American Monetary Institute’s Steve Zarlenga offers a seminar (free!) immediately prior to their annual conference. I think Zarlenga’s fundamental ideas are sound and this should be a good way to understand key monetary issues in three hours. More detail about the conference (not free) is here. More about monetary history and principles in his book.
In the July issue of Land Lines, two UIC economists show how limitations on the increase in real estate tax assessments not only fail to protect all homeowners, but actually cause many of them to pay more tax than they would in the absence of the limitations. It’s simple mathematics, say Richard F. Dye and Daniel P. McMillen. If the total tax take does not decrease, then those with relatively small increases in home value– not protected by assessment caps– end up paying a larger share to make up for the absence of assessments on the full value of homes in areas where values are rising rapidly.
This is despite the fact that business’ share of the tax burden grows. And it has nothing to do with TIF’s. Well, I guess TIF’s worsen the situation further, but that isn’t discussed in this article.
Land Lines comes from the Lincoln Institute of Land Policy. They provide free subscriptions in hard-copy. Or you can download it without charge, but they want you to register. You can probably avoid registration by using bugmenot.
Phineas Baxandall, one of the authors of the Illinois PIRG report
blogged yesterday, commented on the item. Well, I responded to his comment, but for some reason WordPress swallowed the comment. Twice. I tried to comment as a normal person instead of myself. Swallowed again. Tried again. Rejected as “duplicate.” I don’t know what’s going on at WordPress, possibly there is some difficulty regarding html in the comment. But following is my response to Phineas Baxandall.
I’m always happy to see activists claiming that Henry George would approve of their work, but in this case there’s a serious gap between George’s proposal and yours.
George wanted to remove all taxes from productive activity, and instead charge for control of land (and other natural resources). Retail sales and service are productive activities, and when they’re taxed then the cost of living increases and living standards are reduced. Real estate transfers, too, usually involve productive activity, either construction or at least the transfer of property to someone who can use it more effectively than the seller.
Development impact fees likewise make it more expensive and difficult to provide housing (or other kinds of development). If such fees were truly user fees, then they’d be paid by all users, rather than just by those who seek to build.
You’re certainly not the first person to misunderstand George’s ideas, which is why we have Henry George Schools in Chicago and elsewhere, run courses by Internet, and have Progress & Poverty posted in original and modernized versions. Some relevant (and more succinct) modern documents are here.
It’s not so important whether your proposal would please Henry George. What’s important is that, had you proposed supporting transit thru a tax on location values, you would have recommended a policy to reliably fund transit in the long run, encourage transit-supportive development patterns, and improve the standard of living of ordinary working people.
A solicitor stopped by my house a week or so ago pushing Illinois PIRG’s campaign to “save our transit.” They do have a report, funded by the “Illinois PIRG Education Fund” and prepared by Brian Imus, Nick Christensen, and Phineas Baxandall, that explains how they want us to pay more money for transit service.
The report notes that “Locations served by transit… show increased property values compared
to similar locations not served by transit.” Although they do cite sources for this assertion, they don’t refer to either of the Chicago studies which are (see footnotes 3 and 4 on page three of this). So then do they propose a tax on location value?
No surprises here. They proclaim “Seven Principles for Funding Transit:”
1-Enhance market efficiency
2-Low collection costs
5-Fare increases are self defeating
They do provide some discussion of each. Then they evaluate several potential sources of funding:
-Rental car tax
-(auto) License, registration or title fees
-Several other driving-related taxes
-Real estate development impact fees
-Real estate transfer tax
-Higher sales tax
-Extend sales tax to services
-Establish a real estate transfer tax, or maybe one of a few other taxes.
But although they acknowledge that transit service increases land value, there is no consideration of this option. Instead, they want to reduce economic efficiency by raisng taxes on economic activity.
Heartland Institute publishes a lot of material, some of it perceptive and helpful, some just striking. Among the latter is perhaps a world record for use of the term “alarmist” (singular and plural noun, and adjective), 22 times in 20 pages of their most recent Environment and Climate News.Come on guys,take some of that corporate money and hire a copyeditor.
Navteq will get $5 million that would otherwise go to schools and other public services, to retain 550 jobs (a total of 900 including expected growth) in downtown Chicago. Navteq CEO Judson Green implied that California would be a more efficient location for the company, but that $5 million persuaded him to remain in Chicago. btw, he is obligated to donate $50,000 of that to “non-profit organizations.” So I wonder about two things:
(1) Wouldn’t the 230,000 square feet that Navteq is taking at 100 N. Riverside have been rented to some other employer, if not Navteq? And if it would’ve remained vacant, wouldn’t that have eased, at least a little, the peak-hour load on the CTA and Metra?
