Downtown Development Pattern Produces Best ROI for Taxes - Part 1

I don’t know about you, but I love exploring downtowns in a community. It seems like every time we’re traveling, I want to take the “long way” and pass through the downtown. Downtowns are the heart of a community and can tell someone a lot about what is important to the community and how alive the community is. But downtowns (and especially vibrant downtowns) also play another role in a city – tax revenue. You heard me right, tax revenue.

A recent exploration of the impact that downtowns have on tax revenue in many communities, both large and small, found that downtowns and downtown type development patterns generate the most amount of property tax per acre when compared to the rest of the city.

This got me thinking about similar implications that our downtown has on our city’s property taxes, so I ran an analysis to see. It turned out the same was true for Elizabethton. It wasn’t a surprise that downtown has higher tax assessments per acre that did other areas of the city, the surprise was how much of an increase there was! The median tax assessment per acre in downtown was approximately $383,000 while the median tax assessment per acre along the West Elk commercial corridor was only $197,000 – a difference of $186,000 in assessment or what would translate into approximately $3,300 per acre in city property taxes. It’s also important to note that this downtown median tax assessment value is the way our downtown is now, not if every building has a store or restaurant and the second and third floors were fixed-up.

Some of you may be saying, “This may be true, but the sales tax Walmart, Ingles, and Lowe's generates are more than enough to make up this difference.” This is a true statement, but as we saw in the years following the 2008 collapse of the stock market, sales taxes can fluctuate. If the local economy is doing well, unemployment is low, and consumer confidence is high, sales tax collections can make up this difference with no problems. If, however, the local economy is performing poorly, unemployment is high and consumer confidence is low people will only purchase what they absolutely need and limit their travel because driving your car out of the way to shop costs money causing sales taxes to plummet. Even with less revenue the city must still provide water service, police and fire protection, pave roads, etc. Sales taxes are not a reliable source of revenue.

Next week I want to take this a step further and talk about why this reality is the way it is and what the implications are if we changed our development policies towards more downtown style development. Until then, let’s talk about it!