 2001 mostly ended it (kept only in one district as surcharge above regular property tax).

http://en.wikipedia.org/wiki/Land_value_tax_in_the_United_States

They mention other cities in PA use it, don't list them, and don't say anything about success or lack. Nothing mentioned there about CA cities using it.

What are references about LVT successes in CA and PA?

MRodgers
MRodgers

Nice site - I like this comment that was linked to yours:

Fortune Magazine, Summer 1972, "Fortune Defends The Property Tax"

"The case against the property tax is generally overstated. Its benefits are frequently overlooked and most of its shortcomings can be corrected.

"Economists generally agree that low property taxes encourage speculators to hold land off the market for appreciation, since the cost of holding the land is insignificant compared with the potential gains. Between 1956 and 1966 land prices almost doubled -- rising from $270 to $520 billion.

"Realistic property taxation would compel the owners of undeveloped and underdeveloped property to pay a fair share of the cost of services from which their land derived its additional value.

"More controversial, but of inestimable importance, is the proposal, endorsed by many economists, to shift the burden of real-property taxation from improvements to land. Studies have shown that 40 percent of the market value of ordinary real estate is traceable to land."

sbrof
sbrof

the only people that complain about the developments are the neighbors losing their piece of the 'country'

the benefits to building in the city is that there are already all the infrastructure needed to support a much higher population. Two very different different scenarios to greenfield development.

grad94
grad94

very happy to see land value taxation discussed here. no taxation system will please all of the people all the time, but lvt is a big improvement over what we now have, for reasons that everone has already stated.

i heard that amsterdam ny has enacted it. while trying to verify that, i found this...

http://www.groundswellusa.org/feet3.htm

ReginaldQMerriweatherIV
ReginaldQMerriweatherIV

So, because Lancaster and Orchard Park overbuilding their environment, we better make sure Buffalo makes the same mistakes? Thats ridiculous.

And people argue about the continued build up of the suburbs all the time. Just not in your city-centric universe or here on BRO. Believe me, it drives me nuts to see the old farms in North Amherst and Clarence torn up for another subdivision, but there is a demand to live out there. Certainly more of a demand than exists on the east side.

sbrof
sbrof

then you should be just as angry with Uniland, Benderson and all the suburban developers. They have been given huge amounts of money and 'subsidies' to develop places like Cross Point, North Point and all the rest.

Hell the construction of Millersport highway \ the Autobahn was nothing more than a giant subsidy to spur development in Amherst around a Publicly supported university... you know. it worked.

Everything comes down to government spending at some point. It isn't as evil as you think. The first ring suburbs only developed because of public subsidies that gave people free money to build a new home and NOT renovate their existing homes.

All commerce in America is, has been and will always be driven by the government's policies, subsidies and will. The only time it wasn't that was probably prior the time of the railroad barons.

sbrof
sbrof

but the current 'mechanisms' are continually building subdivisions and commercial building out in Wheatfield, Clarence, Amherst etc... where there also must be new schools, power, sewer, roads, fire protection, snow plowing...

but no one else seem to say how that shouldn't happen because of our lack of population growth and jobs.

The Kettle
The Kettle

What of the cost to the public for eventual demolition of these properties and or the risk to the public by letting them go fallow? I think the est for demo of AM&As was over 10 mill due to the city. I like to think of rehab incentives as an ivestment to put derelict buildings back to productivity as well as public beautification.

It would be a different story if his development was a new build.

And yes, developers and the general public all benifit from subsidies in some way.

MRodgers
MRodgers

At the very least, the increase of rehabilitation due to lessening the penalty of reassessment would provide a stronger overall tax base for the city that goes beyond the property tax conundrum.

Matthew.Ricchiazzi
Matthew.Ricchiazzi

YES!!! I was very encouraged to read this!! We must eliminate the Property Tax's Investment Penalty. We should not penalize homeowners for sweat equity, or for investing in our neighborhoods. The LVT would redistribute the property tax burden away from homeowners and onto vacant properties and urban parking lots. It creates an inventive for property owners to make their properties as productive as possible (rather than penalizing productivity, as the property tax currently does).