(2) If in fact California is a better location, will Navteq execs and customers end up flying back and forth, adding to O’Hare congestion and greenhouse gas?
Maybe RM Daley answered the question at his press conference to announce the deal. If he hadn’t used our tax money to persuade Navteq to stay in the City, “there’d be a big headline, ‘Why does Mayor Daley let those companies move?’ “ And I guess he’s right, at least in some cases. Apparently there’s no headline, “Why does Mayor Daley waste all this money?”
The other TIF subsidy is $58.8 million, covering about 1/8th the cost of renovating/expanding the space atop Union Station.
The new Union Station will have an additional 14 stories on top of the existing eight stories. It will house a 300-room hotel, likely to be operated by Hilton Hotels Corp.; 85,000 square feet of retail space; 200 condominiums; and 600,000 square feet of office space.
The office anchor tenant, the American Medical Association, has agreed to lease 275,000 square feet, said a Jones Lang LaSalle spokeswoman.
This project was first proposed over a decade ago. Maybe it’s not viable on its own, without the subsidy, in which case one wonders why it is needed if no one who will use it is willing to pay for it. Or perhaps market conditions have improved and it’s viable now, in which case one wonders why the developer should be given what amounts to about a dozen years worth of taxes on a thousand Chicago bungalows.
Several weeks ago, Ben Joravsky(?) mentioned that Mike Quigley had done a report on TIF’s, their impacts and misuse. Having finally read it, I find it’s a good, clear description of how TIF’s work in Chicago and Cook County, and I recommend it for those who want a good understanding of this. There are also recommendations for improving the reporting, so the public (if it cares, and/or is aided by journalists) could understand what TIF’s are actually doing.
Unfortunately, Quigley believes that TIF’s are a legitimate development tool, just that they’ve been used inappropriately. Why local governments cannot simply collect the taxes and build the infrastructure, without designating special zones, is not explained.
Today’s Tribune gives us another example of the community collecting the rent: Chicago Park District harbors.
For many years, boat slips were greatly underpriced, so in order to get one you had to bribe a Park District employee. In 1996, harbor management was contracted out to Westrec Marina Management. Rates were raised and continue to increase. Harbors were improved and the number of spaces increased from 4400 to 5100.
A slip for your 35-foot boat at the popular northside harbors will cost you $3418 if you’re a Chicago resident, with a 25% surcharge for nonresidents. Fees are expected to yield $20.4 million in 2007, against $7.3 million operating costs. Of course there are also capital expenses, but the balance goes into the Park District’s general fund (although part of the cost is municipal tax which presumably goes to the City).
Of course there are people complaining about the cost: “It saddens me to see these prices get to the point where some people have to reconsider whether they can afford to do it anymore. With the way the economy’s going, fewer people will be able to get into boating in the first place,” says one boater.
You will always get people complaining, on behalf of the poor, that their costs should be reduced. It is obvious that boaters are not poor people. If you don’t want to pay to keep your boat in Chicago, there are less expensive harbors at Waukegan, Winthrop Harbor, Michigan City, and elsewhere. There are cans and star docks (which I guess require one to row out to one’s yacht) for as little as $1200/year.
Henry George’s proposal is really this simple. The community makes land valuable. That value belongs to the community, who should collect it in the form of a periodic payment for the exclusive right to use a piece of it. Even when the land is water.
A February Civic Federation report(pdf), which I just encountered, reviews the year-end 2005 status of ten pension funds serving local gov’t employees in Chicago and Cook County, including CTA. Total unfunded liabilities: $16,486,000,000. And of course this doesn’t include any of the inadequately-funded State pension funds, nor suburban funds.
So some solution will have to be found for public pension funds, and I see no reason why transit riders should pay any more than other taxpayers for unwise decisions made by those they elected.
Our friends at the Illinois Society of Professional Farm Managers and Rural Appraisers have issued their 2007 report. Basically, farmland prices continue to rise into the first quarter of this year. Although 1031 exchanges are still a factor, the greater part of the increase seems to be due to increasing yields of crops selling at higher prices (ethanol subsidies being part of the reason). Coal mining also seems to be a factor, I guess because landowners can expect to sell rights, or the land itself. And wind turbines, which as I understand it yield far more than field crops.
Prime quality farmland is selling at $5,000 to $6,000 per acre outside of metropolitan areas, and up to $30,000 on the suburban fringe. “Recreational” (hunting) land goes for less (this being land not terribly good for farming).
The report points out that 55% of American farmland is owned by people who do not farm it, and “that number is growing.” If I were inclined to join them, I would be concerned by the report’s assertion that “Farmland is a growth stock,” with a graph very reminiscent of a stock chart, showing that farmland values fluctuate, but the long-term trend is sharply up.
There’s lots more and the report is well worth a look by those interested in where our food comes from and what it costs to produce.