Sound concept, everything else wrong

Argyle station, one of the platforms to be widened. Graham Garfield photo from Wikimedia, Creative Commons Attribution Share-alike 2.0 generic license

Argyle station, one of the platforms to be widened. Graham Garfield photo from Wikimedia, Creative Commons Attribution Share-alike 2.0 generic license

[The following was written in September 2016, but for some reason was not published until January 2017.]

If good transit increases land values – which it does – then shouldn’t the increase in real estate values should be used to fund transit infrastructure?  Yes, if you do it right.

Case in point is CTA’s “Red Purple Modernization Project” and, in particular, the “Lawrence to Bryn Mawr Modernization.”  The structure is nearly 100 years old, been maintained somewhat, it seems reasonable that it might need rebuilding.   Maybe it’s even reasonable to widen the platforms (which must account for a lot of the >$1 billion cost), even tho we know from Granville and Loyola that elevator access can be achieved on existing narrow platforms.  It would be interesting to know of any evidence that narrow platforms actually are associated with more accidents or injuries than wider platforms.

We’re already stuck with a federal funding system thru which skilled local politicians have milked federal taxpayers for over $1 billion just for this 1.3 mi segment. But a local match is needed.  It’s not clear from the posted documents how much this match would be, but under new laws the State permits “Transit TIF’s” which can be used to raise much of it.

According to the CTA documents, “Transit TIF funds are created by growth in property value, known as increment, that occurs because of the investment in transit.” That’s almost certainly a lie, as a TIF absorbs the entire increase in assessed value that occurs during its life.  Increase due to better schools goes to the transit TIF.  Ditto for increase due to more effective policing, sanitation improvements, libraries, flood control, fire protection, or anything else the government does and pays for. Ditto for increases due to private activity that makes the area more desirable (for instance, good private schools have been shown to raise land values). Ditto for inflation, which has already returned to real estate values and will doubtless continue, on the average tho not every year, for decades.

So where will governments get the money to pay for schools, sanitation, libraries, and everything else including pension costs resulting from past services? The land value increase is already taken, as is the increase in improvements and from inflation.  So it’ll have to come from other taxes.  We’re already seeing higher taxes for nearly every kind of productive activity, and we’ll just see more.  It’s been pretty well demonstrated that people will put up with this.  Not a lot all at once, but a bit more every year.

We’re stuck with this, it is going to happen, the current crew will be re-elected repeatedly or similar ones put in their place. But, just for fun, we might consider what should have been done instead.

Well, first, a proper evaluation should have been done of restoring the third track on the parallel Metra line a mile or so west. Restore a couple of the stations which existed there sixty years ago, integrate the fare structure, and  we might find that two tracks would have been sufficient. But that would have required more coordination than legislators seem to feel is necessary.

Second, CTA needs to fix operational problems that constrain its capacity.  At Clark Junction, for instance, it takes about 18 seconds to reset the switches and signals after the route clears. Similarly, at Howard trains approaching from north and south are often held out because nobody can get empty trains out of the station, or perhaps sometimes because nobody got around to changing the signals. How could this be fixed?  How many more trains handled?

India does something a bit like what Scott Adams suggested

image credit: Andrew Sorensen (cc) via Flickr

image credit: Andrew Sorensen (cc) via Flickr

It was over four years ago that I blogged about Scott Adams’ suggestion that the government could improve tax compliance by publicly honoring those who pay the most taxes. (My point was, not that this is a wonderful idea, but that it illustrates that tax ideas get attention when expressed by influential people.) Now, on the way to following up something else, I discover that tax authorities in India are emailing “certificates of appreciation” to those who they believe have complied with income tax rules. And the certificate will be bronze, silver, gold, or platinum, depending on how much tax you have paid.  There is no monetary value nor official privilege attached to the email. The few comments with the Times of India article seem positive, tho I tend more to agree with those who see it as spam.

Extreme land value follies in Vancouver

Credit: tglucas500 via flickr

Credit: tdlucas5000 via flickr

Up in Vancouver BC, analyst Jens von Bergmann calculates that the increase in land value for single family houses over the past year exceeded the total income earned by the entire population of the City.  Median increase was $262,000, average was $318,877.  Von Bergmann estimates this to be equivalent to $126/hour, assuming people work a 40 hour week 62 weeks per year (allowing for multiple-worker households).  By comparison, actual labor yields an average income of $26/hour (all figures in multicolored Canadian dollars, of course).