ReginaldQMerriweatherIV
ReginaldQMerriweatherIV

I agree that it would, in all likelihood, encourage development upon vacant lots. I just disagree that LVT eliminates market distortons because the very rate of LVT is, in and of itself, a market distortion.

Nor does it change that fact that we are discussing which mechanisms will bring more physical 'development' into an already overbuilt region that continues to bleed jobs and population.

jimmy
jimmy

It looks like Termini is setting the groundwork for backing out of the AM&As and Lafayette Hotel projects. It looks like he needs a better subsidy from the state to make these projects profitable enough to be worth his time.

For Termini, it always seems to come down to the state filling his pocket before he will get anything done. Now before ILPB and BRL get their collective panties in a bunch, I am well aware that suburban developers get subsidies and hand-outs too. It doesn't matter to me if everyone in the state gets handouts, I don't believe he should base his entire plan on historical credits and other state subsidies, if he can't finance it himself then he shouldn't start the project. I am sick of the developers profiting off our tax money.

DTK2OD
DTK2OD

Are there any examples of pure land value taxation in the US? Or do most cities employ a split-rate property tax where the land is taxed at a higher percentage than the buildings/improvements which are built upon it? Too bad they don't teach interesting theories like this in my economics class.

MRodgers
MRodgers

I believe that's why we need to check with places that initiated this program and have reaped rewards such as - the success since inception in Harrisburg, PA which had implemented had 4,200 vacant structures. Today, there are less than 500. But, that is for the updated research to determine as Joshua Vincent provides in his info to me - posted above.

ReginaldQMerriweatherIV
ReginaldQMerriweatherIV

In theory, LVT is a worthwhile idea. In application, problems can arise.

Specifically, the LVT and all of Henry George's theories are based on the assumption that land supply is of fixed value. While, yes, there exists a finite supply of land on our planet, the current AVAILABLE supply of land is not limited. Therefore, the value of the land is determined by its marginal utility to society. This is the Catch-22 of the LVT, since land value (and 'higher and better use') are subjective concepts, the value of the land is theoretically limitless, or conversely, absolutely worthless.

MRodgers
MRodgers

Part of my ongoing research was to determine if LVT could be enacted with or without state approval. I just received this correspondance from Joshua Vincent of UrbanTools.org:

"As far as legal permission, the cities in Pennsylvania needed permissive legislation from the state in all cases, which is per usual in the US. In New York State, a Home Rule message is required. Laws have been passed permitting all cities, most wons and some school districts to enact LVT.

We do know that this is constitutional in New York, as Mario Cuomo signed one bill into law in 1993. I know that then-Senator Nanula was a supporter.

As early as 1973, the Greater Buffalo Development Corporation studied LVT and the outcome was favorable for employers and homeowners.

Since that time, market values have dropped and land vacancy has risen, so I suspect that the reductions on homeowners would be more than before, but only empirical study will let us know for sure.

The state of NY is pretty much like Pennsylvania when it comes to assessments, although we have county assessments (not a great idea, as they lag and out the burden of value on declining cities to the advantage of the county non-urban areas), and New York has municipal assessors. One difference is the homestead rate differentials, which are not legal in most states. The studies we have done in Albany and Rochester were predicated on a need to get away from the Homestead, but that is up to the city to decide.

For Buffalo, I think the most important outcomes will be tax relief, and creating an economic climate more conducive to rehabbing and new construction; therefore, land values should tick up in a years-out scenario. Hope this helps."

townline
townline

Placing the majority of taxable value on improvements, like we currently do, is why our parking lots are so cheap and profitable. Back asswards if you ask me. Its also why crappy land owners demo buildings, or allow demo-by-neglect, so that they can ultimately reduce their tax burden without losing a land-asset.

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