But the land price appreciates every hour of every day, so it might make more sense to calculate the median increase as $29.89 (mean $36.38) per hour.

Of course this cannot continue indefinitely, but something like it has been going on for a long time in Vancouver, as well as a few other cities.  Wealthy international buyers from less stable places want a refuge, as well as perhaps an investment.  But even this group, depending on developments overseas, must eventually be limited.  Some analysts — Garth Turner comes to mind — have been warning of a crash for years and years.

What really impresses me about von Bergmann’s analysis is that BC assessment authorities appear to do a decent job of estimating land value, and making the data broadly available.  It’d be worth something to live in a place like that.

h/t Wealth and Want.

Can a citizens dividend reduce violence?

Wikimedia Commons

Wikimedia Commons

The Washington Post says that Richmond, CA has reduced shootings by paying violent offenders up to $1,000 per month to be less violent. The murder rate declined by 50%.  Even tho the cost of this program is less than the cost of adding one cop to the force, isn’t it wrong to bribe criminals to not commit crimes?

Of course it’s wrong, but it seems to work.  So what if, instead of giving money to violent criminals, we gave money to everybody, thru a citizens dividend?

The Richmond program also hires mentors to help the beneficiaries stay out of trouble, which is an additional necessary component of a program like this.

 

Hey Bruce! Mike! Here’s a few bucks for the deficit… or something.

For a full-sized (23.4mb!) copy of this cool Illinois Coal Industry Map produced by Illlinois State Geological Survey, click the image

For a full-sized (23.4mb!) copy of this cool Illinois Coal Industry Map produced by Illinois State Geological Survey, click the image

En route to writing something else, I discovered that the Center for Tax and Budget Accountability published a report last fall suggesting that Illinois might want to impose a severance tax on coal. I was surprised to learn that we didn’t already have such a tax, but encouraged that somebody is looking into it.

The report looks into severance taxes in several coal-producing states, suggesting that Illinois might raise anywhere from $1.6 million to $128.8 million, which might be shared with local governments, used as general revenue, or put into a permanent fund, or some combination. The numbers are pretty modest in the context of a state budget short by $4.6 billion for just the current fiscal year, but that’s no excuse to ignore them.

I did note a couple curious things in the report.  On page five it asserts that, since most Illinois coal is consumed in other states, consumers in those states would pay most of the tax. I rather doubt that any consumers would pay it.  Rather, since the coal market is national, implementation of a significant severance tax here would just reduce the value of coal deposits, so the tax would be paid by the owners or lessees of coal rights.

Second, there’s no discussion of existing real estate tax as it applies to coal deposits. Per 35 ILCS 200/10-175 it appears that coal rights, if not yet developed, are taxed on a value not to exceed $75/acre, practically a negligible amount.  That’s an extremely cheap way for speculators to hold rights waiting for a price increase.  But, per 35 ILCS 200/10-180, coal which is actually being mined is assessed much higher, based on its actual economic value as defined in the statute. So there’s already a substantial incentive not to mine the coal.  A proper analysis would consider how a severance fee would affect this assessment, both in terms of revenue and incentives to mine or not mine.

 

Politician talking sense…

 

image credit: njcull (cc) via flickr

image credit: njcull (cc) via flickr

…or at least so it appears from this interview. (No transcript is posted so you’ll have to listen to the audio.) Andrew Barr is described as Chief Minister of the Australian Capital Territory.  His jurisdiction is substituting a “land tax” (which seems to be approximately proportional to land value) for the “stamp duty” (tax on buying/selling real estate), also using the revenue to reduce payroll taxes and eliminate a tax on insurance. He calls the land tax the least distorting tax.

The change is, in a sense, optional. Owners may choose,, instead of paying the tax annually, to incur a debt which becomes due when the property is sold.

Apparently this change is being phased in, having been announced in 2012, as also reported by Incentive Taxation.

Suppose Northern Illinois University, all its students, staff, and buildings disappeared

NIU campus scene. Credit: EarlRShumaker via flickr (cc)

NIU campus scene. Credit: EarlRShumaker via flickr (cc)

Well, then, that would reduce economic activity in the region.  On that basis, the University estimates the impact would be $900 million annually.  That’s figured by counting staff salaries, student expenditures, capital improvements, and the multiplier effect of each.

But of course this is a phony argument, intended to maintain the flows of tax dollars to the state’s “higher education” system. Let’s just suppose that all government funding of the University stopped. Quite possibly it could remain in operation, as lots of nongovernment schools do. But suppose otherwise.  Tomorrow morning we wake up and find that Northern Illinois University is going out of business.  And, just to keep the exercise meaningful, suppose none of the other Illinois government schools are able to pick up the slack; maybe they went out of business too, or maybe they just won’t expand.

So now there’s a big campus for sale. Would a nongovernment school want to buy it?  Or maybe one or more other organizations, such as a mental hospital, retirement community, corporate think-tank, drug rehabilitation center, penal facility, religious group, will want to buy the space?  The campus won’t remain empty.  It will be re-used or redeveloped, and that will involve an unknown (but positive) number of jobs and investments.

What about the students? It seems the economic return on college credentials is decreasing,  but surely it has some value for some people.  There are lots of colleges, public and private, looking for students.  Some students will decide to put full-time formal education aside for a time, look for jobs or start businesses.  And starting a business might be a good idea, with a labor force suddenly available.

And the faculty? Surely they’re employable, as consultants or teachers elsewhere, or doing something else.  If they really can’t do anything but teach at a government school, what necessary skills do they lack?

Meanwhile, we also need to consider the benefit to taxpayers of no longer funding the University.  How much would they save?  Or, more  likely, taxpayers would “save” nothing, but more funds would be available to cover other existing obligations, which does seem to result in some public benefit.

One more thing.  This topic was raised by a link in an email I received, labeled “What’s a state university worth to the region in which it’s located?”  That’s kind of meaningless; do we mean “to the people living in the region,” or “to the taxpayers of the region,” or “to the owners of land in the region,” or something else? And necessarily, the analysis needs to imagine what would happen in the absence of the university.  Do there exist any examples of a significant state university shutting down?  I know of none.  Perhaps a test is needed. Maybe I shouldn’t be surprised that Cold Spring Shops hasn’t commented on this.

 

Armistice Day

Perry Willis has a relevant post over at Zero Aggression Project noting that what is now designated as “Veterans Day” originated as commemoration of the end of the “Great War” (subsequently known as World War I).  It was intended not to honor those who did time in the military, but rather to remember how wars are usually started by the political class to further their own interests. Wikipedia reminds us that the word “veteran” means “a person who has had long service or experience in a particular occupation or field,” which of course includes a lot of us who never participated in the military.  He has a suggestion for renaming the holiday again, too, which I doubt will ever be enacted by any governmental bodies.

Willis notes that “Yes, Veterans Day also includes a solemn remembrance of all the young lives lost in past wars…” but he doesn’t mention that the U S already has another holiday for that.

Billionaires controlling land and other natural resources

The Resnicks who, according to Forbes, own 70,000 acres of pistachio and almond trees in California’s central valley, and entitlements to “at least 120 billion gallons of water per year” (enough to supply nearly 2 million households, by my estimate), and additional privileges.  Their assets total $4.3 billion, estimates Forbes, including not only California properties but also Fiji Water. At least the government of Fiji manages to collect some tax on the water exported.  In the U S, they’re well-connected with major politicians, and how much tax they pay is not reported.

Just another example of how fortunes are accumulated by control of natural resources, facilitated and supplemented by political favors (and, yes, a lot of hard work).

UPDATE December 27 2015: Not for the first time, the Resnicks have shared a tiny bit of their fortune with the Aspen Institute, which is thus funded by water taken from Fiji and California.  Silly me, I always assumed the Aspen Institute was in Colorado, but of course for optimal influence and convenient participation by the influential it is in Washington, DC. And, yes, among the Institute’s concerns is water supply.

People are willing to pay more than fares for transit

This is really nothing new, except that it is a new data about an old truth:

from the Econsult report

from the Econsult report

Analysis of Philadelphia suburban data shows that people are willing to pay more than fares for rail transit, as indicated by house prices in areas near the stations. These are really land prices since characteristics of the houses are already filtered out. Interesting to see that people living more than a half-mile from the station seem willing to pay more for frequent service than for extensive parking, but I wouldn’t want to conclude too much from this limited analysis.  The study considers only parking and frequency of service, nothing about travel time, availability of feeder bus, or anything else, but the main point remains.  See the full report here.